DEF 14A 1 d620451ddef14a.htm DEFINITIVE NOTICE & PROXY STATEMENT <![CDATA[Definitive Notice & Proxy Statement]]>
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.        )

Filed by the Registrant  þ

Filed by a party other than the Registrant  ¨

Check the appropriate box:

 

¨ Preliminary Proxy Statement
¨ Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
¨ Definitive Additional Materials
¨ Soliciting Material Pursuant to §240.14a-12

Sykes Enterprises, Incorporated

 

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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¨ Fee paid previously with preliminary materials.
¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

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LOGO    SYKES ENTERPRISES, INCORPORATED

April 17, 2014

Dear Shareholder:

I am pleased to invite you to attend the Sykes Enterprises, Incorporated 2014 Annual Meeting of Shareholders. The meeting will be held at the Florida Museum of Photographic Arts, The Cube at Rivergate Plaza, 400 N. Ashley Drive, Cube 200, Tampa, Florida, 33602 on Tuesday, May 20, 2014, at 8:00 a.m., Eastern Daylight Savings Time. In the following pages, you will find the Notice of Annual Meeting of Shareholders as well as a Proxy Statement which describes the items of business to be conducted at the meeting.

Your vote is important, so to assure your representation at the Annual Meeting, please vote on the matters described in this proxy statement by completing the enclosed proxy card and mailing it promptly in the enclosed envelope. If your shares are held in street name by a brokerage firm, bank or other nominee, the nominee will supply you with a proxy card to be returned to it. It is important that you return the proxy card as quickly as possible so that the nominee may vote your shares. If your shares are held in street name by a nominee, you may not vote those shares in person at the Annual Meeting unless you obtain a power of attorney or legal proxy from that nominee authorizing you to vote the shares, and you present that power of attorney or proxy at the Annual Meeting.

Sincerely,

 

LOGO
James T. Holder
Secretary

Important notice regarding the availability of proxy materials

for the Shareholders Meeting To Be Held On May 20, 2014

This proxy statement and our 2013 Annual Report to Shareholders are available at:

https://materials.proxyvote.com/871237


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TABLE OF CONTENTS

     Page  

Notice of 2014 Annual Meeting of Shareholders

     1   

General Information

     2   

Proposal 1: Election of Directors

     3   

Director Qualifications and Biographical Information

     5   

Corporate Governance

     9   

Director Compensation

     15   

Executive Compensation

     17   

Compensation Committee Report

     30   

Proposal 2: Advisory Vote to Approve Executive Compensation

     45   

Proposal 3: Ratification of the Appointment of Independent Registered Public Accounting Firm

     46   

Audit Committee Disclosure

     47   

Report of the Audit Committee

     49   

Security Ownership

     50   

Section  16(a) Beneficial Ownership Reporting Compliance

     51   

Requirements, Including Deadlines, for Submission of Proxy Proposals and Nomination of Directors

     52   

Other Matters

     52   


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SYKES ENTERPRISES, INCORPORATED

400 North Ashley Drive

Tampa, Florida 33602

 

LOGO

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

Date and Time:    8:00 a.m. Eastern Daylight Savings time on May 20, 2014
Place:    Florida Museum of Photographic Arts, The Cube at Rivergate Plaza, 400 N. Ashley Drive, Cube 200, Tampa, Florida, 33602
Items of Business:   

1.    To elect three directors to hold office until the 2017 Annual Meeting of Shareholders and one director to hold office until the 2015 Annual Meeting of Shareholders;

  

2.    To hold a shareholder advisory vote on executive compensation;

  

3.    To ratify the appointment of Deloitte & Touche LLP as independent auditors of the Company; and

  

4.    To transact any other business as may properly come before the Annual Meeting.

Only shareholders of record as of the close of business on March 21, 2014, will be entitled to vote at the Annual Meeting or any adjournment or postponement of the Annual Meeting. Information relating to the matters to be considered and voted on at the Annual Meeting is set forth in the proxy statement accompanying this Notice.

Tampa, Florida

April 17, 2014

 

By Order of the Board of Directors,
LOGO
James T. Holder
Secretary


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  GENERAL INFORMATION      

 

SYKES ENTERPRISES, INCORPORATED

400 North Ashley Drive

Tampa, Florida 33602

PROXY STATEMENT

2014 ANNUAL MEETING OF SHAREHOLDERS

Tuesday, May 20, 2014

GENERAL INFORMATION

 

This Proxy Statement is furnished in connection with the solicitation of proxies on behalf of the Board of Directors of Sykes Enterprises, Incorporated (the “Company”) for the Annual Meeting of Shareholders (the “Annual Meeting”) to be held at the Florida Museum of Photographic Arts, The Cube at Rivergate Plaza, 400 N. Ashley Drive, Cube 200, Tampa, Florida, 33602, on Tuesday, May 20, 2014, at 8:00 a.m.,

Eastern Daylight Savings Time, and any adjournment or postponement of the Annual Meeting.

This Proxy Statement and the annual report to shareholders of the Company for the year ended December 31, 2013 are first being mailed on or about April 18, 2014 to shareholders entitled to vote at the Annual Meeting.

 

 

Shareholders Entitled To Vote

 

 

The record date for the Annual Meeting is March 21, 2014. Only shareholders of record as of the close of business on the record date are entitled to notice of the Annual Meeting and to vote at the Annual Meeting. As of the record date, 43,633,555 shares of common stock were outstanding and entitled to vote at the Annual Meeting.

Votes cast by proxy or in person at the Annual Meeting will be tabulated by the inspector of elections appointed for the Annual Meeting, who will also determine whether a quorum is present for the transaction of business. The Company’s Bylaws provide that a quorum is present if the holders of a majority of the issued and outstanding shares of common stock entitled to vote at the meeting are present in person or represented by proxy. Abstentions will be counted as shares that are present and entitled to vote for purposes of determining whether a quorum is present. Shares held by nominees for beneficial owners will also be counted for purposes of determining whether a quorum is present if the nominee has the discretion to vote on at least one of the matters presented, even though the nominee may not exercise discretionary voting power with respect to other matters and even though voting instructions have not been received from the beneficial owner (a “broker non-vote”). At the Annual Meeting, if a quorum exists, directors will be elected by a majority vote, as more fully described under Proposal 1 – Election of Directors below. Approval of the other proposals will require the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting. Broker non-votes will not be counted as votes cast in determining whether a Proposal has been approved.

Shareholders are requested to vote by completing the enclosed Proxy and returning it signed and dated in the enclosed postage-paid envelope. Shareholders are urged to

indicate their votes in the spaces provided on the Proxy. Proxies solicited by the Board of Directors of the Company will be voted in accordance with the directions given in the Proxy. Where no instructions are indicated, signed Proxies will be voted FOR each of the proposals listed in the Notice of Annual Meeting of Shareholders. Returning your completed Proxy will not prevent you from voting in person at the Annual Meeting, should you be present and wish to do so.

Any shareholder giving a Proxy has the power to revoke it at any time before it is exercised by:

 

 

filing with the Secretary of the Company written notice of revocation,

 

 

submitting a duly executed Proxy bearing a later date than the previous Proxy, or

 

 

appearing at the Annual Meeting and voting in person.

Proxies solicited by this Proxy Statement may be exercised only at the Annual Meeting and any adjournment of the Annual Meeting and will not be used for any other meeting. Proxies solicited by this Proxy Statement will be returned to the Board of Directors and will be tabulated by an inspector of elections designated by the Board of Directors.

The cost of solicitation of Proxies by mail on behalf of the Board of Directors will be borne by the Company. Proxies also may be solicited by personal interview or by telephone by directors, officers, and other employees of the Company without additional compensation. The Company also has made arrangements with brokerage firms, banks, nominees, and other fiduciaries that hold shares on behalf of others to forward proxy solicitation materials to the beneficial owners of such shares. The Company will reimburse such record holders for their reasonable out-of-pocket expenses.

 

 

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          PROPOSAL 1: ELECTION OF DIRECTORS  

 

PROPOSAL 1: ELECTION OF DIRECTORS

 

The Company’s Board of Directors (the “Board”) currently is comprised of 9 individuals, and is divided into three classes (designated “CLASS I,” “CLASS II,” and “CLASS III”), as nearly equal in number as possible, with each class serving a three-year term expiring at the third annual meeting of shareholders after its election. The term of the four current CLASS I directors will expire at the Annual Meeting. Mr. H. Parks Helms and Dr. Linda McClintock-Greco, whose terms are expiring at this meeting, and who have served on the Board for 37 years and 15 years respectively, have notified the Board that they will retire and not stand for re-election this year. The Company’s Board of Directors, upon the recommendation of the Nominating and Corporate Governance Committee, has nominated James S. MacLeod to stand for re-election, and William D. Muir, Jr., and Lorraine Leigh Lutton to stand for election, as CLASS I directors, whose terms will all expire at the 2017 Annual Meeting of Shareholders. The Company’s Board of Directors, upon the recommendation of the Nominating and Corporate Governance Committee, has nominated James K. Murray, Jr. to stand for re-election as a CLASS III director, whose term will expire at the 2015 Annual Meeting of Shareholders.

Provided that a quorum is present at the Annual Meeting, each nominee shall be elected by the affirmative vote of a majority of the votes cast with respect to that nominee’s election. A majority of votes cast means that the number of shares voted “for” a director’s election exceeds 50% of the number of votes cast with respect to that director’s election.

Votes cast shall include (i) votes for the election of such director and (ii) votes against the election of such director, and shall exclude abstentions with respect to that director’s election and broker non-votes.

Incumbent directors Murray and MacLeod have provided to the Company contingent letters of resignation from the Board which shall become effective only if such director fails to receive a sufficient number of votes for re-election at the Annual Meeting and the Board determines to accept the resignation. The Board will consider and act upon the letter of resignation of a director who fails to receive the affirmative vote of a majority of the votes cast on his election within ninety (90) days after the date on which the election results were certified and will promptly make public disclosure of the results of its decision. The Board, in making its decision, may consider any factors or other information that it considers appropriate and relevant. The director who has tendered his resignation shall not participate in the decision of the Board with respect to his resignation. If such incumbent director’s resignation is not accepted by the Board, such director shall continue to serve until his successor is duly elected, or his earlier resignation or removal.

In the event any nominee is unable to serve, the persons designated as proxies will cast votes for such other person in their discretion as a substitute nominee. The Board of Directors has no reason to believe that the nominees named herein will be unavailable or, if elected, will decline to serve.

 

 

THE BOARD OF DIRECTORS RECOMMENDS THE FOLLOWING NOMINEES FOR ELECTION AS DIRECTORS IN THE CLASS SPECIFIED AND URGES EACH SHAREHOLDER TO VOTE “FOR” THE NOMINEES. EXECUTED PROXIES IN THE ACCOMPANYING FORM THAT ARE NOT OTHERWISE MARKED WILL BE VOTED AT THE ANNUAL MEETING “FOR” THE ELECTION AS DIRECTORS OF THE NOMINEES NAMED BELOW.

Directors Standing for Election at the 2014 Annual Meeting

 

CLASS I — TERM EXPIRES AT THE 2017 ANNUAL MEETING.

 

Name    Age        Position(s) with the Company      Director
Since
 

James S. MacLeod (2)(4)(5)

     66         Director        2005   

William D. Muir, Jr.

     45         Nominee for Director        N/A   

Lorraine Leigh Lutton

     48         Nominee for Director        N/A   

CLASS III — TERM EXPIRES AT THE 2015 ANNUAL MEETING.

 

Name    Age        Position(s) with the Company      Director
Since
 

James K. Murray, Jr. (2)(5)

     78         Director        2005   

 

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  PROPOSAL 1: ELECTION OF DIRECTORS      

 

Directors Whose Term of Office Continues

 

CLASS II — TERM EXPIRES AT THE 2016 ANNUAL MEETING.

 

Name    Age        Position(s) with the Company      Director
Since
 

Paul L. Whiting (1)(4)

     70         Director & Non-Executive Chairman        2003   

Lt. General Michael DeLong (Ret.) (2)(3)

     68         Director        2003   

Iain A. Macdonald (4)(5)

     69         Director        2004   

CLASS III — TERM EXPIRES AT THE 2015 ANNUAL MEETING.

 

Name    Age        Position(s) with the Company      Director
Since
 

Charles E. Sykes

     51         Director, President & Chief Executive Officer        2004   

William J. Meurer (4)(5)

     70         Director & Chairman of the Audit Committee        2000   

 

(1) 

Chairman of the Board

(2) 

Member of the Compensation Committee

(3) 

Member of the Nominating and Corporate Governance Committee

(4) 

Member of the Audit Committee

(5) 

Member of the Finance Committee

 

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          PROPOSAL 1: ELECTION OF DIRECTORS  

 

Director Qualifications and Biographical Information

 

Biographical information for each of the director nominees is set forth below, including the key qualifications, experience, attributes, and skills that led our Board to the conclusion that each of the director nominees should serve as a director.

Our Board includes individuals with strong backgrounds in executive leadership and management, accounting and finance, and Company and industry knowledge, and we believe that, as a group, they work effectively together in overseeing our business. We believe that our directors hold themselves to the highest standards of integrity and that they are committed to representing the long-term best interests of our stockholders. While we do not have a formal diversity policy, we believe that our directors’ diversity of backgrounds and experiences, which include public accounting, military, aerospace, manufacturing, banking, technology, telecommunications, finance and retail, results in different ideas and varying viewpoints that contribute to effective oversight of our business.

 

Mr. Whiting

 

Director Since December 2003

Paul L. Whiting was elected to the Board of Directors in December 2003 and was elected Non-Executive Chairman in August 2004. He is also a member of the Board’s Audit Committee. Since 1997, Mr. Whiting has been President of Seabreeze Holdings, Inc., a privately held investment company. Previously, Mr. Whiting held various positions within Spalding & Evenflo Companies, Inc., including Chairman, Chief Executive Officer and Chief Financial Officer. Presently, Mr. Whiting sits on the boards of TECO Energy, Inc. (a public company) and Tampa Electric Company, Florida Investment Advisors, Inc., The Bank of Tampa and its holding company, The Tampa Bay Banking Co. Mr. Whiting also serves on the board of the Florida West Coast Public Broadcasting, Inc. as well as the boards of various civic organizations, including, among others, the Academy Prep Center of Tampa, Inc., a full scholarship, private, college preparatory middle school for low-income children, where he is a Trustee and past Board President.

Qualifications:

 

 

Mr. Whiting’s public company CEO, CFO and director experience as well as his private investment company business experience provides a unique combination of leadership, financial and business analytical skills, business judgment and investment banking knowledge to the Board as the Company’s non-executive Chairman.

Lt. Gen. DeLong

 

Director Since September 2003

Lt. General Michael DeLong (USMC Retired) was elected to the Board of Directors in September 2003 and is a member of the Nominating and Corporate Governance Committee and the Compensation Committee. From October 2003 to February 2008, Lt. Gen. DeLong served as Vice Chairman of Shaw Arabia Limited, President of Shaw CentCom Services, LLC, and Senior Vice President of the Shaw Group, Inc. From February, 2008 through February 2013, Lt. Gen. DeLong served as Vice President of Boeing International Corporation. On March 1, 2013 Lt. Gen. DeLong was named President and CEO and General Manager of Gulf to Gulf Contractors International and serves as the Boeing Consultant for the Middle East and Africa. From 1967 until his retirement on November 1, 2003, Lt. Gen. DeLong led a distinguished military career, most recently serving as the Deputy Commander, United States Central Command at MacDill Air Force Base, Tampa, Florida. He holds a Master’s Degree in Industrial Management from Central Michigan University and an honorary Doctorate in Strategic Intelligence from the Joint Military Intelligence College and graduated from the Naval Academy as an Aero Engineer.

Qualifications:

 

 

Gen. DeLong’s military career, together with his international business executive experience, allows him to bring to the Board leadership and skills in strategic analysis and judgment as well as a knowledge of international business and political environments.

 

 

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  PROPOSAL 1: ELECTION OF DIRECTORS      

 

Mr. Macdonald

 

Director Since May 2004

Iain A. Macdonald was originally elected to the Board of Directors in 1998 and served until 2001, when he resigned for personal reasons. Mr. Macdonald was re-elected to the Board of Directors in May 2004 and since then has been a member of the Audit Committee. In December 2012, Mr. Macdonald was also appointed as a member of the Finance Committee. During the past 10 years, Mr. Macdonald has served on the boards of a series of technology-based business ventures in the UK, which he has assisted to develop and obtain funding. He was a founding partner, and is currently Chairman of Yakara Ltd., a developer of SMS and IVR telecommunications software solutions and is a former member of the Board of Northern AIM VCT plc, which is a venture capital investment fund. From 2008 to 2011, he served on the Board of Scottish Enterprise, Scotland’s economic development agency. Prior to joining the Company’s Board in 1998, Mr. Macdonald served as a director of McQueen International Ltd. from 1996 until its acquisition by the Company in 1998.

Qualifications:

 

 

Having served as a director of an entity in the UK which was acquired by the Company in 1998, Mr. Macdonald offers a unique institutional viewpoint and depth of industry knowledge. He also brings to the Board considerable leadership, international business, financial and governmental experience.

Mr. Sykes

 

Director Since August 2004

Charles E. Sykes was elected to the Board of Directors in August 2004 to fill the vacancy created by the retirement of the Company’s founder and former Chairman, John H. Sykes. Mr. Charles Sykes joined the Company in September 1986 and has served in numerous capacities throughout his years with the Company. Mr. Charles Sykes was appointed as Vice President of Sales, North America in 1999 and between the years of 2000 to 2003 served as Group Executive, Senior Vice President of Marketing and Global Alliances, and Senior Vice President of Global Operations. Mr. Sykes was appointed President and Chief Operating Officer in July, 2003 and was named President and Chief Executive Officer in August 2004. Mr. Sykes received his Bachelor of Science degree in mechanical engineering from North Carolina State University in 1985. He currently serves on the boards of the Greater Tampa Chamber of Commerce, the Tampa Bay Partnership and the Tampa Bay Metro Board of the American Heart Association, as a Trustee of the University of Tampa, as a director of Feeding America of Tampa Bay, Inc. and Junior Achievement of Tampa Bay, and is a member of the Florida Council of 100.

Qualifications:

 

 

As the Chief Executive Officer of the Company, Mr. Sykes provides the Board with information gained from hands-on management of Company operations, identifying near-term and long-term goals, challenges and opportunities. As the son of the Company’s founder and having worked for the Company for his full career, he brings a continuity of mission and values on which the Company was established.

 

 

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          PROPOSAL 1: ELECTION OF DIRECTORS  

 

 

Mr. MacLeod

 

Director Since May 2005

James S. MacLeod was elected to the Board of Directors in May 2005 and is Chairman of the Compensation Committee and is a member of the Audit Committee and the Finance Committee. Mr. MacLeod has served in various positions at CoastalStates Bank in Hilton Head Island, South Carolina since February 2004 and is currently its President. Mr. MacLeod also serves on the Board of Directors of CoastalStates Bank and has served as Chairman of the Board and Chief Executive Officer of CoastalSouth Bancshares, its holding company, since 2011. From June 1982 to February 2004, he held various positions at Mortgage Guaranty Insurance Corp in Milwaukee, Wisconsin, the last 7 years serving as its Executive Vice President. Mr. MacLeod has a Bachelor of Science degree in Economics from the University of Tampa, a Master of Science in Real Estate and Urban Affairs from Georgia State University and a Masters in City Planning from the Georgia Institute of Technology. Mr. MacLeod is currently a Trustee and Vice Chairman, of the Board, and serves as the Chairman of the Governance and Valuation Committees and is a member of the Performance Committee of the Allianz Funds.

Qualifications:

 

 

As a result of his extensive financial services background, Mr. MacLeod brings to the Board valuable financial analytical skills and experience, a deep understanding of cash transaction and management issues, as well as business acumen and judgment.

Mr. Murray

 

Director Since May 2005

James (“Jack”) K. Murray, Jr., was elected to the Board of Directors in May 2005 and is a member and Chairman of the Finance Committee and a member of the Compensation Committee. Mr. Murray currently serves as Chairman of Murray Corporation, a private venture capital enterprise based in Tampa, Florida. Mr. Murray also serves as President of Murray Advisors, Inc. and as Chairman of the Advisory Board of HealthEdge Investment Fund II, a private equity fund focused primarily on investments in the health care field. In 1970, Mr. Murray was one of the founders of a company that is today HealthPlan Services, Inc. which was acquired by The Dun & Bradstreet Corporation (NYSE:DNB) in 1978. From 1978 through 1993, Mr. Murray served in various capacities for Dun & Bradstreet Corporation, including President of Dun & Bradstreet Credit Services, and from 1990 through 1993, served in various capacities including President, principal executive officer and Chairman for the Reuben H. Donnelley Corp., a publisher of telephone yellow pages. In 1994, Mr. Murray and other financial partners acquired HealthPlan Services from Dun & Bradstreet. In May 1995, HealthPlan Services became a public company and was listed on the New York Stock Exchange. Mr. Murray retired from HealthPlan Services in 2000. Mr. Murray serves on the boards of the University of Tampa, Canterbury Towers, and The General Theological Seminary.

Qualifications:

 

 

Mr. Murray’s diverse experience in both the public company and private venture capital arenas allows him to bring to the Board significant leadership skills as well as business, transactional and financial analytic skills.

 

 

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  PROPOSAL 1: ELECTION OF DIRECTORS      

 

 

Mr. Meurer

 

Director Since October 2000

William J. Meurer was elected to the Board of Directors in October 2000 and is a member and Chairman of the Audit Committee and a member of the Finance Committee. Previously, Mr. Meurer was employed for 35 years with Arthur Andersen LLP where he served most recently as the Managing Partner for Arthur Andersen’s Central Florida operations. Since retiring from Arthur Andersen in 2000, Mr. Meurer has been a private investor and consultant. Mr. Meurer also serves on the Board of Trustees for Lifelink Foundation, Inc. and as a member of the Board of Directors of the Eagle Family of Funds and Walter Investment Management Corporation.

Qualifications:

 

 

As former managing partner of an international public accounting firm, Mr. Meurer brings to our Board relevant experience with financial accounting, audit and reporting issues, SEC filings and complex corporate transactions.

Ms. Lutton

 

Nominee for Director

Lorraine Leigh Lutton serves as the President of St. Joseph’s Hospital, a 529 bed tertiary acute care facility in Tampa Florida and member of the BayCare Health System, as well as the Hillsborough County Market Leader for BayCare Health System, where her responsibilities include representing BayCare to the community, serving as the local liaison to the St. Joseph’s-Baptist Healthcare Governing Board and coordinating all of BayCare’s acute care facilities in Hillsborough County, including St. Joseph’s Hospital, St. Joseph’s Women’s Hospital, St. Joseph’s Children’s Hospital, St. Joseph’s Hospital-North, St. Joseph’s Hospital-South and South Florida Baptist Hospital in Plant City, totaling over 1,000 beds. Ms. Lutton has been employed by St. Joseph’s in a variety of roles since 1992, serving most recently as Chief Operating Officer from 2004 to 2013, when she was named as President. Ms. Lutton received her bachelor’s degree in public health, health policy and administration from the University of North Carolina at Chapel Hill, and her master’s degree in business administration from the Anderson Graduate School of Management at UCLA. Ms. Lutton is a Fellow of the American College of Healthcare Executives.

Qualifications:

 

 

Ms. Lutton brings to our Board substantial business experience in the healthcare arena, as well as communication, planning, organizational and management skills.

Mr. Muir

 

Nominee for Director

William D. Muir, Jr. serves as the Chief Operating Officer of Jabil Circuit, Inc. (NYSE: JBL), having been promoted to this position in 2013. From 2009 to 2013, Mr. Muir served as Jabil’s Executive Vice President and Chief Executive Officer, Global Manufacturing Services, responsible for $14B of annual revenue with commercial leadership across diversified markets, including Healthcare & Life Sciences, Enterprise & Infrastructure, High Velocity and Industrial & Clean-tech. Additionally, Mr. Muir led the global, integrated capabilities in Operations, Supply Chain and Design which underpin these diversified businesses. Previously, Mr. Muir served as Regional President for Asia, responsible for Jabil’s Operations and Business Development efforts across China, India, Vietnam, Malaysia, Singapore and Japan. In this capacity, he resided in Shanghai from 2004 through 2007 and subsequently in Singapore until 2009. Prior to his leadership role in Asia, Mr. Muir led Global Business Development efforts for Jabil across large-scale customer relationships and has also held roles leading Operations across the Americas.

Qualifications:

 

 

Mr. Muir brings to our Board a diverse background spanning engineering, manufacturing, supply chain, business development, and operations. He has been a leader in information technology, supply chain, security, quality, engineering innovation, and global, strategic accounts. Mr. Muir’s decade long global and domestic profit and loss responsibility also brings valuable business financial acumen to the Board.

 

 

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          CORPORATE GOVERNANCE   

 

CORPORATE GOVERNANCE

 

The Company maintains a corporate governance page on its website which includes key information about its corporate governance initiatives, including its Corporate Governance Guidelines, Code of Ethics, and charters for the committees of the Board of Directors. The corporate governance page can be found at www.sykes.com, by clicking on “Investor Relations” and then on “Corporate Governance.”

The Company’s policies and practices reflect corporate governance initiatives that are compliant with the listing requirements of the Nasdaq Stock Market and the corporate governance requirements of the Sarbanes-Oxley Act of 2002, including:

 

 

the Board of Directors has adopted clear corporate governance policies;

 

 

a majority of the board members are independent of the Company and its management;

 

 

all members of the key board committees — the Audit Committee, the Compensation Committee, the Nominating

   

and Corporate Governance Committee and the Finance Committee — are independent;

 

 

the independent members of the Board of Directors meet regularly without the presence of management;

 

 

the Company has adopted a code of ethics that applies to all directors, officers and employees which is monitored by its Nominating and Corporate Governance Committee;

 

 

the charters of the Board committees clearly establish their respective roles and responsibilities; and

 

 

the Company’s Audit Committee has established procedures for the receipt, retention and treatment, on a confidential basis, of complaints received by the Company, including the Board and the Audit Committee, regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters. These procedures are described under “Communications With Our Board” below.

 

 

Certain Relationships and Related Person Transactions

 

 

Review and Approval of Related Person Transactions. In order to ensure that material transactions and relationships involving a potential conflict of interest for any executive officer or director of the Company are in the best interests of the Company, under the Code of Ethics adopted by the Board of Directors for all of our employees and directors, all such conflicts of interest are required to be reported to the Board of Directors, and the approval of the Board of Directors must be obtained in advance for the Company to enter into any such transaction or relationship. Pursuant to the Code of Ethics, no officer or employee of the Company may, on behalf of the Company, authorize or approve any transaction or relationship, or enter into any agreement, in which such officer, director or any member of his or her immediate family, may have a personal interest without such Board approval. Further, no officer or employee of the Company may, on behalf of the Company, authorize or approve any transaction or relationship, or enter into any agreement, if they are aware that an executive officer or a director of the Company, or any member of any such person’s family, may have a personal interest in such transaction or relationship, without such Board approval.

The Company’s Audit Committee reviews all conflict of interest transactions involving executive officers and directors of the Company, pursuant to its charter.

In the course of their review of a related party transaction, the Board and the Audit Committee considers:

 

 

the nature of the related person’s interest in the transaction;

 

 

the material terms of the transaction, including, without limitation, the amount and type of transaction;

 

 

the importance of the transaction to the Company;

 

 

the importance of the transaction to the related person;

 

 

whether the transaction would impair the judgment of the director or executive officer to act in the best interests of the Company; and

 

 

any other matters the Board or Committee deems appropriate.

Any member of the Board or the Audit Committee who has a conflict of interest with respect to a transaction under review may not participate in the deliberations or vote respecting approval of the transaction, provided, however, that such director may be counted in determining the presence of a quorum.

 

 

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Related Party Transactions. On January 25, 2008, the Company entered into a real estate lease with Kingstree Office I, LLC, an entity controlled by Mr. John Sykes, the Company’s founder and former Chief Executive Officer and Chairman, relating to the Company’s call center in Kingstree, South Carolina. On

May 21, 2008, the Audit Committee of the Board reviewed this transaction and recommended approval to the full Board, which also approved the transaction. During the year ended December 31, 2013, the Company paid $438,811 to Kingstree Office I, LLC as rent on the Kingstree facility.

 

 

Leadership Structure

 

 

Upon the 2004 retirement of Mr. John Sykes, the Board elected to change the leadership structure to separate the Chief Executive Officer position from that of the Chairman of the Board. The Board determined in 2005 that the change in leadership created an opportune time to change the leadership structure, and that the Company would benefit

from having an independent non-employee Chairman who could provide a diversity of view and experience in consultation with the newly elected President and Chief Executive Officer. The Board continues to believe that the Company is best served by having this bifurcated leadership structure.

 

 

Risk Oversight

 

 

The Board has determined that the role of risk oversight will currently remain with the full Board as opposed to having responsibility delegated to a specific committee. Management has created an enterprise risk management committee which

is primarily responsible for identifying and assessing enterprise risks, developing risk responses and evaluating residual risks. The chairperson of the management committee reports directly to the full Board.

 

 

Director Independence

 

In accordance with Nasdaq rules, the Board affirmatively determines the independence of each director and nominee for election as a director in accordance with guidelines it has adopted, which include all elements of independence set forth in the Nasdaq listing standards. Based upon these standards, at meetings held on March 19, 2014 and April 11, 2014, the Board determined that each of the following non-employee directors is independent and has no relationship with the Company, except as a director and shareholder of the Company:

 

(1)    Paul L. Whiting    (5)    James S. MacLeod
(2)    Lt. General Michael DeLong (Ret.)    (6)   

James K. Murray, Jr.

(3)   

William J. Meurer

   (7)    Lorraine L. Lutton (nominee)
(4)    Iain A. Macdonald    (8)    William D. Muir, Jr. (nominee)

In connection with its decision to nominate Mr. Muir and Ms. Lutton to stand for election at the Annual Meeting, the Board has affirmatively determined that each of these nominees is independent and has no relationship with the Company.

Nominations for Directors

 

 

The Nominating and Corporate Governance Committee (the “Nominating Committee”) is responsible for screening potential director candidates and recommending qualified candidates to the Board for nomination. The Nominating Committee considers all relevant criteria including, age, skill, integrity, experience, education, time availability, stock exchange listing standards, and applicable federal and state laws and

regulations. The Nominating Committee has a specific goal of creating and maintaining a board with the heterogeneity, skills, experience and personality that lend to open, honest and vibrant discussion, consideration and analysis of Company issues, and accordingly the Nominating Committee also considers individual qualities and attributes that will help create the desired heterogeneity.

 

 

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The Nominating Committee may use various sources for identifying and evaluating nominees for directors including referrals from our current directors, management and shareholders, as well as input from third party executive search firms retained at the Company’s expense. If the Nominating Committee retains one or more search firms, such firms may be asked to identify possible nominees, interview and screen such nominees and act as a liaison between the Nominating Committee and each nominee during the screening and evaluation process. The Nominating Committee will review the resume and qualifications of each candidate identified through any of the sources referenced above, and determine whether the candidate would add value to the Board. With respect to candidates that are determined by the Nominating Committee to be potential nominees, one or more members of the Nominating Committee will contact such candidates to determine the candidate’s general availability and interest in serving. Once it is determined that a candidate is a good prospect, the candidate will be invited to meet the full Nominating Committee which will conduct a personal interview with the candidate. During the interview, the Nominating Committee will evaluate whether the candidate meets the guidelines and criteria adopted by the Board, as well as exploring any special or unique qualifications, expertise and experience offered by the candidate and how such qualifications, expertise and/or experience may complement that of existing Board members. If the candidate is approved by the Nominating Committee, as a result of the Nominating Committee’s determination that the candidate will be able to add value to the Board and the candidate expresses his or her interest in serving on the Board, the Nominating Committee will then review its conclusions with the Board and recommend that the candidate be selected by the Board to stand for election by the shareholders or fill a vacancy or newly created position on the Board.

Mr. H. Parks Helms and Dr. Linda McClintock-Greco, whose terms are expiring at this meeting, and who have served on the Board for 37 years and 16 years respectively, have notified the Board that they will retire and not stand for re-election this year. The remaining two Class I directors whose terms expire at the Annual Meeting have each been recommended to the Board by the Committee, and nominated by the Board to stand for re-election. The Committee also recommended to the Board, and the Board has nominated, William D. Muir, Jr. and Lorraine Leigh Lutton for election as new directors. Both Mr. Muir and Ms. Lutton were recommended to the Committee for consideration by non-management members of our Board of Directors.

The Committee will consider qualified nominees recommended by shareholders who may submit

recommendations to the Nominating Committee in care of our Corporate Secretary, 400 North Ashley Drive, Tampa, Florida 33602. Any shareholder nominating an individual for election as a director at an annual meeting must provide written notice to the Secretary of the Company, along with the information specified below, which notice must be received at the principal business office of the Company no later than the date designated for receipt of shareholders’ proposals as set forth in the Company’s proxy statement for its annual shareholders’ meeting. If there has been no such prior public disclosure, then to be timely, a shareholder’s nomination must be delivered to or mailed and received at the principal business office of the Company not less than 60 days nor more than 90 days prior to the annual meeting of shareholders; provided, however, that in the event that less than 70 days notice of the date of the meeting is given to the shareholders or prior public disclosure of the date of the meeting is made, notice by the shareholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the annual meeting was mailed or such public disclosure was made.

To be considered by the Nominating Committee, shareholder nominations must be accompanied by: (1) the name, age, business and residence address of the nominee; (2) the principal occupation or employment of the nominee for at least the last ten years and a description of the qualifications of the nominee; (3) the number of shares of our stock that are beneficially owned by the nominee; (4) any legal proceedings involving the nominee during the previous ten years and (5) any other information relating to the nominee that is required to be disclosed in solicitations for proxies for election of directors under Regulation 14A of the Exchange Act, together with a written statement from the nominee that he or she is willing to be nominated and desires to serve, if elected. Also, the shareholder making the nomination should include: (1) his or her name and record address, together with the name and address of any other shareholder known to be supporting the nominee; and (2) the number of shares of our stock that are beneficially owned by the shareholder making the nomination and by any other supporting shareholders. Nominees for director who are recommended by our shareholders will be evaluated in the same manner as any other nominee for director.

We may require that the proposed nominee furnish us with other information as we may reasonably request to assist us in determining the eligibility of the proposed nominee to serve as a director. At any meeting of shareholders, the Chairman of the Board may disregard the purported nomination of any person not made in compliance with these procedures.

 

 

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Communications with our Board

 

 

Shareholders and other parties interested in communicating with our Board of Directors may do so by writing to the Board of Directors, Sykes Enterprises, Incorporated, 400 N. Ashley Drive, Tampa, Florida 33602. Under the process for such communications established by the Board of Directors, the Executive Vice President and General Counsel of the Company reviews all such correspondence and regularly forwards to all members of the Board a summary of the correspondence. Directors may at any time review a log of all correspondence received by the Company that is addressed to the Board or any member of the Board and request copies of any such correspondence. Correspondence that, in the opinion of the Executive Vice President and General Counsel,

relates to concerns or complaints regarding accounting, internal accounting controls and auditing matters is summarized and the summary and a copy of the correspondence is forwarded to the Chairman of the Audit Committee. Additionally, at the direction of the Audit Committee, the Company has established a worldwide toll free hotline administered by an independent third party through which employees may make anonymous submissions regarding questionable accounting or auditing matters. Reports of any anonymous submissions are sent to the Chairman of the Audit Committee as well as the Executive Vice President and General Counsel of the Company.

 

 

Meetings and Committees of the Board

 

 

The Board. Each director is expected to devote sufficient time, energy and attention to ensure diligent performance of his or her duties and to attend all Board, committee and shareholders’ meetings. The Board met five times during 2013, of which four were regularly scheduled meetings and

one was an unscheduled meeting. All directors attended at least 75% of the meetings of the Board and of the committees on which they served during the fiscal year ended December 31, 2013. All of the directors attended the 2013 Annual Meeting of Shareholders on May 21, 2013.

 

 

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Committees of the Board

 

 

The Board has four standing committees to facilitate and assist the Board in the execution of its responsibilities. The Board may also establish special committees as needed to assist the Board with review and consideration of non-routine matters. The standing committees are the Audit Committee, Finance Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. All the committees are comprised solely of non-employee,

independent directors. Charters for each committee are available on the Company’s website at www.sykes.com by first clicking on “Investor Relations” and then on “Corporate Governance.” The charter of each committee is also available in print to any shareholder who requests it. The table below shows membership for the entire year 2013 for each of the standing Board committees.

 

 

Non-employee Directors  

Audit

Committee

 

Finance

Committee

 

Nominating and

Corporate
Governance
Committee

  Compensation
Committee

Paul L. Whiting (Chairman of the Board)

  ü      

Lt. General Michael P. DeLong (Ret.)*

      ü   ü

Dr. Linda McClintock-Greco

      ü  

H. Parks Helms

      Chair  

Iain A. Macdonald

  ü   ü    

James S. MacLeod

  ü   ü     Chair

William J. Meurer

  Chair   ü    

James K. Murray

      Chair       ü
Employee Director                    

Charles E. Sykes

No. of Meetings in 2013

  8   2   4   6

 

* Gen. DeLong was a member of the Compensation Committee from 5/21/13 to 12/31/13.

 

Audit Committee. The Audit Committee serves as an independent and objective party to monitor the Company’s financial reporting process and internal control system. The Committee’s responsibilities, which are discussed in detail in its charter, include, among other things, the appointment, compensation, and oversight of the work of the Company’s independent auditing firm, as well as reviewing the independence, qualifications, and activities of the auditing firm. The Company’s independent auditing firm reports directly to the Committee. All proposed transactions between the Company and the Company’s officers and directors, or an entity in which a Company officer or director has a material interest, are reviewed by the Committee, and the approval of the Committee is required for such transactions. In 2013, the Audit Committee held eight meetings. The Board has determined that Mr. Meurer is an “audit committee financial expert” within the meaning of the rules of the Securities and Exchange Commission. The Committee is governed by a written charter, which is reviewed on an annual basis. Additional information about the Audit Committee is included

under the heading “Audit Committee Disclosure” later in this proxy statement.

Finance Committee. The principal purpose of the Finance Committee is to assist the Board of Directors in evaluating significant investments and other financial commitments by the Company. The Committee has the authority to review and make recommendations to the Board with respect to debt and equity limits, equity issuances, repurchases of Company stock or debt, policies relating to the use of derivatives, and proposed mergers, acquisitions, divestitures or investments by the Company that require approval by the full Board. The Committee also has authority to approve capital expenditures not previously approved by the Board of Directors. The level of authority applies to capital expenditures in excess of $2 million but less than $5 million. This authority is used, and the Committee convened only, when management recommends a decision prior to the next Board meeting. In 2013, the Finance Committee held 2 meetings. The Committee is governed by a written charter, which is reviewed on an annual basis.

 

 

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Nominating and Corporate Governance Committee. The purpose of the Nominating and Corporate Governance Committee is to: (a) identify individuals qualified to become members of the Board of Directors of the Company and its subsidiaries; (b) recommend to the Board of Directors director nominees for election at the annual meeting of shareholders or for election by the Board of Directors to fill open seats between annual meetings; (c) recommend to the Board of Directors committee appointments for directors; (d) develop and recommend to the Board of Directors corporate governance guidelines applicable to the Company; and (e) monitor the Company’s compliance with good corporate governance standards. In 2013, the Nominating and Corporate Governance Committee held four meetings. The Committee is governed by a written charter, which is reviewed on an annual basis.

Compensation Committee. The Compensation Committee’s responsibilities, which are discussed in detail in its charter,

include, among other things, the establishment of the base salary, incentive compensation and any other compensation for the Company’s President and Chief Executive Officer, and to review and approve the President and Chief Executive Officer’s recommendations for the compensation of certain executive officers reporting to him. This Committee also monitors the Company’s management incentive cash and equity based bonus compensation arrangements and other executive officer benefits, and evaluates and recommends the compensation policy for the directors to the full Board for consideration. The Committee also determines compensation and benefits of the Company’s non-employee directors. This Committee is also responsible for providing oversight and direction regarding the Company’s employee health and welfare benefit programs. In 2013, the Committee held six meetings. The Committee is governed by a written charter, which is reviewed on an annual basis.

 

 

Compensation Committee Interlocks and Insider Participation.

 

None.

 

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DIRECTOR COMPENSATION

Directors who are executive officers of the Company receive no compensation for service as members of either the Board of Directors or any committees of the Board.

Fifth Amended and Restated 2004 Non-Employee Director Fee Plan

 

 

On May 17, 2012, the shareholders approved the Fifth Amended and Restated 2004 Non-Employee Director Fee Plan (the “2004 Fee Plan”) providing that the annual cash and equity retainer compensation amounts payable to directors under the 2004 Fee Plan would be determined by the Board of Directors on an annual basis. The 2004 Fee Plan provides that all new non-employee directors joining the Board will receive an initial grant of shares of common stock on the date the new director is elected or appointed, the number of which will be determined by dividing $60,000 by the closing price of the Company’s common stock on the trading day immediately preceding the date a new director is elected or appointed, rounded to the nearest whole number of shares. The initial grant of shares vests in twelve equal quarterly installments, one-twelfth on the date of grant and an additional one-twelfth

on each successive third monthly anniversary of the date of grant. The award lapses with respect to all unvested shares in the event the non-employee director ceases to be a director of the Company, and any unvested shares are forfeited.

The 2004 Fee Plan also provides that each non-employee director will receive, on the day after the annual shareholders meeting, an annual retainer for service as a non-employee director (the “Annual Retainer”). The Annual Retainer consists of shares of the Company’s common stock and cash. For 2013, the total value of the Annual Retainer was $125,000, payable $50,000 in cash and the remainder paid in stock, the amount of which was determined by dividing $75,000 by the closing price of the Company’s common stock on the date of the annual meeting of shareholders, rounded to the nearest whole number of shares.

 

 

In addition to the Annual Retainer award, the 2004 Fee Plan also provides for any non-employee Chairman of the Board to receive an additional annual cash award of $100,000, and each non-employee director serving on a committee of the Board to receive an additional annual cash award in the following amounts:

 

Position    Amount  

Audit Committee

  

Chairperson

   $ 20,000   

Member

   $ 10,000   

Compensation Committee

  

Chairperson

   $ 15,000   

Member

   $ 7,500   

Finance Committee

  

Chairperson

   $ 12,500   

Member

   $ 7,500   

Nominating and Corporate Governance Committee

  

Chairperson

   $ 12,500   

Member

   $ 7,500   

 

The annual grant of shares vests in four equal quarterly installments, one-fourth on the day following the annual meeting of shareholders, and an additional one-fourth on each successive third monthly anniversary of the date of grant. The annual grant of cash, including all amounts paid to a non-employee Chairman of the Board and all amounts paid to non-employee directors serving on committees of the Board, vests in four equal quarterly installments, one-fourth on the day following the annual meeting of shareholders, and an additional one-fourth on each successive third monthly

anniversary of the date of grant. The award lapses with respect to all unpaid cash and unvested shares in the event the non-employee director ceases to be a director of the Company, and any unvested shares and unpaid cash are forfeited. At the Board’s regularly scheduled meeting on March 19, 2014, upon the recommendation of the Compensation Committee, the Board determined that its compensation for the next fiscal year beginning on the date of the 2014 annual shareholder meeting would remain unchanged from 2013 levels. As the 2004 Fee Plan will

 

 

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terminate in May, 2014, prior to the Annual Meeting, it is anticipated that such equity grants to non-employee directors will be made under the Company’s 2011 Equity Incentive Plan.

The Board may pay additional cash compensation to any non-employee director for services on behalf of the Board over and above those typically expected of directors, including but not limited to service on a special committee of the Board.

 

 

The following table contains information regarding compensation paid to the non-employee directors during fiscal year ending December 31, 2013, including cash and shares of the Company’s common stock.

 

(a)

   (b)      (c)      (d)      (e)      (f)      (g)      (h)  
Name   

Fees Earned
or Paid in
Cash

($)(1)

    

Stock
Awards

($)(2)

    

Option
Awards

($)

    

Non-Equity
Incentive Plan
Compensation

($)

    

Change in
Pension

Value and
Nonqualified
Deferred
Compensation
Earnings

($)

    

All Other
Compensation

($)

    

Total

($)

 

Mark C. Bozek

     14,375                                                 14,375   

Lt. General Michael DeLong (Ret.)

     61,250         75,007                                         136,257   

H. Parks Helms

     62,500         75,007                                         137,507   

Iain A. Macdonald

     67,500         75,007                                         142,507   

James S. MacLeod

     82,500         75,007                                         157,507   

Linda McClintock-Greco, M.D.

     57,500         75,007                                         132,507   

William J. Meurer

     77,500         75,007                                         152,507   

James K. Murray, Jr.

     70,000         75,007                                         145,007   

Paul L. Whiting

     160,000         75,007                                         235,007   

 

(1) 

Amounts shown include the cash portion of the annual retainers and amounts paid for services on Board committees paid to each non-employee director in 2013. The fees earned by Mr. Whiting include $100,000 for service as non-employee Chairman of the Board.

(2) 

The amounts shown in column (c) represent the Annual Retainer amounts paid in shares of the Company’s common stock. The amounts are valued based on the aggregate grant date fair value of the awards in accordance with FASB ASC Topic 718 (formerly FAS 123(R)). See Notes 1 and 26 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 filed on February 20, 2014 for a discussion of the relevant assumptions used in calculating the grant date fair value in accordance with FASB ASC Topic 718.

 

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COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

 

This Compensation Discussion and Analysis (this “CD&A”) is intended to assist our shareholders in understanding the compensation of our 2013 named executive officers (“NEOs”) and includes the following individuals:

 

Name    Title

Charles E. Sykes

   President and Chief Executive Officer (“CEO”)

W. Michael Kipphut

   Former Executive Vice President and Chief Financial Officer

Christopher M. Carrington

   Executive Vice President of Global Delivery

Lawrence R. Zingale

   Executive Vice President and General Manager of Major Markets

James T. Holder

   Executive Vice President, General Counsel and Corporate Secretary

Sykes is a complex global business serving sophisticated and demanding clients. Our business and financial strategies require careful expense management while providing superior customer service and value. This requires experienced executive leadership with sound business judgment, a passion for service excellence, and the ability to understand and implement the Company’s strategic growth plan, including leveraging our proprietary technology and effectively managing our global customer response team.

The primary and overriding objective of the Compensation Committee of the Board (the “Committee”) in determining our executive compensation is to align the elements of our executive compensation program with the interests of our shareholders, with the ultimate goal being to increase and optimize shareholder value. Our executive compensation program aligns our business strategy and talent requirements with our goal of maximizing shareholder value by offering sufficiently competitive fixed compensation elements (such as base salary) to attract and retain talented executives while simultaneously emphasizing variable, “at risk,” compensation elements (such as short-term and long-term performance- and time-based incentive awards) to drive targeted performance and reward results in order to enhance long-term shareholder value.

The following are a few key financial and operating results, as well as the resulting incentive compensation results for 2013 and the 2011 – 2013 performance period:

2013 Financial and Compensation Results

 

 

Revenues for 2013 increased 12% year over year to $1.264 billion. On a constant currency basis,* and

 

* See the Company’s Current Report on Form 8-K filed with the SEC on February 18, 2014, for a reconciliation of these Non-GAAP (generally accepted accounting principles) financial measures to their most directly comparable GAAP financial measures.
 

excluding revenue attributable to our acquisition of Alpine Access, Inc. in August of 2012 (which contributed only partially to revenues in 2012), revenues for 2013 increased 5.9% year over year. Revenue is not a determinate for short-term incentive compensation, but is for long-term incentive compensation.

 

 

Adjusted Operating Income* for 2013 increased 5.2% year over year to $72.9 million. Short-term incentive compensation for the year 2013 was based solely on Adjusted Operating Income targets, which were earned at 92.8% of the target award opportunity resulting in a payout of only 82% of the target award opportunity.

2011 – 2013 Financial and Compensation Results

 

 

Cumulative revenue for the 2011 – 2013 performance period was $3.56 billion, which fell below the threshold performance requirement for a payout under the terms of the award for the 2011 – 2013 performance period.

 

 

Cumulative Adjusted Operating Income for the 2011 – 2013 performance period was $225 million, which fell below the threshold performance requirement for a payout under the terms of the award for the 2011 – 2013 performance period.

 

 

Based on the above revenue and Adjusted Operating Income measures, the performance shares tied to the 2011 – 2013 performance period were not earned by the named executive officers (“NEOs”) and have therefore been cancelled.

 

 

Many of the time-vested stock appreciation rights (“SARs”) granted in recent years were in the money at year end.

The Company’s adjustments to its executive compensation program have resulted in a strong linkage between pay and performance. While the Company’s financial performance in 2013 met the Board’s short-term performance targets, its long-term performance fell below the Board’s more demanding long-term performance targets for the 2011 –2013 performance period.

The Company uses Adjusted Operating Income as a performance measure in order to eliminate certain one-time or non-performance related items. The Company defines “Adjusted Operating Income” as operating income less:

 

 

depreciation and amortization related to asset write-ups in connection with acquisitions;

 

 

costs to obtain synergies in connection with acquisitions;

 

 

transaction costs associated with entity acquisitions and dispositions;

 

 

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restructuring and impairment charges related to acquisitions and dispositions referenced above; and

 

 

any effect (positive or negative) from foreign currency exchange rate fluctuations.

2014 Compensation Decisions

The Committee approved changes to the Company’s executive compensation long-term incentive program (“LTIP”) in 2014 and continues to believe that the current executive compensation program creates a strong alignment between pay and performance. Accordingly, after deliberation with the CEO and with the Committee’s independent compensation advisor, the Committee recommended to the Board that for 2014 it retain its incentive compensation structure to include short-term (one-year) performance-based cash incentives, and long-term (three-year) performance-based equity incentives, with payment dependent on achievement of pre-determined revenue and income targets. The Committee also recommended, and the Board approved, the following compensation policies for 2014:

 

 

Because the NEOs did not receive salary increases in 2013, the Committee approved moderate increases (below 5% of the base salary of each of the NEOs during 2014), with the goal of keeping base salaries of the NEOs near the 50th percentile of base pay of the Company’s Compensation Peer Group (as discussed below).

 

There will be no increases to short-term incentive opportunities.

 

 

There will be no increases to long-term incentive opportunities, with the goal of retaining a long-term incentive plan that is highly performance-based. Accordingly, the LTIP for 2014 – 2016 will consist of the following elements:

g      20% of the grant consisting of restricted stock with time-based vesting, which will increase or decrease in value based on changes in the Company’s stock price over time;

g      30% of the grant consisting of SARs with time-based vesting, which are only valuable to our executives if our stock price rises above the value of our stock on the date of grant; and

g      50% of the grant consisting of performance shares, with their value tied to challenging three-year financial performance targets, 1/3 of which are based on the Company’s revenue and 2/3 of which are based on the Company’s Adjusted Operating Income.

 

 

As the Company’s size and complexity has made achievement of the Board’s current maximum performance range thresholds for short-term and long-term incentive opportunities increasingly more difficult to achieve, the Committee adjusted the maximum performance range thresholds from 150% of target to 120% of target for both its short-term and long-term incentive opportunities in 2014.

 

 

Compensation Philosophy and Objectives

 

 

The Committee believes that the most effective executive compensation program is one that is designed to enhance shareholder value by attracting and retaining the talent and experience best suited to manage, guide and build our business. This requires fair and competitive base salaries and benefits designed to attract qualified executives, as well as carefully designed incentive compensation programs to link the interests of the executives to the long-term interests of our shareholders.

In evaluating and determining the complete compensation packages for the Company’s executive officers generally, and the NEOs specifically, the Committee reviews relevant market data provided by its outside independent compensation consultant, which includes an evaluation of the executive compensation packages paid to similarly situated executives of similarly situated companies. Although the market pay data is only one of many factors considered when making executive compensation determinations, the Committee generally seeks to position pay opportunities within a range of 80% to 120% of the 50th percentile pay level of similarly

situated executives. However, variations from this objective may occur as dictated by the experience level of the individual executive.

A significant percentage of the target total compensation to our NEOs and other executive officers consists of performance-based incentives which align the interests of our executives with those of our shareholders. Although there is no pre-established policy for the allocation between either cash and non-cash or short-term and long-term performance-based incentive compensation, in 2013 the Committee continued the basic structure utilized in recent years, which determined performance-based incentives as a percentage of base salary, which percentage was validated against current market pay data. A significant percentage of the target total direct compensation to our executive officers is in the form of non-cash, long-term equity incentive awards. A chart showing the relative percentages between base salary and target short-term and long-term incentive compensation of the NEOs for 2013 is included below in the section of this CD&A entitled “Elements of Compensation.”

 

 

 

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Roles and Responsibilities in Determining Executive Compensation

 

 

The Role of the Compensation Committee. The Committee has been charged with the responsibility for establishing, implementing and continually monitoring adherence with the Company’s compensation philosophy. The Committee’s goal is to ensure that the form and amount of compensation and benefits paid to our executive team, specifically including the NEOs, is fair, reasonable and sufficiently competitive to attract and retain high quality executives who can lead the Company to achieve the goals that the Board believes will maximize shareholder value. For executives other than the CEO, executive compensation matters are first considered by the Committee, which then makes recommendations to the Board. The Board then considers and approves the Committee’s recommendations or disapproves the Committee’s recommendations and instructs the Committee to revise its compensation recommendations. As it relates to the compensation of the Company’s CEO, the Committee meets first with the CEO to obtain information regarding performance, objectives and expectations, discusses the matter with the Board and then makes a final compensation determination. The CEO is not present during voting or any deliberations regarding his compensation.

The Role of the Chief Executive Officer. The Committee meets periodically with the CEO to discuss and review executive compensation. The CEO provides the Committee with the appropriate business context for executive compensation decisions as well as specific recommendations for each of the executives, including the NEOs. Additionally, the Chairman of the Committee meets periodically with the CEO to discuss the Committee’s views on the CEO’s compensation and proposals for adjustments to be considered by the Committee.

The Role of Senior Management. The Committee periodically meets with representatives of our Human Resources, Finance, and Legal departments. These individuals provide the Committee with requested data, information, and advice regarding our executive compensation program, specifically with regard to incentive plan designs, performance measures and goals, and disclosure. These representatives are not involved in conversations regarding their own compensation.

The Role of Outside Independent Consultants. In accordance with the Committee’s charter, the Committee has the authority to retain any outside counsel, consultants or other advisors to the extent deemed necessary and appropriate, including the sole authority to approve the terms of engagement and fees related to services provided. Since 2010, the Committee has utilized Pearl Meyer & Partners (“PM&P”) as its independent executive compensation consultant.

During 2013, at the Committee’s request, PM&P provided the following services:

 

 

Attended all Committee meetings. When appropriate, the Committee has discussions with its consultant without management present to ensure candor and impartiality;

 

 

Provided research, market data, survey information and design expertise to assist the Company develop executive and director compensation programs;

 

 

Advised the Committee on all principal aspects of executive and director compensation, including the competitiveness of program design and award values; and

 

 

Provided specific analyses with respect to the compensation of the Company’s executive officers.

PM&P is directly engaged by, and its activities are dictated by, the Committee. PM&P and its affiliates provide services only to the Committee and are prohibited from providing services or products of any kind to the Company. PM&P has certified to the Committee that neither it, nor any of the individuals providing services to the Committee on its behalf, have any business or personal relationship with any of the directors or executive officers of the Company, and has further certified that the compensation it receives for its services to the Committee comprised less than 1% of its total revenue for 2013.

In 2013, the Committee assessed the independence of PM&P and considered whether its work raised any conflicts of interest, taking into consideration the independence factors set forth in the NASDAQ listing rules. Based on that assessment, the Committee determined that PM&P was independent and that its work did not raise any conflicts of interest.

The Role of Peer Group Data. In making its compensation decisions for 2013, the Committee compared the Company’s pay and performance levels against a peer group of twelve publicly traded companies which the Committee believes compete with the Company in the customer contact management industry for executive talent (the “Compensation Peer Group”). PM&P and the Committee annually review the composition of the Compensation Peer Group is to determine whether there are new companies which should be added, or existing companies which should be deleted. For its analysis in 2013, the Committee replaced two companies in the Compensation Peer Group from those used in 2012 due to the fact that one had been acquired by another entity and one had decreased in relative size to an extent that comparisons to the Company were no longer deemed valid.

 

 

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The companies included in the Compensation Peer Group and used as the basis for comparison and analysis by the Committee with respect to 2013 compensation decisions were:

 

 

Genpact Limited

 

Kforce Inc.

 

Convergys Corporation

 

FTI Consulting, Inc.

 

West Corporation

 

Ciber, Inc.

 

Alliance Data Systems Corporation

 

TeleTech Holdings, Inc.

 

Acxiom Corporation

 

CDI Corp.

 

Syntel, Inc.

 

ExlService Holdings, Inc.

As in prior years, the Compensation Peer Group analysis and data are one of many factors considered by the Committee and the Board in making its final pay determinations. Other important factors include the current and expected performance of the Company, the current and expected performance of the executive and ensuring that our executive compensation program is internally consistent and equitable.

 

 

Executive Compensation Analysis

 

 

As in prior years, the Committee requested, reviewed, and discussed an independent analysis of the Company’s executive compensation program provided by PM&P. The analysis included a review of compensation competitiveness, pay and performance alignment, our LTIP design, and an overall risk assessment of the executive compensation program. The following were the significant findings from this analysis:

 

 

Base salaries were generally positioned at the 50th percentile of our Compensation Peer Group;

 

 

Target total cash compensation (salary plus target short-term incentive opportunity) was generally positioned at the 50th percentile of our Compensation Peer Group;

 

 

Long-term incentive grant values were positioned near the 75th percentile of our Compensation Peer Group, but the aggregate equity grant rate (as a percent of shares outstanding) was below the 25th percentile of our Compensation Peer Group;

 

 

Total direct compensation (target total cash compensation plus long-term incentive grant value) was positioned slightly above the 50th percentile of our Compensation Peer Group;

 

 

Company performance (across a variety of financial and operating metrics) on a 1-year and 3-year basis was generally positioned at the 75th percentile; and

 

 

The overall program strikes a balance between risks and rewards, and is not believed to encourage executives to take undue risks that could materially harm the Company.

The above analysis reflects our executive team in the aggregate. As expected, there is variation by executive (with regard to pay competitiveness) and by performance measure (with regard to relative performance). This analysis was

completed in August 2012 and was one of many inputs into the Committee’s decisions with regard to our 2013 executive compensation program.

Results of the 2013 Shareholder Advisory Vote to Approve Compensation of Our NEOs. At our 2013 Annual Meeting of Shareholders, our shareholders had the opportunity to cast an advisory vote to approve the compensation of our named executive officers as disclosed in our 2013 Proxy Statement. Approximately 82.5% of the votes cast on this proposal voted to approve, on an advisory basis, the 2012 compensation of our named executive officers. The Committee believes that the results of this vote indicate that our shareholders generally support our executive compensation program. The Committee considered that support when making executive compensation decisions for fiscal 2013. As a result, the Committee recommended that the executive compensation structure for 2013 remain substantially the same, utilizing a combination of base salary, short-term incentive and long-term incentive compensation, with total compensation being weighted heavily toward equity-based compensation. The Committee did recommend, and the Board approved for 2013, the addition of time-based restricted stock to the mix of long-term compensation and also increased the grant values and maximum earning potential for equity incentive compensation for the executive officers, including the NEOs. The long-term equity incentive compensation program designs for performance cycles beginning in 2011, 2012 and 2013 are shown below in the tables under the heading “Performance-Based, Long-Term Equity Incentive Compensation” in this CD&A. The Committee will continue to monitor and consider the outcome of shareholder advisory votes when making future decisions regarding our executive compensation program.

 

 

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Elements of Compensation

 

 

The compensation program for our executives includes several direct compensation components. Those components are base salary, annual cash incentive awards and equity-based incentive awards, which are granted in the form of time-based restricted stock (or restricted stock units), performance–based restricted stock (or restricted stock units), and time-based SARs. Our executives are also permitted to

participate in our 401(k) plan which is available to all employees, as well as our non-qualified executive deferred compensation plan. The purpose of the deferred compensation plan is to provide our executives with the ability to take advantage of tax deferred savings which may not be fully available to them under our 401(k) plan.

 

 

The relative percentages between base salary, annual cash incentive targets and long-term, equity-based incentive targets as compared to total target compensation for the NEOs for 2013 were as follows:

 

Name      Total Direct
Compensation
       Base
Salary
       Annual
Cash
Incentive
       Long-Term
Equity
Incentive
 

Charles E. Sykes

       100%           20%           20%           60%   

W. Michael Kipphut

       100%           32%           23%           45%   

Christopher M. Carrington

       100%           32%           23%           45%   

Lawrence R. Zingale

       100%           32%           23%           45%   

James T. Holder

       100%           45%           23%           32%   

 

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The key elements of our 2013 executive compensation program were as follows:

 

Type of
Compensation

 

 

Element of
Compensation

 

 

Description

 

 

Rationale

 

  Target
Positioning
within
Compensation
Peer Group

 

Base Salary

     

   Fixed amount of annual cash compensation

 

   Attracts and retains talented, experienced executives

 

 

 

 

 

Near market mean (50th percentile)

 

 

 

 

Short-Term

Incentive Awards

 

 

 

Annual Performance-Based Cash Incentive Award

 

    Variable cash amount based on achievement of Company (and sometimes individual) performance goals

   Award value based on a percentage of the executive’s base salary and achievement of Adjusted Operating Income performance targets

   Threshold performance paid out at 50% of target, maximum performance paid out at 150% of target

 

 

   Motivates executives to achieve and exceed annual goals

    Attracts talent by offering a compensation opportunity that awards performance

   Maximizes short-term profitability and drives shareholder value

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-Term

Incentive Awards

 

 

 

Stock Appreciation Rights

 

    Entitles recipient to receive, at the time of exercise, shares with a market value equal to the difference between the exercise price of the SARs (the closing price of the underlying shares on the grant date) and the market price of the underlying shares on the date of exercise

   Vest ratably over a three-year period

 

 

   Value tied to the appreciation of the value of our Common Stock

    Balances short-term and long-term decision making

 

 

 

 

 

 

 

 

 

 

 

Up to 75th percentile of the market, but balanced with low equity grant rate

  Time-Based Restricted Stock (or Stock Unit) Awards  

    New share-based element of incentive compensation for fiscal 2013

   Vest ratably over a three-year period

 

 

 

   Time-based vesting blends a short-term award with long-term incentive

   Rewards longevity

 
 

 

 

 

 

 

Performance-Based Restricted Stock (or Stock Unit) Awards

 

    Variable amount of shares paid out to the executive at the end of a three-year performance period

   Award value based on a percentage of the executive’s base salary in the year of grant and achievement of revenue and Adjusted Operating Income performance targets

    1/3 of the amount of shares paid out are tied to gross revenue, 2/3 of the shares paid out are tied to Adjusted Operating Income

   Threshold performance (95% of target performance measures) paid out at 50% of the target payout, maximum performance (110% of target performance measures) paid out at 200% of target payout

 

 

 

 

 

   Rewards achievement of long-term performance goals

    Balances short-term and long-term decision making

   Maximizes long-term profitability and drives shareholder value

 

Base Salary

 

Base salary is designed to provide each of our NEOs with a fixed amount of annual compensation that is competitive with the marketplace. Base salaries for the NEOs are determined for each executive based on his or her position and responsibility, and are further informed by using market data provided to the Committee by PM&P. Base salary ranges of our executives are designed so that salary opportunities for a given position will be approximately between 80% and 120%

of the 50th percentile pay level of our Compensation Peer Group. During its review of base salaries for executives, the Committee primarily considers:

 

 

the market data provided by PM&P;

 

 

internal review of the executive’s compensation, both individually and relative to other officers; and

 

 

individual performance of the executive.

 

 

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Salary levels are typically considered annually as part of the Company’s performance review process as well as upon a promotion or other change in job responsibility. Merit-based increases to the base salaries of our executive leadership team, other than the President and CEO, are based on the Committee’s assessment of the individual’s performance, with input from the President and CEO. Merit increases for the President and CEO are determined by the Committee based upon the Committee’s assessment of performance, with input from the Board, and after consultation with PM&P. Based upon a combination of all the foregoing factors, the Committee made no salary adjustments for the NEOs in 2013.

Performance-Based Annual Cash Incentive Compensation

The annual cash incentive component of the total direct compensation paid to our executive leadership team is designed to:

 

 

Reward achievement of pre-determined annual corporate (and sometimes individual) performance goals;

 

 

Reward current performance by basing payment on the achievement of quantifiable performance measures that reflect contributions to the success of our business; and

 

 

Encourage actions by the executives that contribute directly to our operating and financial results.

In fiscal year 2013, the annual cash incentive opportunity for the President and CEO and all other executive officers was determined based solely upon the achievement of pre-determined corporate financial goals.

At the beginning of the year, the Committee sets minimum, target and maximum levels for the portion of the cash incentive component of total direct compensation that is determined by reference to corporate financial performance. Threshold performance represents the minimum performance that still warrants incentive recognition for that particular goal

and maximum performance represents the highest level likely to be attained. No annual performance-based cash incentive compensation determined by reference to corporate financial performance is paid to any executive of the Company if our financial results do not exceed the threshold determined for that year.

At the beginning of each year, the Committee also sets the award percentage tied to salary for the President and CEO and recommends an award percentage for each of the other members of the executive leadership team that they will receive if the performance goals are met. The Committee’s goal in setting target award levels is to create a compensation program such that the potential incentive awards, when combined with each officer’s base salary, will provide a fully competitive total cash compensation opportunity, with the portion of compensation “at risk” (i.e., the target award level) being reflective of the level of that officer’s accountability for contributing to the Company’s bottom line financial results, and the degree of influence that officer has over results. In setting these percentages, the Committee considers these factors as well as data from the market assessment provided by PM&P.

For 2013, the Committee met with management and reviewed the Company’s operating plan for 2013 to establish the target financial goals of the Company on which the annual performance-based cash incentive compensation awards would be based. The performance measure selected for the 2013 short-term incentive plan was Adjusted Operating Income.

The Committee believes that Adjusted Operating Income, as defined, is an effective and appropriate measure of the Company’s operating performance on an annual basis to use in its evaluation of executive compensation. The performance target for 2013 was Adjusted Operating Income of $77.1 million. The Company’s actual Adjusted Operating Income for 2013 was $71.571 million. This performance result yielded a short-term incentive payout equal to 82% of the targeted payout for each participant.

 

 

The Company’s 2013 annual incentive plan compensation is summarized in the table below:

 

Named Executive Officer    Base
Salary
     Threshold
Award
Percentage*
     Target
Award
Percentage*
     Maximum
Award
Percentage*
     Target
Annual
Incentive
Award
     2013
Annual
Cash
Incentive
Award
     2013 Award
Percentage*
 

Charles E. Sykes

   $ 624,999         50%         100%         150%       $ 624,999       $ 512,499         82%   

W. Michael Kipphut

   $ 424,299         35%         70%         105%       $ 297,009       $ 243,548         57%   

Christopher M. Carrington

   $ 425,006         35%         70%         105%       $ 297,504       $ 304,645         57%   

Lawrence R. Zingale

   $ 400,005         35%         70%         105%       $ 280,004       $ 261,243         57%   

James T. Holder

   $ 306,342         25%         50%         75%       $ 153,171       $ 125,600         41%   

 

* As a percentage of the respective NEO’s base salary.

 

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Discretionary Bonuses

The Committee believes that discretionary bonuses should be a rare occurrence because such bonuses do not support our philosophy of aligning the long-term interests of our executive officers with those of our shareholders. Consistent with its past practices, the Committee did not award any discretionary bonuses to any of the NEOs for 2013 performance.

Performance-Based, Long-Term Equity Incentive Compensation

The performance-based, long-term equity incentive compensation component of total direct compensation for our executive officers is designed to encourage them to focus on long-term Company performance and provides an opportunity for executive officers and certain designated key employees to increase their ownership stake in the Company. The Committee utilizes a combination of time-based restricted stock (or restricted stock units for executives and key employees in foreign countries who would incur unfavorable tax consequences due to local tax laws if they were to receive restricted stock), performance-based restricted stock (or restricted stock units) and time-based SARs. The Committee believes these components of performance-based, long-term equity incentive compensation directly align the interests of the Company’s executive officers with the interests of its shareholders by requiring achievement of both long-term operating results that are the drivers of long-term value creation and actual increases in the Company’s stock price. For 2013, the grant mix for the NEOs was as follows:

 

LOGO

The performance-based restricted stock award is earned based on cumulative performance over a 3-year performance

period. The time-based restricted stock award and SARs vest ratably over a 3-year period (i.e., 1/3 of the award vests at the end of the first year of the period, 1/3 vests at the end of the second year of the period and 1/3 vests at the end of the third year of the period).

The Committee’s goal in setting target long-term equity incentive award levels is to create a complete compensation program, such that the potential annual cash and long-term equity incentive awards, when combined with each officer’s base salary, will provide a fully competitive total compensation opportunity, with a significant portion of “at risk” compensation. In setting award percentages (which are tied to salary), the Committee considers the level of each executive officer’s accountability for contributing to bottom line financial results, and the degree of influence that executive officer has over results, as well as data from the market assessment provided by PM&P.

With respect to the performance-based restricted stock, the Committee meets with management each year to review the proposed operating plan for the upcoming year, and in conjunction with the Board’s approval of its operating plan, together with growth goals for the succeeding two years, sets the financial targets for the next three-year performance cycle. The Committee first utilized this method for determining long- term incentive compensation on a three-year performance cycle for the performance cycle beginning January 1, 2005 and has continued utilizing this method for the three-year performance period beginning in 2013. The performance-based restricted stock awards are paid out at 50% of target payout for attaining 95% of the target performance measure (the threshold performance goal) and at 200% of the target payout for attaining 110% of target performance measure (the maximum performance goal), with straight-line interpolation between threshold and target and between target and maximum. Below is a discussion of the specific design elements of each performance-based restricted stock grant that was either awarded in or has a payout potential in the years covered by this Proxy Statement. The amount each NEO received as performance-based, long-term equity incentive compensation for each of the three-year measurement periods beginning in 2011, 2012 and 2013 is reported in the “Stock Awards” column of the Summary Compensation Table on page 31 of this Proxy Statement.

 

 

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2013 - 2015 Performance Cycle

The Committee set the 2013 - 2015 performance cycle LTIP awards as a percentage of the base salary of each NEO as follows:

 

Named Executive Officer   

Performance
Stock

Award
Percentage
Threshold

    

Performance
Stock

Award
Percentage
Target

    

Performance
Stock

Award
Percentage
Maximum

     Restricted
Stock
Award
Percentage
     SAR Award
Percentage
 

Charles E. Sykes

     100%         200%         400%         80%         120%   

W. Michael Kipphut

     50%         100%         200%         40%         60%   

Christopher M. Carrington

     50%         100%         200%         40%         60%   

Lawrence R. Zingale

     50%         100%         200%         40%         60%   

James T. Holder

     25.5%         50%         100%         20%         30%   

The performance stock awards will be paid to our NEOs following completion of fiscal 2015, if earned. The shares of restricted stock and SARs were granted in fiscal 2013, and will have value based on the value of the shares of the Company’s common stock over the three-year vesting period for the restricted stock and SARs.

The three-year, cumulative performance measures that will be used by the Committee for calculating award values for performance stock awards granted for the 2013 - 2015 performance period are:

 

Performance Measure    Weighting      Threshold Performance      Target Performance      Maximum Performance  

Adjusted Operating Income

     2/3       $ 230,904,863       $ 243,057,750       $ 267,363,525   

Revenue

     1/3       $ 3,666,644,107       $ 3,859,625,375       $ 4,245,587,913   

The 2013 - 2015 performance cycle LTIP target award values for the performance stock awards, which will be paid to our NEOs following completion of fiscal 2015, if earned, and the number and value of shares of restricted stock and the number of shares underlying SARs awarded are as follows:

 

Named Executive Officer   

Performance
Stock

Value at Target

    

Number of

Shares of

Performance
Stock Awarded

at Target

     Restricted
Stock
Value(1)
     Number of
Shares of
Restricted
Stock
Awarded
     Number of
Shares
Underlying
SARs(2)
 

Charles E. Sykes

   $ 1,250,000         81,967       $ 500,000         32,787         123,355   

W. Michael Kipphut(3)

   $ 424,297         27,823       $ 169,719         11,129         41,871   

Christopher M. Carrington

   $ 425,000         27,869       $ 170,000         11,148         41,941   

Lawrence R. Zingale

   $ 400,000         26,230       $ 160,000         10,492         39,474   

James T. Holder

   $ 153,174         10,044       $ 61,269         4,018         15,116   

 

(1) 

The value of the restricted stock award is calculated by multiplying the market price of the Company’s common stock on the grant date by the number of shares awarded to the NEO. The grant date value of the restricted stock granted to our NEOs is included in the amount set forth under “Stock Awards” on the “Summary Compensation Table” later in this proxy statement. The restricted stock award vests ratably over a three-year period, with 1/3 of the award vesting after fiscal 2013, 1/3 of the award vesting after fiscal 2014 and 1/3 of the award vesting after fiscal 2015.

(2) 

The SARs vest ratably over a three-year period, with 1/3 of the award vesting after fiscal 2013, 1/3 of the award vesting after fiscal 2014, and 1/3 of the award vesting after fiscal 2015. Upon exercise, the NEO is entitled to a payout equal to the value of the SARs in shares of the Company’s common stock. The SARs were granted on March 26, 2013 with an exercise price of $15.25. The actual grant date value of the SARs granted to our NEOs is set forth under “Option Awards” on the “Summary Compensation Table” later in this proxy statement. The actual number of shares underlying the SARs cannot be determined until such time as the SARs vest and are exercised and the spread between the fair value on the date of exercise and the base price is known.

(3) 

Due to Mr. Kipphut’s retirement in April of 2014, Mr. Kipphut will not receive a payout of performance stock for the 2013 - 2015 performance period and will forfeit a portion of the restricted stock award and SARs.

 

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2012 - 2014 Performance Cycle

The Committee set the 2012 - 2014 performance cycle LTIP awards as a percentage of the base salary of each NEO as follows:

 

Named Executive Officer     

Performance
Stock

Award
Percentage
Threshold

      

Performance
Stock

Award
Percentage
Target

      

Performance
Stock

Award
Percentage
Maximum

       SAR Award
Percentage
 

Charles E. Sykes

       100%           200%           300%           100%   

W. Michael Kipphut

       47%           93%           140%           47%   

Christopher M. Carrington(3)

       N/A           N/A           N/A           N/A   

Lawrence R. Zingale

       47%           93%           140%           47%   

James T. Holder

       23%           47%           70%           23%   

The performace stock awards will be paid to our NEOs following completion of fiscal 2014, if earned. The SARs were granted in fiscal 2012, and will have value based on the value of the shares of the Company’s common stock over the three-year vesting period for the SARs.

The three-year, cumulative performance measures that will be used by the Committee for calculating award values for performance stock awards granted for the 2012 - 2014 performance period are:

 

Performance Measure    Weighting      Threshold Performance      Target Performance      Maximum Performance  

Adjusted Operating Income

     2/3       $ 265,714,151       $ 279,699,106       $ 307,669,017   

Revenue

     1/3       $ 3,536,384,491       $ 3,722,509,991       $ 4,094,760,990   

The 2012 - 2014 performance cycle LTIP target award values for the performance stock awards, which will be paid to our NEOs following completion of fiscal 2014, if earned, and the number of shares underlying SARs are as follows:

 

Named Executive Officer    Total Award
Value at Target
    

Performance Stock

Value at Target

     Number of Shares of
Performance Stock
Awarded at Target
     Number of Shares
Underlying  SARs(1)
 

Charles E. Sykes

   $ 1,875,000       $ 1,250,000         82,183         104,690   

W. Michael Kipphut(2)

   $ 594,017       $ 395,997         26,035         33,169   

Christopher M. Carrington(3)

     N/A         N/A         N/A         N/A   

Lawrence R. Zingale

   $ 514,268       $ 342,833         22,540         28,716   

James T. Holder

   $ 214,443       $ 142,972         9,400         11,972   

 

(1) 

The SARs vest ratably over a three-year period, with 1/3 of the award vesting after fiscal 2012, 1/3 of the award vesting after fiscal 2013, and 1/3 of the award vesting after fiscal 2014. Upon exercise, the NEO is entitled to a payout equal to the value of the SARs in shares of the Company’s common stock. The SARs were granted on March 21, 2012 with an exercise price of $15.21. The actual grant date value of the SARs granted to our NEOs is set forth under “Option Awards” on the “Summary Compensation Table” later in this proxy statement. The actual number of shares underlying the SARs cannot be determined until such time as the SARs vest and are exercised and the spread between the fair value on the date of exercise and the base price is known.

(2) 

Due to Mr. Kipphut’s retirement in April of 2014, Mr. Kipphut will not receive a payout of performance stock for the 2012 - 2014 performance period and will forfeit a portion of the restricted stock award and SARs.

(3)

Mr. Carrington was not employed by the Company on the grant date and is therefore not participating in this performance cycle of incentive compensation.

 

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2011 - 2013 Performance Cycle

In 2011, the Committee set the 2011 - 2013 performance cycle LTIP awards as a percentage of the base salary of each NEO as follows:

 

Named Executive Officer     

Performance
Stock

Award
Percentage
Threshold

      

Performance
Stock

Award
Percentage
Target

      

Performance
Stock

Award
Percentage
Maximum

       SAR Award
Percentage
 

Charles E. Sykes

       100%           200%           300%           100%   

W. Michael Kipphut

       47%           93%           140%           47%   

Christopher M. Carrington(1)

       N/A           N/A           N/A           N/A   

Lawrence R. Zingale

       47%           93%           140%           47%   

James T. Holder

       23%           47%           70%           23%   

The three-year, cumulative performance measures that were used by the Committee for calculating award values for performance stock awards granted for the 2011 - 2013 performance period were:

 

Performance Measure    Weighting      Threshold Performance      Target Performance      Maximum Performance      Actual Performance  

Adjusted Operating Income

     2/3       $ 270,982,862       $ 277,334,707       $ 293,649,021       $ 224,572,000   

Revenue

     1/3       $ 3,761,735,793       $ 3,835,500,930       $ 4,024,136,575       $ 3,560,000,000   

Because the Company’s cumulative Adjusted Operating Income and revenue during the 2011 - 2013 performance period did not meet their respective performance thresholds for a payout of performance stock, no payouts were made in 2013:

 

Named Executive Officer   

Performance Stock

Award Value at Target

     Performance Stock
Award Value
 

Charles E. Sykes

   $ 1,250,000       $ 0   

W. Michael Kipphut

   $ 395,997       $ 0   

Christopher M. Carrington(1)

     N/A         N/A   

Lawrence R. Zingale

   $ 342,833       $ 0   

James T. Holder

   $ 142,972       $ 0   

 

(1)

Mr. Carrington was not employed with the Company on the grant date and therefore did not participate in this performance cycle of incentive compensation.

The Outstanding Equity Awards At Fiscal Year-End table later in this proxy statement shows the number of shares underlying outstanding SARs granted in 2011 held by each NEO, which have an exercise price of $18.67, based on the market price of the Company’s common stock on the grant date.

 

Executive Deferred Compensation

Participation in the Company’s executive Deferred Compensation Plan (the “Deferred Compensation Plan”) is limited to employees at the Director level and above within the Company’s organizational structure (in ascending order, Directors, Senior Directors, Executive Directors, Vice Presidents, Senior Vice Presidents, Executive Vice Presidents and the President). Participants in the Deferred Compensation Plan may elect to defer any amount of base compensation and bonus. The Company matches a portion of amounts deferred by participants at the level of Vice President and above on a quarterly basis as follows: 50% match on salary deferred, up to a total match of $12,000 per year for Senior Vice Presidents and above and $7,500 per year for Vice Presidents. No match is made on deferrals by other participants. The matching contributions made to the Deferred Compensation Plan by the Company are made in the form of Company common stock.

Compensation deferred by a participant while participating in the Deferred Compensation Plan is deferred until such participant’s retirement, termination, disability or death, or a change in control of the Company, as defined in the Deferred Compensation Plan, and in such event is paid out to the participant or his beneficiary. Under current tax law, a participant does not recognize income with respect to deferred compensation until it is paid to him or her. Upon payment, the participant will recognize ordinary income in an amount equal to the sum of the cash and the fair market value of the shares of stock received, and the Company will be entitled to a deduction equal to the income recognized by the participant.

Distributions of a participant’s deferred compensation and Company common stock contributed as matching contributions are made as soon as administratively feasible six months after retirement or termination of employment, unless the participant dies or becomes disabled while still an employee, in which case both distributions are made on the first day of the second month following the death or disability.

 

 

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  EXECUTIVE COMPENSATION       

 

 

A participant in the Deferred Compensation Plan forfeits any undistributed matching contributions if the participant is terminated for “cause” as defined in the Deferred Compensation Plan or the participant enters into a business or employment which the Company’s CEO determines to be in violation of any non-compete agreement between the participant and the Company. In addition, participants that terminate their employment (for reasons other than death, disability or retirement) less than seven years after the date they begin making contributions to the Deferred Compensation

Plan risk forfeiture of all or a portion of the Company’s matching contributions and earnings, as outlined below:

 

Years of Participation in the

Deferred Compensation

Plan Prior to Termination

  

Effect of Termination on

Matching Contribution

and Earnings

Less than 3

   Forfeited

More than 3, but less than 5

   Forfeits 67%

More than 5, but less than 7

   Forfeits 33%

More than 7

   Retains 100%

In the event of a distribution of benefits as a result of a change in control, the Company will increase the benefits for Senior Vice Presidents, Executive Vice Presidents and the President by an amount sufficient to offset the income tax obligations created by the distribution of benefits.

 

 

Other Elements of the Compensation Program

 

 

Stock Ownership Guidelines

The Board has adopted stock ownership guidelines for the NEOs and other members of the senior management team, which vary by position from 150% to 400% of base salary. These guidelines, which allow the executives five (5) years beginning on August 1, 2013 to acquire the required amount of stock, were originally adopted in 2006 and updated in 2013. The Committee reviews the stock ownership of the Company’s executive officers on an annual basis to ensure that the executive officers are aware of where each stands in relation to the established guidelines. For purposes of the guidelines, stock ownership includes fully vested stock options, directly held common stock and fully vested matching shares under the Company’s executive Deferred Compensation Plan. There are no additional stock holding period requirements for shares acquired upon exercise of SARs or upon the vesting of performance-based restricted stock.

Clawback and Anti-Hedging Policies

The Board has not yet adopted specific clawback and anti-hedging policies beyond the requirements already created by various provisions of Sarbanes-Oxley. However, the Board intends to adopt fully compliant clawback and anti-hedging policies as soon as practical following the issuance of final rules and regulations by the SEC in enacting the requirements of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

Change-in-Control Provisions

We have change-in-control provisions in the employment agreements with Messrs. Sykes, Kipphut, Carrington and Zingale, as well as in all of the equity incentive agreements with all of our executives and key employees. The change-in-

control provision in the employment agreement with Mr. Sykes is a modified “double-trigger” arrangement which permits him to terminate his agreement for “Good Reason,” the definition of which includes a change-in-control. The change-in-control provisions in the four other employment agreements are “double-trigger” arrangements, meaning that payments are only made if there is a change-in-control of the Company and the executive officer’s employment is terminated without cause, or the executive officer terminates employment for good reason, as such terms are defined in their respective employment agreements. All of our employment agreements with the NEOs, and the other executive officers, contain severance agreements ranging from one to three years of compensation and benefits in the event of termination by the Company other than for cause. These agreements are discussed in greater detail beginning on page 40 under the heading “Employment Agreements.” We believe that providing these agreements helps increase our ability to attract, retain and motivate highly qualified management personnel and encourage their continued dedication without distraction from concerns over job security relating, among other things, to a change-in-control of the Company.

Perquisites and Other Personal Benefits

The Company provides its NEOs with perquisites and other personal benefits that the Company and the Committee believe are reasonable and consistent with its overall compensation program to better enable the Company to attract and retain superior employees for key positions. These amounts represent mainly Company matches to the Deferred Compensation Plan, excess group term life insurance premiums and additional compensation paid to the NEOs related to the cost of executive physicals and other health and welfare benefits. The NEOs are also permitted to fly in business class when traveling overseas

 

 

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          EXECUTIVE COMPENSATION  

 

on business and are permitted to attend sporting events utilizing Company paid tickets that are not otherwise utilized in connection with business development. The Committee

periodically reviews the levels of perquisites and other personal benefits provided to NEOs.

 

 

Mitigating Compensation Risks

 

 

Although the responsibility for oversight of enterprise risk management lies with the full Board, the Committee annually reviews and conducts an assessment of the risks associated with the Company’s compensation policies and practices. Based on its assessment conducted in 2013, the Committee determined that the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company. In reaching that conclusion, the Committee evaluated each of the following key elements of the Company’s compensation plans and practices for its executive officers:

 

 

Performance and pay horizons are appropriate and not overweight in short-term incentives;

 

 

The relationship between the incremental achievement levels and corresponding payouts in the Company’s incentive plans are appropriate and have caps on payouts;

 

The incentive plans employ a reasonable mix of performance metrics and are not concentrated on a single metric;

 

 

Criteria for payments are closely aligned with our strategic goals and shareholder interests;

 

 

Payout curves are reasonable and do not contain steep “cliffs” that might encourage unreasonable short-term business decisions to achieve payment thresholds; and

 

 

Equity compensation plans for executive officers consist of a balanced mix of performance-based restricted stock awards, time-based SARs, and time-based restricted stock awards.

 

 

Tax and Accounting Implications

 

 

Deductibility of Executive Compensation. As part of its role, the Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which provides that the Company may not deduct compensation of more than $1,000,000 per year that is paid to certain individuals. The Company believes that compensation paid under its management incentive plans is generally fully deductible for federal income tax purposes. However, in certain situations, the Committee may approve compensation that will not meet the requirements of Section 162(m) in order to ensure competitive levels of total compensation for its executive officers.

Nonqualified Deferred Compensation. On October 22, 2004, the American Jobs Creation Act of 2004 (the “Jobs Creation Act”) was signed into law, changing the tax rules applicable to nonqualified deferred compensation arrangements. The Company believes its agreements containing deferred compensation components comply with the final regulations issued in connection with the Jobs Creation Act. A more detailed discussion of the Company’s nonqualified deferred compensation arrangements is provided on page 35 under the heading “Nonqualified Deferred Compensation.”

 

 

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  COMPENSATION COMMITTEE REPORT      

 

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

THE COMPENSATION COMMITTEE

James S. MacLeod, Chairman

James K. Murray, Jr.

Lt. Gen. Michael DeLong (Ret.)

 

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          COMPENSATION COMMITTEE REPORT  

 

Summary Compensation Table

 

The table below summarizes the total compensation paid to, or earned by, each of the named executive officers for the fiscal years ending December 31, 2013, December 31, 2012 and December 31, 2011. The Company has entered into employment agreements with each of the named executive officers which are summarized under the section entitled “Employment Agreements” below. When setting the total compensation for each of the named executive officers, the Committee considers all of the executive’s current compensation, including equity and non-equity based compensation.

The named executive officers did not receive payments which would be characterized as “Bonus” payments for the fiscal years ended December 31, 2013, December 31, 2012 or December 31, 2011. Amounts listed under column (g), “Non-Equity Incentive Plan Compensation” were paid in accordance with parameters determined by the Committee on March 19, 2013, March 6, 2012 and March 7, 2011, respectively, and were paid in March 2014, March 2013 and March 2012, respectively.

 

(a)

  (b)     (c)     (d)     (e)     (f)     (g)     (h)     (i)     (j)  

Name and

Principal Position

  Year    

Salary

($)(1)

   

Bonus

($)

    Stock
Awards
($)(2)
   

Option
Awards

($)(2)

   

Non-Equity
Incentive Plan
Compensation

($)(3)

   

Change in
Pension

Value and
Nonqualified
Deferred
Compensation
Earnings

($)

    All Other
Compensation
($)(4)
   

Total

($)

 
Charles E. Sykes     2013        624,998               1,749,999        749,998        512,499               30,021        3,667,515   
President and Chief     2012        624,998               1,250,627        624,999        546,874               32,019        3,079,517   
Executive Officer     2011        609,058               1,250,610        624,999        502,473               31,944        3,019,084   
W. Michael Kipphut     2013        424,299               594,018        254,576        243,548               40,217        1,556,658   
Executive Vice President     2012        422,379               396,190        198,019        258,707               36,439        1,311,734   
& Chief Financial Officer     2011        413,210               388,429        194,135        238,629               36,759        1,271,162   
Christopher M. Carrington(5)     2013        425,006               595,009        255,001        304,645               4,712        1,584,373   
Executive Vice President of Global Delivery    

 

2012

2011

  

  

   

 

137,047

  

  

   

 


  

  

   

 


  

  

   

 


  

  

   

 

401,711

  

  

   

 


  

  

   

 

2,157

  

  

   

 

540,915

  

  

Lawrence R. Zingale     2013        400,005               560,011        240,002        261,243               27,675        1,488,935   
Executive Vice President,     2012        374,088               343,001        171,435        216,036               26,462        1,131,022   
General Manager Major Markets     2011        352,701               336,284        168,071        203,685               25,980        1,086,721   
James T. Holder     2013        306,342               214,446        91,905        125,600               24,721        763,014   
Executive Vice President,     2012        304,955               143,050        71,473        133,418               24,077        676,973   
General Counsel and     2011        294,101               140,249        70,070        121,317               23,852        649,588   
Corporate Secretary                                                                        

 

(1)

The amounts shown in column (c) include amounts resulting from a 27th pay period that fell into 2011.

(2)

The amounts shown in column (e) and (f) represent awards pursuant to long term incentive bonus programs (restricted stock and stock appreciation rights, respectively) established by the Compensation Committee. The amounts are valued based on the aggregate grant date fair value of the awards in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation” (formerly FAS 123(R)). See Notes 1 and 26 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 filed on February 20, 2014 for a discussion of the relevant assumptions used in calculating the grant date fair value in accordance with FASB ASC Topic 718.

(3)

The amounts in column (g) reflect the cash awards to the named individuals pursuant to annual performance based incentive programs established by the Committee and discussed in more detail on page 35 under the heading “Performance Based Annual Cash Incentive Compensation.”

(4)

The amounts shown in column (i) reflect for each named executive officer:

 

  matching contributions allocated by the Company to each of the named executive officers pursuant to the Executive Deferred Compensation Plan described in more detail on page 35 under the heading “Nonqualified Deferred Compensation;”

 

  reimbursement for premiums attributable to increased coverage for vision, dental and group medical insurance benefits;

 

  the cost of premiums for term life and disability insurance benefits; and

 

  the Company’s matching contribution to the Sykes Enterprises, Incorporated Employees’ 401(k) Savings Plan and Trust.
(5)

Mr. Carrington was not employed by the Company until September 13, 2012.

 

SYKES ENTERPRISES, INCORPORATED  ï  2014 Proxy Statement    31


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Grants of Plan-Based Awards

 

The following table provides information about equity and non-equity awards granted to the named executives in 2013, including (i) the grant date, (ii) the estimated future payouts under the non-equity incentive plan awards, (iii) the estimated future payouts under equity incentive plan awards, which consist of shares of restricted stock, (iv) all other stock awards which consist of shares of the Company’s stock contributed as matching contributions under the Executive Deferred Compensation Plan, (v) all other option awards, which consist of Stock Appreciation Rights and the base price of those Stock Appreciation Rights, and (vi) the fair value of the equity awards on the date of grant.

 

    (b)
Grant
Date
    

Estimated Future

Payouts Under Non-Equity
Incentive Plan Awards(1)

    

Estimated Future Payouts Under

Equity Incentive Plan Awards(2)

    

(i)

All Other
Stock
Awards:
Number of
Shares of
Stock or
Units

(#)(3)

    

(j)

All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(4)

    

(k)

Exercise
or Base
Price of
Option
Awards
($/sh)

    

(l)

Grant
Date Fair
Value of
Stock
and
Option
Awards
($)

 

(a)

Name

     (c)
Threshold
($)
     (d)
Target
($)
     (e)
Maximum
($)
     (f)
Threshold
(#)
     (g)
Target
(#)
     (h)
Maximum
(#)
             

Charles E. Sykes

    3/26                                 40,984         81,967         163,934                         15.25         1,249,997   
    3/26                                                         32,787                 15.25         500,002   
    3/26                                                                 123,355         15.25         749,998   
    3/26         312,500         625,000         937,500                                                           
      3/31                                                         751                 15.96         11,986   

W. Michael Kipphut

    3/26                                 13,912         27,823         55,646                         15.25         424,301   
    3/26                                                         11,129                 15.25         169,717   
    3/26                                                                 41,871         15.25         254,576   
    3/26         148,504         297,008         445,512                                                           
    3/31                                                         538                 15.96         8,586   
    6/30                                                         186                 15.76         2,931   
    9/30                                                         25                 17.89         447   

Christopher M. Carrington

    3/26                                 13,935         27,869         55,738                         15.25         425,002   
    3/26                                                         11,148                 15.25         170,007   
    3/26                                                                 41,941         15.25         255,001   
    3/26         148,750         297,500         446,250                                                           

Lawrence R. Zingale

    3/26                                 13,115         26,230         52,459                         15.25         400,008   
    3/26                                                         10,492                 15.25         160,003   
    3/26                                                                 39,474         15.25         240,002   
    3/26         140,000         280,000         420,000                                                           
    3/31                                                         269                 15.96         4,293   
    6/30                                                         234                 15.76         3,687   
      9/30                                                         223                 17.89         3,989   

James T. Holder

    3/26                                 5,022         10,044         20,088                         15.25         153,171   
    3/26                                                         4,018                 15.25         61,275   
    3/26                                                                 15,116         15.25         91,905   
    3/26         76,587         153,174         229,760                                                           
    3/31                                                         206                 15.96         3,288   
    6/30                                                         179                 15.76         2,821   
    9/30                                                         184                 17.89         3,292   
      12/31                                                         118                 21.81         2,574   

 

(1) 

These amounts are based on the individual’s current salary and position.

(2)

Where amounts are shown in columns (f) and (h), then the amounts shown in column (f) reflect the Long-Term Incentive Stock Grant minimum which is 80% of the target amount shown in column (g), and the amount shown in column (h) is 150% of such target amount. The target amount shown is an absolute target. These amounts are based on the individual’s current salary and position. The grant date fair value of the long-term incentive plan awards are based upon the target amounts shown in column (g).

(3)

The amounts shown in column (i) reflect the number of shares of stock granted to each named executive officer as matching contributions pursuant to the Executive Deferred Compensation Plan.

(4)

The amounts shown in column (j) reflect the number of Stock Appreciation Rights granted to each named executive officer as part of the Long-Term Incentive awards as described in more detail on page 24 under the heading “Performance-Based, Long-Term, Equity Incentive Compensation.” The actual number of shares underlying the Stock Appreciation Rights cannot be determined until such time as the Stock Appreciation Rights vest and are exercised and the spread between the fair value on the date of exercise and the base price is known. The fair value of the Stock Appreciation Rights included in column (l) is the amount determined pursuant to FASB ASC Topic 718 (formerly FAS Statement 123(R)).

 

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          COMPENSATION COMMITTEE REPORT  

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table provides information on the holdings of stock option and stock awards by the named executives as of December 31, 2013. The table includes both exercisable and unexercisable options together with the exercise price and the expiration date; unvested Stock Appreciation Rights; the number of shares and market value of unvested matching contributions to the Executive Deferred Compensation Plan; and the number of shares of long term incentive (“LTI”) restricted stock together with the market value of those shares.

 

     Option Awards     Stock Awards  

(a)

  (b)     (c)     (d)     (e)     (f)     (g)     (h)     (i)     (j)  
Name   Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
   

Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options

(#)

   

Option
Exercise
Price

($)

    Option
Expiration
Date
   

Number
of Shares
or Units of
Stock
That Have
Not Vested

(#)

   

Market
Value of
Shares or
Units of
Stock That
Have Not
Vested

($)

   

Equity
Incentive

Plan Awards:
Number of
Unearned
Shares,
units or
Other Rights
That Have
Not Vested

(#)

   

Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares,
Units or
Other Rights
That Have
Not Vested

($)

 

Charles E. Sykes

                 

2008-2010 SARs(1)

    15,432                      17.87        01/02/18                               

2009-2011 SARS(2)

    67,947                      19.69        01/05/19                               

2010-2012 SARs(3)

    49,381                      23.88        03/05/20                               

2011-2013 LTI  PS(4)

                                                     53,562        1,168,187   

2011-2013 SARs(5)

    58,686        29,342               18.67        03/07/21                               

2012-2014 LTI  PS(6)

                                                     71,225        1,553,417   

2012-2014 SARs(7)

    34,896        69,794               15.21        03/21/22                               

2013-2015 LTI PS(8)

                                                     111,065        2,422,328   

2013-2015 LTI RS(9)

                                                     32,787        715,084   

2013-2015 SARs(10)

           123,355               15.25        03/26/23                               

W. Michael Kipphut

                 

2010-2012 SARs(3)

    18,284                      23.88        03/05/20                               

2011-2013 LTI PS(4)

                                                     16,635        362,809   

2011-2013 SARs(5)

           9,115               18.67        03/07/21                               

2012-2014 LTI PS(6)

                                                     22,564        492,121   

2012-2014 SARs(7)

           22,113               15.21        03/21/22                               

2013-2015 LTI PS(8)

                                                     37,701        822,259   

2013-2015 LTI RS(9)

                                                     11,129        242,723   

2013-2015 SARs(10)

           41,871               15.25        03/26/23                               

Christopher M. Carrington

                 

2013-2015 LTI PS(8)

                                                     37,762        823,589   

2013-2015 LTI RS(9)

                                                     11,148        243,138   

2013-2015 SARs(10)

           41,941               15.25        03/26/23                               

Lawrence R. Zingale

                 

2008-2010 SARs(1)

    4,706                      17.87        01/02/18                               

2009-2011 SARS(2)

    13,501                      19.69        01/05/19                               

2010-2012 SARs(3)

    14,719                      23.88        03/05/20                     

2011-2013 LTI PS(4)

                                                     14,402        314,108   

2011-2013 SARs(5)

    15,782        7,890               18.67        03/07/21                     

2012-2014 LTI PS(6)

                                                     19,534        426,037   

2012-2014 SARs(7)

           19,144               15.21        03/21/22                               

2013-2015 LTI PS(8)

                                                     35,541        775,149   

2013-2015 LTI RS(9)

                                                     10,492        228,831   

2013-2015 SARs(10)

           39,474               15.25        03/26/23                               

James T. Holder

                 

2010-2012 SARs(3)

    6,170                 23.88        03/05/20                               

2011-2013 LTI PS(4)

                                                     6,006        130,991   

2011-2013 SARs(5)

           3,290               18.67        03/07/21                               

2012-2014 LTI PS(6)

                                                     8,146        177,664   

2012-2014 SARs(7)

           7,982               15.21        03/21/22                               

2013-2015 LTI PS(8)

                                                     13,609        296,812   

2013-2015 LTI RS(9)

                                                     4,018        87,633   

2013-2015 SARs(10)

           15,116               15.25        03/26/23                               

 

(1) 

The figures in this row represent Stock Appreciation Rights (“SARs”) that were issued to the named executive officer in connection with the long-term incentive award for the 2008-2010 performance measurement period. The SARs vest 1/3 each year on January 2, 2009, 2010, and 2011, provided the employee is still in the employ of the Company.

 

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(2) 

The figures in this row represent SARs that were issued to the named executive officer in connection with the long-term incentive award for the 2009-2011 performance measurement period. The SARs vest 1/3 each year on January 5, 2010, 2011, and 2012, provided the employee is still in the employ of the Company.

(3) 

The figures in this row represent SARs that were issued to the named executive officer in connection with the long-term incentive award for the 2010-2012 performance measurement period. The SARs vest 1/3 each year on January 5, 2011, 2012, and 2013, provided the employee is still in the employ of the Company.

(4)

The figures in this row represent performance vesting restricted shares that were issued to the named executive officer in connection with the long-term incentive award for the 2011-2013 performance measurement period. The shares vest on March 16, 2014 if the performance measures have been met, provided the employee is still in the employ of the Company.

(5)

The figures in this row represent SARs that were issued to the named executive officer in connection with the long-term incentive award for the 2011-2013 performance measurement period. The SARs vest 1/3 each year on March 7, 2012, 2013, and 2014, provided the employee is still in the employ of the Company.

(6)

The figures in this row represent performance vesting restricted shares that were issued to the named executive officer in connection with the long-term incentive award for the 2012-2014 performance measurement period. The shares vest on March 21, 2015 if the performance measures have been met, provided the employee is still in the employ of the Company.

(7) 

The figures in this row represent SARs that were issued to the named executive officer in connection with the long-term incentive award for the 2012-2014 performance measurement period. The SARs vest 1/3 each year on March 21, 2013, 2014, and 2015, provided the employee is still in the employ of the Company.

(8) 

The figures in this row represent performance vesting restricted shares that were issued to the named executive officer in connection with the long-term incentive award for the 2013-2015 performance measurement period. The shares vest on March 15, 2016 if the performance measures have been met, provided the employee is still in the employ of the Company.

(9) 

The figures in this row represent time vesting restricted shares that were issued to the named executive officer in connection with the long-term incentive award for the 2013-2015 performance measurement period. The shares vest 1/3 each year on March 15, 2014, 2015 and 2016, provided the employee is still in the employ of the Company.

(10) 

The figures in this row represent SARs that were issued to the named executive officer in connection with the long-term incentive award for the 2013-2015 performance measurement period. The SARs vest 1/3 each year on March 15, 2014, 2015, and 2016, provided the employee is still in the employ of the Company.

Option Exercises and Stock Vested

 

The following table provides information for the named executive officers on (1) SAR exercises during 2013, including the number of shares acquired upon exercise and the value realized; and (2) the number of shares acquired upon vesting of matching contributions under the Executive Deferred Compensation Plan, and the value realized upon the vesting of such shares.

 

     Options Awards      Stock Awards  

(a)

   (b)      (c)      (d)      (e)  
Name   

Number of Shares
Acquired On Exercise

(#)

     Value Realized
on Exercise ($)
    

Number of Shares
Acquired on Vesting

(#)

    

Value Realized
on Vesting

($)

 

Charles E. Sykes

           

EDC Matching Contr.(1)

                     751         11,986   

W. Michael Kipphut

           

EDC Matching Contr.(1)

                     749         11,965   

2006 SARS

     5,847         118,577                   

2007 SARS

     2,485         50,395                   

2008 SARS

     2,432         49,320                   

2009 SARS

     2,181         47,022                   

2011 SARS

     1,447         29,345                   

2012 SARS

     2,764         56,053                   

Christopher M. Carrington

           

EDC Matching Contr.(1)

                               

Lawrence R. Zingale

           

EDC Matching Contr.(1)

                     1,916         30,712   

2012 SARS

     2,393         48,530                   

James T. Holder

           

EDC Matching Contr.(1)

                     687         11,974   

2008 SARS

     270         5,475                   

2009 SARS

     490         10,564                   

2011 SARS

     522         10,586                   

2012 SARS

     997         20,219                   
(1)

Reflects the Company’s matching contributions in the form of shares of its common stock held for the account of the named executive officer in the Executive Deferred Compensation Plan which vested during fiscal year ended December 31, 2013.

Pension Benefits

 

The Company does not maintain any pension plans for the benefit of its executive officers.

 

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Nonqualified Deferred Compensation

 

Pursuant to the Company’s Executive Deferred Compensation Plan, certain executives, including the named executive officers, may defer all or any portion of their base salary, and all or any portion of their performance based non-equity incentive compensation. Deferral elections are made on or before December 31st of each year for amounts to be deferred from income earned with respect to the following year. The table below shows the investment options available under the Deferred Compensation Plan and their annual rate of return for the calendar year ended December 31, 2013, as reported by the Compensation Committee of the Plan.

 

Name of Fund   Rate
of Return
     Name of Fund   Rate
of Return
 

Vanguard Prime Money Market Investor Fund

    .02%       Goldman Sachs Mid Cap Value A Fund     32.43%   

Prudential Total Return Bond A Fund

    -1.17%       Principal MidCap S&P 40-0 Index R3 Fund     32.41%   

PIMCO Real Return A Fund

    -9.41%       Goldman Sachs Small Cap Value A Fund     38.28%   

Janus Balanced S Fund

    19.28%       Principal SmallCap S&P 600 Index R3 Fund     15.54%   

John Hancock Disciplined Value A Fund

    35.51%       MFS New Discovery R3 Fund     40.15%   

Principal LargeCap S&P 500 Index R3 Fund

    31.40%       Manning & Napier World Opp. A Fund     18.78%   

MainStay Large Cap Growth R2 Fund

    36.44%        

 

Distributions of the participants’ deferred compensation and any vested Company stock matching contributions are made as soon as administratively feasible six months after retirement or termination of employment, unless the participant dies or becomes disabled while still an employee, in which case both distributions are made as soon as administratively feasible.

In the event the participant terminates employment (for reasons other than death, disability or retirement) without participating in the plan for three years, the matching contributions and earnings attributable thereto are forfeited. In the event that a participant terminates employment after three years but less than five years of participation in the Plan, the participant forfeits 67% of the matching contribution and earnings. In the event a participant terminates employment

after five years but less than seven years of participation in the Plan, the participant forfeits 33% of the matching contribution and earnings.

In the event of a distribution of benefits as a result of a change in control, the Company will increase the benefits for the Senior Vice Presidents, Executive Vice Presidents and the President by an amount sufficient to offset the income tax obligations created by the distribution of benefits.

Participants forfeit undistributed matching contributions if the participant is terminated for “cause” as defined in the Plan or the participant enters into a business or employment which the Company’s CEO determines to be in violation of any non-compete agreement between the participant and the Company.

 

 

The following table shows information regarding contributions by the named executive officers, the Company’s matching contributions, aggregate earnings on contributions during fiscal year 2013, and the aggregate balance at year end. There were no distributions from the plan to named executive officers during fiscal year 2013.

 

(a)

     (b)        (c)        (d)        (e)        (f)  
Name     

Executive
Contributions
in Last

Fiscal Year(1)

($)

      

Company
Contribution
in Last
Fiscal Year(2)

($)

      

Aggregate
Earnings
in Last
Fiscal Year

($)

      

Aggregate
Withdrawals/

Distributions

($)

      

Aggregate
Balance at
Last Fiscal
Year  End(3)

($)

 

Charles E. Sykes

       54,687           11,986           75,921                     455,005   

W. Michael Kipphut

       35,806           11,964           74,890                     615,808   

Christopher M. Carrington

                                                 

Lawrence R. Zingale

       32,000           11,970           74,555                     333,248   

James T. Holder

       24,507           11,975           100,620                     427,660   

 

(1) 

The amounts shown are included in the amounts of “salary” in column (c) of the Summary Compensation Table.

(2) 

The amounts shown are included in the amounts of “Other Compensation” in column (i) of the Summary Compensation Table.

(3)

The amounts shown include 100% of the aggregate executive and Company contributions which have all been reported in the Summary Compensation Table.

 

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Equity Compensation Plan Information

 

The following table summarizes the equity compensation plans under which the equity securities of Sykes may be issued as of December 31, 2013:

 

     (a)     (b)      (c)  
      Number of
Securities to be
Issued Upon
Exercise of
Options, Warrants
and Rights
    Weighted Average
Exercise Price of
Outstanding
Options, Warrants
and Rights
     Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a))
 

Equity compensation plans approved by shareholders(1)

     202,098                3,838,981   

Equity compensation plans not approved by shareholders

     108,339 (2)              N/A (2) 

Totals

     310,437                3,838,981   

 

(1)

Includes shares of common stock of Sykes authorized for awards under the 2001 Equity Incentive Plan, the 2011 Equity Incentive Plan and the 2004 Non-Employee Director Fee Plan.

(2)

Represents shares of common stock of Sykes issued as matching grants under the Executive Deferred Compensation Plan for executives described on page 27 above. There is no specific number of shares reserved for issuance under the Executive Nonqualified Deferred Compensation Plan.

 

Shares awarded under all of the above plans may be from Sykes’ authorized and unissued shares, treasury shares or shares acquired in the open market. For a summary of the terms of Sykes’ equity compensation plans, see Note 26 of

our consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2013 filed on February 20, 2014 and incorporated herein by reference.

 

 

Potential Payments upon Termination or Change of Control

 

 

The tables below reflect the amount of compensation to each of the named executive officers of the Company in the event of a termination of such executive’s employment. The amount of compensation payable to each named executive officer upon voluntary termination, involuntary not-for-cause termination, termination following a change of control and in the event of a disability or death of the executive is shown below. The amounts shown assume that such termination was effective as of December 31, 2013, and thus includes amounts earned through such time and are estimates of the amounts which would be paid out to the executives upon their termination. The actual amounts to be paid out can only be determined at the time of such executive’s separation from the Company.

Payments Made Upon Termination

Regardless of the manner in which a named executive officer’s employment terminates, he is entitled to receive amounts earned during his term of employment. Depending upon the date of a termination, such amounts may include:

 

 

non-equity incentive compensation earned during the fiscal year;

 

 

shares which have vested and for which the restrictions have lapsed under Long-Term Incentive compensation awards;

 

 

shares to be issued as a result of the vesting of SARs under Long-Term Incentive compensation awards;

 

amounts contributed to the Executive Deferred Compensation Plan; and

 

 

unused vacation pay.

Payments Made Upon Termination by the Company Without Cause, or by the Executive with Good Reason

In the event the employment of any of Messrs. Sykes, Kipphut, Carrington or Zingale is terminated by the Company for any reason other than death, disability, or cause (as defined in their respective employment agreements), or if such officer terminates his employment agreement prior to the expiration of the renewal period for good reason (as defined in their respective employment agreements, other than a termination by the officer in connection with a change of control (as defined in his employment agreement)), the officer will be entitled to the following payments:

 

 

Mr. Sykes will be entitled to receive an amount equal to two times his annual base salary.

 

 

Mr. Kipphut will be entitled to receive an amount equal to his annual base salary, plus an amount equal to the maximum annual performance bonus he could earn under the performance based bonus plan in which Mr. Kipphut is then participating.

 

 

Messrs. Carrington and Zingale will be entitled to receive an amount equal to his annual base salary, plus an amount equal to the maximum annual performance bonus he could earn under the performance based bonus plan in which he is then participating.

 

 

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In the event that such officer terminates his employment agreement in connection with a change of control, such officer will be entitled to receive the benefits listed under the heading “Payments Made Upon a Change of Control” below.

In the event of the termination by the Company of the employment of Mr. Holder for any reason other than death, disability or cause, he will be entitled to receive an amount equal to his annual base salary.

Except as provided below, the foregoing amounts are to be paid biweekly in equal installments over 52 weeks, commencing immediately upon such officer’s separation from service. If such officer is determined to be a “specified employee” on the date of his “separation from service” (each as defined in Section 409(A) of the Internal Revenue Code and applicable regulations), to the extent that he is entitled to receive any benefit or payment upon such separation from service under the employment agreement that constitutes deferred compensation within the meaning of Section 409A of the Internal Revenue Code before the date that is six months after the date of his separation from service, such benefits or payments will not be provided or paid to him on the date otherwise required to be provided or paid. Instead, all such amounts shall be accumulated and paid in a single lump sum on the first business day after the date that is six months after the date of his separation from service (or, if earlier, within fifteen (15) days following his date of death). All remaining payments and benefits otherwise required to be paid or provided on or after the date that is six months after the date of his separation from service will be paid or provided or paid in accordance with the payment schedule described above.

Payments Made Upon Death or Disability

In the event of the death or disability of a named executive officer, in addition to the benefits listed under the heading “Payments Made Upon Termination” above, the named executive officer will receive benefits under the Company’s disability plan or payments under the Company’s life insurance plan, as appropriate. The Company pays for life insurance and accidental death and dismemberment coverage for its executive team in amounts equal to twice the executive’s base salary, up to a maximum of $500,000. The Company also pays for short term disability for its executives with a benefit of 70% of base salary, up to a maximum of $2,500 per week, and long term disability utilizing multiple plans. The base long term disability plan provides for a benefit to the executives of 70% of base salary, up to a maximum of $15,000 per month. The base long term disability plan is supplemented with two individual policy plans designed to provide the executives with long term disability insurance approximating 75% of covered compensation.

Payments Made Upon a Change of Control

The Company has entered into employment agreements with Messrs. Sykes, Kipphut, Carrington and Zingale which contain

change of control payment provisions. Pursuant to these provisions, if any of Messrs. Sykes, Kipphut, Carrington or Zingale terminates his employment in connection with a change of control (as defined in their employment agreement), instead of the benefits listed under the heading “Payments Made Upon Termination,” he will receive the following benefits:

Mr. Sykes. Mr. Sykes will be entitled to receive an amount equal to three times his then current annual base salary, plus an amount determined by multiplying the annual target bonus designated or otherwise indicated for Mr. Sykes in the year such change of control occurs by a factor of three. The target bonus amount is to be determined under the performance-based bonus plan in which Mr. Sykes is then participating. In addition, all stock options, stock grants or other similar equity incentives and/or compensation programs will immediately accelerate and become fully vested and exercisable at the option of Mr. Sykes.

Mr. Kipphut. Mr. Kipphut will be entitled to receive an amount equal to two times his then current annual base salary, plus an amount determined by multiplying the annual target bonus designated or otherwise indicated for Mr. Kipphut in the year such change of control occurs by a factor of two. The target bonus amount is to be determined under the performance-based bonus plan in which Mr. Kipphut is then participating. In addition, all stock options, stock grants or other similar equity incentives and/or compensation programs will immediately accelerate and become fully vested and exercisable at the option of Mr. Kipphut.

Messrs. Carrington and Zingale. Each of Messrs. Carrington and Zingale will be entitled to receive an amount equal to two times his then current annual base salary, plus an amount determined by multiplying the annual target bonus designated or otherwise indicated for him in the year such change of control occurs by a factor of two. The target bonus amount is to be determined under the performance-based bonus plan in which he is then participating. In addition, all stock options, stock grants or other similar equity incentives and/or compensation programs will immediately accelerate and become fully vested and exercisable at his option.

Except as provided below, the foregoing amounts are to be paid biweekly in equal installments over 52 weeks, commencing immediately upon such officer’s separation from service. If such officer is determined to be a “specified employee” on the date of his “separation from service” (each as defined in Section 409(A) of the Internal Revenue Code and applicable regulations), to the extent that he is entitled to receive any benefit or payment upon such separation from service under the employment agreement that constitutes deferred compensation within the meaning of Section 409A of the Internal Revenue Code before the date that is six months after the date of his separation from service, such benefits or payments will not be provided or paid to him on the date

 

 

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otherwise required to be provided or paid. Instead, all such amounts shall be accumulated and paid in a single lump sum on the first business day after the date that is six months after the date of his separation from service (or, if earlier, within fifteen (15) days following his date of death). All remaining payments and benefits otherwise required to be paid or provided on or after the date that is six months after the date of his separation from service will be paid or provided or paid in accordance with the payment schedule described above.

Mr. Holder. Mr. Holder does not have change of control provisions in his employment agreement, but under various equity incentive agreements, all stock options, stock grants or other similar equity incentives and/or compensation programs will immediately accelerate and become fully vested and exercisable at his option in the event of a change in control.

 

 

Charles E. Sykes

The following table shows the potential payments upon termination or a change of control of the Company for Charles E. Sykes, the Company’s President and CEO, as if such termination had occurred on December 31, 2013:

 

     Company Initiated      Executive Initiated  
Type of Benefit   

Before
Change in
Control
Termination
w/o Cause
or for Good
Reason

($)

    

After
Change in
Control
Termination
w/o Cause
or for Good
Reason

($)

     Voluntary
Termination
($)
    

Voluntary
Termination
for “Good
Reason”

($)

    

Change

in

Control

($)

 

Severance Pay

     1,250,000         1,875,000                 1,250,000         1,875,000   

Bonus Payment

             1,875,000                         1,875,000   

Stock Grants Vesting Acceleration

             9,169,426                         9,169,426   

Stock Option Vesting Acceleration

             1,981,420                         1,981,420   

Deferred Compensation Vesting Acceleration

                                       

Payment for Taxes Resulting from Deferred Compensation Distribution

             171,292                         171,292   

Total

     1,250,000         15,072,138                 1,250,000         15,072,138   

W. Michael Kipphut

The following table shows the potential payments upon termination or a change of control of the Company for W. Michael Kipphut, the Company’s Executive Vice President and CFO, as if such termination had occurred on December 31, 2013:

 

     Company Initiated      Executive Initiated  
Type of Benefit   

Before
Change in
Control
Termination
w/o Cause
or for Good
Reason

($)

    

After
Change in
Control
Termination
w/o Cause
or for Good
Reason

($)

     Voluntary
Termination
($)
    

Voluntary
Termination
for “Good
Reason”

($)

    

Change
in
Control

($)

 

Severance Pay

     424,298         848,596                 424,298         848,596   

Bonus Payment

     445,513         594,016                 445,512         594,017   

Stock Grants Vesting Acceleration

             2,988,406                         2,988,406   

Stock Option Vesting Acceleration

             449,241                         449,241   

Deferred Compensation Vesting Acceleration

                                       

Payment for Taxes Resulting from Deferred Compensation Distribution

             231,829                         231,829   

Total

     869,811         5,112,088                 869,810         5,112,089   

 

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Christopher M. Carrington

The following table shows the potential payments upon termination or a change of control of the Company for Christopher M. Carrington, the Company’s Executive Vice President of Global Delivery, as if such termination had occurred on December 31, 2013:

 

     Company Initiated      Executive Initiated  
Type of Benefit   

Before
Change in
Control
Termination
w/o Cause
or for Good
Reason

($)

    

After
Change in
Control
Termination
w/o Cause
or for Good
Reason

($)

     Voluntary
Termination
($)
    

Voluntary
Termination
for “Good
Reason”

($)

    

Change
in
Control

($)

 

Severance Pay

     425,000         850,000                 425,000         850,000   

Bonus Payment

     446,250         892,500                 446,250         892,500   

Stock Grants Vesting Acceleration

             1,458,784                         1,458,784   

Stock Option Vesting Acceleration

             275,133                         275,133   

Deferred Compensation Vesting Acceleration

                                       

Payment for Taxes Resulting from Deferred Compensation Distribution

                                       

Total

     871,250         3,476,417                 871,250         3,476,417   

Lawrence R. Zingale

The following table shows the potential payments upon termination or a change of control of the Company for Lawrence R. Zingale, the Company’s Executive Vice President and General Manager, Major Markets, as if such termination had occurred on December 31, 2013:

 

     Company Initiated      Executive Initiated  
Type of Benefit   

Before
Change in
Control
Termination
w/o Cause
or for Good
Reason

($)

    

After
Change in
Control
Termination
w/o Cause
or for Good
Reason

($)

     Voluntary
Termination
($)
    

Voluntary
Termination
for “Good
Reason”

($)

    

Change
in
Control

($)

 

Severance Pay

     400,000         800,000                 400,000         800,000   

Bonus Payment

     420,000         840,000                 420,000         840,000   

Stock Grants Vesting Acceleration

             2,699,315                         2,699,315   

Stock Option Vesting Acceleration

             506,794                         506,794   

Deferred Compensation Vesting Acceleration

                                       

Payment for Taxes Resulting from Deferred Compensation Distribution

             119,842                         119,842   

Total

     820,000         4,965,951                 820,000         4,965,951   

 

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  COMPENSATION COMMITTEE REPORT      

 

James T. Holder

The following table shows the potential payments upon termination or a change of control of the Company for James T. Holder, the Company’s Executive Vice President, General Counsel and Corporate Secretary, as if such termination had occurred on December 31, 2013:

 

     Company Initiated      Executive Initiated  
Type of Benefit   

Before
Change in
Control
Termination
w/o Cause
or for Good
Reason

($)

    

After
Change in
Control
Termination
w/o Cause
or for Good
Reason

($)

     Voluntary
Termination
($)
    

Voluntary
Termination
for “Good
Reason”

($)

    

Change in
Control

($)

 

Severance Pay

     306,347         306,347                           

Bonus Payment

                                       

Stock Grants Vesting Acceleration

             1,078,897                         1,078,897   

Stock Option Vesting Acceleration

             162,173                         162,173   

Deferred Compensation Vesting Acceleration

                                       

Payment for Taxes Resulting from Deferred Compensation Distribution

             160,998                         160,998   

Total

     306,347         1,708,415                         1,402,068   

Employment Agreements