DEF 14A 1 a14-2411_1def14a.htm DEF 14A

Table of Contents

 

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  x

 

Filed by a Party other than the Registrant  o

 

Check the appropriate box:

o

Preliminary Proxy Statement

o

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x

Definitive Proxy Statement

o

Definitive Additional Materials

o

Soliciting Material under §240.14a-12

 

TeleTech Holdings, Inc.

(Name of Registrant as Specified In Its Charter)

 

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

x

No fee required.

 

 

o

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

 

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

 

 

(5)

Total fee paid:

 

 

 

o

Fee paid previously with preliminary materials.

 

 

o

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

 

(1)

Amount Previously Paid:

 

 

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

 

 

(3)

Filing Party:

 

 

 

 

(4)

Date Filed:

 

 

 

 



Table of Contents

 

Table of Contents

 

Chairman’s Letter to Stockholders

iii

Notice of 2014 Annual Stockholders Meeting

iv

Executive Summary

1

General Information

3

Important Information About the Proxy Materials and Voting Your Shares

3

·

Why am I receiving these proxy materials?

 

·

Why did I receive a Notice of Internet Availability of proxy materials?

 

·

How can I vote my shares?

 

·

What are the matters to be voted on at the Annual Meeting?

 

·

What are my voting choices?

 

·

How does the Board recommend that I vote?

 

·

How will my shares be voted by proxy?

 

·

How can I revoke my proxy or change my vote?

 

·

Will shares I hold in my brokerage account be voted if I do not provide timely voting instructions?

 

·

Will shares that I own as a stockholder of record be voted if I do not return my proxy card in a timely manner?

 

·

What is required to conduct the business of the Annual Meeting?

 

·

How many votes are required to approve each proposal?

 

·

How are votes counted?

 

·

If I own or hold shares in a brokerage account, can my broker vote my shares for me?

 

·

I share an address with another stockholder, how will we receive our proxy materials?

 

·

How can I attend the Annual Meeting?

 

·

How can I see the list of stockholders entitled to vote?

 

·

What happens if additional items of business are presented at the Annual Meeting?

 

·

Is my vote confidential?

 

·

Where can I find the voting results?

 

·

How may I obtain financial and other investor information about TeleTech?

 

·

Who will conduct and pay for the cost of this proxy solicitation?

 

Corporate Governance

7

·

Board Leadership Structure

7

·

Board Risk Oversight

8

·

Communications with our Board

8

·

Board Committees

9

 

·

Audit Committee

9

 

·

Compensation Committee

10

 

·

Nominating and Governance Committee

10

 

·

Executive Committee

10

·

Ethics Code for Executive and Financial Officers

10

·

Director Compensation Overview

11

Audit Committee Report

11

Stock Ownership Information for Directors, Management and Certain Beneficial Owners

13

·

Section 16(a) Beneficial Ownership Reporting Compliance

14

Related Party Transactions

14

 

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Executives and Executive Compensation

15

·

TeleTech Executive Team

15

·

Compensation Discussion and Analysis

16

 

·

Executive Summary

 

 

·

Our Named Executive Officers

 

 

·

Stockholder Support for Our Compensation Decisions

 

 

·

Our 2013 Performance

 

 

·

Executive Compensation Program Overview and Design Principles

 

 

·

How We Use Consultants

 

 

·

How We Use Peer Group, Survey and Benchmarking Data

 

 

·

How We Use Employment Agreements

 

 

·

How We Determine Executive Compensation

20

·

Executive Compensation Tables

25

 

·

Summary Compensation Table

 

 

·

Nonqualified Deferred Compensation Table

 

 

·

All Other Compensation Table

 

 

·

Grants of Planned-Based Awards

 

 

·

Outstanding Equity Awards at Year-End

 

 

·

Option Exercises and Stock Vested

 

 

·

Potential Payments Upon Termination or Change in Control

 

 

·

Equity Compensation Plan Information

 

Compensation Committee Report

32

Independent Registered Public Accounting Firm

32

·

Fees Paid to Accountants

 

·

Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services

 

Proposals to be Voted On at the Annual Meeting

33

·

Proposal 1: Election of Directors

33

 

·

Nominations of Directors

34

 

·

2014 Director Nominees

34

 

·

Required Vote

36

 

·

Recommendation of the Board

36

·

Proposal 2: Ratification of the Appointment of Independent Registered Public Accounting Firm

36

 

·

Required Vote

37

 

·

Recommendation of the Board and the Audit Committee

37

·

Proposal 3: Advisory Vote on Executive Compensation

37

 

·

Required Vote

37

 

·

Recommendation of the Board

38

Additional Information

38

·

Stockholder Submission of Nominations and Proposals

 

·

Other Business

 

·

Annual Report on Form 10-K

 

 

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April 8, 2014

 

 

Dear Stockholders:

 

 

It is my pleasure to invite you to join us at the Annual Meeting of Stockholders of TeleTech Holdings, Inc., to be held at 9197 South Peoria Street, Englewood, Colorado. The meeting will take place on Thursday, May 22, 2014, at 10:00 a.m., Mountain Daylight Time. At the meeting, we will report on TeleTech’s results for 2013 and comment on our expectations for the upcoming year. We hope you are able to attend.

 

 

Details regarding admission to the meeting and the business to be conducted at the meeting are provided in the Notice of the Annual Stockholders Meeting and the accompanying Proxy Statement. Together with the Proxy Statement, we are making available a copy of our 2013 Annual Report to Stockholders. We encourage you to read our Annual Report, which includes our audited financial statements and provides detailed information about our business.

 

 

We elected to provide access to our proxy materials via the internet under the Securities and Exchange Commission’s internet notice and access rules. In our business, we are focused on improving the customer engagement for our clients. Our aspirations are no different about our stockholders. We believe that by making our proxy materials available via the internet we enhance our stockholders’ ability to access our information, connect with our business, and understand how TeleTech is governed and managed to maximize stockholder value, the quality and efficiency of services to our clients, and exceptional opportunities for our employees. By providing the proxy materials via the internet, we also reduce the environmental impact of our Annual Meeting. For additional information about the Annual Meeting, please see the Important Information about the Proxy Materials and Voting Your Shares section of this Proxy Statement.

 

 

PLEASE VOTE

 

Your vote is important. Whether or not you plan to attend the Annual Meeting, we encourage you to read these materials carefully and promptly vote your shares. There are several ways you can vote: via internet, by telephone, by mailing the enclosed proxy, or by attending the meeting in person. Please vote as soon as possible to ensure your vote is recorded promptly. If you hold shares in a brokerage account, your broker will not be able to vote your shares on most matters unless you provide your voting instructions.

 

 

On behalf of the Board of Directors and all TeleTech employees, thank you for your continued support of, and confidence in, TeleTech and our business.

 

 

 

Very truly yours,

 

 

 

 

KENNETH D. TUCHMAN

 

 

 

Chairman and Chief Executive Officer

 

 

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Notice of Annual Meeting of Stockholders

 

Thursday, May 22, 2014

 

10:00 a.m. Mountain Daylight Time

 

TeleTech Global Headquarters

9197 South Peoria Street

Englewood, Colorado 80112

 

 

ITEMS OF BUSINESS:

 

At the meeting, our stockholders will be asked to:

 

·        Elect seven directors named in the Proxy Statement, for a term of one year;

 

·        Ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2014;

 

·        Approve, on an advisory basis, our executive compensation; and

 

·        Transact such other business, including stockholder proposals, as may properly come before the meeting.

 

The meeting will also include a report on our financial results for fiscal year 2013, our operations, and our business outlook for 2014.

 

RECORD DATE:

 

Only stockholders of record at the close of business on March 27, 2014, will be entitled to receive notice of, and to vote at, the 2014 Annual Stockholders Meeting.

 

By Order of the Board of Directors

 

 

 

 

 

 

Margaret B. McLean

 

Senior Vice President, Corporate Secretary and General Counsel

 

 

 

Englewood, Colorado

 

April 8, 2014

 

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held on May 22, 2014: This Notice of Annual Meeting and Proxy Statement and the 2013 Annual Report are available at www.teletech. com/ProxyVote.

 

 

REVIEW YOUR PROXY STATEMENT AND VOTE IN ONE OF FOUR WAYS:

 

 

VIA INTERNET

 

Visit the website listed on your proxy card

 

 

 

BY MAIL

 

Sign, date and return your proxy card in the enclosed envelope

 

 

 

BY TELEPHONE

 

Call the telephone number on your proxy card

 

 

IN PERSON

 

Attend the Annual Meeting and vote in person

 

 

 

 

 

 

ELECTION TO RECEIVE ELECTRONIC DELIVERY OF FUTURE ANNUAL MEETING MATERIALS.

You can expedite delivery and avoid costly mailings by confirming in advance your preference for electronic delivery.

 

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9197 South Peoria Street
Englewood, Colorado 80112

 

 


PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS


 

EXECUTIVE SUMMARY

 

Our Proxy Statement contains information about the matters that will be voted on at our Annual Meeting of Stockholders as well as other helpful information about TeleTech Holdings, Inc., our corporate governance, and our executive compensation.

 

This Proxy Statement, the accompanying proxy and our 2013 Annual Report to Stockholders or a Notice of Internet Availability of Proxy Materials which contains instructions on how to access our proxy materials and vote online, are first being sent or provided to stockholders beginning on or about April 8, 2014. For more information, see Important Information about the Proxy Materials and Voting Your Shares below.

 

This summary highlights certain information contained elsewhere in our Proxy Statement. We encourage you to read the entire Proxy Statement carefully before voting.

 

MATTERS TO BE VOTED ON AT 2014 ANNUAL MEETING

 

 

Proposal

 

 

Board Recommendation

 

 

For more detail, see
page:

 

 

 

 

 

 

1.   Election of directors

 

FOR each Nominee

 

33

 

 

 

 

 

 

 

 

 

 

2.   Ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2014

 

FOR

 

37

 

 

 

 

 

 

 

 

 

 

3.   Advisory vote to approve executive compensation

 

FOR

 

37

 

 

 

 

 

 

OUR COMPANY

 

·             Our Company was founded in 1982 as a pioneer in the customer care business process outsourcing industry. Today we are diversifying our customer care service offerings by providing integrated customer strategy and analytics-driven, technology-enabled customer engagement management solutions.

 

·             From strategic consulting to technology solutions, customer acquisition, customer care and operational execution, our 41,000 employees, speaking over 50 languages, deliver results in 24 countries on six continents for clients in the automotive, communications and media, financial services, government, healthcare, technology, transportation and retail industries.

 

·             Our services are delivered across four distinct and integrated business segments: Customer Management Services (CMS), Customer Growth Services (CGS), Customer Technology Services (CTS), and Customer Strategy Services (CSS).

 

·             TeleTech maintains the highest ethical, environmental and safety standards everywhere we do business, and, through TeleTech Community Foundation, TeleTech invests in education and development in communities where we live and work.

 

2013 PERFORMANCE HIGHLIGHTS

 

·      Our 2013 revenue was $1.19 billion, an increase of 2.6 percent over year ago period.

 

·      Our operating margin was 8.5 percent of revenue, up from 6.8 percent in the prior year.

 

·      Our net cash from operations increased to $137.9 million compared to $106.9 million in the prior year.

 

·      Our diluted earnings per share were $1.29 compared to $1.26 in the prior year.

 

·      In 2013, we repurchased 2.48 million shares for $56.5 million.

 

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CORPORATE GOVERNANCE HIGHLIGHTS

 

Our Board follows sound governance practices.

 

 

Independence

 

·  Five out of seven Board nominees are independent directors.

 

·  All Board committees, except a special purpose Executive Committee, are composed exclusively of independent directors.

 

 

 

Executive Sessions

·  The independent directors regularly meet in executive session without management.

 

 

·  The independent directors regularly meet with independent auditors, internal audit and legal executives.

 

 

 

Board Oversight of Risk Management

·  Board regularly reviews TeleTech’s approach to identifying, assessing and managing risks facing our business.

 

 

·  The Audit Committee reviews our overall enterprise risk management policies and practices, including financial risk exposure and internal controls.

 

 

 

Stock Ownership Requirements

·  Our Chief Executive Officer and Chief Financial Officer must, within five years of attaining the position, hold common stock valued at 3x of base salary.

 

 

·  Other members of our executive leadership team must, within five years of appointment, hold common stock valued at 2.5x of base salary.

 

 

 

Board Practices

·  Board annually reviews the effectiveness of its committees and periodically reviews its effectiveness as a group.

 

 

·  Nomination priorities are adjusted annually to ensure that our Board, as a whole, continues to reflect the appropriate mix of skills and experience necessary to support TeleTech strategy.

 

 

·  Board committees have access to independent advisors at their sole discretion.

 

 

 

Accountability

·  All directors stand for election annually.

 

 

·  Our Chairman of the Board and Chief Executive Officer is the controlling stockholder of TeleTech. He controls more than 60 percent of our common stock.

 

BOARD NOMINEES

 

 

 

 

 

 

 

 

 

 

Director

 

Age

 

Director Since

 

Independent

 

Qualifications

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kenneth D. Tuchman

 

54

 

1994

 

 

 

·  Global executive

·  Business process outsourcing innovator

·  TeleTech founder

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

James E. Barlett

 

70

 

2000

 

 

 

·  Global CEO experience

·  Public company director experience

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tracy L. Bahl

 

52

 

2013

 

ü

 

·  Private equity executive

·  Healthcare

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gregory A. Conley

 

59

 

2012

 

ü

 

·  Global CEO experience

·  Technology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert N. Frerichs

 

62

 

2012

 

ü

 

·  Public company director

·  Consulting services

·  Technology services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shrikant Mehta

 

70

 

2004

 

ü

 

·  International entrepreneurship

·  Innovation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Anjan Mukherjee

 

40

 

2009

 

ü

 

·  Private equity executive

·  M&A and investment advice

 

 

 

 

 

 

 

 

 

 

2013 EXECUTIVE COMPENSATION HIGHLIGHTS

 

·             Our executive compensation program is designed to reward financial results and effective strategic leadership, which we believe are key to building sustainable value for our stockholders.

 

·             Our executive compensation program utilizes a mix of base salary, performance-based cash incentive awards, equity awards, and discretionary cash bonuses to attract and retain high-qualified executives and maintain a strong relationship between executive pay and company performance.

 

·             Our executive compensation program places significant weight on ethical and responsible conduct in pursuit of TeleTech’s performance goals.

 

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·        Our executive compensation programs place a meaningful portion of compensation “at risk” by aligning cash incentive payments to performance and by granting equity that vests over four- and five-year periods to ensure that the actual compensation realized by executives aligns with stockholder value over the long term.

 

·        Our executive officers are subject to stock ownership and stockholding requirements.

 

·        We ensure that our rewards are affordable by aligning them to the company’s annual business plan.

 

Our stockholders have indicated strong support for our executive compensation program with 99.7 percent vote in favor of the program at our 2013 Annual Meeting of Stockholders.

 

GENERAL INFORMATION

 

This proxy statement (“Proxy Statement”) is issued in connection with the solicitation of proxies by the Board of Directors of TeleTech Holdings, Inc. (“TeleTech” or the “Company”) for use at the 2014 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on May 22, 2014 at 10:00 a.m. Mountain Daylight Time, at 9197 South Peoria Street, Englewood, Colorado and at any adjournment or postponement thereof.

 

On or about April 8, 2014, we will begin distributing to each stockholder entitled to vote at the Annual Meeting either (1) this Proxy Statement, a proxy card or voting instruction form, and our 2013 Annual Report to Stockholders, which we collectively refer to as the “proxy materials,” or (2) an email or notice of internet availability of proxy materials, in each case with instructions on how to access electronic copies of our proxy materials.

 

This Proxy Statement contains important information regarding the Annual Meeting, the proposals on which you are being asked to vote, information about our voting procedures, and information you may find useful in determining how to vote.

 

IMPORTANT INFORMATION ABOUT THE PROXY MATERIALS AND VOTING YOUR SHARES

 

Why am I receiving these proxy materials?

 

The Company is soliciting your proxy in connection with the Annual Meeting. As a stockholder, you are invited to attend the Annual Meeting and are requested to vote on the items of business discussed in this Proxy Statement.

 

Why did I receive a Notice of Internet Availability of proxy materials?

 

Under the rules of the U.S. Securities and Exchange Commission, we are using the internet as the primary means of furnishing proxy materials to our stockholders. Most of our stockholders will not receive printed copies of the proxy materials unless they request them. Accordingly, if you received a Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) by mail, you will not receive a printed copy of the proxy materials, unless you request one as instructed in that notice. Instead, the Notice of Internet Availability will instruct you on how you may access and review the proxy materials on the internet, free of charge. This approach to distribution of proxy materials reduces the environmental impact of our Annual Meeting, expedites stockholders’ receipt of the proxy materials, and lowers our costs. The Notice of Internet Availability also includes instructions allowing stockholders to request to receive future proxy materials in printed form by mail or electronically by email.

 

How can I vote my shares?

 

If you are a stockholder of record, you may vote by internet, by telephone or by mail at any time prior to the meeting, or you may vote in person at the meeting, as follows:

 

·        Vote by Internet at www.proxyvote.com. Use the internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Daylight Time on May 21, 2014. Have your proxy card or Notice of Internet Availability in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

 

·        Vote by Phone. Use any telephone to call 1-800-690-6903 to transmit your voting instructions up until 11:59 p.m. Eastern Daylight Time on May 21, 2014. Have your proxy card in hand when you call and then follow the instructions. If you received a Notice of Internet Availability, you may request a proxy card by following the instructions in the notice.

 

·        Vote by Mail. If you received or requested a printed copy of the proxy materials by mail, you may vote by proxy by filling out the proxy card and returning it in the postage-paid envelope we have provided or returning it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. If you received a Notice of Internet Availability, you may request a proxy card by following the instructions in the notice.

 

·        Vote at the Meeting. You may vote your shares at the meeting. You will be admitted to the meeting only if you have a ticket. See “How can I attend the Annual Meeting?” in this Proxy Statement for instructions on obtaining a ticket.

 

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If your shares are held in an account at a brokerage firm, bank or similar organization, you will receive voting instructions from the organization holding your account and you must follow those instructions to vote your shares.

 

Additional Procedures. Votes cast by proxy prior to the Annual Meeting will be tabulated by an automatic system administered by Broadridge Financial Solutions, Inc. Votes cast by proxy or in person at the Annual Meeting will be counted by the persons we appoint to act as election inspectors for the Annual Meeting. With regard to the election of directors, votes may be cast in favor or withheld; votes that are withheld will be excluded entirely from the tabulation of votes and will have no effect. Cumulative voting is not permitted in the election of directors. Consequently, you are entitled to one vote for each share of our common stock held in your name for as many persons as there are directors to be elected, and for whose election you have the right to vote.

 

With respect to the other proposals submitted for stockholder approval (other than the election of directors), you may vote for or against the proposal, or you may abstain. Abstentions will have the same effect as a negative vote.

 

If you hold shares beneficially in street name and do not provide your broker with voting instructions, your shares may constitute “broker non-votes.” Generally, brokerage firms have the authority to vote your shares without your voting instructions on certain “routine” matters, such as Proposal 2, but not on other “non-routine” items, such as Proposals 1 and 3. In tabulating the voting result for any particular proposal, shares that constitute broker non-votes are not considered votes cast on that proposal. Thus, broker non-votes will not affect the outcome of any matter being voted on at the meeting, assuming that a quorum is obtained

 

For your information, voting via the internet is the least expensive to us, followed by telephone voting, with voting by mail being the most expensive. Also, you may help to save us the expense of a second mailing if you vote promptly.

 

What are the matters to be voted for at the Annual Meeting?

 

The items of business scheduled to be voted on at the Annual Meeting are:

 

·        Proposal 1: The election of seven directors (see page 33);

 

·        Proposal 2: The ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2014 (see page 36); and

 

·        Proposal 3: The approval, on an advisory basis, of the compensation for our executive officers (see page 37).

 

We will also consider other business that properly comes before the Annual Meeting.

 

What are my voting choices?

 

For the election of directors, you may vote “FOR” or “WITHHOLD” with respect to each nominee. For the other proposals, you may vote “FOR” or “AGAINST” or you may “ABSTAIN” from voting.

 

How does the Board recommend that I vote?

 

Our Board recommends that you vote your shares:

 

·                  “FOR” each of the nominees to our Board;

 

·                  “FOR” the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2014; and

 

·                  “FOR” the proposal to approve, on an advisory basis, the compensation for our named executive officers.

 

Kenneth D. Tuchman, our Chairman and Chief Executive Officer and the beneficial owner of approximately 63.4 percent of the issued and outstanding shares of common stock as of the record date (62.8 percent of the shares entitled to vote, excluding stock options) has indicated that he intends to vote: (1) “FOR” each of the nominees to our Board; (2) “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2014; and (3) “FOR” the approval, on an advisory basis, the compensation for our named executive officers.

 

Additionally, on April 1, 2011, Mr. Tuchman entered into a Voting Agreement whereby he has agreed to vote shares he beneficially owns “FOR” the election of Mr. Barlett to our Board through and including December 31, 2017.

 

How will my shares be voted by proxy?

 

Valid proxies provided to the Company by telephone, over the internet or by mailed proxy card will be voted at the Annual Meeting as directed by you unless revoked in accordance with the instructions. If you properly execute and submit your proxy, but do not indicate how you want your shares voted, the persons named as your proxies will vote your shares in accordance with the recommendations of our Board of Directors. These recommendations are:

 

·        “FOR” the seven Director-nominees set forth in the Proxy Statement;

 

·        “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm;

 

·        “FOR” the approval of our executive compensation.

 

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How can I revoke my proxy or change my vote?

 

You may revoke your proxy or change your vote at any time prior to the taking of the vote at the Annual Meeting. If you are the stockholder of record, you may change your vote by:

 

·          Voting again through the internet or by telephone, or by completing, signing, dating and returning a new proxy card with a later date, all of which automatically revoke the earlier proxy so long as completed prior to the applicable deadline for each method;

 

·          Providing a written notice of revocation to our Corporate Secretary at TeleTech Holdings, Inc., 9197 South Peoria Street, Englewood, Colorado 80112 prior to your shares being voted; or

 

·          Attending the Annual Meeting and voting in person. Your attendance at the meeting alone will not cause your previously granted proxy to be revoked unless you specifically so request before the taking of the vote.

 

For shares you hold beneficially in street name, you may change your vote by submitting new voting instructions to your broker, bank, trustee or nominee following the instructions they provided, or, if you have obtained a legal proxy from your broker, bank, trustee or nominee giving you the right to vote your shares, by attending the Annual Meeting and voting in person.

 

Will shares I hold in my brokerage account be voted if I do not provide timely voting instructions?

 

If your shares are held through a brokerage firm, they will be voted as you instruct on the voting instruction card provided by your broker. If you sign and return your card without giving specific instructions, your shares will be voted in accordance with the recommendations of our Board of Directors.

 

If you do not provide timely instructions as to how your brokerage shares are to be voted, your broker will have the authority to vote them only on the ratification of our independent registered public accounting firm. Your broker will be prohibited from voting your shares on the election of directors, and the advisory approval of our executive compensation. These “broker non-votes” will be counted only for the purpose of determining whether a quorum is present at the meeting and not as votes cast.

 

Will shares that I own as a stockholder of record be voted if I do not return my proxy card in a timely manner?

 

Shares that you own as a stockholder of record will be voted as you instruct on your proxy card. If you sign and return your proxy card without giving specific instructions, they will be voted in accordance with the recommendations of our Board of Directors. If you do not return your proxy card in a timely manner, your shares will not be voted unless you or your proxy holder attends the Annual Meeting and vote in person.

 

What is required to conduct the business of the Annual Meeting?

 

In order to conduct business at the Annual Meeting, a quorum of a majority of the outstanding shares of common stock entitled to vote as of the record date must be present in person or represented by proxy. Both abstentions and broker non-votes are counted for the purpose of determining the presence of a quorum.

 

How many votes are required to approve each proposal?

 

Directors are elected by a plurality of the votes cast. This means that the seven individuals nominated for election to the Board of Directors who receive the most “FOR” votes (among votes properly cast in person, electronically, telephonically or by proxy) will be elected.

 

The affirmative vote of the holders of a majority of the outstanding shares of Common Stock present in person or represented by proxy at the meeting and entitled to vote is required to approve the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm.

 

The vote on executive compensation is advisory and non-binding, but we will consider stockholders to have approved the compensation of our named executive officers if the number of votes cast “FOR” the proposal exceeds the number of votes cast “AGAINST” the proposal.

 

How are votes counted?

 

Abstentions will be treated as shares that are present and entitled to vote and will consequently have the effect of a vote “AGAINST” the particular matter, except in the case of the vote on executive compensation for which an abstention will have no effect. Votes withheld from a director nominee will have no effect on the election of the director from whom votes are withheld. If a broker indicates on the proxy card that it does not have discretionary authority to vote certain shares on a particular matter, it is referred to as a “broker non-vote.” Broker non-votes will be treated as shares that are present and entitled to vote for purposes of determining the presence of a quorum, but will not be considered as voted for the purpose of determining the approval of the particular matter.

 

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If I own or hold shares in a brokerage account, can my broker vote my shares for me?

 

The election of directors and the executive compensation vote are matters on which brokers do not have discretionary authority to vote. Thus, if your shares are held in a brokerage account and you do not provide instructions as to how your shares are to be voted on these proposals, your broker or other nominee will not be able to vote your shares on these matters. Accordingly, we urge you to provide instructions to your broker or nominee so that your votes may be counted. You should vote your shares by following the instructions provided on the voting instruction card that you receive from your broker.

 

I share an address with another stockholder, how will we receive our proxy materials?

 

For stockholders of record, we have adopted a procedure called “householding,” which the SEC has approved. Under this procedure, we are delivering a single copy of the Notice of Availability and, if applicable, this Proxy Statement and the 2013 Annual Report on Form 10-K to multiple stockholders who share the same address unless we have received contrary instructions from one or more of the stockholders. This procedure reduces our printing and mailing costs and the impact of printing and mailing these materials on the environment. Stockholders who participate in householding will continue to be able to access and receive separate proxy cards. Upon written or oral request, we will deliver promptly a separate copy of the Notice of Availability and, if applicable, this Proxy Statement and the 2013 Annual Report on Form 10-K to any stockholder at a shared address to which we delivered a single copy of any of these documents. To receive a separate copy of the Notice of Availability and, if applicable, this Proxy Statement or the 2013 Annual Report on Form 10-K, or to request delivery of a single copy of these materials if multiple copies are currently being delivered, stockholders may contact us at TeleTech Holdings, Inc., 9197 South Peoria Street, Englewood, Colorado 80112, Attention: Investor Relations, or by calling 1 .800.TELETECH (1.800.835.3832). Outside of the U.S., please dial +1.303.397.8100.

 

Stockholders who hold shares in “street name” (as described above) may contact their brokerage firm, bank, broker- dealer or other similar organization to request information about householding.

 

How can I attend the Annual Meeting?

 

If you plan to attend the Annual Meeting, please mark the appropriate box on the proxy card and return the proxy card promptly. The admission ticket for the meeting will be forwarded to you. If you are a stockholder of record and arrive at the Annual Meeting without an admission ticket, we will have to verify your share ownership before you are admitted to the meeting. If you are a beneficial owner, you will only be admitted upon presentation of evidence of your beneficial holdings, such as a bank or brokerage firm account statement.

 

How can I see the list of stockholders entitled to vote?

 

A complete list of stockholders entitled to vote at the Annual Meeting will be available for examination by any stockholder, for any purpose germane to the meeting, at the Annual Meeting and at our principal office located at 9197 South Peoria Street, Englewood, Colorado 80112 during normal business hours for a period of at least 10 days prior to the Annual Meeting.

 

What happens if additional items of business are presented at the Annual Meeting?

 

We are not aware of any item that may be voted on at the Annual Meeting that is not described in this Proxy Statement. However, the holders of the proxies that we are soliciting will have the discretion to vote them in accordance with their best judgment on any additional matters that may be voted on, including matters incidental to the conduct of the meeting.

 

Is my vote confidential?

 

Stockholders may elect that their identity and individual vote be held confidential by marking the appropriate box on their proxy card or ballot. Confidentiality will not apply to the extent that voting disclosure is required by law or is necessary or appropriate to assert or defend any claim relating to voting. Confidentiality also will not apply with respect to any matter for which votes are solicited in opposition to the director nominees or voting recommendations of our Board of Directors, unless the persons engaging in the opposing solicitation provide stockholders with voting confidentiality comparable to that which we provide.

 

Where can I find the voting results?

 

We expect to announce preliminary voting results at the Annual Meeting and to publish final results in a Current Report on Form 8-K that we will file with the Securities and Exchange Commission within four business days following the meeting. The report will be available on our website at www.teletech.com under the “Investors” and “Company SEC filings” tabs.

 

How may I obtain financial and other information about TeleTech?

 

Additional financial and other information about the Company is included in our Annual Report on Form 10-K, which we file with the Securities and Exchange Commission, and which is available on our website at www.teletech.com under the “Investors” and

 

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“Company SEC Filings” tabs. We will also furnish a copy of our 2013 Annual Report (excluding exhibits, except those that are specifically requested) without charge to any stockholder who so requests by contacting our Investor Relations department at TeleTech Holdings, Inc., 9197 South Peoria Street, Englewood, Colorado, 80112, Attention: Investor Relations, by calling 1.800. TELETECH (1.800.835.3832). Outside of the U.S., please dial +1.303.397.8100, or by emailing investor.relations@teletech.com.

 

You can also obtain, without charge, a copy of our bylaws, codes of conduct and Board committee charters by contacting the Investor Relations department or you can view these materials on the internet by accessing our website at www.teletech.com and clicking on the “Investors” tab, then clicking on the “Corporate Governance” tab.

 

Who will conduct and pay for the cost of this proxy solicitation?

 

We will bear all costs of soliciting proxies, including reimbursement of banks, brokerage firms, custodians, nominees and fiduciaries for reasonable expenses they incur. Proxies may be solicited personally, by mail, by telephone, or via internet; by our directors, officers or other regular employees without remuneration other than regular compensation. We will request brokers and other fiduciaries to forward proxy soliciting material to the beneficial owners of shares of common stock that are held of record by such brokers and fiduciaries and will reimburse such persons for their reasonable out-of-pocket expenses.

 

CORPORATE GOVERNANCE

 

TeleTech is committed to best practices in corporate governance. The Company is governed by our Board of Directors. The role of the Board includes the oversight of the Company’s management; appointment of the Chief Executive Officer; setting goals for and overseeing performance of the Company’s executive management team; planning for management succession; overseeing effective corporate governance, including selecting and recommending for stockholder approval nominees for the Board of Directors; assessing Board performance; planning for Board succession; forming and staffing Board committees; reviewing and monitoring the development and implementation of the Company’s annual strategic, financial, and operations plans and budgets; assessing and monitoring risk and risk management practices; reviewing and approving significant corporate actions; reviewing and monitoring processes designed to assure TeleTech’s integrity, including financial reporting, compliance with legal and regulatory obligations, maintenance of confidential channels to report concerns about violations of laws and policies, and protection against reprisals for those who report such violations; overseeing the relationship between the Company and its stockholders; and supporting the Company’s commitment to its corporate responsibility and sustainable business.

 

Board Leadership Structure

 

Our Board is led by TeleTech’s founder, Mr. Kenneth D. Tuchman, who serves as the Chairman of the Board. Mr. Tuchman is also TeleTech’s Chief Executive Officer. The Board retains the flexibility to determine from time to time whether the position of the Chief Executive Officer and the Chairman of the Board should be combined or separated, whether an independent director should serve as Chairman of the Board, and whether to appoint a lead independent director to serve as a liaison between independent directors and the Chairman.

 

At present, the Board believes that the Company is best served by having Mr. Tuchman serve as both the Company’s Chairman of the Board and Chief Executive Officer. The Board’s view is based on the facts that Mr. Tuchman beneficially owns more than 63 percent of the outstanding equity in the Company, has a unique insight into the Company’s customer engagement solutions strategy as an industry innovator and the Company founder, and is intimately involved in the day to day strategic direction of the Company.

 

Since the size of the Board is relatively small and each independent director has unrestricted access to Mr. Tuchman and the Company’s management, the independent members of the Board do not currently perceive the need for an appointment of a lead independent director. Our Board also believes that appointing a lead independent director may serve to create a potential conflict among the directors and interfere with the current collaborative environment in the boardroom that permits the Board to leverage the knowledge and experience of each Board member to drive strategic initiatives necessary to support the Company’s transformation from a business process outsourcing business to an analytics and technology enabled global customer experience company.

 

With the exception of Mr. Tuchman and Mr. Barlett, who is the Board’s executive Vice Chairman, all of our other directors are independent.

 

The Board is aware of the potential conflicts that may arise in having Mr. Tuchman, the Company’s largest and controlling stockholder, serve as the Chairman of the Board, but believes that there are adequate governance safeguards in place to mitigate against such risks. Such safeguards include, but are not limited to,

 

·        Executive sessions of the Board for independent directors;

 

·        The oversight of financial reporting, independent and internal auditors, integrity and risk management, and related party transactions by the Audit Committee of the Board, comprised entirely of independent directors;

 

·        Executive management performance reviews and compensation determination by the Compensation Committee of the Board comprised entirely of independent directors, who utilize, when appropriate, the services of an independent compensation consultant;

 

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·        The Nominating and Governance Committee comprised entirely of independent directors oversees periodic Board and Board committees performance assessments;

 

·        Recommendations for nominations of Board members for stockholders’ vote are conducted by the Nominating and Governance Committee, comprised entirely of independent directors;

 

·        The broad-based public company, finance and global business experience of the members of our Board, generally, and members of the Audit Committee in particular; and

 

·        Unrestricted access available to all Board members to independent consultants, including legal counsel.

 

Lastly, our Board has in the past demonstrated the independence necessary to address potential conflicts of interest through the use of special ad hoc committees to address specific matters when they arise.

 

 

 

 

 

Board Participation

 

Board Leadership

 

 

 

 

 

 

 

 

 

·      Six Board meetings held in 2013

 

·      Chairman of the Board:

Kenneth D. Tuchman

 

 

 

 

 

 

 

 

·      Acted by unanimous written consent twice

 

·      Vice Chairman of the Board:

James E. Barlett

 

 

 

 

 

 

 

 

·      Each director attended at least 75 percent of all Board and relevant committee meetings

 

·      Director Independence

Five of seven

 

 

 

 

 

 

 

 

·      Seven directors attended our Annual Meeting of Stockholders in 2013

 

 

 

 

 

 

 

 

Board Risk Oversight

 

While our executive officers and various other members of management, including our Chief Risk Officer, are responsible for day-to-day management of risk, our Board oversees and monitors our risk management practices in the course of its ongoing review of the Company’s strategy, business plans, risk transfer programs. The Board and its Committees periodically request and receive comprehensive reports from key Company functions, including legal, treasury, tax, and information security.

 

The Board has delegated oversight of certain categories of risk management to designated Board committees, which report to the Board on matters related to the specific areas of risk they oversee.

 

 

 

 

Board/Committee

 

Primary Areas of Risk Oversight

 

 

 

 

 

 

Full Board

 

Enterprise risk management structure; strategic risk associated with TeleTech’s business plan; major litigation; significant capital transactions, including M&A, technology investment and divestitures; capital structure risks.

 

 

 

 

 

 

Audit Committee

 

Risks of financial reporting and disclosure; major financial exposure risks; significant IT risks; ethics and compliance risks, including regulatory and legal; currency exposure; liquidity risks; related party transactions.

 

 

 

`

 

 

Compensation Committee

 

Executive recruiting, retention, and succession planning; compensation policies and practices, including incentive compensation; health and welfare benefits programs.

 

 

 

 

 

 

Nominating and Governance Committee

 

Corporate governance risks; effectiveness of Board’s and Committees’ oversight and performance; Board succession, candidate nomination and succession planning; conflicts of interest; director independence.

 

 

 

 

Annually, the Audit Committee, with assistance from the risk assurance department, conducts an annual enterprise-wide risk assessment and, with input from management, adopts the Company’s annual internal audit plan designed to test business processes that may represent special risk exposures to the Company. The Audit Committee quarterly reviews the results of internal audits and actively monitors the progress of recommended remedial and mitigation plans. The Audit Committee also oversees and reports to the full Board on TeleTech’s ongoing business continuity and disaster recovery planning efforts.

 

The Compensation Committee annually reviews TeleTech’s executive compensation programs for inherent risks and receives periodic reports from the Company’s human capital and legal departments on steps the Company takes to anticipate and mitigate any potential risks in incentive and performance-based compensation programs. The Compensation Committee believes that executive compensation should be contingent on performance relative to targets and business plans. It expects TeleTech executives to achieve these targets in a manner consistent with TeleTech’s ethical standards and policies. The Board engages in periodic discussions with management on how to maximize executives’ performance through compensation incentives without creating unreasonable risks to the business. For additional information on TeleTech compensation programs’ risks, please review section titled “Executive Compensation – Compensation Discussion and Analysis,” in these proxy materials.

 

Communications with our Board

 

The Board established a process for Stockholders and other interested parties to communicate with the Board or any directors by requesting that all communication be sent to the following address:

 

TeleTech Holdings, Inc.

c/o Corporate Secretary

9197 South Peoria Street

Englewood, Colorado 80112

 

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Board Committees

 

The following table provides the composition of each of our Board committees as of April 2014:

 

Director

 

 

Audit Committee

 

 

 

Compensation
Committee

 

 

 

Nominating and
Governance Committee

 

 

 

Executive
Committee

 

 

Kenneth D. Tuchman

 

 

 

 

 

 

 

 

 

 

James E. Barlett

 

 

 

 

 

 

 

 

 

Chair

 

 

Tracy L. Bahl

 

 

 

 

 

 

 

 

 

 

Gregory A. Conley

 

 

 

ü

 

 

 

ü

 

 

 

 

 

 

Robert N. Frerichs

 

 

 

ü

 

 

 

ü

 

 

 

 

 

 

Shrikant Mehta

 

 

 

 

 

 

 

Chair

 

 

 

ü

 

 

Anjan Mukherjee

 

 

 

 

 

Chair

 

 

 

ü

 

 

 

ü

 

 

Robert M. Tarola1

 

 

 

Chair

 

 

 

 

 

 

 

 

1 Mr. Tarola will not be standing for re-election to the Board of Directors at the Annual Meeting.

 

Audit Committee

 

The Audit Committee operates under the Audit Committee charter adopted by our Board and available at http://www. teletech.com/investors/corporate-governance/ (“Corporate Governance” under the “Investors” tab on our public website www.teletech.com). It is responsible for, among other things:

 

·        Assisting the Board in its oversight of the integrity of TeleTech’s financial statements;

 

·        Overseeing the adequacy of internal controls and the financial reporting and disclosure processes;

 

·        Selecting, evaluating, and appointing the independent registered public accounting firm, including assessing the firm’s independence and qualifications;

 

·        Reviewing and approving all non-audit services performed by the independent registered public accounting firm;

 

·        Overseeing the activities and progresses of the internal audit department;

 

·        Overseeing TeleTech’s ethics program and its confidential hotline process, including reviewing the establishment of and compliance with the Code of Conduct;

 

·        Overseeing investigations into any matters within the Audit Committee’s scope of responsibility;

 

·        Overseeing our enterprise risk management programs; and

 

·        Reviewing and approving all related-party transactions.

 

In 2013, the members of the Audit Committee included Robert M. Tarola (Chair), Gregory A. Conley and, as of February 2013, Robert N. Frerichs, each of whom is independent within the meaning of the NASDAQ Stock Market Rules and Rule 10A-3(b)(l) under the Securities Exchange Act of 1934.

 

Our Board determined that Mr. Tarola qualifies as “audit committee financial expert” within the meaning of the SEC rules. Mr. Tarola’s relevant experience includes his CPA qualifications, his experience as a partner with Price Waterhouse LLP (now PricewaterhouseCoopers LLP), and his work as chief financial officer of W.R. Grace & Co. and MedStar Health, Inc.

 

The Audit Committee oversees TeleTech’s internal disclosure processes, including TeleTech’s anonymous and confidential channels available to employees to report concerns about financial reporting. The Committee established procedures for, and oversees receipt and treatment of confidential, (including anonymous) submissions by TeleTech employees of concerns about the Company’s accounting, internal control and auditing practices. These processes are established to assure accurate and complete financial reporting and to identify timely any potential issues that could impact TeleTech’s accounting, financial reporting and effectiveness of its internal controls. The Audit Committee reviews and assesses the matters raised through these reporting channels and monitors managements’ response to these reports, engaging when warranted.

 

The Audit Committee evaluates the independence, qualifications and performance of TeleTech’s internal audit function and annually approves the Company’s internal audit plan. The Committee also discusses with management TeleTech’s risk assessment and management practices, the Company’s major financial risk exposures and the steps management has taken to monitor and mitigate such exposures to be within the Company’s risk tolerance levels.

 

During 2013, the Audit Committee held four regularly scheduled meetings and four special meetings, and did not approve any matters through unanimous written consent.

 

The Audit Committee reviews and assesses the adequacy of its charter, and revises it as appropriate, on an annual basis.

 

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Compensation Committee

 

The Compensation Committee operates under the Compensation Committee charter adopted by our Board and available at http://www.teletech.com/investors/corporate-governance/ (“Corporate Governance” under the “Investors” tab on our public website www.teletech.com). It is responsible for, among other things:

 

·        Reviewing performance goals and approving the annual salary, incentives and all other compensation for each executive officer, including any employment arrangements and change of control agreements with such officers;

 

·        Reviewing and approving compensation programs for independent members of our Board;

 

·        Reviewing and approving material employee benefit plans (and changes thereto);

 

·        Reviewing and evaluating risks associated with our compensation programs; and

 

·        Adopting and administering various equity-based incentive plans.

 

In 2013, the members of the Compensation Committee included Anjan Mukherjee (Chair), Gregory A. Conley and, as of February 2013, Robert Frerichs, each of whom is an “independent director” as defined under the NASDAQ Stock Market Rules, a “non-employee director,” as defined under SEC Rule 16b-3, and an “outside director,” as defined under section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

 

During 2013, the Compensation Committee held four regularly scheduled meetings and six special meetings and did not approve any matters through unanimous written consent. The Compensation Committee reviews and assesses the adequacy of its charter, and revises it as appropriate, on an annual basis.

 

Nominating and Governance Committee

 

The Nominating and Governance Committee operates under the Nominating and Governance Committee charter adopted by our Board and available at http://www.teletech.com/investors/corporate-governance/ (“Corporate Governance” under the “Investors” tab on our public website www.teletech.com). It is responsible for, among other things:

 

·        Identifying and recommending to our Board qualified candidates to stand for election to the Board (or be appointed pending the election at the annual stockholders meeting); and

 

·        Overseeing TeleTech’s corporate governance, including the evaluation of the Board and its committees’ performance and processes, and assignment and rotation of Board members to various committees.

 

During 2013, the members of the Nominating and Governance Committee included Shrikant Mehta (Chair) and Anjan Mukherjee, each of whom satisfies the independence requirements for nominating committee members pursuant to the NASDAQ Stock Market Rules.

 

During 2013, the Nominating and Governance Committee held four regularly scheduled meetings, one special meeting, and approved one matter through unanimous written consent. The Nominating and Governance Committee reviews and assesses the adequacy of its charter, and revises it as appropriate, on an annual basis.

 

Executive Committee

 

In 2013, the Board appointed the Executive Committee of the Board to take certain action, under a delegation of authority resolution from the Board, between regularly scheduled Board meetings that are otherwise reserved to the Board. All actions taken by the Executive Committee are reported to, and reviewed by, the full Board at the Board meeting immediate following the action taken. The Executive Committee is authorized to consider and approve, among other things:

 

·        Mergers, acquisitions, and divestiture transactions at a level in excess of management’s authority but below a certain specific authority limit designated by the Board, provided that such transactions are not inconsistent with TeleTech’s overall strategy as approved by the Board;

 

·        Capital expenditure transactions at a level in excess of management’s authority but below a certain specific authority limit designated by the Board, provided that such transactions are consistent with the annual business plan approved by the Board; and

 

·        Funding for the share repurchase program at a level in excess of management’s authority but below a certain specific limit designated by the Board.

 

During 2013, the members of the Executive Committee included James E. Bartlett (Chair), Shrikant Mehta, and Anjan Mukherjee.

 

The Committee did not meet and conducted no business in 2013.

 

Ethics Code for Executive and Financial Officers

 

We have adopted an Ethics Code for Executive and Financial Officers. It applies to all of our senior executives and financial officers, including our Chief Executive Officer, Chief Financial Officer, Executive Vice Presidents leading of each of our business

 

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segments, General Counsel, Treasurer, Senior Vice President of Finance (who is also acting as our interim Controller), financial directors and controllers of each of our business segments and any person performing similar functions. The Ethics Code is available on our website at http://www.teletech.com/investors/corporate-governance/ and we intend to disclose any waiver of, or amendments to, the Ethics Code on our website. You may also obtain a copy of the document without charge by writing to:

TeleTech Holdings, Inc.

9197 South Peoria Street

Englewood, Colorado 80112

Attention: Corporate Secretary

 

We also have TeleTech Code of Conduct, which mandates rules of ethical business conduct to all TeleTech employees and members of our Board of Directors, including our executives and financial officers. We maintain a confidential web-based and telephone hotline, where employees can seek guidance or report concerns about violations of laws, our policies, or Code of Conduct, including any concerns about financial reporting, misconduct, or fraud.

 

Director Compensation Overview

 

During 2013, the independent directors’ compensation was set as follows:

 

·   An annual retainer of $75,000;

 

·   Additional annual retainer fees for Board committee service as follows:

 

 

Chair of Audit Committee

 

 

 

$27,000

 

 

 

Members of Audit Committee

 

 

 

$13,500

 

 

 

Chair of Compensation Committee

 

 

 

$20,000

 

 

 

Members of Compensation Committee

 

 

 

$10,000

 

 

 

Chair of Nominating and Governance Committee

 

 

 

$15,000

 

 

 

Members of Nominating and Governance Committee

 

 

 

$  5,000

 

 

 

·        An annual grant of $75,000 of restricted stock units in TeleTech stock, based on the fair market value of our common stock on the grant date; and

 

·        For non-employee directors who joined the Board in 2013, also receuved an initial restricted stock unit welcome grant in the amount of $100,000, based on the fair market value of our common stock on the grant date. The welcome restricted stock grants vest on the earlier of the first anniversary of the grant date or the date of the succeeding year’s Annual Meeting of Stockholders, or any change-in-control event (as defined in the relevant restricted stock unit agreement).

 

The employee directors do not receive additional compensation for their Board service.

 

The following table summarizes the actual compensation earned by independent directors during 2013:

 

 

Name

 

 

 

Fees Earned or Paid in Cash ($)

 

 

 

Stock Awards 1,2 ($)

 

 

 

Total ($)

 

 

 

Tracy L. Bahl

 

 

 

$  31,490

 

 

 

$99,984

 

 

 

$131,474

 

 

 

Gregory A. Conley

 

 

 

$  98,500

 

 

 

$74,984

 

 

 

$173,484

 

 

 

Robert Frerichs

 

 

 

$  91,761

 

 

 

$74,984

 

 

 

$166,745

 

 

 

Shrikant Mehta

 

 

 

$  90,000

 

 

 

$74,984

 

 

 

$164,984

 

 

 

Anjan Mukherjee

 

 

 

$100,000

 

 

 

$74,984

 

 

 

$174,984

 

 

 

Robert M. Tarola

 

 

 

$102,000

 

 

 

$74,984

 

 

 

$176,984

 

 

 

1      Reflects the aggregate dollar amounts recognized for stock awards for financial statement reporting purposes in accordance with the guidance in Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation (“FASB ASC Topic 718”).

 

For information regarding assumptions use to compute grant date fair market value with respect to the stock awards, see, Note 20 to our financial statements in our Annual Report on Form 10-K for the year ended December 31, 2013.

 

2      As December 31, 2013, Mr. Bahl held 4,009 unvested restricted stock unit (RSU) awards; and all the other independent directors held 3,349 unvested restricted stock unit awards.

 

3      As of December 31, 2013, Mr. Mehta held 15,000 of outstanding options; and Mr. Tarola held 35,000 of outstanding options.

 

AUDIT COMMITTEE REPORT

 

The Audit Committee performs its duties as outlined in the Audit Committee charter, and reviews and makes recommendations to the Board of Directors concerning oversight of the reliability and integrity of TeleTech’s financial statements and the adequacy of its system of internal controls and processes to assure compliance with TeleTech’s policies and procedures, Code of Conduct and applicable laws and regulations. The Audit Committee’s duties

 

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and responsibilities also include the oversight of the Company’s annual audit by its independent registered public accountanting firm, TeleTech’s internal audit, legal compliance, and risk management functions. All directors who serve on the Audit Committee are “independent” as provided in the applicable NASDAQ Stock Market standards and U.S. Securities and Exchange Commission rules.

 

TeleTech management is responsible for the preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design and operating effectiveness of controls over financial reporting. TeleTech’s independent registered public accounting firm, PricewaterhouseCoopers LLP, is responsible for auditing the effectiveness of TeleTech’s system of internal control over financial reporting and the fair presentation of the Company’s financial statements.

 

The Audit Committee periodically meets with the Company’s internal and independent auditors, with and without management present, to discuss the results of their examinations, the evaluation of TeleTech’s internal controls, management’s representations regarding internal control over financial reporting, and the overall quality of TeleTech’s financial reporting. The Committee also periodically meets with TeleTech management directly responsible for financial reporting, accounting, tax and treasury processes; and with investor relations and legal executives. The Committee reviews TeleTech’s quarterly and annual financial statements and meets with both the Company management and the Company’s independent auditor to discuss the details of the financial statements before they are issued.

 

During our general sessions and private executive meetings with PricewaterhouseCoopers LLP, the Audit Committee asks for and discusses issues that PricewaterhouseCoopers LLP believe should be raised with the Audit Committee, including required communications under professional auditing standards and other matters that may indicate a need for Audit Committee action, recommendations to management or to the Board of Directors. Such matters, if any, are brought to the attention of the Board and addressed as necessary. The Audit Committee employs a similar process when it communicates with TeleTech’s internal audit and legal executives.

 

We oversee TeleTech’s internal disclosure processes, including TeleTech’s anonymous and confidential channels available to employees to report concerns about financial reporting. The Committee established procedures for and oversees receipt and treatment of complaints received by TeleTech regarding accounting, internal control and auditing matters, and confidential, anonymous submission by TeleTech employees of concerns about the Company’s accounting or auditing practices. These processes are established to identify timely any potential issues that employees believe could impact TeleTech’s accounting, financial reporting and effectiveness of its internal controls. We review and assess the matters raised through these reporting channels and monitor managements’ response to these reports, engaging when warranted.

 

The Audit Committee continued to oversee a transition (started two years ago) in TeleTech’s financial and risk management leadership. Key positions of chief financial officer, general counsel, controller and internal audit executive have been (and are being) filled with professionals who bring skills and experience more suited to TeleTech’s complexity and strategic direction.

 

The Audit Committee evaluates the independence, qualifications and performance of TeleTech’s internal audit function and annually approves the Company’s internal audit plan. The Committee also discusses with management TeleTech’s risk assessment and management practices, the Company’s major financial risk exposures and the steps management has taken to monitor and mitigate such exposures to be within the Company’s risk tolerance levels.

 

The Audit Committee is directly responsible for the appointment, compensation and oversight of the work of PricewaterhouseCoopers LLP, TeleTech’s independent registered public accounting firm, and reviews periodically the firm’s performance, including the firm’s audit approach and plans, the assessment of the suitability for TeleTech of its engagement partners and key personnel, and an evaluation of the firm’s fees for service. In 2013, PricewaterhouseCoopers LLC’s engagement team was led by a senior engagement partner who was vetted by the Committee at the time of required partner transition in 2010, and was found at the time (and continues) to have appropriate level of professional expertise to oversee the conduct of the TeleTech annual audit. The work of the lead engagement partner is supported by other PricewaterhouseCoopers LLC’s partners experienced with TeleTech operations in Denver (where most of the accounting and financial reporting functions are located) and in key countries where TeleTech has material operations. In 2013, the fees charged by PricewaterhouseCoopers LLC were determined by us to be reasonable and adequate to ensure a comprehensive audit and to promote independence.

 

The Audit Committee has discussed with PricewaterhouseCoopers LLP its independence from TeleTech and TeleTech’s management, and requested and received the written disclosure and letter from PricewaterhouseCoopers LLP required by the Public Company Accounting Oversight Board’s Rule 3526, Communication with Audit Committees Concerning Independence. Based on these reviews and discussions, the Audit Committee recommended that PricewaterhouseCoopers LLP be reappointed as auditors of TeleTech for 2014, which would be the eighth consecutive year serving in such capacity.

 

PricewaterhouseCoopers LLP audited the annual financial statements for the year ended on December 31, 2013, as prepared by management, and expressed an opinion that the financial statements fairly present the financial position, results of operations and cash flows of TeleTech in conformity with accounting principles generally accepted in the United States of America. Management has also represented to us that the annual financial statements of TeleTech were prepared in accordance with accounting principles generally accepted in the United States of America.

 

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Based on these reviews, we recommended to our Board that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2013 for filing with the SEC.

 

Respectfully submitted,

 

Robert M. Tarola, Chair

Gregory A. Conley

Robert Frerichs

 

STOCK OWNERSHIP OF DIRECTORS, MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

 

The table below sets forth information, as of March 27, 2014, concerning the beneficial ownership of the following persons and entities:

 

·                  Each person or entity known to us to beneficially own more than five percent of our outstanding common stock;

 

·                  Each of our directors and nominees for our Board;

 

·                  Each of our named executive officers; and

 

·                  All of our current directors and executive officers as a group.

 

We have determined beneficial ownership in accordance with SEC rules. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and/or investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws.

 

Applicable percentage ownership is based on 49,738,053 shares of common stock outstanding at March 27, 2014. In computing the number of shares of common stock beneficially owned by a person or entity and the percentage ownership of that person or entity in accordance with U.S. Securities and Exchange Commission rules, we deemed outstanding shares of common stock: (1) subject to stock options held by that person that are currently exercisable or exercisable within 60 days of March 27, 2014; and (2) issuable upon the vesting of Restricted Stock Units (“RSUs”) within 60 days of March 27, 2014. Also in accordance with SEC rules, we did not deem outstanding these two categories of shares of common stock for the purpose of computing the percentage ownership of any other person or entity.

 

The information provided in the table is based solely on our records, and information filed with the U.S. Securities and Exchange Commission with respect to the owners of our shares of common stock, except where otherwise noted. Unless otherwise indicated, the address of each beneficial owner listed in the table is c/o TeleTech Holdings, Inc., 9197 Peoria Street, Englewood, Colorado 80112.

 

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Stock Ownership of Directors, Management and Certain Beneficial Owners

 

 

 

Shares Beneficially Owned

 

Name and Address of the Beneficial Owner

 

Common Stock

 

Options Vested and Options
and RSUs Vesting Within 60
Days of 3/27/2014

 

Total Beneficial
Ownership as of
3/27/2014

 

Percent of Class

 

5% Stockholders

 

 

 

 

 

 

 

 

 

Kenneth D. Tuchman

 

31,218,828

 

800,000

 

32,018,8281

 

63.4%

 

Executive Officers and Directors

 

 

 

 

 

 

 

 

 

Kenneth D. Tuchman

 

31,218,828

 

800,000

 

32,018,8281

 

63.4%

 

James E. Barlett

 

497,832

 

 

497,832

 

1.0%

 

Tracy L. Bahl

 

 

4,009

 

4,0092

 

*

 

Gregory A. Conley

 

 

3,349

 

3,3493

 

*

 

Martin F. DeGhetto

 

90,498

 

 

90,498

 

*

 

Robert Frerichs

 

5,875

 

3,349

 

9,2244

 

*

 

Charles Keith Gallacher

 

 

 

 

*

 

Judi Hand

 

146,306

 

 

146,306

 

*

 

Shrikant C. Mehta

 

52,342

 

18,349

 

70,6915

 

*

 

Margaret B. McLean

 

 

 

 

*

 

Anjan Mukherjee

 

20,951

 

3,349

 

24,3006

 

*

 

Regina M. Paolillo

 

29,937

 

 

29,937

 

*

 

Brian A. Shepherd

 

 

 

 

*

 

Robert M. Tarola10

 

27,342

 

38,349

 

65,6917

 

*

 

All directors, director nominees and executive officers as a group (14 persons)

 

32,089,911

 

870,754

 

32,960,665

 

65.1%

 

 

*Less than 1 percent.

 

1 Includes 31,208,828 shares subject to sole voting and investment power, 10,000 shares with shared voting and investment power and 800,000 options exercisable within 60 days after March 27, 2014. The shares with sole voting and investment power consist of: (i) 6,442,022 shares held by Mr. Tuchman; (ii) 14,766,806 shares held by a limited liability partnership controlled by Mr. Tuchman; and (iii) 10,000,000 shares held by a revocable trust controlled by Mr. Tuchman. The shares with shared voting and investment power consist of 10,000 shares owned by Mr. Tuchman’s spouse. Excluding Mr. Tuchman’s 800,000 vested stock options, Mr. Tuchman is the beneficial owner of approximately 62.8 percent of the shares of common stock entitled to vote at the meeting.

 

2 Includes 4,009 RSUs scheduled to vest within 60 days after March 27, 2014.

 

3 Includes 3,349 RSUs scheduled to vest within 60 days after March 27, 2014.

 

4 Includes 3,349 RSUs scheduled to vest within 60 days after March 27, 2014.

 

5 Includes 15,000 options exercisable within 60 days after March 27, 2014 and 3,349 RSUs scheduled to vest within 60 days after March 27, 2014.

 

6 Includes 3,349 RSUs scheduled to vest within 60 days after March 27, 2014.

 

7 Includes 35,000 options exercisable within 60 days after March 27, 2014 and 3,349 RSUs scheduled to vest within 60 days after March 27, 2014.

 

8 Mr. Tarola will not be standing for re-election to the Board of Directors at the Annual Meeting.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and holders of more than 10 percent of our common stock to file with the SEC reports regarding their ownership and changes in ownership of our equity securities. Based on our review of the Forms 3, 4 and 5 filed, we believe that our directors, executive officers and 10 percent stockholders filed all Section 16(a) reports on a timely basis during 2013.

 

RELATED PARTY TRANSACTIONS

 

In accordance with our written Related Party Transaction Policy, the Audit Committee of the Board is responsible for reviewing and approving transactions required to be disclosed as a “related party” transaction under applicable law, including U.S. Securities and Exchange Commission rules (generally, transactions involving amounts in excess of $120,000 in which a related person has a direct or indirect interest). TeleTech management monitors all related party transactions and reports on their status to the Audit Committee quarterly. TeleTech executive officers and directors complete a questionnaire during the first quarter of each fiscal year, in which they provide information about the terms of all their related party transactions (as defined in Item 404(a) of Regulation S-K) that occurred during the prior year and that are expected to occur during the current year. In reviewing related party transactions, the Audit Committee considers whether these transactions are executed at “arm’s length” by reviewing all relevant facts and circumstances, including among others, the commercial reasonableness of the terms, the

 

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actual and perceived benefit to the Company, opportunity costs of alternate transactions, the materiality and character of the related party’s interest, the actual and apparent conflict of interests, the impact on a director’s independence (if the related party is a director, an immediate family member of a director, or an entity controlled by a director) and the terms on which a similar transaction can be secured from unrelated third parties.

 

During 2013, TeleTech undertaken the following related party transactions subject to disclosure:

 

Avion, LLC. TeleTech continued the agreement for aircraft leasing arrangements with Avion, owned 100 percent by Mr. Tuchman, our Chairman and CEO. During 2013, we paid Avion an aggregate of $630,000 for services provided to us.

 

Convercent (formerly known as Business Controls). In 2013, the Company provided consulting and other services to Convercent, a web security and education and ethics compliance company, majority owned by a company controlled by Mr. Tuchman, our Chairman and CEO. During 2013, TeleTech generated $570,000 in revenue from this contract.

 

AirMax, LLC. TeleTech has an agreement for aircraft operations and maintenance services with AirMax, which is beneficially owned by Mr. Tuchman, our Chairman and CEO. During 2013, we paid AirMax approximately $627,000 for services provided to us.

 

EXECUTIVES AND EXECUTIVE COMPENSATION

 

TeleTech Executive Team

 

The following persons are our executive officers:

 

Martin F. DeGhetto, 55, serves as TeleTech’s Executive Vice President, Customer Management Services, TeleTech’s largest business segment. Mr. DeGhetto joined TeleTech as Executive Vice President of Operations in 2010 and assumed the responsibilities for TeleTech’s information technology in 2012. Between 2008 and 2010, Mr. DeGhetto was an executive vice president and chief operations officer commercial division at Connextions, Inc., a privately-held technology and business services company for healthcare industry. Prior to Connextions, Mr. DeGhetto spent almost a decade at Convergys Corporation, (NYSE:CVG) a customer management company, where he held various positions of increasing responsibility culminating in his role as a senior vice president, North American/European operations which he held between 2003 and 2008. Prior to Convergys, Mr. DeGhetto was an executive with American Express Company and AT&T/American Transtech. Mr. DeGhetto holds a B.S. Professional Management degree from NOVA Southeastern University.

 

 

Judi Hand, 53, serves as TeleTech’s Executive Vice President, Customer Growth Services. She joined TeleTech in 2007 as President and General Manager for Direct Alliance Corporation, a TeleTech wholly-owned subsidiary, and in 2011, assumed additional responsibility as our Chief Sales Officer. Between 2003 and 2007, Ms. Hand was a senior executive with AT&T, culminating her career there as a senior vice president for enterprise sales. Prior to AT&T, Ms. Hand worked at Qwest, a public global communications company and several of its subsidiaries in sales and marketing roles of increasing responsibility. Ms. Hand holds an MBA from Stanford University and a B.S. in Communications degree from University of Nebraska.

 

 

Charles Keith Gallacher, 46, serves as Executive Vice President Global Markets and Industries. He joined TeleTech in 2013. Between 2007 and 2013, Mr. Gallacher was a partner and managing Director for Accenture plc, where he led the North American technology specialized sales teams. Between 2003 and 2006, Mr. Gallacher worked for Cognizant as vice president for North American sales and business development. Between 1997 and 2003, Mr. Gallacher was a partner and managing director for CSC Consulting (Computer Sciences Corp). Mr. Gallacher started his career in technology at EDS (now HP). He holds a B.B.A. in Business from the University of Texas at Arlington.

 

 

Regina M. Paolillo, 55, serves as Executive Vice President, Chief Administrative and Financial Officer. Ms. Paolillo joined TeleTech in 2011. Between 2009 and 2011, Ms. Paolillo was an executive vice president for enterprise services and chief financial officer at Trizetto Group, Inc., a privately held business and professional services company serving the healthcare industry. Between 2007 and 2008, Ms. Paolillo served as a senior vice president, operations group for General Atlantic, a leading global growth equity firm with U.S. $17 billion in capital. Between 2005 and 2007, Ms. Paolillo served as an executive vice president for revenue cycle and mortgage services at Creditek, a Genpact subsidiary, (NYSE:G) a global business process and technology management company. Prior to the company’s acquisition by Genpact, between 2003 and 2005 and 2002 and 2003, Ms. Paolillo was Creditek’s chief executive officer and chief financial officer respectively. Prior to Creditek, Ms. Paolillo served as the chief financial officer and executive vice president for corporate services at Gartner, Inc., (NYSE:IT) an information technology research and advisory company. Ms. Paolillo holds a B.S. in Accounting degree from New Haven University.

 

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Brian A. Shepherd, 46, serves as Executive Vice President, Customer Strategy Services and Technology Services. He joined TeleTech in 2013. Since 2012, Mr. Shepherd has been a member of the board of directors for UXP Systems, a Canadian technology and software company. Prior to TeleTech, between 2005 and 2012, Mr. Shepherd worked for Amdocs Ltd., (NASDAQ:DOX) communication, media and entertainment industry software and services provider, with roles of increasing responsibility, culminating in the executive vice president and group president role for broadband cable and satellite group, and a global marketing role. Mr. Shepherd served as senior vice president of customer business operations for DST Innovis, where he worked between 2002 and 2005, when it was acquired by Amdocs. Prior to DST Innovis, Mr. Shepherd was a strategy consultant with McKinsey & Company, and manager of a pharmaceutical manufacturing operation for Eli Lilly. Mr. Shepherd holds an M.S. in Business degree from Harvard Business School and a B.S. in Economics degree from Wabash College.

 

 

Margaret B. McLean, 50, serves as Senior Vice President, General Counsel and Chief Risk Officer. She joined TeleTech in 2013. Between 1998 and 2013, Ms. McLean was a senior executive at CH2M HILL, a global engineering and program management company, serving as the company’s Chief Legal Officer starting in 2007. Ms, McLean was a corporate finance and M&A partner at the law firm of Holme Roberts and Owen (now Bryan Cave), working in Denver, London, and Moscow offices. Ms. McLean started her career in IT at Hewlett Packard (NYSE:HPQ) and led the application systems department for Science Applications Int’l (NYSE:SAIC). She holds a JD from the University of Michigan, an MBA from the University of Colorado, and a B.S. in Management Information Systems and Computer Science from the University of Arizona.

 

Information regarding Kenneth D. Tuchman, Chairman and CEO, and James E. Barlett, Vice Chairman, is provided in this section under the heading “Information Concerning the Nominees for Election as Directors.”

 

Compensation Discussion and Analysis

 

In this section, we discuss our compensation philosophy and describe the compensation program for our Chief Executive Officer, our Chief Financial Officer, and our executive leadership team. We explain how our Compensation Committee of the Board determines compensation for our executive leadership team and its rationale for its specific 2013 compensation decisions.

 

Executive Summary

 

Our executive compensation program is designed to reward financial results and effective strategic leadership, which we believe are key elements in building sustainable value for our stockholders. TeleTech has a pay-for-performance philosophy that aligns the interests of our stockholders and members of our executive leadership team. Our executive compensation program also places significant weight on ethical and responsible conduct in pursuit of the Company’s performance goals.

 

A meaningful portion of our executive compensation is “at risk”. It aligns cash incentive payments to performance and grants equity that vests over a five-year period to ensure that the actual compensation realized by executives directly and demonstrably links to individual and company performance over the long term.

 

Our executive compensation philosophy helps guide the Compensation Committee’s decisions by rewarding the executive team’s contribution to the Company’s overall performance, while also recognizing and differentiating individual performance of each member of the team. The executive compensation program includes four distinct components: equity awards, annual discretionary performance-based cash incentive awards, discretionary cash bonuses, and base salaries.

 

We carefully benchmark our compensation decisions against a market-relevant group of peer companies that are potential competitors for the caliber of executive talent required to manage our complex and global business. Our goal is to:

 

·             Attract, motivate and retain our highly qualified executives.

 

·             Offer market competitive compensation opportunities by targeting base salaries at the median of our peer group and equity and incentive rewards at the 75th percentile of our peer group.

 

·             Ensure that our rewards are affordable by aligning them to the Company’s annual business plan.

 

In 2013, our executive compensation program garnered 99.7 percent support from our stockholders.

 

Our Named Executive Officers

 

We provide detailed compensation discussion for our five named executive officers: our Chief Executive Officer, our Chief Financial Officer and three other highest compensated executives during the fiscal year ended December 31, 2013.

 

Kenneth D. Tuchman

 

Chairman of the Board and Chief Executive Officer

Regina M. Paolillo

 

Executive Vice President, Chief Administrative and Financial Officer

Martin F. DeGhetto

 

Executive Vice President, Customer Management Services

Charles Keith Gallacher

 

Executive Vice President, Global Markets and Industries

Brian A. Shepherd

 

Executive Vice President, Customer Strategy Service and Customer Technology Services

 

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Stockholder Support for Our Compensation Decisions

 

At our 2013 Annual Meeting of Stockholders, our stockholders approved the compensation of our named executive officers (“say-on-pay vote”) with over 99.7 percent approval rate. In light of the stockholder support, the Compensation Committee made no significant changes to the overall design of our compensation programs during 2013. The Compensation Committee will continue to consider the outcome of the Company’s say-on-pay votes when making future compensation decisions for our named executive officers.

 

Our 2013 Performance

 

In 2013, our annual revenue was $1.19 billion compared to annual revenue of $1.16 billion in 2012, an increase of 2.6 percent over a year ago period. Our operating margin was 8.5 percent of revenue, up from 6.8 percent year over year. Our net cash flow from operations increased to $137.9 million compared to $106.9 million in 2012. Our diluted earnings per share were $1.29 compared to $1.26 in prior year. In 2013, we repurchased 2.48 million shares for $56.5 million.

 

Executive Compensation Program Overview and Design Principles

 

Our goal for executive compensation is to attract, motivate and retain highly qualified executives focused on delivering superior performance that creates long-term investor value. We have developed and implemented executive compensation policies, plans and programs intended to closely align the financial interests of the named executive officers with those of our stockholders in order to enhance our long-term growth and profitability and therefore create long-term stockholder value. Our executive compensation program also requires each named executive officer to demonstrate exceptional individual performance and to contribute as a member of the team to our overall success rather than merely achieve specific objectives within that officer’s area of responsibility. Each year, the Compensation Committee, which is made up entirely of independent directors, determines the compensation of the CEO and, after reviewing the CEO’s recommendations, the other named executive officers.

 

Five Overarching Principles

 

We have designed our executive compensation program around five overarching principles:

 

·             Structure compensation programs with a significant portion of variable, or at-risk, compensation to ensure that the actual compensation realized by named executive officers directly and demonstrably links to individual and company-wide performance;

 

·             Offer market competitive compensation opportunities that will allow us to attract and retain named executive officers capable of leading us to the fulfillment of our business objectives;

 

·             Ensure that our named executive officers remain focused on individual operational goals to build the foundation for our long-term success;

 

·             Align the interests of named executive officers and stockholders to achieve long-term stock price performance; and

 

·             Maintain an egalitarian culture with respect to compensation programs, such that a broad range of management employees may generally participate in the same equity-based and cash-based incentive programs as the named executive officers.

 

Four Components of Compensation

 

To achieve the five overarching principles, the compensation program for the named executive officers consists of the following four components of compensation, in order of their importance:

 

·             Equity awards in the form of RSUs or stock options under our Equity Incentive Plans;

 

·             Annual discretionary performance-based cash incentive awards;

 

·             Discretionary cash bonuses to recognize exceptional individual achievement and contributions to our overall financial performance based on a decision by the Compensation Committee to fund discretionary bonuses outside of the discretionary performance-based cash incentive awards; and

 

·             Base salary.

 

The named executive officers are also eligible to participate in our general health and welfare programs, 401(k) plan, insurance program and other employee programs on substantially the same basis as other employees. Although we pay as perquisites all or a portion of the named executive officers’ premiums for certain plans, we believe that perquisites should be limited in scope and value, and they have not historically constituted a significant portion of executive compensation.

 

Equity Awards

 

Equity Awards in the Form of RSUs Minimize Dilution and Support Long-Term Focus. We rely heavily on long-term equity awards in our executive compensation program to attract and retain an outstanding executive team and to motivate the executive team to improve our long-term financial performance. We implemented a program of awarding RSUs in

 

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order to motivate executives, enhance morale and teamwork, and encourage retention. Unlike a stock option award, the compensation value of an RSU award does not depend solely on future stock price increases; at grant, its value is equal to our stock price. Although its value may increase or decrease with changes in our stock price before vesting, an RSU award will maintain value in the long term, encouraging retention. By contrast, the value of a stock option depends solely on future stock price appreciation. Accordingly, RSUs deliver significantly greater share-for-share compensation value at grant than stock options, and we can offer comparable grant date compensation with fewer shares and — with regard to RSUs that vest over time — less dilution to our stockholders.

 

The Compensation Committee believes that RSU awards are the most effective way to align the named executive officers’ interests with the interests of our stockholders and to attract and retain talented executives by providing a strong economic incentive to continued employment. Furthermore, the Compensation Committee believes that substantial equity ownership by individual executive officers helps to align their interests and to ensure that these individuals remain focused on building stockholder value.

 

Selective Use of Stock Options Allows Market-Competitive Equity Grants. The Compensation Committee selectively utilizes stock option grants to provide market-competitive equity grants that are tied to long-term stock appreciation. The Compensation Committee believes that such long-term stock option awards provide a market-competitive total compensation package, while also requiring an increase in stockholder value for the recipient to receive the financial reward associated with the stock option award.

 

Cash Incentives

 

Discretionary Performance-Based Cash Incentives. The Compensation Committee believes that discretionary performance-based cash incentive awards are an important component of our executive compensation program as they provide recognition to named executive officers whom the Compensation Committee has determined are eligible to receive an award based on the Compensation Committee’s subjective evaluation of each named executive officer’s performance. They are, however, a less significant factor in attracting new executive talent than our equity awards, as they tend to promote retention only in the short term. The secondary significance of the discretionary performance- based cash incentive awards is further evidenced by the fact that the CEO and the Vice Chairman have not historically elected to receive them.

 

Discretionary Cash Bonuses Award Exceptional Individual Achievement and Provide Retention Incentives. We have not historically relied on discretionary cash bonuses because we prefer to reward executive performance with long-term equity incentive compensation. Nevertheless, the Compensation Committee believes that discretionary cash bonuses are another important component of our executive compensation program because they allow the Compensation Committee to recognize exceptional individual achievement and contributions to our overall financial performance based on the Compensation Committee’s subjective evaluation of each named executive officer’s performance or to provide for retention of key executives. This is especially true in situations where the Compensation Committee believes that the discretionary performance-based cash incentives, as funded based on achievement of certain annual revenue and operating income targets have not adequately compensated an executive officer for his or her individual achievements and contributions. See the section “How We Determine Executive Compensation — 2013 Financial Performance and Discretionary Performance-Based Cash Incentive Award Funding” below for more information about the funding of the discretionary performance-based cash incentive awards.

 

Base Salaries Reflect Our Emphasis on Building Stockholder Value. The Compensation Committee believes that base salaries are much less important than long-term equity awards and cash incentives in meeting our compensation objectives. While we believe that base salaries should generally be competitive, we do not believe that base salaries provide significant long-term focus nor do we believe that they are a key driver in motivating our named executive officers to build stockholder value. As a result, we have historically targeted base salaries for our named executive officers at the 50th percentile of the “peer group” as defined in this section under the heading “How We Use Peer Group, Survey and Benchmarking Data.” The secondary significance of the base salaries is further evidenced by the fact that the Compensation Committee approved a request from Mr. Tuchman to waive his right to the full amount of his base salary as set forth in his employment agreement and instead receive a base salary of $1 per year effective in 2012 and thereafter until further notice.

 

How We Use Consultants

 

The company on behalf of the Compensation Committee of our Board retained the services of Compensia, Inc., an executive compensation consulting firm. From time to time, Compensia provides advice to the Compensation Committee and to TeleTech. In addition, the Compensation Committee has retained the services of the law firm, Latham & Watkins, LLP, to act as independent counsel to the Compensation Committee from time to time. No member of our Board or any named executive officer has any affiliation with either Compensia or Latham & Watkins and our CEO has not met with representatives of Compensia or Latham & Watkins regarding his compensation or the compensation of other named executive officers.

 

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Compensia. The Compensation Committee either directly, or through our human capital department at the direction of the Compensation Committee, periodically seeks input from Compensia on a range of executive compensation issues. At least every other year, Compensia provides the Compensation Committee with independent compensation advice on various aspects of executive compensation, including:

 

·             A periodic review of our compensation practices, trends and philosophy;

 

·             A competitive assessment of our executive compensation levels and pay-for-performance linkage;

 

·             An analysis of peer group companies that compete with us and that follow similar compensation models, along with benchmark compensation and benefits data for the peer group; and

 

·             A review of our equity award and cash incentive programs.

 

When asked to provide advice, Compensia takes its direction solely from, and provides reports to, the Compensation Committee, or members of our human capital department at the direction of, and on behalf of, the Compensation Committee. All costs of Compensia’s services are paid by the Company at the direction of the Compensation Committee. Although Compensia provides recommendations on the structure of our compensation programs, Compensia does not determine the amount or form of compensation for any named executive officers. We do not use Compensia for services outside of executive compensation. We paid Compensia less than $15,000 in 2013 for services provided. In light of the prospective application of the independence analysis of compensation consultants, at the request of the Compensation Committee, Compensia addressed and confirmed their independence in writing to the Compensation Committee.

 

Latham & Watkins. From time to time, the Compensation Committee, either directly or through our legal departments seeks advice from Latham & Watkins on various legal issues related to the Committee’s responsibilities and executive compensation. Although Latham & Watkins may provide legal advice on the structure of compensation programs, Latham & Watkins does not determine the amount or form of compensation for any named executive officers. We do not use Latham & Watkins for services outside of those provided to the Compensation Committee.

 

How We Use Peer Group, Survey and Benchmarking Data

 

With the assistance of our human capital department, the Compensation Committee identified a “peer group” of companies for 2013 that compete with us in the labor and capital markets and that follow similar compensation models. The peer group that the Compensation Committee reviewed to ensure that our total compensation is within a reasonably competitive range included: Acxiom Corporation, Convergys Corporation, DST Systems, ExlService Holdings, Fair Isaac, FTI Consulting, Inc., ICF International, IGate, Insperity, Inc., Interactive Intelligence, Sapient, Sykes Enterprises Incorporated, Syntel, TrueBlue and West Corporation. The Compensation Committee selected this group of companies because they are in the same or similar industries, they compete with us for executive talent and they employ similar executive compensation models. The Compensation Committee reviews the compensation practices of this peer group to effectively design compensation arrangements to attract new executives in our highly competitive, rapidly changing markets and to confirm proper levels of compensation for our named executive officers. This peer group data is one factor the Compensation Committee uses in establishing targeted base salaries (targeted at the 50th percentile of peer group base salary compensation for executive officers performing the same or similar roles) and discretionary performance-based cash incentive awards (targeted at the 75th percentile of peer group incentive bonus awards for executive officers performing the same or similar functions) and otherwise determining the mix of equity awards, cash incentives, and base salaries. The peer group data, however, is not a definitive or dispositive factor in making such compensation decisions. Moreover, the Compensation Committee does not adhere to strict formulas, benchmarking or its review of this peer group data to determine the mix of compensation elements. Instead, the Compensation Committee considers various factors in exercising its discretion to determine compensation, including the experience, responsibilities and performance of each named executive officer as well as our overall financial performance.

 

How We Use Employment Agreements

 

From time to time, we have entered into employment agreements with senior executive officers, including some of the named executive officers. The Compensation Committee reviews but does not have to approve employment agreements with senior executive officers, except the Chief Executive Officer and Chief Financial Officer of TeleTech.

 

As a matter of policy, TeleTech does not enter into employment agreements with its employees except in circumstance when required to do so by law or in special circumstances when management believes that such agreements are desirable and necessary to attract an executive or retain an executive in light of market conditions. Based on an evaluation of these factors, the Company previously entered into employment agreements with Mr. Tuchman and Ms. Paolillo.

 

Tuchman Agreement. Mr. Tuchman is entitled to receive an annual base salary. On March 8, 2012, the Compensation Committee approved a request from Mr. Tuchman to waive his right to the full amount of his base salary as set forth in his employment agreement and instead to receive a base salary of $1 per year effective 2012. Mr. Tuchman is also entitled to participate in all other employee benefit plans, in each case, on terms and conditions no less favorable than the terms and conditions generally applicable to his peers.

 

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Paolillo Agreement. Ms. Paolillo is entitled to receive a base salary and is eligible to receive additional incentive compensation and discretionary cash bonuses, as may be determined by the Compensation Committee from time to time.

 

In 2013, TeleTech entered into employment agreements with Mr. Gallacher and Mr. Shepherd at the time of their hiring. Mr. Gallacher is entitled to receive a base salary, a guaranteed bonus for 2013, which was paid in March 2014, and is eligible to receive additional incentive compensation and discretionary cash bonuses, as may be determined by the Compensation Committee from time to time. Mr. Shepherd is entitled to receive a base salary, a guaranteed bonus for 2013, which was paid in March 2014, and is eligible to receive additional incentive compensation and discretionary cash bonuses, as may be determined by the Compensation Committee from time to time. Employment agreement provisions relating to severance, termination and change-in-control are discussed in greater detail in the “Executive Compensation Tables” section under the heading “Potential Payments upon Termination or Change in Control—Employment Agreements.”

 

How We Determine Executive Compensation

 

Compensation Committee Determines All Executive Compensation

 

The Compensation Committee determines all compensation for the named executive officers on an annual basis. The Compensation Committee conducts a subjective evaluation of the performance of each named executive officer to determine if any changes in the officer’s compensation are appropriate. The Chief Executive Officer does not participate in the Compensation Committee’s deliberations or decisions about his compensation. At the Compensation Committee’s request, however, the Chief Executive Officer and the Executive Vice President, Chief Administrative and Financial Officer review with the Compensation Committee the performance of the other named executive officers. The Compensation Committee gives considerable weight to the Chief Executive Officer’s evaluation of the other named executive officers in its subjective evaluation because of his direct knowledge of each officer’s performance and contributions.

 

The Compensation Committee reviews peer group data as described above under “Executive Compensation Program Overview and Design Principles—How We Use Peer Group, Survey and Benchmarking Data.” The Compensation Committee, however, does not base its aggregate compensation decisions on such peer group data, but rather utilizes it as a measure of the competitive market for executive talent in our industry. The Compensation Committee also does not adhere to strict formulas to determine the mix of equity awards, cash incentives and base salaries. The Compensation Committee can and does consider our objective financial results in its subjective evaluation of each named executive officer’s performance. However, other than the funding of our discretionary performance-based cash incentive awards, there is no formulaic tie between our financial results and the Compensation Committee’s evaluation of the performance of each named executive officer. See “2013 Financial Performance and Discretionary Performance-Based Cash Incentive Award Funding” in this section for more information regarding funding of the discretionary performance-based cash incentive awards. The Compensation Committee also considers various factors in exercising its discretion to determine the composition and amount of compensation for each named executive officer. The ability to impose subjective judgment and to consider various factors in its discretion, rather than relying on a formulaic approach, provides important flexibility in determining compensation components and the amount of compensation required to retain current executives, to attract new executives in our highly competitive, rapidly changing markets and to confirm appropriate levels of compensation for our named executive officers. For each named executive officer, the Compensation Committee determines the amount of each component of compensation under our executive compensation program using subjective criteria, based on each named executive officer’s impact on our overall performance by examining the following “success factors”:

 

·        Contribution to our overall operating effectiveness, strategic success and profitability;

 

·        Role in developing and maintaining key client relationships;

 

·        Level of responsibility, scope, and complexity of such named executive officer’s position relative to other named executive officers;

 

·        Leadership growth and management development over the past year;

 

·        Completion of strategic projects;

 

·        Innovations to continuously improve performance and open communications;

 

·        Ability to provide hands-on business problem solving and wise business decisions; and

 

·        Demonstration of business ownership.

 

The Compensation Committee selected these eight success factors because they believe they are important indicators of increased stockholder value. The success factors are not quantified or weighted for importance. The Compensation Committee’s use of the success factors is tied to the responsibilities of the named executive officers. For example, greater weight will be given to the “role in developing and maintaining key client relationships” for the Executive Vice President, Global Markets and Industries due to his responsibilities for overseeing sales operations, while greater weight will be given to “contribution to our overall operating effectiveness, strategic success and profitability,” and “completion of strategic projects,” among other factors, for the Chief Financial Officer and Chief Administrative Officer, for her responsibilities relating to our financial performance and growth.

 

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Equity Awards

 

In determining the amount of any grant of an equity award to a named executive officer, the Compensation Committee reviews the outstanding equity awards of the named executive officer to determine whether additional awards are warranted in light of the Compensation Committee’s review of the named executive officer’s performance. The Compensation Committee then determines the actual award to any officer based on general reference to, but not benchmarked to, our peer group data for equity compensation for the executive officer’s role with us and as compared to our other executive officers and the relative performance of each other executive officer.

 

Vesting Conditions. All RSU awards to our named executive officers give the officer the right to receive a specified number of shares of common stock at no cost to the officer, if the terms of the grant are satisfied and the officer is continuously employed or serves on our Board through each vesting date. The Compensation Committee approves all equity awards and the grant date for any individual equity award is the date on which the Compensation Committee approves such grant. The Compensation Committee approves all equity awards at meetings of the Compensation Committee and does not generally use unanimous written consents for any equity award approvals. RSU awards typically vest over a period of four or five years. The named executive officer is generally not eligible to receive the shares if service is terminated before the RSUs vest. In addition, the vesting of RSUs may be affected by a change in control as discussed in the “Executive Compensation Tables” section under the heading “Potential Payments upon Termination or Change in Control.” The Compensation Committee also has the discretion to accelerate the vesting of any RSU or stock option.

 

2013 RSU Awards. In April 2013, as part of our annual equity award process for both named executive officers and other management personnel, the Compensation Committee took into account each named executive officer’s relative contributions to our operating results in 2012 as well as the overall competitiveness of each named executive officer’s compensation package in comparison with our “peer group” as described under “Executive Compensation Program Overview and Design Principles—How We Use Peer Group, Survey and Benchmarking Data.” Accordingly, the Compensation Committee granted 14,934 RSU awards to Ms. Paolillo and Mr. DeGhetto that vest over time in five equal installments through 2018, subject to continued employment.

 

2013 Stock Option Awards. Under our Equity Incentive Plans, stock options are authorized to be issued at the discretion of the Compensation Committee. During 2013, the Compensation Committee did not authorize the grant of any stock option awards to our named executive officers.

 

Funding for Discretionary Performance-Based Cash Incentives and Discretionary Cash Bonuses

 

Funding for discretionary performance-based cash incentive awards is determined throughout the year based on our achievement of annual revenue and operating income objectives in our internal business plan (excluding extraordinary, unusual or infrequently occurring events or changes in accounting principles). The Compensation Committee awards discretionary performance-based cash incentives to executive officers on an annual basis in the year following the year for which performance is measured. The Compensation Committee has the authority to reduce or entirely eliminate the funding of the discretionary performance-based cash incentive awards, in its sole discretion. See “2013 Financial Performance and Discretionary Performance-Based Cash Incentive Award Funding” in this section for more detail regarding funding of the discretionary performance-based cash incentive awards in 2013.

 

Additionally, the Compensation Committee may from time to time determine that additional funding should be provided outside of the discretionary performance-based cash incentive awards to fund discretionary bonuses for retention or to award executive officers and non-executive officer employees for their efforts during those years in which our annual revenue and operating income performance resulted in a low funding of discretionary performance-based cash incentive awards.

 

2013 Discretionary Performance-Based Cash Incentive Awards based upon 2012 Financial Performance

 

In March 2013, the Compensation Committee awarded discretionary performance-based cash incentive awards to our named executive officers for 2012 performance as follows: Ms. Paolillo $315,000 and Mr. DeGhetto $315,000. Mr. Tuchman communicated to the Compensation Committee prior to the determination of discretionary performance-based cash incentive awards that he did not desire to receive any such awards approved by the Compensation Committee.

 

2013 Financial Performance and Discretionary Performance-Based Cash Incentive Award Funding

 

Funding of the discretionary performance-based cash incentive awards is based on our achievement of corporate annual revenue and operating income targets which include all four of our business segments. In measuring our performance under both the revenue and operating income targets, we exclude certain one-time or unusual items which may occur during the year such as mergers, acquisitions, asset impairments, client credits, restructuring activities, abandonment charges, government grant claw backs, incentive benefit pool or 401(k) funding accruals or legal and settlement expenses.

 

For purposes of awards to be made in 2014 for 2013 performance, the Compensation Committee approved $1.9 million of discretionary performance-based cash incentive awards based on achievement of 2013 revenue results of $1.19 billion and operating income results of $101.4 million against the annual revenue targets of $1.215 billion to $1.240 billion

 

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and operating income targets of $112.4 million to $117.8 million. The 2013 operating income results were equitably adjusted by the Compensation Committee for purposes of determining discretionary performance-based cash incentive awards for events outside of the Company’s direct control such as foreign exchange fluctuations not reasonably capable of being hedged, impacts of transaction costs of unbudgeted acquisitions and asset divestitures (including non-cash accounting treatment of such transactions), and acts of god (such as weather and natural disasters), as well as other unusual events not capable of being reasonably planned or mitigated in Committee’s best judgment. Based upon these equitable adjustments, the 2013 revenue results of $1.21 billion and adjusted operating income results of $112.9 million were measured against the targets discussed above. Achievement at the 100 percent level for annual revenue and operating income targets in 2013 would have resulted in the funding of the discretionary performance-based cash incentive awards at $2.7 million based upon the amount of discretionary performance-based cash incentive awards that the named executive officers are collectively entitled to receive at 100 percent of their targets. See “2013 Cash Incentives – Strategic Objectives—2013 Discretionary Performance-Based Cash Incentive Payout” below for more information about payment targets. Failure to achieve minimum annual revenue and operating income targets in 2013 would have resulted in the failure to fund the discretionary performance-based cash incentive awards. As we performed between targets in 2013, the amount of discretionary performance-based cash incentive awards paid out was interpolated to reflect this performance.

 

While the discretionary performance-based cash incentive award targets are reset each year, the Compensation Committee seeks to set target levels for purposes of funding the discretionary performance-based cash incentive awards that are difficult to achieve, but achievable, if certain conditions are satisfied, including, in particular the following:

 

·        We continue to operate our business to our historic standards of efficiency, production and performance;

 

·        We continue to close sales with new and existing customers;

 

·        We continue to control our costs of conducting and growing our business and operations;

 

·        External market forces are consistent with expectations (at the time we establish our annual budgets) in the business process outsourcing market;

 

·        Clients we serve continue to remain financially sound and satisfy their contractual obligations to us; and

 

·        We do not experience unforeseen events, such as natural disasters, political or social instability or other casualty events that have a material adverse impact on our financial results.

 

Consequently, our ability to achieve the discretionary performance-based cash incentive award targets each year is heavily dependent not only upon factors within our control, but also upon current economic conditions and the conditions outlined above. For example, in 2010, we did not fund the discretionary performance-based cash incentive awards in any period other than the third quarter of 2010 for achievement of the operating income target for that quarter. In 2011, the Compensation Committee elected to eliminate 100 percent of the 2011 discretionary performance-based cash incentive awards due to our overall financial performance. Accordingly, there is uncertainty with respect to achieving the discretionary performance-based cash incentive award funding targets at the time they are set, and although our strong historical operating performance, favorable business process outsourcing market conditions and continued performance by clients with whom we contract have resulted in prior funding of discretionary performance-based cash incentive awards, prior years have demonstrated that past performance is not a guarantee of future performance and that the Compensation Committee has set targets at levels designed to challenge management. Therefore, the targets set each year, provide our named executive officers with a reasonable, although not certain, expectation of receiving cash incentives through discretionary performance-based awards.

 

In addition, the determination of cash incentives through discretionary performance-based awards or through discretionary cash bonuses are subjective and subject to the discretion of the Compensation Committee, which has retained complete authority and discretion to decide whether to make any cash incentive awards and, if made, the amount of such awards.

 

2013 Cash Incentives – Strategic Objectives

 

The Compensation Committee bases its decision to award cash incentives through discretionary performance-based awards and discretionary cash bonuses to individual named executive officers, if any, primarily on subjective criteria relating to achievement of our strategic objectives. Specifically, the Compensation Committee subjectively bases its decision to award cash incentives on the eight success factors described above in this section under “Compensation Committee Determines All Executive Compensation,” including such considerations as (i) company-wide business results, including revenue, gross margin, operating income and free cash flow on a consolidated basis, indicators such as total company bookings, client retention, employee retention and overhead efficiencies, and support, enablement and monetization of cross-company organic and inorganic investments; (ii) business segment results, including revenue, gross margin, operating income and free cash flow on a business segment basis, indicators such as business segment bookings, client retention, client profitability, employee retention and employee productivity on a business segment basis, and delivery against business segment organic and inorganic investments; and (iii) execution against strategy to

 

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deliver on a long term plan to meet revenue and operating income goals. While the Compensation Committee can and does consider objective financial results in its subjective evaluation of an executive officer’s performance, there is no formulaic tie between the financial results and the amount of the cash incentives under discretionary performance-based awards or discretionary cash bonuses. Further, the Compensation Committee exercises discretion in determining to award discretionary performance-based cash incentives rather than relying on a formulaic approach. The Compensation Committee generally determines whether to award a discretionary performance-based cash incentive, and the amount of any such award, to named executive officers in February of the year following the year for which performance is measured. After the Compensation Committee determines whether to award and the amount of the awards of discretionary performance-based cash incentives to named executive officers, the Company generally pays those bonuses in the next 30 days.

 

The discretionary performance-based cash incentive awards do not provide for the adjustment or recovery of amounts paid to a named executive officer if the results in a previous year are subsequently restated or adjusted in a manner that would have originally resulted in a smaller award.

 

2013 Discretionary Performance-Based Cash Incentive Payout. For 2013, the Compensation Committee targeted the discretionary performance-based cash incentive awards for named executive officers at the 75th percentile of bonus compensation for our peer group companies based on our peer group data (as discussed above under “Executive Compensation Program Overview and Design Principles—How We Use Peer Group, Survey and Benchmarking Data”).

 

In March 2014, the Compensation Committee awarded discretionary performance-based cash incentive awards to the named executive officers for 2013 performance as follows: Ms. Paolillo $400,000; Mr. DeGhetto $500,000; Mr. Gallacher $350,000 and Mr. Shepherd $500,000. Mr. Tuchman communicated to the Compensation Committee prior to the determination of discretionary performance-based cash incentive awards that he did not desire to receive any such awards approved by the Compensation Committee.

 

The table below shows the target and actual discretionary performance-based cash incentive award amounts paid to each named executive officer in 2014 for 2013 performance as a percentage of base salary.

 

 

 

 

Cash Incentives—Percentage of
Base Salary

 

 

 

Title

 

 

Target

 

Actual

 

 

Chairman of the Board and CEO

 

 

0%1

 

0%1

 

 

Executive Vice President, Chief Administrative and Financial Officer

 

 

160%

 

107%

 

 

Executive Vice President, Customer Management Services

 

 

123%

 

133%

 

 

Executive Vice President, Global Markets and Industries

 

 

147%

 

88%2

 

 

Executive Vice President, Customer Strategy and Technology Services

 

 

125%

 

111%2

 

 

1  Mr. Tuchman communicated to the Compensation Committee prior to the determination of discretionary performance-based cash incentive awards that he did not desire to receive such awards.

 

2  Represents guaranteed bonus as agreed under Mr. Gallacher’s and Mr. Shepherd’s employment agreement.

 

2013 Discretionary Bonuses. The Compensation Committee did not award any discretionary cash bonuses to the named executive officers in 2013.

 

2013 Base Salaries

 

The Compensation Committee analyzed benchmarks for competitive base salaries using the “peer group” described above under “Executive Compensation Program Overview and Design Principles—How We Use Peer Group, Survey and Benchmarking Data.” Generally, the Compensation Committee targeted the base salaries of our named executive officers for 2013 at the 50th percentile of the peer group. Based on these targets, the Compensation Committee approved a base salary increase for Mr. DeGhetto from $350,000 to $375,000. Base salaries for the other named executive officers were in line with targets, with the exception of Mr. Tuchman’s base salary which is described below, and accordingly, no adjustments were made to base salaries for named executive officers other than Mr. DeGhetto.

 

CEO Compensation

 

The independent members of our Board, at the recommendation of the Compensation Committee, determine adjustments to the CEO’s compensation and evaluate the performance of the CEO. Historically, our Board has compensated Mr. Tuchman primarily through grants of equity and not through cash compensation under discretionary performance-based cash incentive awards, discretionary cash bonuses or base salary. Our Board believes that focusing Mr. Tuchman’s compensation on equity awards better aligns the CEO compensation with the interests of stockholders.

 

In 2012, the Compensation Committee approved a request from Mr. Tuchman to waive his right to the full amount of his base salary under his employment agreement and instead receive a base salary of $1 per year. Additionally, in 2013, Mr. Tuchman communicated to the Compensation Committee prior to the determination of discretionary performance-based

 

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cash incentive awards or discretionary cash bonuses that he did not desire to receive any discretionary performance- based cash incentive award or discretionary cash bonus. Mr. Tuchman received additional compensation in the amount of approximately $58,747 in 2013, as discussed in the “Executive Compensation Tables” section under the heading “All Other Compensation Table.”

 

Tax and Accounting Considerations

 

Limitations on the Deductibility of Compensation. Under section 162(m) of the Code, unless certain exceptions apply, no tax deduction is allowed for annual compensation in excess of $1 million paid to our principal executive officer and three most highly compensated executive officers other than our principal financial officer unless it qualifies as “performance- based compensation” that is based upon performance criteria that has been disclosed to and approved by stockholders before the payment of such compensation. Performance-based compensation qualifying under section 162(m), among other requirements, must be payable only upon attainment of pre-established, objective performance goals that were established by a Board committee that consists only of “outside directors.” In 2013, the Compensation Committee did not award any equity-based or other compensation that would meet the performance-based compensation requirements of section 162(m). Discretionary performance-based cash incentive awards do not meet the requirements for exempt performance-based compensation under section 162(m). In the future, the Compensation Committee will use its discretion to determine whether to make awards that satisfy the “qualified performance-based compensation” requirements of section 162(m) in order to maximize tax deductibility of executive compensation, while balancing the interests of our stockholders and the most appropriate methods and approaches for the design and delivery of compensation to our named executive officers.

 

Section 409A of the Code imposes additional income taxes on executive officers for certain types of deferred compensation that do not comply with section 409A. In 2008, we revised several of our compensation plans and agreements with technical changes designed to cause nonqualified deferred compensation payable under such plans and agreements to comply with, or be exempt from, section 409A. We provide certain executives, including our named executive officers, with the opportunity to contribute all or a portion of their salaries, cash incentives or discretionary cash bonuses to a deferred compensation plan. We do not provide deferred compensation to the named executive officers in excess of their individual contributions.

 

Accounting Considerations. The Compensation Committee also considers the accounting and cash flow implications of our executive compensation program. In our financial statements, we record salaries and cash incentives as expenses in the amount paid, or to be paid, to the named executive officers. Accounting rules also require us to record equity awards as an expense in our financial statements even though equity awards are not paid as cash to employees. The accounting expense of equity awards to employees is calculated in accordance with the guidance in FASB ASC Topic 718. The Compensation Committee believes, however, that the advantages of equity compensation programs, as discussed above, outweigh the non-cash compensation expense associated with them.

 

Compensation Risk Assessment

 

As discussed above under the heading “Board’s Role in Our Risk Management,” annually we conduct an assessment of our compensation policies and practices for all employees. We review and discuss the results of this assessment with the Compensation Committee. Based upon this assessment, review and discussion, we believe that any risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on us.

 

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Executive Compensation Tables

 

Summary Compensation Table for 2013

 

The following table sets forth the compensation for the services in all capacities to us and our subsidiary companies for the years ended December 31, 2013, 2012 and 2011 of (1) our CEO, (2) our CFO; and (3) the three most highly compensated executive officers, other than the CEO and CFO, employed by us as of December 31, 2013, whose total annual salary and bonus exceeded $100,000, referred to as the “named executive officers” in this Proxy Statement:

 

Name and Principal Position

 

Year

 

Salary ($)

 

Bonus($)1

 

Stock
Awards ($)
2

 

Option
Awards ($)
2

 

Non-Equity
Incentive Plan
Compensation
($)
3

 

Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings ($)
4

 

All Other
Compensation
($)
5

 

Total ($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kenneth D. Tuchman

(Chief Executive Officer)

 

2013

 

1

 

 

 

 

 

301,856

 

58,747

 

360,604

 

2012

 

78,078

 

 

 

 

 

180,817

 

60,462

 

319,357

 

 

2011

 

350,000

 

 

 

 

 

 

65,781

 

415,781

Martin F. DeGhetto

(Executive Vice President Customer Management Services)

 

2013

 

370,481

 

 

317,497

 

 

315,000

 

 

52,463

 

1,055,441

 

2012

 

340,385

 

 

390,250

 

 

 

 

35,325

 

765,960

 

2011

 

300,000

 

150,000

 

2,086,000

 

 

 

 

32,995

 

2,568,995

Charles Keith Gallacher

(Executive Vice President, Global  Markets and Industries)

 

2013

 

215,385

 

85,000

 

1,785,750

 

 

 

 

2,812

 

2,088,947

 

2012

 

 

 

 

 

 

 

 

 

2011

 

 

 

 

 

 

 

 

Regina M. Paolillo

(Executive Vice President, Chief Administrative and Financial Officer)

 

2013

 

375,000

 

 

317,497

 

 

315,000

 

202,896

 

16,022

 

1,226,415

 

2012

 

375,000

 

350,000

 

1,689,000

 

 

 

18,776

 

8,817

 

2,441,593

 

2011

 

46,154

 

 

3,462,000

 

1,302,167

 

 

 

 

4,810,321

Brian A. Shepherd

(Executive Vice President, Customer  Strategy and Technology Services)

 

2013

 

398,647

 

 

1,374,750

 

 

 

 

29,091

 

1,802,488

 

2012

 

 

 

 

 

 

 

 

 

2011

 

 

 

 

 

 

 

 

 

1       Amounts are discretionary cash bonus payments and sign-on bonus payments outside of the discretionary performance-based cash incentive awards that are not subject to pre-established and communicated performance measures. Discretionary bonuses are paid in the first quarter of the year following the year for which such bonus was awarded and sign-on bonuses are generally paid at the time of hire.

 

2       Amounts were calculated pursuant the guidance in FASB ASC Topic 718. We calculate the fair value for RSUs based on the closing price of our common stock on the date of grant multiplied by the number of shares granted and assume with regard to performance vesting RSUs, if any, achievement of the maximum performance targets.

 

3       Amounts are annual discretionary performance-based cash incentive awards payments that are awarded based upon the Compensation Committee’s subjective assessment of each named executive officer’s performance under pre-established and communicated performance measures (specifically, the success factors described above in the section entitled “Compensation Discussion and Analysis” under the headings “How We Determine Executive Compensation—Compensation Committee Determines All Executive Compensation” and “How We Determine Executive Compensation—2013 Cash Incentives-Strategic Objectives”) and were paid during the first quarter of 2013 based on prior year performance.

 

4       Amounts are summarized below in the section entitled “Nonqualified Deferred Compensation Table.”

 

5       Amounts are summarized below under the heading “All Other Compensation Table.”

 

The Summary Compensation Table should be read in conjunction with additional tables and narrative descriptions that follow. The Grants of Plan-Based Awards table, and the accompanying description of the material terms of the RSU awards granted in 2013, provides information regarding the long-term equity incentives awarded to named executive officers in 2013. The Outstanding Equity Awards at Year-End and Option Exercises and Stock Vested tables provide further information on the named executive officers’ potential realizable value and actual value realized with respect to their equity awards. The base salary for Mr. Tuchman was initially established in his employment agreement with us at $250,000. The Compensation Committee subsequently approved an increase in the base salary for Mr. Tuchman to $350,000 prior to his request in March 2012 to reduce his annual salary to $1. Mr. Tuchman’s employment agreement is described below under “Potential Payments Upon Termination or Change in Control—Employment Agreements.”

 

Nonqualified Deferred Compensation Table

 

Named executive officers have the opportunity to contribute all or a portion of their salaries, discretionary cash bonuses or cash incentive awards to a deferred compensation plan. We do not provide deferred compensation to the named executive officers in excess of their individual contributions. The following table summarizes activity in our deferred compensation plan during 2013 for our named executive officers:

 

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Nonqualified Deferred Compensation Table

 

Name

 

Executive
Contributions in
Last Fiscal Year
($)
1

 

Registrant
Contributions in
Last Fiscal Year
($)

 

Aggregate
Earnings in
Last Fiscal
Year($)
2

 

Aggregate
Withdrawals/
Distributions in
Last Fiscal Year
($)

 

Aggregate
Balance at
Last Fiscal
YearEnd($)
3

Kenneth D. Tuchman

 

 

 

301,856

 

 

1,844,745

Martin F. DeGhetto

 

 

 

 

 

Charles Keith Gallacher

 

 

 

 

 

Regina M. Paolillo

 

352,868

 

 

202,896

 

 

  927,185

Brian A. Shepherd

 

 

 

 

 

 

1  Amounts set forth in this column are included in “Salary,” “Bonus” and/or “Non-Equity Incentive Plan” compensation columns of the Summary Compensation Table above for the named executive officers.

 

2  Amounts set forth in this column are included in the “Change in Pension Value and Non-qualified Deferred Compensation Earnings” column of the Summary Compensation Table above for the named executive officers.

 

3  Amounts set forth in this column were reported as compensation to the named executive officers in the Summary Compensation Table for 2012 and previous years.

 

All Other Compensation Table

 

The following table describes the perquisites and other compensation received by the named executive officers during 2013:

 

Perquisite

 

Mr. Tuchman

 

Ms. Paolillo

 

Mr. DeGhetto

 

Mr. Gallacher

 

Mr. Shepherd

Use of Aircraft

 

$   4,357

 

 

 

 

$14,275

 

 

 

 

 

Automobile

 

$ 33,952

 

 

 

 

 

 

 

 

 

Executive Health/Dental/Vision Premiums

 

$ 16,715

 

 

$  5,441

 

 

$19,955

 

 

$2,708

 

 

 

Group Term/Executive Life Premiums

 

$      410

 

 

$     768

 

 

$10,768

 

 

$   104

 

 

$     218

 

Deferred Death Benefit

 

$   3,313

 

 

 

 

 

 

 

 

 

401(k) Plan Matching Contributions

 

 

 

$  9,813

 

 

$  7,465

 

 

 

 

$  2,596

 

Relocation

 

 

 

 

 

 

 

 

 

$26,277

 

Total

 

$58,747

 

 

$16,022

 

 

$52,463

 

 

$2,812

 

 

$29,091

 

 

Grants of Plan-Based Awards

 

Each of the Non-Equity Incentive Plan Awards reported in this “Grants of Plan-Based Awards” table refers to discretionary performance-based cash incentive award payments. The material terms of these incentive awards are described in the section entitled “Compensation Discussion and Analysis.” The following table sets forth information about the discretionary performance-based cash incentive awards or discretionary cash bonuses for the named executive officers in 2013 and the RSU stock awards to each named executive officer during 2013:

 

 

 

 

 

Estimated Future Payouts Under Non-
Equity Incentive Plan Awards
1

 

Estimated Future Payouts Under Equity
Incentive Plan Awards

 

All Other
Stock
Awards:
Number of
Shares of

Stock or
Units (#)
2

 

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

 

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

 

Grant Date
Fair Value
of Stock
and Option
Awards($)
3

Name

 

Grant Date

 

Threshold ($)

 

Target ($)

 

Maximum ($)

 

Threshold ($)

 

Target ($)

 

Maximum ($)

 

 

 

 

 

 

 

 

Kenneth D. Tuchman

 

 

 

 

 

 

 

 

 

 

 

Martin F. DeGhetto

 

4/01/2013

 

237,500

 

462,500

 

687,500

 

 

 

 

14,934

 

 

21.26

 

317,497

Charles Keith Gallacher

 

6/07/2013

 

250,000

 

587,500

 

925,000

 

 

 

 

75,000

 

 

23.81

 

1,785,750

Regina M. Paolillo

 

4/01/2013

 

262,500

 

600,000

 

937,500

 

 

 

 

14,934

 

 

21.26

 

317,497

Brian A. Shepherd

 

2/20/2013

 

225,000

 

562,500

 

900,000

 

 

 

 

75,000

 

 

18.33

 

1,374,750

 

1       Amounts set forth in these columns are based on estimated future payouts for 2013 discretionary performance-based cash incentive awards. Mr. Tuchman has elected not to participate in prior year discretionary performance-based cash incentive awards and he again elected not to receive such awards for 2013. However, on December 31, 2013 Mr. Tuchman was still eligible to receive payments for such awards.

2       Amounts set forth in this column represent the number of shares underlying time-in-service based RSU awards.

3       Amounts set forth in this column represent the grant date fair value as determined pursuant to the guidance in FASB ASC Topic 718. We calculate the fair value for RSUs based on the closing price of our common stock on the date of grant multiplied by the number of shares granted.

 

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Outstanding Equity Awards at Year-End

 

The following table presents information regarding the outstanding equity awards held by each of the named executive officers as of December 31, 2013, including the vesting dates for the portions of these awards that had not vested as of that date. All equity awards listed below were issued from our Equity Incentive Plans.

 

 

 

 

 

Options Awards

 

 

 

 

 

 

 

 

Stock Awards

 

 

 

 

 

 

 

 

Name

 

Grant Date

 

Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)

 

Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)

 

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($)
1

 

Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other Rights
Have Not Vested
(#)

 

Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Other Rights that
Have Not Vested
(#)
2

 

(a)

 

(b)

 

(c)

 

(d)

 

(e)

 

(f)

 

(g)

 

(h)

 

(j)

 

(k)

 

Kenneth D. Tuchman

 

11/4/2005

 

800,000

 

 

11.35

 

11/4/2015

 

 

 

 

 

 

 

3/5/2010

 

 

 

 

 

75,0003

 

1,795,500

 

 

 

Martin F. DeGhetto

 

3/25/2010

 

 

 

 

 

12,5009

 

299,250

 

 

 

 

 

3/4/2011

 

 

 

 

 

50,00010

 

1,197,000

 

 

 

 

 

3/5/2012

 

 

 

 

 

20,00011

 

478,800

 

 

 

 

 

4/1/2013

 

 

 

 

 

14,9348

 

357,520

 

 

 

Charles Keith Gallacher

 

6/7/2013

 

 

 

 

 

75,00012

 

1,795,500

 

 

 

Regina M. Paolillo

 

11/15/2011

 

 

150,0004

 

17.31

 

11/15/2021

 

75,0005

 

1,795,500

 

100,0006

 

2,394,000

 

 

 

11/1/2012

 

 

 

 

 

80,0007

 

1,915,200

 

 

 

 

 

4/1/2013

 

 

 

 

 

14,9348

 

357,520

 

 

 

Brian A. Shepherd

 

2/20/2013

 

 

 

 

 

75,00013

 

1,795,500

 

 

 

 

1       The dollar amounts are determined by multiplying (i) the number of shares or units reported by (ii) $23.94 (the closing price of our common stock on December 31, 2013, the last trading day of 2013).

 

2       The dollar amounts are determined by multiplying (i) the number of shares or units reported by (ii) $23.94 (the closing price of our common stock on December 31, 2013, the last trading day of 2013).

 

3       The unvested portion of this time-in-service-based RSU award is scheduled to vest on March 5, 2014, subject to continued employment.

 

4       The unvested portion of these performance-based Non-Qualified Stock Options vests over 6 years, with 16,666 shares eligible for vesting on December 31, 2014, 16,667 shares eligible for vesting on December 31, 2015, 16,667 shares eligible for vesting on December 31, 2016 and 100,000 shares eligible for vesting on December 31, 2017, with vesting of each tranche subject to satisfaction of performance-based criteria.

 

5       The unvested portion of this time-in-service-based RSU award vests in two installments, 33.33 percent vests November 15, 2014 and 66.67 percent vests November 15, 2015, subject to continued employment.

 

6       The unvested portion of this performance-based RSU is eligible for vesting on December 31, 2014.

 

7       The unvested portion of this time-in-service-based RSU award vests in four equal annual installments beginning on November 1, 2014 and on each anniversary thereafter, subject to continued employment.

 

8       The unvested portion of this time-in-service-based RSU award vests in five equal annual installments beginning on April 1, 2014 and on each anniversary thereafter, subject to continued employment.

 

9       The unvested portion of this time-in-service-based RSU award is scheduled to vest on March 25, 2014, subject to continued employment.

 

10    The unvested portion of this time-in-service-based RSU award vests in two equal annual installments beginning on March 4, 2014 and on the anniversary thereafter, subject to continued employment.

 

11    The unvested portion of this time-in-service-based RSU award vests in four equal annual installments beginning on March 5, 2014 and on each anniversary thereafter, subject to continued employment.

 

12    The unvested portion of this time-in-service-based RSU award vests in four installments beginning with 40 percent vesting on June 7, 2015 and three equal installments vesting on each anniversary thereafter, subject to continued employment.

 

13    The unvested portion of this time-in-service-based RSU award vests in four installments beginning with 40 percent vesting on February 20, 2015 and three equal installments vesting on each anniversary thereafter, subject to continued employment.

 

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Option Exercises and Stock Vested

 

The following table presents information regarding the exercise of stock options by named executive officers during 2013, and on the vesting of RSUs held by named executive officers during 2013.

 

 

 

Stock Awards

 

 

Name

 

 

Number of Shares Acquired
on Vesting (#)

 

 

Value Realized
on Vesting($)1

 

 

 

Kenneth D. Tuchman

 

 

75,000

 

 

1,440,750

 

 

 

Martin F. DeGhetto

 

 

42,500

 

 

835,675

 

 

 

Charles Keith Gallacher

 

 

 

 

 

 

 

Regina M. Paolillo

 

 

45,000

 

 

1,160,590

 

 

 

Brian A. Shepherd

 

 

 

 

 

 

 

1 The dollar amounts above for stock awards are determined by multiplying (i) the number of shares of common stock to which the vesting of the RSU related by (ii) the per-share closing price of our common stock on the date of vesting.

 

Potential Payments Upon Termination or Change in Control

 

Employment Agreements

 

The employment agreements described below with respect to Mr. Tuchman, Ms. Paolillo, Mr. Gallacher and Mr. Shepherd outline the compensation and benefits that each of the named executive officers is entitled to receive upon termination. The employment agreement for Mr. Tuchman was amended in December 2008 in order to comply with the deferred compensation rules under section 409A of the Code. In February of 2014, the Compensation Committee approved a change in our severance policy for executive officers, including named executive officers.

 

Agreement with Kenneth D. Tuchman. We entered into an employment agreement with Mr. Tuchman, our Chairman and Chief Executive Officer, in October 2001. If, during the term, we terminate Mr. Tuchman’s employment other than for cause, death or disability or if Mr. Tuchman resigns for “good cause”, we will pay Mr. Tuchman as severance a sum equal to 24 months of Mr. Tuchman’s then current base salary, plus 24 months of continued fringe benefits that he would have been entitled to receive as of the date of his termination. For purposes of Mr. Tuchman’s employment agreement, good cause means (i) a material decrease in Mr. Tuchman’s base salary and/or a material decrease in Mr. Tuchman’s employee benefits (other than pursuant to a general reduction or modification of such salary or benefits generally applicable to our senior executives); or (ii) a material change in the responsibilities or duties assigned to Mr.Tuchman, as measured against Mr. Tuchman’s responsibilities or duties immediately prior to such change, that causes Mr. Tuchman to be of materially reduced stature or responsibility; or (iii) the occurrence of circumstances establishing constructive discharge under the common law of the State of Colorado, under which the Company’s conduct makes or allows Mr. Tuchman’s working conditions to become so intolerable that Mr. Tuchman has no reasonable choice but to resign. However, a constructive discharge does not exist unless a reasonable person would concur with Mr. Tuchman’s opinion that the working conditions are intolerable. In addition, all of Mr. Tuchman’s unvested stock options that would have vested under his option agreements during the 12 months following his date of termination will vest. In December 2008, the Compensation Committee authorized an amendment to Mr. Tuchman’s employment agreement in order to ensure that the severance payments would comply with, or be exempt from, the deferred compensation rules of the Internal Revenue Service and therefore, would not trigger additional taxation under section 409A of the Code. Under the amendment, the amounts due to Mr. Tuchman that are not exempt from section 409A of the Code will be payable to him in a lump sum within 60 days following the date of termination of Mr. Tuchman’s employment. Prior to the amendment, the amounts due were payable to Mr. Tuchman in 24 equal monthly installments after the termination of Mr. Tuchman’s employment. During Mr. Tuchman’s employment and for a period of three years thereafter, Mr. Tuchman is subject to non-competition, non-solicitation and confidentiality provisions. On March 8, 2012, the Compensation Committee approved a request from Mr. Tuchman to waive his right to the full amount of his base salary as set forth in Section 2 of his employment agreement and instead receive a base salary of $1 per year effective March 8, 2012.

 

Agreement with Regina M. Paolillo. We entered into an employment agreement with Ms. Paolillo on November 3, 2011. The employment agreement may generally be terminated by either us or by Ms. Paolillo upon 30 days’ written notice. However, if we terminate Ms. Paolillo’s employment without “Cause”, we will pay to Ms. Paolillo as severance a sum equal to one year of her then current base salary. “Cause” exists if, in our sole and absolute discretion, Ms. Paolillo engages in: (i) violation of any Company policy, procedure, guideline or agreement; (ii) theft, embezzlement, misappropriation of funds, or misuse of Company property or time; (iii) willful dishonesty causing harm to the Company; (iv) conviction of or a plea of guilty or nolo contendre to any felony, or to any misdemeanor involving dishonesty, fraud, abuse of trust, breach of fiduciary duty, physical or emotional harm to any person or moral turpitude or use, possession, or distribution of controlled substances; (v) conduct which the Company determines in its sole and absolute discretion to be disruptive and not in the best interest of the Company; (vi) unauthorized use of trade secrets or confidential information (or the Company’s reasonable belief that Ms. Paolillo has done so or has attempted to do so); (vii) repeated dishonesty or misrepresentation

 

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involving the Company or any of its affiliates or subsidiaries; (viii) violation of the Company’s Substance Abuse Policy; (ix) illegal gambling on the Company’s or any affiliate’s or subsidiary’s premises; (x) discriminatory or harassing behavior, whether or not illegal under federal, state or local law; (xi) making any statements, whether written or oral that disparage or defame the Company or any of its affiliates or subsidiaries; (xii) intentionally falsifying any document or making any false or misleading statement related to Ms. Paolillo’s employment by the Company; (xiii) or poor performance as determined by the Company’s Chief Executive Officer, in his sole discretion. Ms. Paolillo’s agreement provides that any severance payments would comply with, or be exempt from, the deferred compensation rules of the Internal Revenue Service and therefore, would not trigger additional taxation under section 409A of the Code. The amounts due to Ms. Paolillo that are not exempt from section 409A of the Code will be payable to her in a lump sum within 60 days following the date of termination of her employment. During Ms. Paolillo’s employment and for a period of one year thereafter, Ms. Paolillo is subject to non-competition provisions. During Ms. Paolillo’s employment and for a period of two years thereafter, Ms. Paolillo is subject to non-solicitation and confidentiality provisions.

 

Agreement with Charles Keith Gallacher. We entered into an employment agreement with Mr. Gallacher on June 3, 2013. The employment agreement may generally be terminated by either us or by Mr. Gallacher upon 30 days’ written notice. However, if we terminate Mr. Gallacher’s employment without “Cause”, we will pay to Mr. Gallacher as severance a sum equal to one year of his then current base salary. For the first two full years of employment commencing from the Employee’s Time-Based RSU grant date and up until the first day upon which the Time-Based RSU vests, “Cause” shall only include any of the following acts: (i) fraud, theft (or attempted theft), embezzlement (or attempted embezzlement), dishonest acts or illegal conduct; (ii) similar acts of willful misconduct of the Employee resulting in material damage to the Company; (iii) a material breach by the Employee of this Agreement that is not cured with fifteen (15) days following the Employee’s receipt of written notice of such breach from the Company; (iv) use of any unlawful controlled substance or use of alcohol to an extent that it interferes on a continuing and material basis with the performance of his duties under this Agreement, (v) a breach of his fiduciary duty that results in material impact to the Company and/or that results in personal profit to the Employee (as determined by the Company, in its sole discretion); (vi) unauthorized use of trade secrets or confidential information (or the Company’s reasonable belief that Employee has or attempted to do so); or (vii) aiding a competitor of the Company or its affiliates or subsidiaries. Following the first vesting date of the Employee’s new hire RSU grant date, “Cause” shall include all of the acts set forth above and shall also include: (viii) failure by the Employee in the performance of his duties that results in a material adverse effect on the Company, which, in the case of such failure is capable of being cured, is not cured to the satisfaction of the Company within thirty (30) days) after the Company gives the Employee notice of such failure. Mr. Gallacher’s agreement provides that any severance payments would comply with, or be exempt from, the deferred compensation rules of the Internal Revenue Service and therefore, would not trigger additional taxation under section 409A of the Code. The amounts due to Mr. Gallacher that are not exempt from section 409A of the Code will be payable to him in a lump sum within 60 days following the date of termination of his employment. During Mr. Gallacher’s employment and for a period of one year thereafter, Mr. Gallacher is subject to non-competition provisions.

 

Agreement with Brian A. Shepherd. We entered into an employment agreement with Mr. Shepherd on January 29, 2013. The employment agreement may generally be terminated by either us or by Mr. Shepherd upon 30 days’ written notice. However, if we terminate Mr. Shepherd’s employment without “Cause”, we will pay to Mr. Shepherd as severance a sum equal to one year of his then current base salary. “Cause” shall include any of the following acts: (i) fraud, theft (or attempted theft); embezzlement (or attempted embezzlement), dishonest acts or illegal conduct; (ii) similar acts of willful misconduct of the Employee resulting in material damage to the Company; (iii) serious neglect by the Employee in the performance of his duties that results, in the reasonable judgment of the CEO, in a material adverse effect on the Company, which, in the case of such neglect which is capable of being cured, is not cured to the reasonable satisfaction of the CEO with fifteen (15) days after the Company gives the Employee written notice of such neglect; (iv) a material breach by the Employee of this Agreement that is not cured with fifteen (15) days following the Employee’s receipt of written notice of such breach from the Company; (v) use of any unlawful controlled substance or use of alcohol to an extent that it interferes on a continuing and material basis with the performance of his duties under this Agreement, (vi) a breach of his fiduciary duty that results in material impact to the Company and/or that results in personal profit to the Employee (as determinate by the Company, in its sole discretion). Mr. Shepherd’s agreement provides that any severance payments would comply with, or be exempt from, the deferred compensation rules of the Internal Revenue Service and therefore, would not trigger additional taxation under section 409A of the Code. The amounts due to Mr. Shepherd that are not exempt from section 409A of the Code will be payable to his in a lump sum within 60 days following the date of termination of his employment. During Mr. Shepherd’s employment and for a period of one year thereafter, Mr. Shepherd is subject to non-competition provisions.

 

Change in Control

 

The stock option and RSU agreements with the named executive officers have provisions for accelerated vesting if there is a change in control of TeleTech. Such vesting occurs on the effective date of a change in control. As defined in those agreements, a change of control means the occurrence of any one of the following events: (1) any consolidation,

 

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merger or other similar transaction (A) involving TeleTech, if TeleTech is not the continuing or surviving corporation, or (B) which contemplates that all or substantially all of the business and/or assets of TeleTech will be controlled by another corporation; (2) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of TeleTech (a “Disposition”); provided, however, that the foregoing shall not apply to any Disposition to a corporation with respect to which, following such Disposition, more than 51 percent of the combined voting power of the then outstanding voting securities of such corporation is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners of at least 51 percent of the then outstanding common stock and/or other voting securities of TeleTech immediately prior to such Disposition, in substantially the same proportion as their ownership immediately prior to such Disposition; (3) approval by the stockholders of TeleTech of any plan or proposal for the liquidation or dissolution of TeleTech, unless such plan or proposal is abandoned within 60 days following such approval; (4) the acquisition by any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended), or two or more persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of 51 percent or more of the outstanding shares of voting stock of TeleTech; provided, however, that for purposes of the foregoing, “person” excludes Kenneth D. Tuchman and his affiliates; provided, further, that the foregoing shall exclude any such acquisition (A) by any person made directly from TeleTech, (B) made by TeleTech or any subsidiary, or (C) made by an employee benefit plan (or related trust) sponsored or maintained by TeleTech or any subsidiary; or (5) if, during any period of 15 consecutive calendar months commencing at any time on or after the Grant Date, those individuals (the “continuing directors”) who either (A) were directors of TeleTech on the first day of each such 15-month period, or (B) subsequently became directors of TeleTech and whose actual election or initial nomination for election subsequent to that date was approved by a majority of the Continuing Directors then on the board of directors of TeleTech, cease to constitute a majority of the board of directors of TeleTech.

As of December 31, 2013, our standard option agreement for the named executive officers (as well as all individuals who are employed at the vice president level or higher) contained a provision whereby the vesting of such stock options (which typically have a four or five year vesting period) would accelerate by a period of two years immediately upon

the occurrence of a change in control. On February 17, 2010, the Compensation Committee approved an amendment to the form of RSU Agreements governing the RSUs currently outstanding and held by our executive officers in order to address an ambiguity in such agreements and clarify that all unvested RSUs held by such executive officers will immediately vest on the effective date of a change in control of TeleTech. The intent of the original agreement was to provide full vesting for executive officers upon a change in control because such executive officers are at the most risk to have their employment terminated upon the occurrence of a change in control.

 

The following table lists the named executive officers and the estimated amounts they would have become entitled to on December 31, 2013: (1) upon termination without cause or resignation for good cause; (2) upon termination for cause or voluntary resignation; (3) upon death; (4) upon disability; and (5) upon a change in control occurring on such date and if the named executive officer’s employment was terminated upon the change in control:

 

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Change of Control Table

 

 

 

 

 

Termination

 

 

 

 

 

 

 

 

 

 

 

 

 

Without Cause

 

Termination

 

 

 

 

 

 

 

 

 

 

 

or Resignation

 

for Cause

 

 

 

 

 

 

 

 

 

 

 

for Good Cause

 

or Voluntary

 

 

 

 

 

Change in

 

Name

 

 

 

 

($)

 

 

Resignation ($)

 

 

Death ($)

 

 

Disability ($)1

 

 

Control ($)

 

 

 

Kenneth D. Tuchman

 

 

 

Cash

 

 

2

 

 

 

3,000

 

2

 

 

 

 

Equity Acceleration2

 

 

 

 

 

 

1,795,500

 

 

 

 

Continued Benefits3

 

 

116,758

 

 

 

 

116,758

 

 

 

 

Accidental Death & Dismemberment Insurance (“AD&D”)

 

 

 

 

200,000

 

200,000

 

 

 

 

 

Life Insurance

 

 

 

 

200,0004

 

 

 

 

 

 

Total

 

 

116,760

 

 

400,000

 

203,000

 

1,912,260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Martin F. DeGhetto

 

 

 

Cash5

 

 

375,000

 

 

 

3,000

 

375,000

 

 

 

 

Equity Acceleration2

 

 

 

 

 

 

2,332,570

 

 

 

 

Continued Benefits

 

 

 

 

 

 

 

 

 

 

AD&D

 

 

 

 

200,000

 

200,000

 

 

 

 

 

Life Insurance

 

 

 

 

3,649,0006

 

 

 

 

 

Total

 

 

375,000

 

 

3,849,000

 

203,000

 

2,707,570

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charles Keith Gallacher

 

 

 

Cash

 

 

400,000

 

 

 

33,333

 

400,000

 

 

 

 

Equity Acceleration2

 

 

 

 

 

 

1,795,500

 

 

 

 

Continued Benefits

 

 

 

 

 

 

 

 

 

 

AD&D

 

 

 

 

200,000

 

200,000

 

 

 

 

 

Life Insurance

 

 

 

 

200,0004

 

 

 

 

 

 

Total

 

 

400,000

 

 

400,000

 

233,333

 

2,195,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regina M. Paolillo

 

 

 

Cash

 

 

375,000

 

 

 

31,250

 

375,000

 

 

 

 

Equity Acceleration2

 

 

 

 

 

 

6,462,220

 

 

 

 

Continued Benefits

 

 

 

 

 

 

 

 

 

 

AD&D

 

 

 

 

200,000

 

200,000

 

 

 

 

 

Life Insurance

 

 

 

 

200,0004

 

 

 

 

 

 

Total

 

 

375,000

 

 

400,000

 

231,250

 

6,837,220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brian A. Shepherd

 

 

 

Cash

 

 

900,000

 

 

 

37,500

 

900,000

 

 

 

 

Equity Acceleration2

 

 

 

 

 

 

1,795,500

 

 

 

 

Continued Benefits

 

 

 

 

 

 

 

 

 

 

AD&D

 

 

 

 

200,000

 

200,000

 

 

 

 

 

Life Insurance

 

 

 

 

200,0004

 

 

 

 

 

 

Total

 

 

900,000

 

 

400,000

 

237,500

 

2,695,500

 

 

1 Represents one month of short term disability.

 

2 Dollar amounts set forth in this row represent the aggregate of: (i) the number of unvested RSUs that would vest upon a change in control multiplied by $23.94, the closing price of our common stock on December 31, 2013; and (ii) the number of unvested stock options that would vest upon a change in control multiplied by the excess of $23.94 over the exercise price of such stock options.

 

3 Pursuant to his employment agre