UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

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o		Soliciting Material Pursuant to § 240.14a-12

RESOURCES CONNECTION, INC.

(Name of Registrant as Specified in Its Charter)

N/A

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

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September 11, 2008

 

Dear Stockholder:

 

On behalf of the Board of Directors, you are cordially invited to attend the 2008 Annual Meeting of Stockholders of Resources Connection, Inc., to be held at the Company’s corporate offices located at 17101 Armstrong Avenue, Irvine, California, 92614. The formal notice of the Annual Meeting appears on the following page. The attached Notice of Annual Meeting and Proxy Statement describe the matters that we expect to be acted upon at the Annual Meeting.

 

During the Annual Meeting, stockholders will hear a brief presentation on the business by the senior management of Resources Connection and have the opportunity to ask questions. Whether or not you plan to attend the Annual Meeting, it is important that your shares be represented. Regardless of the number of shares you own, please sign and date the enclosed proxy card and promptly return it to us in the enclosed postage-prepaid envelope. Alternatively, as discussed in Section I of the Proxy Statement, you may be eligible to vote electronically over the internet or by telephone. If you sign and return your proxy card without specifying your choices, your shares will be voted in accordance with the recommendations of the Board of Directors contained in the Proxy Statement.

 

We look forward to seeing you on October 17, 2008, and urge you to return your proxy as soon as possible.

 

Sincerely,

 

 

Donald B. Murray

Executive Chairman of the Board

 

 

Thomas D. Christopoul

President and Chief Executive Officer

 

RESOURCES CONNECTION, INC.
17101 ARMSTRONG AVENUE
IRVINE, CALIFORNIA 92614
(714) 430-6400

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 17, 2008

 

To the Stockholders of Resources Connection, Inc.:

 

The Annual Meeting of Stockholders of Resources Connection, Inc. will be held at 10:30 a.m., Pacific Daylight Time, on October 17, 2008, at the Company’s corporate offices located at 17101 Armstrong Avenue, Irvine, California, 92614, for the following purposes:

 

1. To vote for the election of Jolene Sykes-Sarkis, Anne Shih and Robert Kistinger to our Board of Directors, each for a three-year term expiring at the Annual Meeting in 2011 and until their successors are duly elected and qualified;

 

2. To approve an amendment of the Resources Connection, Inc. 2004 Performance Incentive Plan to increase the number of shares available for issuance under the plan by 2,000,000 shares;

 

3. To approve an amendment to the Resources Connection, Inc. Employee Stock Purchase Plan to extend the term of the Plan by eight years and to increase the number of shares available for issuance under the plan by 2,000,000 shares;

 

4. To ratify the appointment of the PricewaterhouseCoopers as the Company’s independent registered public accounting firm for FY 2009; and

 

5. To transact such other business as may properly come before the meeting or any postponements or adjournments thereof.

 

The Board of Directors has fixed the close of business on August 22, 2008, as the record date for determining stockholders entitled to notice of, and to vote at, the Annual Meeting.

 

By order of the Board of Directors,

 

Sincerely,

 

 

Donald B. Murray

Executive Chairman of the Board

 

Irvine, California

September 11, 2008

 

 

 

 

 

PROXY STATEMENT

 

We are sending this Proxy Statement to you, the stockholders of Resources Connection, Inc. (“Resources Connection” or “the Company”), a Delaware corporation, as part of our Board of Directors’ solicitation of proxies to be voted at our Annual Meeting of Stockholders to be held at 10:30 a.m., Pacific Daylight Time, on October 17, 2008, at the Company’s corporate offices located at 17101 Armstrong Avenue, Irvine, California, 92614, and at any postponements or adjournments thereof. This Proxy Statement and accompanying form of proxy were first sent to stockholders on or about September 11, 2008.

 

We are enclosing a copy of our 2008 Annual Report to Stockholders, which includes our fiscal 2008 financial statements. The Annual Report is not, however, part of the proxy materials.

 

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on October 17, 2008

 

This Proxy Statement and our 2008 Annual Report to Stockholders are also available electronically at the U.S. Securities and Exchange Commission website at www.sec.gov.

 

In order to accomplish our goal of setting forth our information in a straightforward and understandable way, we have organized this year’s Proxy Statement into three sections. You should read all three sections.

 

I. Questions and answers: this section provides answers to frequently asked questions.

 

II. Proxy proposals: this section provides information about the proposals to be voted on at this stockholders’ meeting.

 

III. Required information: this section provides information that is required by law to be included in the Company’s Proxy Statement, which has not been included in Sections I and II.

 

SECTION I

 

QUESTIONS AND ANSWERS

 

What am I voting on?

 

At the Annual Meeting, our stockholders will be voting on the following proposals:

 

a. the election of three directors (Jolene Sykes-Sarkis, Anne Shih and Robert Kistinger) to our Board of Directors;

 

b. the amendment of the Resources Connection, Inc. 2004 Performance Incentive Plan to increase the number of shares available for issuance under the plan by 2,000,000 shares;

 

c. the amendment of the Resources Connection, Inc. Employee Stock Purchase Plan to extend the term of the plan by eight years and to increase the number of shares available for issuance under the plan by 2,000,000 shares;

 

d. the ratification of the appointment of the Company’s independent registered public accounting firm for fiscal year 2009; and

 

e. any other business properly raised at the meeting or any postponement or adjournment thereof.

 

How does the Board of Directors recommend I vote on each of the proposals?

 

Our Board of Directors recommends you vote FOR election to our Board of Directors of each of the three nominees for director named in Proposal A and FOR each of the other proposals, as outlined in Section II of this Proxy Statement.

 

Who can attend the Annual Meeting?

 

All stockholders as of August 22, 2008, the record date, can attend the Annual Meeting. If your shares are held through a broker, bank or nominee, you are considered the beneficial holder of such shares and if you would like to attend the Annual Meeting, you must either (1) write Kate W. Duchene, our Chief Legal Officer, at 17101 Armstrong Avenue, Irvine, CA 92614; or (2) bring to the meeting a copy of your brokerage account statement or legal proxy” (which you can obtain from the broker, bank or nominee that holds your shares). Please note, however, that beneficial owners whose shares are held in “street name”) by a broker, bank or nominee may vote their shares at the Annual Meeting only as described below under “Who is entitled to vote at the meeting?”

 

Who is entitled to vote at the meeting?

 

Stockholders of record as of the close of business on August 22, 2008, which is known as the record date, are entitled to vote at the Annual Meeting. If you are the beneficial owner of shares held in “street name” through a broker, bank or nominee, the proxy materials are being forwarded to you by your broker, bank or nominee together with a voting instruction card. Because a beneficial owner is not the stockholder of record, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from the broker, bank or nominee that holds your shares, giving you the right to vote the shares at the meeting. Even if you plan to attend the annual Meeting, we recommend that you submit a proxy in advance of the annual Meeting so that your vote will be counted if you later decide not to attend the Annual Meeting.

 

How do I vote?

 

You can vote on matters that properly come before the meeting in one of four ways: by submitting a proxy via the Internet, by telephone or, by mail, or by voting in person at the meeting.

 

If your shares are registered in the name of a bank, brokerage firm or other nominee, you may be eligible to submit a proxy to vote your shares electronically over the Internet or by telephone. A large number of banks and brokerage firms are participating in the Broadridge Financial Solutions, Inc. online program. This program provides eligible stockholders who receive a copy of the Proxy Statement the opportunity to submit a proxy over the Internet

or by telephone. If your bank or brokerage firm is participating in Broadridge’s program, your voting form will provide instructions for such alternative methods of voting. You do this by following the instructions on the voting form. If you submit your proxy via the Internet or by telephone, you do not have to return your voting card by mail.

 

If your proxy card or voting form does not reference Internet or telephone information, please complete and return the paper proxy card or voting form. Sign and date each proxy card or voting form you receive and return it in the postage-paid envelope. If you are a stockholder of record and return your signed proxy card but do not mark the boxes showing how you wish to vote, your shares will be voted FOR election to our Board of Directors of each of the three nominees for director named in Proposal A and FOR each of the Company’s other proposals, as outlined in Section II of this Proxy. If you are the beneficial owner of shares held in “street name” by a broker, bank or nominee, and you sign and return a voting form but do not provide specific voting instructions, your shares may be treated as “broker non-vote” and may not be counted in connection with certain matters as described below under “What happens if my shares are held by a broker or nominee?”

 

You have the right to revoke your proxy at any time before your shares are actually voted at the Annual Meeting. If you are a stockholder of record, you may revoke your proxy by:

 

 

If you are the beneficial owner of shares held in “street name” by a broker, bank or nominee, you may change your vote by submitting new voting instructions to your broker or nominee, or, if you have obtained a legal proxy from your broker, bank or nominee giving you the right to vote your shares, by attending the Annual Meeting and voting in person.

 

Please note that attendance at the Annual Meeting will not by itself constitute revocation of a proxy.

 

How will voting on any other business be conducted?

 

Other than the proposals described in Section II of this Proxy Statement, we know of no other business to be considered at the Annual Meeting. However, if any other matters are properly presented at the meeting or any postponement or adjournment thereof, your proxy, if properly submitted, authorizes Thomas D. Christopoul and Nathan W. Franke, our Chief Executive Officer and Chief Financial Officer, respectively, to vote in their discretion on those matters.

 

Who will count the vote?

 

Representatives of American Stock Transfer and Trust Company will serve as the inspector of election at the annual Meeting and will count the vote.

 

Who will bear the cost of soliciting votes?

 

While the Company does not anticipate a solicitation at this time, if one were to be conducted, the solicitation of proxies would be conducted by mail, and the Company would bear all attendant costs. These costs would include the expense of preparing and mailing proxy solicitation materials and reimbursements paid to brokerage firms and others for their expenses incurred in forwarding solicitation materials to beneficial owners of the Company’s common stock. The Company may conduct further solicitation personally, telephonically, through the Internet or by facsimile through its officers, directors and employees, none of whom will receive additional compensation for assisting with the solicitation. The Company may generate other expenses in connection with the solicitation of proxies.

What does it mean if I receive more than one proxy card or voting form?

 

It probably means your shares are registered differently and are in more than one account. Please sign and return each proxy card or voting form you receive, or otherwise electronically respond to each as set forth in the voting instructions on each proxy card or voting form, to ensure that all your shares are voted.

 

How many shares can vote?

 

As of the record date, 45,240,405 shares of our common stock were outstanding. Each share of our common stock outstanding on the record date is entitled to one vote on each of the three director nominees and one vote on each other matter that may be presented for consideration and action by the stockholders at the Annual Meeting.

 

What is the voting requirement for each of the above matters?

 

A plurality of the shares of common stock voted in person or by proxy is required to elect the nominees for directors. A plurality means that the three nominees receiving the largest number of votes represented by shares of our common stock in person or by proxy and entitled to vote at the Annual Meeting will be elected. Each stockholder will be entitled to vote the number of shares of common stock held as of the record date by that stockholder for each director position to be filled. Stockholders will not be allowed to cumulate their votes in the election of directors. A properly executed proxy marked “WITHHOLD AUTHORITY” with respect to the election of one or more directors will not be voted with respect to the director or directors indicated, although it will be counted for purposes of determining whether there is a quorum.

 

For each of the other matters, approval will require the affirmative vote of stockholders holding a majority of those shares present or represented at the meeting and entitled to vote on the matter.

 

What constitutes a quorum?

 

A quorum is a majority of the shares of our common stock outstanding on the record date, present in person or by proxy, and entitled to vote at the Annual Meeting. Because there were 45,240,405 eligible votes as of the record date, we will need at least 22,620,203 votes present in person or by proxy at the Annual Meeting for a quorum to exist.

 

What happens if my shares are held by a broker or nominee?

 

If you are the beneficial owner of shares held in “street name” by a broker, the broker, as the record holder of the shares, is required to vote those shares in accordance with your instructions. If you do not give instructions to the broker, that person will nevertheless be entitled to vote the shares with respect to “discretionary” items but will not be permitted to vote the shares with respect to “non-discretionary” items (in which case, the shares will be treated as broker non-votes). If you are a beneficial owner, please note that brokers do not have discretionary authority to vote on your behalf for amendment of the 2004 Performance Incentive Plan or amendment of the Employee Stock Purchase Plan. All other proposals outlined in Section II of this Proxy Statement are considered discretionary and may be voted upon by your broke if you do not give instructions.

 

How will “broker non-votes” and abstentions be treated?

 

“Broker non-votes” are shares held by brokers or nominees for which the broker or nominee lacks discretionary power to vote and never received specific voting instructions from the beneficial owner of the shares. Broker non-votes are counted for purposes of calculating a quorum. However, when the broker or nominee notes on the proxy card that it lacks discretionary authority to vote shares on a particular proposal and has not received voting instructions from the beneficial owner, those shares are not deemed to be entitled to vote for the purpose of determining whether stockholders have approved the matter and, therefore, will not be counted in determining the outcome for that particular proposal.

 

As described above, a properly executed proxy marked “WITHHOLD AUTHORITY” with respect to the election of one or more directors will not be voted with respect to the director or directors indicated. For all other proposals, a properly executed proxy marked “ABSTAIN” with respect to the proposal has the same effect as a vote

against the matter. In both cases, a properly executed proxy marked “WITHHOLD AUTHORITY” or “ABSTAIN” will be counted for purposes of determining whether a quorum is present.

 

When must notice of business to be brought before an annual meeting be given and when are stockholder proposals due for the 2009 Annual Meeting?

 

Advance Notice Procedures.  Under our bylaws, business, including director nominations, may be brought before an annual meeting if it is specified in the notice of the meeting or is otherwise brought before the meeting by or at the discretion of our Board of Directors or by a stockholder entitled to vote who has delivered notice to our corporate secretary (containing certain information specified in our bylaws) not earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the first anniversary of the preceding year’s annual meeting (for next year’s annual meeting, no earlier than the close of business on June 19, 2009, and no later than the close of business on July 19, 2009). These requirements are separate from and in addition to the SEC’s requirements that a stockholder must meet in order to have a stockholder proposal included in next year’s proxy statement.

 

Stockholder Proposals for the 2009 Annual Meeting.  If you are submitting a proposal to be included in next year’s proxy statement, you may do so by following the procedures prescribed in SEC Rule 14a-8. To be eligible for inclusion, stockholder proposals must be received by our corporate assistant secretary at our executive offices no later than May 14, 2009.

 

How do I obtain a copy of the Annual Report on Form 10-K that Resources Connection filed with the SEC?

 

A copy of the Company’s most recent Annual Report has been included with this proxy material. If you desire another copy of our Annual Report or Form 10-K, we will provide one to you free of charge upon your written request to our Investor Relations Department at 17101 Armstrong Avenue, Irvine, CA 92614, or from our Investor Relations website at http://ir.resourcesglobal.com.

 

How may I obtain a separate set of proxy materials?

 

If you share an address with another stockholder, you may receive only one set of proxy materials (including this Proxy Statement and our Annual Report) unless you have provided contrary instructions. If you wish to receive a separate set of proxy materials, please request the additional copies by contacting our Finance Department, Attn: Investor Relations at 17101 Armstrong Avenue, Irvine, California 92614, or by telephone at 714-430-6400. A separate set of proxy materials will be sent promptly following receipt of your request.

 

If you are a stockholder of record and wish to receive a separate set of proxy materials in the future, or if you are a stockholder at a shared address to which we delivered multiple copies of this Proxy Statement or the Annual Report and you desire to receive one copy in the future, please contact our Finance Department, Attn: Investor Relations at 17101 Armstrong Avenue, Irvine, California 92614, or by telephone at 714-430-6400.

 

If you hold shares beneficially in street name, please contact your broker, bank or nominee directly if you have questions, require additional copies of this Proxy Statement or the Annual Report, or wish to receive multiple reports by revoking your consent to householding.

 

The Company’s fiscal year consists of 52 or 53 weeks, ending on the last Saturday in May in each year. The fiscal years ended May 26, 2007 and May 31, 2008 consisted of 52 and 53 weeks, respectively.

 

SECTION II

 

PROXY PROPOSALS

 

 

Currently, our Board of Directors consists of eight directors. Our Amended and Restated Certificate of Incorporation provides for a classified Board of Directors consisting of three classes of directors, each serving

staggered three-year terms. At the Annual Meeting, three directors will be elected, each serving a term of three years expiring at our 2011 Annual Meeting of Stockholders and until his or her successor is duly elected and qualified. Each of the nominees, Jolene Sykes-Sarkis, Anne Shih and Robert Kistinger, is presently a member of our Board of Directors. Ms. Shih was introduced to the Board by the Chief Executive Officer. Mr. Kistinger was first introduced to the Board by a third-party executive search firm. Ms. Sykes-Sarkis was previously elected at the 2005 annual meeting. In 2006, Mr. Kistinger was appointed to fill the unexpired term of retiring director, John C. Shaw, and in 2007, Ms. Shih was appointed to fill the unexpired term of resigning director, Stephen Giusto. The Board of Directors, acting upon the recommendation of the Corporate Governance, Nominating and Compensation Committee, recommends that the stockholders vote in favor of the election of the nominees named in this Proxy Statement to serve as members of our Board of Directors. (See “Nominees” below).

 

The five directors whose terms do not expire in 2008 are expected to continue to serve after the Annual Meeting until such time as their respective terms of office expire and their successors are duly elected and qualified. (See “Other Directors” below).

 

If at the time of the Annual Meeting any of the nominees should be unable or decline to serve, the person named as proxy on the proxy card will vote for such substitute nominee or nominees as our Board of Directors recommends, or vote to allow the resulting vacancy to remain open until filled by our Board of Directors, as our Board of Directors recommends. Each of the nominees has consented to serve if elected.

 

Following is biographical information about each nominee and each director.

 

Nominees

 

The individuals standing for election are:

 

Jolene Sykes-Sarkis, age 58, is a director of Resources Connection, a position which she has held since April 2002. Mrs. Sarkis is currently a private marketing and advertising consultant. Mrs. Sarkis held various positions of responsibility for Time Inc. from 1985 to 2001 in sales and marketing, primarily for Time Inc.’s leading publications which include Time, People, Sports Illustrated, Fortune and Money. Mrs. Sarkis served as Publisher of Fortune from 1996 to 2001 and, additionally, as President of Fortune from 1999 to 2001.

 

Robert F. Kistinger, age 55, is a director of Resources Connection, having been elected to the Board in August 2006. He was formerly President and Chief Operating Officer of the Fresh Group of Chiquita Brands International, Inc. Mr. Kistinger began his career at Chiquita more than 27 years ago and has held numerous senior management positions in accounting, financial analysis and strategic planning roles. Prior to joining Chiquita, Mr. Kistinger was with the accounting firm of Arthur Young & Company for six years and is a certified public accountant and a member of the American Institute of Certified Public Accountants. Mr. Kistinger is a member of the board of executive advisors at the Williams College of Business at Xavier University.

 

Anne Shih, age 61, is a director of Resources Connection, having been named to the Board in October 2007. Ms. Shih is actively involved in philanthropic endeavors, including serving as vice chair of the Board of Governors of the Bowers Museum in Santa Ana, California. Ms. Shih is a native of Taiwan and a founder and board member of the United Chinese American Association and board member of the Historical and Cultural Foundation of Orange County. She was awarded a Certificate of Special Congressional Recognition from the U.S. Congress for her outstanding and invaluable service to the community.

 

The Board of Directors unanimously recommends that stockholders vote FOR each of the nominees set forth above.

 

Other Directors:

 

The following persons represent the members of our Board of Directors whose terms of office do not expire until after the Annual Meeting and who are therefore not standing for re-election at the Annual Meeting:

 

Donald B. Murray, age 61, co-founded Resources Connection in June 1996 and served as our Managing Director from inception until April 1999. From April 1999 through May 2008, Mr. Murray served as our Chairman, Chief Executive Officer and President and as one of our directors. On June 1, 2008, Mr. Murray resigned as

President and Chief Executive Officer, but remains as Executive Chairman of the Board of Directors. Prior to founding Resources Connection, Mr. Murray was Partner-In-Charge of Accounting and Assurance Services for the Orange County, California office of Deloitte & Touche LLP, a professional services firm, from 1988 to 1996. From 1984 to 1987, Mr. Murray was the Partner-In-Charge of the Woodland Hills office of Touche Ross & Co., a predecessor firm to Deloitte & Touche LLP, an office he founded in 1984. Mr. Murray was admitted to the Deloitte & Touche partnership in 1983. Mr. Murray’s term of office as one of our directors expires at the Annual Meeting in 2009.

 

A. Robert Pisano, age 65, is a director of Resources Connection, a position he has held since November 2002. Mr. Pisano is currently the President and Chief Operating Officer of the Motion Picture Association of America, a position he has held since October 1, 2005. He served as the National Executive Director and Chief Executive Officer of the Screen Actors Guild, from September 2001 to April 2005. From August 1993 to August 2001, he was Executive Vice President, then Vice Chairman and Consultant to Metro-Goldwyn-Mayer, Inc. (“MGM”). Prior to joining MGM, Mr. Pisano was Executive Vice President of Paramount Pictures from May 1985 to June 1991, serving as General Counsel and a member of the Office of the Chairman. From 1969 to 1985, Mr. Pisano was an associate and then a partner with the law firm O’Melveny & Myers LLP. Mr. Pisano is also a director of the FPA Group of Funds, where he serves on the Audit Committee, the Motion Picture and Television Fund and StateNet, a legislative and regulatory reporting service. Mr. Pisano’s term of office as one of our directors expires at the Annual Meeting in 2009.

 

Thomas D. Christopoul, age 44, is a director of Resources Connection, a position he has held since January 2006. On June 1, 2008, Mr. Christopoul assumed the position of President and Chief Executive Officer of the Company. Prior to assuming his executive position with the Company, he was president of Somerset Shore Associates, Inc., an independent investment and advisory company in New Jersey. Prior to October 2005, he was the Chief Executive Officer and Chairman of Cendant Corporation’s Marketing Services Division and Cendant’s Financial Services Division. While at Cendant, Mr. Christopoul also held a number of senior executive positions, including the position of Senior Executive Vice President, Executive Vice President of Human Resources and Chief Administrative Officer. During his more than 10 years with Cendant, he led worldwide human resources and information technology, marketing and a broad array of corporate staff functions on a global basis. Prior to Cendant, he also held senior management positions at Nabisco and Pepsi-Cola Company. Mr. Christopoul sits on the boards of four privately owned entities, Nor1, Inc., Pinnacle Care International, TAI, Inc., and Hudson Crossing, LLC, on whose board he serves as Chairman. Mr. Christopoul’s term of office as one of our directors expires at the Annual Meeting in 2009.

 

Karen M. Ferguson, age 44, co-founded Resources Connection in June 1996. From inception to August 1998, Ms. Ferguson served as Managing Director of our Northern California practice. She then served as the Regional Managing Director of our East Coast practice offices and as an Executive Vice President, positions she has held since May 2001 and April 1999, respectively. In March 2008, Ms. Ferguson was promoted to the position of President, North America. Ms. Ferguson has been a director of Resources Connection since April 1999. Prior to 1996, Ms. Ferguson was a director with Accounting Solutions, a regional Northern California contract project-based firm, from 1994 to 1995. From 1985 to 1994, Ms. Ferguson was in the San Francisco office of Deloitte & Touche LLP, a professional services firm, as a Senior Manager. Ms. Ferguson sits on the board of Overland Solutions, Inc., a privately owned entity. Ms. Ferguson’s term of office as one of our directors expires at the Annual Meeting in 2010.

 

Neil Dimick, age 59, is a director of Resources Connection, a position he has held since November 2003. Prior to joining the Board, Mr. Dimick served as Executive Vice President and Chief Financial Officer of AmerisourceBergen Corporation from August 2001 to May 2002. He served as Senior Executive Vice President and Chief Financial Officer of Bergen Brunswig Corporation, as well as a director and a member of the Board’s Finance, Investment and Retirement committees, for more than five years prior to its merger with AmeriSource Health in 2001. Mr. Dimick began his professional career as a corporate auditor with Deloitte & Touche LLP, a professional services firm. He was a partner with the firm for eight years and served for four years as the National Director of the firm’s Real Estate Industry Division. Mr. Dimick currently also serves on the Board of Directors of HLTH Corporation, where he serves as a member of the Governance and Nominating Committee; WebMD (an approximately 90% owned subsidiary of HLTH Corporation), where he serves as a member of the Audit and Nominating

Committees; Thoratec Corporation, where he serves as Chairman of the Board and as a member of the Audit Committee; Mylan Laboratories, Inc., where he serves as a member of the Audit, Finance and Executive Committees; and Alliance Imaging, Inc., where he serves on the Audit and Finance Committees. Mr. Dimick’s term of office as one of our directors expires at the Annual Meeting in 2010.

 

B. PROPOSAL TO AMEND THE RESOURCES CONNECTION, INC.
2004 PERFORMANCE INCENTIVE PLAN

 

General

 

The Resources Connection, Inc. 2004 Performance Incentive Plan (the “2004 Plan”) was adopted by the Board and subsequently approved by the stockholders on October 15, 2004; the 2004 Plan was last amended with the approval of the stockholders on October 19, 2006. At the 2008 Annual Meeting, stockholders will be asked to approve a new amendment to the 2004 Plan. Specifically, the proposed new amendment would increase the number of shares of the Company’s common stock available for issuance under the 2004 Plan by an additional 2,000,000 shares.

 

Key Features of the 2004 Plan:

 

 

As of August 22, 2008, a total of 5,463,463 shares of the Company’s common stock were then subject to outstanding awards granted under the 2004 Plan. In addition, 937,279 shares of the Company’s common stock remained available for new award grants under the 2004 Plan. The Board of Directors approved the request for replenishment of the 2004 Plan based, in part, on a belief that the number of shares currently available under the 2004 Plan does not give the Company sufficient authority and flexibility to provide adequately for future incentives to new and existing employees. In building a rapidly growing employee population whose interests are aligned with our stockholders, equity awards are an integral component of the Company’s compensation philosophy.

 

We will continue to have the authority to grant awards under the previously approved 2004 Plan share limits, if stockholders do not approve the proposed 2004 Plan amendment; however, we will not be able to continue using equity as an important incentive in hiring new employees or rewarding and retaining proven talent.

 

Currently, no new awards may be granted under any equity compensation plan maintained by us other than the 2004 Plan and under our Employee Stock Purchase Plan under Proposal C below.

 

The Company continues to believe that broad-based equity awards are important to achieving team-based results because they help to focus employees on the objective of creating incremental value in the entire Company, not just in one location or for any individual. Stock-based plans like the 2004 Plan are vital to achieving the Company’s goal to attract, retain and motivate employees with talent, integrity, enthusiasm and loyalty. The Company historically has awarded equity to a broad-based employee group; a practice that aligns the financial

goals of employees and stockholders alike. We believe our approach to equity compensation is accomplishing its objective as evidenced by the fact that of the 8.5 million options outstanding and unexercised under our stock-based plans, approximately 2.8 million options are vested and in the money as of August 22, 2008.

 

In its initial request for stockholder approval of the 2004 Plan, in the 2004 Proxy Statement, the Company stated its intention to target annual dilution from new option grants to approximately four percent of the outstanding common stock of the Company Over the last four years, using award guidelines put in place by the Board of Directors in 2004, the Company’s option grant issuance has averaged 3.875% of shares outstanding, while at the same time reducing the number of shares outstanding with the repurchase of more than 7 million shares of the Company’s stock. The following table illustrates the Company’s historical burn rate for equity awards under the 2004 Plan for fiscal years 2005 through 2008.

 

 

It is the Company’s intent to continue to target the potential annual dilution from new option grants to approximately three percent of the outstanding common stock of the Company, although the Company reserves discretion to exceed that limit should special circumstances (such as an acquisition or reorganization) arise in which the Company determines that additional awards are in the best interests of stockholders.

 

Summary Description of the 2004 Plan

 

The principal terms of the 2004 Plan are summarized below. The following summary is qualified in its entirety by the full text of the 2004 Plan, as proposed to be amended, which has been filed as Annex A to the copy of this Proxy Statement that was filed electronically with the Securities and Exchange Commission and can be reviewed on the Securities and Exchange Commission’s website at http://www.sec.gov. You may also obtain, free of charge, a copy of the 2004 Plan by writing to the Stock Plan Administrator, Resources Connection, Inc., 17101 Armstrong Avenue, Irvine, CA 92614.

 

Purpose.  The purpose of the 2004 Plan is to promote the success of the Company and the interests of our stockholders by providing an additional means for us to attract, motivate, retain and reward directors, officers, employees and other eligible persons through the grant of awards and incentives for improved financial performance of the Company. Equity-based awards are also intended to further align the interests of award recipients and our stockholders. We are a people-based business whose value is created by our client-service delivery and intellectual capital within the organization.

 

Administration.  Our Board of Directors or one or more committees appointed by our Board of Directors will administer the 2004 Plan. Our Board of Directors has delegated general administrative authority for the 2004 Plan to the Corporate Governance, Nominating and Compensation Committee. The Committee may delegate some or all of its authority with respect to the 2004 Plan to another committee of directors, and certain limited authority to grant awards to employees may be delegated to one or more officers of the Company. (The appropriate acting body, be it the Board of Directors, a committee within its delegated authority, or an officer within his or her delegated authority, is referred to in this proposal as the “Administrator”).

 

The Administrator has authority subject to the terms and conditions of the 2004 Plan with respect to award grants including, without limitation, the authority:

 

 

 

No Repricing.  In no case (except due to an adjustment to reflect a stock split or similar event or any repricing that may be approved by stockholders) will any adjustment be made to a stock option under the 2004 Plan (by amendment, cancellation and regrant, exchange or other means) that would constitute a repricing of the per share exercise price of the award.

 

Eligibility.  Persons eligible to receive awards under the 2004 Plan include directors, officers and employees of the Company or any of its subsidiaries, directors of the Company, and certain consultants and advisors to the Company or any of its subsidiaries. Approximately 700 officers and employees of the Company and its subsidiaries (including all of the Company’s named executive officers), and each of the Company’s five non-employee directors, are considered eligible under the 2004 Plan at the present time.

 

Authorized Shares; Limits on Awards.  The following table reflects the maximum number of shares of the Company’s common stock that may be issued or transferred pursuant to awards under the 1999 and 2004 plans, as of August 22, 2008.

 

AUTHORIZED AWARDS UNDER APPROVED PLANS*

 

 

 

 

If stockholders approve the proposed 2004 Plan amendment, the number of shares available for award grant purposes under the 2004 Plan will be increased by an additional 2,000,000 shares. Any shares issued in respect of any “full-value award” granted under the 2004 Plan following approval of the amendment to the 2004 Plan requested in this Proxy Statement, will be counted against the share limit described in the preceding paragraph as two and a half shares for every one share actually issued in connection with the award. For example, if a stock bonus of 100 shares of the Company’s common stock were granted under the 2004 Plan, 250 shares would be deducted from the 2004 Plan’s share limit with respect to that stock bonus award. As referenced above, a “full-value award” is any award granted under the 2004 Plan other than a stock option with a per share exercise price at least equal to the fair market value of a share of the Company’s common stock at the time of grant of the award.

 

The following other limits are also contained in the 2004 Plan:

 

 

To the extent that an award is settled in cash or a form other than shares, the shares that would have been delivered had there been no such cash or other settlement will not be counted against the shares available for issuance under the 2004 Plan. In the event that shares are delivered in respect of a dividend equivalent right, only the actual number of shares delivered with respect to the award shall be counted against the share limits of the 2004 Plan. To the extent that shares are delivered pursuant to the exercise of a stock option, the number of underlying shares as to which the exercise related shall be counted against the applicable share limits, as opposed to only counting the shares actually issued. Shares that are subject to or underlie awards which expire or for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under the 2004 Plan will again be available for subsequent awards under the 2004 Plan. Shares that are exchanged by a participant or withheld by the Company to pay the exercise price of an award granted under the 2004 Plan or the 1999 Long Term Incentive Plan (“the 1999 Plan”), as well as any shares exchanged or withheld to satisfy the tax withholding obligations related to any award under either of these plans, will not be available for subsequent awards under the 2004 Plan. In addition, the 2004 Plan generally provides that shares issued in connection with awards that are granted by or become obligations of the Company through the assumption of awards (or in substitution for awards) in connection with an acquisition of another company will not count against the shares available for issuance under the 2004 Plan. The Company may not increase the applicable share limits of the 2004 Plan by repurchasing shares of common stock on the market (by using cash received through the exercise of stock options or otherwise).

 

Types of Awards.  The 2004 Plan authorizes stock options, restricted stock, stock bonuses and other forms of awards granted or denominated in the Company’s common stock or units of the Company’s common stock, as well as cash bonus awards pursuant to Section 5.2 of the 2004 Plan. The 2004 Plan retains flexibility to offer competitive incentives and to tailor benefits to specific needs and circumstances. Any award may be paid or settled in cash.

 

A stock option is the right to purchase shares of the Company’s common stock at a future date at a specified price per share (the “exercise price”). The per share exercise price of an option may not be less than the fair market value of a share of the Company’s common stock on the date of grant. The maximum term of an option is ten years from the date of grant. An option may either be an incentive stock option or a nonqualified stock option.

Incentive stock option benefits are taxed differently from nonqualified stock options, as described under “Federal Income Tax Consequences of Awards Under the 2004 Plan” below. Incentive stock options are also subject to more restrictive terms and are limited in amount by the U.S. Internal Revenue Code and the 2004 Plan. Incentive stock options may only be granted to employees of the Company or a subsidiary.

 

The other types of awards that may be granted under the 2004 Plan include, without limitation, stock bonuses, restricted stock, performance stock, stock units, dividend equivalents, or similar rights to purchase or acquire shares, and cash awards granted consistent with Section 5.2 of the 2004 Plan as described below.

 

Performance-Based Awards.  The Administrator may grant awards that are intended to be performance-based awards within the meaning of Section 162(m) of the U.S. Internal Revenue Code (“Performance-Based Awards”). Performance-Based Awards are in addition to any of the other types of awards that may be granted under the 2004 Plan (including options which may also qualify as performance-based awards for Section 162(m) purposes). Performance-Based Awards may be in the form of restricted stock, performance stock, stock units, other rights, or cash bonus opportunities.

 

The vesting or payment of Performance-Based Awards (other than options) will depend on the absolute or relative performance of the Company on a consolidated, subsidiary, segment, division, or business unit basis. The Administrator will establish the criterion or criteria and target(s) on which performance will be measured. The Administrator must establish criteria and targets in advance of applicable deadlines under the U.S. Internal Revenue Code and while the attainment of the performance targets remains substantially uncertain. The criteria that the Administrator may use for this purpose will include one or more of the following: earnings per share, cash flow (which means cash and cash equivalents derived from either net cash flow from operations or net cash flow from operations, financing and investing activities), total stockholder return, gross revenue, revenue growth, operating income (before or after taxes), net earnings (before or after interest, taxes, depreciation and/or amortization), return on equity or on assets or on net investment, cost containment or reduction, or any combination thereof. The performance measurement period with respect to an award may range from three months to ten years. Performance targets will be adjusted to mitigate the unbudgeted impact of material, unusual or nonrecurring gains and losses, accounting changes or other extraordinary events not foreseen at the time the targets were set unless the Administrator provides otherwise at the time of establishing the targets.

 

Performance-Based Awards may be paid in stock or in cash (in either case, subject to the limits described under the heading “Authorized Shares; Limits on Awards” above). Before any Performance-Based Award (other than an option) is paid, the Administrator must certify that the performance target or targets have been satisfied. The Administrator has discretion to determine the performance target or targets and any other restrictions or other limitations of Performance-Based Awards and may reserve discretion to reduce payments below maximum award limits.

 

Deferrals.  The Administrator may provide for the deferred payment of awards, and may determine the other terms applicable to deferrals. The Administrator may provide that deferred settlements include the payment or crediting of interest or other earnings on the deferred amounts, or the payment or crediting of dividend equivalents where the deferred amounts are denominated in shares.

 

Acceleration of Awards; Possible Early Termination of Awards.  Generally, and subject to limited exceptions set forth in the 2004 Plan, if any person acquires more than 50% of the outstanding common stock or combined voting power of the Company, if certain changes in a majority of our Board of Directors occur over a period of not longer than two years, if stockholders prior to a transaction do not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the Company’s assets or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries, or if the Company is dissolved or liquidated, then awards then-outstanding under the 2004 Plan may become fully vested or paid, as applicable, and may terminate or be terminated in such circumstances. The Administrator also has the discretion to establish other change in control provisions with respect to awards granted under the 2004 Plan. For example, the Administrator could provide for the acceleration of vesting or payment of an award in connection with a change in control event that is not described above and provide that any such acceleration shall be automatic upon the occurrence of any such event.

Transfer Restrictions.  Awards under the 2004 Plan generally are not transferable by the recipient other than by will or the laws of descent and distribution and are generally exercisable, during the recipient’s lifetime, only by the recipient. The Administrator may, however, permit certain gifts of awards to family members for tax or estate planning purposes. Any amounts payable or shares issuable pursuant to an award generally will be paid only to the recipient or the recipient’s beneficiary or representative. The Administrator has discretion, however, to establish written conditions and procedures for the transfer of awards to other persons or entities, provided that such transfers comply with applicable federal and state securities laws.

 

Adjustments.  As is customary in incentive plans of this nature, each share limit and the number and kind of shares available under the 2004 Plan and any outstanding awards, as well as the exercise or purchase prices of awards, and performance targets under certain types of performance-based awards, are subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends, or other similar events that change the number or kind of shares outstanding, and extraordinary dividends or distributions of property to the stockholders.

 

No Limit on Other Authority.  The 2004 Plan does not limit the authority of the Board of Directors or any committee to grant awards or authorize any other compensation, with or without reference to the Company’s common stock, under any other plan or authority.

 

Termination of or Changes to the 2004 Plan.  The Board of Directors may amend or terminate the 2004 Plan at any time and in any manner. Stockholder approval for an amendment will be required only to the extent then required by applicable law or any applicable listing agency or required under Sections 162, 422 or 424 of the U.S. Internal Revenue Code to preserve the intended tax consequences of the plan. For example, stockholder approval will be required for any amendment that proposes to increase the maximum number of shares that may be delivered with respect to awards granted under the 2004 Plan. (Adjustments as a result of stock splits or similar events will not, however, be considered an amendment requiring stockholder approval.) Unless terminated earlier by the Board of Directors, the authority to grant new awards under the 2004 Plan will terminate on September 2, 2014. Outstanding awards, as well as the Administrator’s authority with respect thereto, generally will continue following the expiration or termination of the plan. Generally speaking, outstanding awards may be amended by the Administrator (except for a repricing), but the consent of the award holder is required if the amendment (or any plan amendment) materially and adversely affects the holder.

 

Federal Income Tax Consequences of Awards Under the 2004 Plan

 

The U.S. federal income tax consequences of the 2004 Plan under current federal law, which is subject to change, are summarized in the following discussion of the general tax principles applicable to the 2004 Plan. This summary is not intended to be exhaustive and, among other considerations, does not describe state, local, or international tax consequences.

 

With respect to nonqualified stock options, the Company is generally entitled to deduct and the participant recognizes taxable income in an amount equal to the difference between the option exercise price and the fair market value of the shares at the time of exercise. With respect to incentive stock options, the Company is generally not entitled to a deduction nor does the participant recognize income at the time of exercise, although the participant may be subject to the U.S. federal alternative minimum tax.

 

The current federal income tax consequences of other awards authorized under the 2004 Plan generally follow certain basic patterns: nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid (if any) only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant); bonuses, cash and stock-based performance awards, dividend equivalents, stock units, and other types of awards are generally subject to tax at the time of payment; and compensation otherwise effectively deferred is taxed when paid. In each of the foregoing cases, the Company will generally have a corresponding deduction at the time the participant recognizes income.

 

If an award is accelerated under the 2004 Plan in connection with a “change in control” (as this term is used under the U.S. Internal Revenue Code), the Company may not be permitted to deduct the portion of the compensation attributable to the acceleration (“parachute payments”) if it exceeds certain threshold limits under

the U.S. Internal Revenue Code (and certain related excise taxes may be triggered). Furthermore, the aggregate compensation in excess of $1,000,000 attributable to awards that are not “performance-based” within the meaning of Section 162(m) of the U.S. Internal Revenue Code may not be permitted to be deducted by the Company in certain circumstances.

 

Specific Benefits Under the 2004 Plan

 

The Company has not approved any awards that are conditioned upon stockholder approval of the 2004 Plan proposal. The Company is not currently considering any other specific award grants under the 2004 Plan. The number, amount and type of awards to be received by or allocated to eligible persons in the future under the 2004 Plan cannot be determined at this time. If the amendment reflected in this 2004 Plan proposal had been in effect in fiscal 2008, we expect that our award grants for fiscal 2008, would not have been substantially different from those actually made in that year under the 2004 Plan. For information regarding stock-based awards granted to the Company’s named executive officers during fiscal 2008, see the material under the heading “Executive Compensation” below. The closing market price for a share of the Company’s common stock as of August 22, 2008 was $23.17 per share.

 

AGGREGATE PAST GRANTS UNDER THE 2004 PLAN

 

As of August 22, 2008, 7,108,596 awards covering shares of the Company’s common stock had been granted under the 2004 Plan. The following table shows information regarding the distribution of those awards among the persons and groups identified below, option exercises and restricted stock vesting prior to and option and unvested restricted stock holdings as of that date

 

 

 

 

EQUITY COMPENSATION PLAN INFORMATION

 

The Company currently maintains four equity compensation plans: the 2004 Plan, the 1999 Plan, the Resources Connection, Inc. Employee Stock Purchase Plan (the “ESPP”) and the Resources Connection, Inc. 1998 Employee Stock Purchase Plan (the “1998 Plan”). These plans have each been approved by the Company’s stockholders.

 

The following table sets forth, for each of the Company’s equity compensation plans, the number of shares of common stock subject to outstanding options, the weighted-average exercise price of outstanding options, and the number of shares remaining available for future award grants as of May 31, 2008.

 

 

 

Board Recommendation

 

The Board of Directors believes that the proposed amendment to the 2004 Plan will promote the interests of the Company and its stockholders and will help the Company and its subsidiaries continue to be able to attract, retain and reward persons important to our success.

 

All members of the Board of Directors and all executive officers are eligible for awards under the 2004 Plan and thus have a personal interest in the approval of the 2004 Plan proposal.

 

The Board of Directors unanimously recommends a vote FOR approval of the proposed amendment to the 2004 Performance Incentive Plan.

 

C. PROPOSAL TO AMEND THE RESOURCES CONNECTION, INC.
EMPLOYEE STOCK PURCHASE PLAN

 

General

 

The Resources Connection, Inc. Employee Stock Purchase Plan (the “ESPP”) was adopted by the Board of Directors on October 17, 2000. At the 2008 Annual Meeting, stockholders will be asked to approve an amendment to the ESPP to extend the term of the plan through October 16, 2018, and to increase the number of shares of the Company’s common stock available for award grants under the ESPP by an additional 2,000,000 shares.

 

The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the U.S. Internal Revenue Code. It provides each of our eligible employees with an opportunity to purchase shares of common stock at a discount through accumulated payroll deductions. Our Board of Directors believes that the ESPP is an important part of our compensation program as it helps to further link the interests of our employees with those of our stockholders.

 

Key Features of the ESPP:

 

 

The following table reflects the maximum number of shares of common stock that have been purchased and the maximum number that remain available for purchase under the ESPP.

 

 

 

 

Currently, the maximum number of shares of common stock that may be issued under the ESPP is 2,400,000. As of August 22, 2008, 1,780,553 shares had been issued and 619,447 shares were available for future awards under the ESPP. On the Company’s most recent purchase date, June 30, 2008, a total of 290,184 shares were purchased by the Company’s employees. Participation in the ESPP has consistently increased over the years, with 1,122 employees participating in 2008, representing approximately 37% of all employees eligible to enroll. At the current rates of purchase and employee participation, after the December purchase, there may not be enough shares available to allow the ESPP to continue. All share counts reflect the Company’s two-for-one stock split in March 2005.

 

Summary Description of the Employee Stock Purchase Plan

 

The principal terms of the ESPP are summarized below. The following summary is qualified in its entirety by the full text of the ESPP, as proposed to be amended, which has been filed as Annex B to the copy of this Proxy Statement that was filed electronically with the Securities and Exchange Commission and can be reviewed on the Securities and Exchange Commission’s website at http://www.sec.gov. You may also obtain, free of charge, a copy of the ESPP by writing to the Stock Plan Administrator, Resources Connection, Inc., 17101 Armstrong Avenue, Irvine, CA 92614.

 

Offering Periods and Purchase Dates.  Shares of the Company’s common stock are offered under the ESPP through a series of offering periods. Offering periods are generally six months in duration. When an eligible employee elects to join an offering period, he or she agrees to contribute a portion of his or her compensation to the plan for that period. On the last day of the offering period, all payroll deductions collected from the participant during that offering period are automatically applied to the purchase of the Company’s common stock, subject to certain limitations. The price paid for the purchase of a share of stock under the ESPP at the end of each offering period is 85% of the lower of (a) the fair market value of the Company’s common stock at the beginning of that offering period or (b) the fair market value of the Company’s common stock at the end of that offering period.

 

Participants in the ESPP generally may not accrue rights to purchase stock under all employee stock purchase plans (as described in Section 423 of the U.S. Internal Revenue Code) of the Company and its subsidiaries at a rate exceeding $25,000 (based on the fair market value of the stock at the beginning of the applicable offering period) for each calendar year in which the purchase right is outstanding.

 

Shares Available.  Currently, a maximum of 2,400,000 shares of the Company’s common stock may be delivered pursuant to the ESPP. If stockholders approve the ESPP proposal, this share limit will be increased to 4,400,000 shares (an increase of 2,000,000 shares). This share limit is subject to customary adjustments in the case of stock splits, reorganizations, mergers and other similar unusual or extraordinary corporate events. As noted above, as of August 22, 2008, 619,447 shares remained available for issuance under the ESPP.

 

Eligibility and Participation.  All persons who are employed by the Company or designated subsidiaries at the start of an offering period, including officers and employee directors, who have been employed for at least 90 days and are regularly scheduled to work more than 10 hours per week and more than 5 months per calendar year, are eligible to participate in the ESPP for that offering period. An eligible employee may become a participant by completing a stock purchase agreement authorizing payroll deductions and filing it with the Company’s payroll office prior to the applicable enrollment date. Payroll deductions are generally limited to 15% of each participant’s compensation. A participant generally may elect to terminate and/or withdraw his or her contributions during an offering period. Participation ends automatically on a participant’s termination of employment.

 

No employee can participate in the ESPP if, after entering the offering period, he or she would be deemed to own stock of the Company possessing more than five percent of the total combined voting power of all of the Company’s outstanding stock.

 

Transfer Restrictions.  A participant’s rights with respect to purchase rights under the ESPP, as well as contributions credited to his or her ESPP account, may not be assigned, transferred, pledged or otherwise disposed of in any way except by will or the laws of descent and distribution.

 

Administration, Amendment and Termination of the Plan.  The ESPP is administered by the Board of Directors or by a committee appointed by the Board of Directors. Currently, the Corporate Governance, Nominating and Compensation Committee of our Board of Directors administers the ESPP. Our Board of Directors may amend,

modify or terminate the plan at any time and in any manner, provided that the existing rights of participants are not materially adversely affected thereby. Stockholder approval for any amendment will only be required to the extent necessary to meet the requirements of Section 423 of the Internal Revenue Code or to the extent otherwise required by law. Currently, the ESPP is scheduled to terminate on October 16, 2010. If stockholders approve the proposed amendment and unless previously terminated by our Board of Directors, no new offering periods will commence on or after October 16, 2018, or, if earlier, when no shares remain available for options under the ESPP.

 

Federal Income Tax Consequences of the ESPP

 

Federal Tax Consequences. Participant contributions to the plan are made on an after-tax basis. Generally, no taxable income will be recognized by a participant as of either the grant date or the exercise date of an option. A participant will generally recognize income (or loss) upon a sale or disposition of the shares acquired under the plan. The company generally will not be entitled to a federal income tax deduction with respect to any shares that are acquired under the ESPP.

 

Specific Benefits Under the ESPP

 

Participation in the ESPP is voluntary and is dependent on each eligible employee’s election to participate and his or her determination as to the level of payroll deductions. Accordingly, future purchases under the ESPP are not determinable. If the amended version of the ESPP had been in effect for fiscal year 2008, we do not expect that the number of shares purchased by participants in the plan during that year would have been materially different than the number of shares purchased as set forth in the table below. The closing market price for a share of the Company’s common stock as of August 22, 2008 was $23.17 per share.

 

AGGREGATE PAST PURCHASES UNDER THE EMPLOYEE STOCK PURCHASE PLAN

 

As of August 22, 2008, 1,780,553 shares of the Company’s common stock had been purchased under the ESPP. The following number of shares have been purchased by the persons and groups identified below:

 

 

 

 

 

Board Recommendation

 

The Board of Directors believes that the proposed amendment to the ESPP will promote the interests of the Company and its stockholders and will help the Company and its subsidiaries continue to be able to attract, retain and reward persons important to our success.

 

All of the Company’s executive officers are eligible to participate in the ESPP and thus have a personal interest in the approval of the ESPP proposal.

 

The Board of Directors unanimously recommends a vote FOR approval of the proposed amendment to the ESPP.

 

D. RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR FISCAL YEAR 2009

 

The Audit Committee of the Board of Directors has appointed the accounting firm of PricewaterhouseCoopers LLP as independent registered public accounting firm to conduct the annual audit of Resources Connection’s financial statements for fiscal year 2009. This matter is nevertheless being submitted to the stockholders to afford them the opportunity to express their views. If this proposal is not approved at the Annual Meeting by the affirmative vote of stockholders holding a majority of the shares present in person or by proxy at the meeting and entitled to vote on this proposal, the Audit Committee intends to reconsider its appointment of PricewaterhouseCoopers LLP as its independent registered public accounting firm.

 

A representative of PricewaterhouseCoopers LLP will be present at the Annual Meeting to answer any questions concerning the independent registered public accounting firm’s areas of responsibility, and will have an opportunity to make a statement if he or she desires to do so.

 

The Board of Directors unanimously recommends a vote FOR ratification of the appointment of PricewaterhouseCoopers LLP.

 

III. REQUIRED INFORMATION

 

Executive Officers

 

The following table sets forth information about our executive officers as of July 31, 2008. Each of our executive officers serves at the pleasure of the Board of Directors:

 

 

Nathan W. Franke.  Mr. Franke has held the position of Chief Financial Officer and Executive Vice President since November 2007. Prior to joining Resources, Mr. Franke was with the firm of Deloitte & Touche LLP for more than twenty-two years, most recently as a senior audit partner, working primarily with publicly-traded companies in the consumer and technology industries.

 

Kate W. Duchene.  Ms. Duchene is our Chief Legal Officer, a position she has held since December 1999. Ms. Duchene is also our Assistant Secretary and Executive Vice President of Human Resources, positions she has held since August 2000. Prior to joining Resources Connection, Ms. Duchene practiced law with O’Melveny & Myers LLP, an international law firm, in Los Angeles, California, specializing in labor and employment matters. Ms. Duchene was with O’Melveny & Myers LLP from October 1990 through December 1999, most recently as a Special Counsel.

 

Anthony Cherbak.  Mr. Cherbak has held the position of Executive Vice President of Operations since July 2005. He joined the company from Deloitte & Touche LLP, a professional services firm, where he spent the majority of his career as an audit partner in the Orange County, California office. While with Deloitte & Touche LLP, Mr. Cherbak led the firm’s consumer business practice for its Pacific Southwest region, and most recently served as the Partner In Charge of the Orange County audit practice.

 

For information about executive officers Donald B. Murray, Thomas D. Christopoul and Karen M. Ferguson, see descriptions above under “Other Directors” in Section II above.          

 

DIRECTOR MEETINGS AND COMMITTEES

 

Attendance at Meetings

 

Our Board of Directors met in person or conducted telephonic meetings a total of seven times during fiscal year 2008. No director attended fewer than 79% of the aggregate number of meetings held by the Board of Directors and the committees of the Board of Directors on which such director served during fiscal 2008. The Company’s policy is that directors should make themselves available to attend the Company’s Annual Meeting of Stockholders. Six Board members attended our 2007 Annual Meeting.

 

Director Independence

 

As required by the Company’s Corporate Governance Guidelines and Committee Charters, our Board of Directors has determined that each of Neil Dimick, A. Robert Pisano, Anne Shih, Jolene Sykes-Sarkis and Robert F. Kistinger is an “independent director” under the NASDAQ Marketplace Rules. Our Board of Directors also determined that Thomas D. Christopoul was an “independent director” under the NASDAQ Marketplace rules during fiscal year 2008 prior to his appointment as President and Chief Executive Officer on June 1, 2008. A copy of the Company’s Corporate Governance Guidelines and Committee Charters can be found on the Corporate Governance page of the Company’s website at www.resourcesglobal.com. There were no transactions, relationships or arrangements engaged in by these directors which the Company had to consider in making this determination.

 

Committees of the Board of Directors

 

Prior to our becoming a public company, our Board of Directors established two standing committees: a Compensation Committee and an Audit Committee. In 2002, the Board established a Nominating Committee as a third standing committee. In April 2003, the Board unanimously approved a restructuring of the committees and established two standing committees: a Corporate Governance, Nominating and Compensation Committee and an Audit Committee, each composed entirely of directors who are not officers or employees of Resources Connection. Each committee of the Board is comprised entirely of individual directors who meet the independence requirements of the NASDAQ Marketplace Rules and, for members of the Audit Committee, applicable rules of the SEC. As part of the restructuring, the Board of Directors also created a Lead Director role to serve as a representative for the independent directors regarding the communication and resolution of any emergency situation or any conflict with the management of the Company. In this role, the Lead Director also chairs the regular executive sessions of the Board of Directors, which are only attended by independent directors. In fiscal year 2004, the Board appointed A. Robert Pisano to serve as the Lead Director. Mr. Pisano was subsequently reappointed to this Lead Director position for fiscal years 2005, 2006, 2007, 2008 and 2009.

 

The Board of Directors annually reviews and approves the charter of each of the committees. The Audit Committee and the Corporate Governance, Nominating and Compensation Committee charters were reviewed and approved on August 7, 2008. The charters of the Corporate Governance, Nominating and Compensation Committee and the Charter of the Audit Committee, are available on the Corporate Governance page of the Company’s website at www.resourcesglobal.com.

 

Corporate Governance, Nominating and Compensation Committee

 

During fiscal 2008, the Corporate Governance, Nominating and Compensation Committee (the “CGN&C Committee”) of our Board of Directors was comprised of three non-employee directors, Thomas D. Christopoul¹, Jolene Sykes-Sarkis, and A. Robert Pisano. The Board of Directors has affirmatively determined that each of A. Robert Pisano, Thomas Christopoul and Jolene Sykes-Sarkis is or was, during their service in 2008, independent under the Board’s independence criteria and the NASDAQ Marketplace Rules. This CGN&C Committee of the Board met four times in person and three times by telephone during our 2008 fiscal year.

 

 

¹ Effective June 1, 2008, Mr. Christopoul assumed the position of President and Chief Executive Officer of the Company and no longer serves as an independent director or member of the CGN&C Committee.

Governance-Related Duties.  The CGN&C Committee is responsible for overseeing the corporate governance principles applicable to the Company, including the Company’s Code of Business Conduct and Ethics (the “Code”), which is approved by the entire Board of Directors annually. A copy of the Code is available on the Corporate Governance page of the Company’s website at www.resourcesglobal.com. The CGN&C Committee annually reviews the Company’s compliance with the NASDAQ Marketplace Rules and reports the conclusions of such review to the Board.

 

Nominating-Related Duties.  The CGN&C Committee is also responsible for overseeing the process of nominating individuals to stand for election or re-election as directors. In doing so, the CGN&C Committee reviews and makes recommendations to the Board with respect to the composition of the Board, tenure of Board members, and skills and attributes for new directors. The CGN&C Committee has also retained a professional executive search firm to assist in the identification and recruitment of independent Board candidates. While the CGN&C Committee normally is able to identify from its own resources and professional search firm, an ample number of qualified candidates, it will consider stockholder suggestions of persons to be considered as nominees. Such suggestions must be sent in writing to the corporate assistant secretary at the Company’s address and must be accompanied by detailed biographical and occupational data on the prospective nominee, along with a written consent of the prospective nominee to consideration of his or her name by the CGN&C Committee. Any director candidates recommended by the Company’s stockholders will be given consideration by the CGN&C Committee, consistent with the process used for all candidates and in accordance with the Company’s policy regarding such recommendations. The Company’s bylaws include additional requirements regarding nominations of persons at a stockholders’ meeting other than by the Board of Directors. See “Questions & Answers — When must notice of business to be brought before an annual meeting be given and when are stockholder proposals due for the 2009 Annual Meeting?”

 

The CGN&C Committee’s process for identifying and evaluating director candidates is as follows. As referenced above, the CGN&C Committee has retained a professional search firm to assist the CGN&C Committee in managing the overall process, including the identification of director candidates who meet certain criteria set from time to time by the CGN&C Committee. All potential candidates, whether identified by the search firm, stockholders or Board members, are reviewed by the CGN&C Committee, the Executive Officers, and at times by the search firm. In the course of this review, some candidates are eliminated from further consideration because of conflicts of interest, unavailability to attend Board or CGN&C Committee meetings or other relevant reasons. The CGN&C Committee then decides which of the remaining candidates most closely match the established criteria, described in the subsequent paragraph, and are therefore deserving of further consideration. The CGN&C Committee then discusses these candidates, decides which of them, if any, should be pursued, gathers additional information if desired, conducts interviews and decides whether to recommend one or more candidates to the Board of Directors for nomination. The Board discusses the CGN&C Committee’s recommended candidates, decides if any additional interviews or further background information is desirable and, if not, decides whether to nominate one or more candidates. Those nominees are named in the proxy statement for election by the stockholders at the Annual Meeting (or, if between Annual Meetings, the nominees may be elected by the Board itself).

 

In order to be recommended by the CGN&C Committee, a candidate must meet the following minimum qualifications, as described in the Company’s Board of Directors Corporate Governance Guidelines: personal ability, integrity, intelligence, relevant business background, independence, expertise in areas of importance to the Company’s objectives, and sensitivity to the Company’s corporate culture and responsibilities. In addition, the CGN&C Committee from time to time looks for individuals with specific qualifications so that the Board as a whole may maintain an appropriate mix both of experience, background, expertise and skills, and of age, gender, and ethnic and racial diversity. These specific qualifications may vary from one year to another, depending upon the composition of the Board at that time.

 

As referenced above, the CGN&C Committee will consider individuals for nomination to stand for election as directors who are recommended to it in writing by any Resources Connection stockholder. Any stockholder wishing to recommend an individual as a nominee for election at the Annual Meeting of stockholders to be held in 2009 should send a signed letter of recommendation, to be received before May 14, 2009, to the following address: Resources Connection, Inc., 17101 Armstrong Avenue, Irvine, CA 92614: Attn: Kate W. Duchene, Chief Legal Officer and Assistant Secretary. Recommendation letters must state the reasons for the recommendation and contain

the full name and address of each proposed nominee as well as brief biographical information setting forth past and present directorships, employments, occupations and civic activities. Any such recommendation should be accompanied by a written statement from the proposed nominee consenting to be named as a candidate and, if nominated and elected, consenting to serve as a director.

 

Compensation-Related Duties  The CGN&C Committee is also responsible for discharging the Board of Directors’ responsibilities relating to the compensation of the Company’s executive officers. The CGN&C Committee reviews and approves the compensation arrangements, plans, policies and programs that apply to our executive officers. Pursuant to the written charter of the CGN&C Committee, its principal compensation related responsibilities, duties and areas of authority include, among other things:

 

 

The CGN&C Committee’s charter permits it to rely on members of management when performing its duties. The CGN&C Committee takes into account our Chief Executive Officer’s recommendations regarding the corporate goals and objectives, performance evaluations and compensatory arrangements for the Company’s executive officers other than the Chief Executive Officer. In particular, the CGN&C Committee considered the Chief Executive Officer’s recommendations regarding the appropriate base salaries and annual incentive compensation opportunity payouts for the Company’s other executive officers for fiscal 2008.

 

As indicated above, pursuant to its charter, the CGN&C Committee is authorized to retain compensation consultants to assist it in carrying out its duties. The CGN&C Committee has the authority to approve any compensation consultant’s fees and other retention terms. During fiscal 2008, the CGN&C Committee determined that there was no business need to retain an executive compensation consultant. The CGN&C Committee evaluates such retention on an annual basis in the light of the business needs of the organization at the relevant time.

Audit Committee

 

During fiscal 2008, the Audit Committee of our Board of Directors consisted of three non-employee directors, Neil Dimick, Thomas Christopoul² and Robert Kistinger. The Board of Directors has affirmatively determined that none of the members of the Audit Committee had a material relationship with the Company and that each member qualified as independent under the applicable SEC rules and the NASDAQ Marketplace Rules during the period of service in fiscal year 2008. Neil Dimick qualifies as the committee’s financial expert and serves as the Audit Committee Chairperson.

 

Our Audit Committee operates under a written charter adopted by our Board of Directors. A copy of the written charter of our Audit committee is available to our stockholders on the Corporate Governance page of the Company’s website at www.resourcesglobal.com. The Audit Committee reviews our auditing, accounting, financial reporting and internal control functions and appoints and engages, on behalf of our Board of Directors, the company’s independent registered public accounting firm. The Audit Committee also reviews and approves the provision of services by our independent registered public accounting firm, PricewaterhouseCoopers LLP, as described under the caption “All Other Fees” below, to ensure such services are compatible with maintaining the independence of PricewaterhouseCoopers LLP. In discharging its duties, the Committee:

 

 

The members of our Audit Committee met eight times during our 2008 fiscal year.

 

Fees

 

PricewaterhouseCoopers’ charges for fiscal years 2008 and 2007 were as follows:

 

 

 

 

Audit Committee Policy Regarding Pre-Approval of Services of Independent Registered Public Accounting Firm

 

As set forth in the Charter, the Audit Committee has the sole authority to review in advance, and grant any appropriate pre-approval of, (I) all auditing services to be provided by the independent registered public accounting firm and (ii) all non-audit services to be provided by the independent registered public accounting firm as permitted by Section 10A of the Securities Exchange Act of 1934, and in connection therewith to approve all fees and other terms of engagement. Such pre-approval can be given as part of the Audit Committee’s approval of the scope of the

 

 

² Mr. Christpoul served as a member of the audit committee during all of fiscal year 2008. However, effective June 1, 2008, Mr. Christopoul assumed the position of President and Chief Executive Officer of the Company and no longer serves as an independent director or a member of the Audit Committee. At that time, Mr. Pisano, an independent director, was nominated and elected to serve as a member of the Audit Committee.

engagement of the independent registered public accounting firm or on an individual basis. The pre-approval of non-auditing services can be delegated by the Audit Committee to one or more of its members, but the decision must be presented to the full Audit Committee at the next scheduled meeting. In fiscal 2008 and fiscal 2007, all fees of PricewaterhouseCoopers LLP were pre-approved by the Audit Committee.

 

Representatives of PricewaterhouseCoopers LLP will be present at the Annual Meeting and will be available to respond to questions. They will be given an opportunity to make a statement if they desire to do so.

 

The following report of the Audit Committee does not constitute soliciting material and shall not be deemed filed with the SEC under the Securities Act of 1933 or the Securities Exchange Act of 1934 or incorporated by reference in any document so filed.

 

AUDIT COMMITTEE REPORT

 

To the Board of Directors of Resources Connection, Inc.:

 

As set forth in more detail in the Audit Committee charter, the Audit Committee’s primary responsibilities fall into three categories:

 

 

The Audit Committee has reviewed and discussed with the Company’s management and its independent registered public accounting firm, PricewaterhouseCoopers LLP, the Company’s audited financial statements for the years ended May 31, 2006, 2007 and 2008, known as the Audited Financial Statements. Management advised the Audit Committee that the Audited Financial Statements were prepared in accordance with generally accepted accounting principles. In addition, the Audit Committee discussed with PricewaterhouseCoopers LLP the matters required by Statement on Auditing Standards No. 61 (Communication with Audit Committees).

 

The Audit Committee also has received and reviewed the written disclosures and the letter from PricewaterhouseCoopers LLP required by Independent Standards Board Standard No. 1 (Independence Discussions With Audit Committees), and the Audit Committee discussed with that firm its independence from the Company. The Audit Committee also discussed with the Company’s management and PricewaterhouseCoopers LLP such other matters, and received such assurances from that firm, as the Audit Committee deemed appropriate.

 

Management is responsible for the Company’s internal controls and the financial reporting process. PricewaterhouseCoopers LLP is responsible for performing an independent audit of the Company’s financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and issuing a report thereon.

 

Based on the foregoing review and discussions and a review of the report of PricewaterhouseCoopers LLP with respect to the Audited Financial Statements, and relying thereon, the Audit Committee recommended to the

Company’s Board of Directors the inclusion of the Audited Financial Statements in Resources Connection’s Annual Report on Form 10-K for the fiscal year ended May 31, 2008.

 

THE AUDIT COMMITTEE

 

Neil Dimick, Chairperson

Robert Kistinger

Thomas Christopoul³

 

Communications with the Board

 

Our Board of Directors provides a process for stockholders to send communications to the Board of Directors, to individual directors or groups of directors. Stockholders may communicate with members of the Board of Directors, including non-management directors as a group, or as individuals. Communications should be sent to the Company’s corporate headquarters at 17101 Armstrong Avenue, Irvine, CA 92614, addressed to the attention of the specific group or individual or, if the communication is intended for all non-management directors, to the Chairperson of the Corporate Governance, Nominating and Compensation Committee or Chairperson of the Audit Committee and marked “Confidential, Intended for Recipient’s Review Only”. Upon receipt of any such communication, the material is forwarded directly to the addressee. If the communication is not directed to a specific individual, the material is forwarded to the Chairperson of the Audit Committee who reviews the content to determine its relevance and appropriate audience.

 

DIRECTOR COMPENSATION — FISCAL 2008

 

The following table presents information regarding the compensation paid during fiscal 2008 to individuals who were members of our Board of Directors at any time during fiscal 2008 and who were not also our employees (referred to herein as “non-employee directors”). The compensation paid to any director who was also one of our employees during fiscal 2008 is presented below in the Summary Compensation Table — Fiscal 2008 and the related explanatory tables. Such employee-directors do not receive separate compensation for service on the Board of Directors.

 

 

 

 

 

³ Effective June 1, 2008, Mr. Christopoul assumed the position of President and Chief Executive Officer of the Company and no longer serves as an independent director or member of the Audit Committee.

 

 

Director Compensation

 

Compensation for non-employee directors during fiscal 2008 generally consisted of an annual cash retainer, additional fees for serving on committees, or as a committee chairperson, and awards of stock options.

 

Annual Retainer

 

The following table sets forth the schedule of annual retainer fees for each non-employee director in effect during fiscal 2008:

 

 

All non-employee directors are also reimbursed for out-of-pocket expenses they incur serving as directors.

 

Stock Option Awards

 

Annual Grants.  Each continuing non-employee director is currently entitled to receive an annual award of 3,000 stock options on the first market date of the calendar year. Each stock option may be exercised to purchase one share of our common stock at an exercise price equal to the fair market value of the underlying common stock on the grant date. Each continuing non-employee director’s stock option award has an ordinary term of ten years, and is subject to a four-year vesting period. Subject to each non-employee director’s continued service, one-fourth of his or her stock option award will vest and become exercisable on each of the first four anniversaries of the grant date. If a non-employee director’s service terminates for any reason, the unvested portion of his or her stock option award will immediately terminate. Vested options will generally remain outstanding and exercisable for three (3) years

after a director’s service terminates. Any vested options that are not exercised within the applicable post-termination of service exercise window will terminate.

 

If there is a corporate transaction such as a dissolution, recapitalization, merger, combination, reorganization, spin-off, exchange of common stock or other similar unusual or extraordinary transaction where the Company does not survive (or does not survive as a public company), each director’s stock option award will become fully vested and exercisable, unless the Board of Directors determines that the vesting of the options should not be accelerated because it has provided for the substitution, assumption, exchange or other continuation of outstanding options. In addition, the Board of Directors has the discretion to accelerate the vesting of each director’s stock option award in connection with a change in control as defined in the 2004 Plan. Any options that become vested in connection with a corporate transaction described above (including a change in control) generally must be exercised prior to the transaction, or they will be “cashed-out” and terminated in connection with the transaction.

 

Each continuing non employee director’s stock option award was granted under, and is subject to the terms of, the 2004 Plan. With respect to awards to directors, the plan is administered by the Board of Directors, and the Board of Directors has the ability to interpret and make all required determinations under the plan. This authority includes making required proportionate adjustments to outstanding stock options to reflect the corporate transactions described above. Directors are not entitled to any dividend equivalent rights on their stock option awards, and stock option awards are generally only transferable to a beneficiary of a director upon his death or as approved by the Board of Directors.

 

Initial Grants.  Each non-employee director who is newly appointed to the Board of Directors is entitled to a one-time award of 6,000 stock options on the date he or she is first appointed. Non-employee directors’ initial stock option awards become vested in the same manner and according to the same vesting schedule described above for annual grants, and otherwise have the same material terms as annual stock option awards described above.

 

Elective Grants.  Each non-employee director is given the option to elect to forego his or her annual board retainer (but not other cash fees) and receive an award of stock options instead. These stock options are granted on the date the annual board retainer otherwise would have been paid. The stock option award is equal to that number of shares of common stock determined by dividing the amount of the annual board retainer by the fair market value of a share of our common stock on the grant date, and multiplying the result by two. These elective options are fully vested on the grant date and may be exercised for three years after the director’s service on the board terminates. Otherwise, these elective options have the same material terms as annual stock option awards described above.

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16 of the Securities Exchange Act of 1934, as amended, requires our executive officers (as defined under Section 16), directors and persons who beneficially own greater than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. We are required to disclose any failure of these executive officers, directors and 10% stockholders to file these reports by the required deadlines. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons that no report on Form 5 was required for such persons, we believe that, for the reporting period covering our 2008 fiscal year, our executive officers and directors complied, on a timely basis, with all their reporting requirements under Section 16(a) for such fiscal year.

 

EXECUTIVE COMPENSATION

 

COMPENSATION DISCUSSION AND ANALYSIS

 

This section contains a discussion of the material elements of compensation awarded to, earned by or paid to the Company’s principal executive and principal financial officers, and to our three other most highly compensated individuals who were serving as executive officers at the end of our 2008 fiscal year. The compensation of Stephen J. Giusto, our former principal financial officer, is also discussed in accordance with SEC rules. These individuals are referred to as the “Named Officers” in this Proxy Statement.

The Company’s current executive compensation programs are determined and approved by the Corporate Governance, Nominating, and Compensation Committee (the “CGN&C Committee”). None of the Named Officers are members of the CGN&C Committee. The CGN&C Committee takes into account the Chief Executive Officer’s recommendations regarding the corporate goals and objectives, performance evaluations and compensatory arrangements for the Company’s executive officers other than the Chief Executive Officer. For example, the CGN&C Committee considered the Chief Executive Officer’s recommendations regarding the appropriate base salaries and annual incentive compensation opportunity payouts for the Company’s other executive officers for fiscal 2008. The other Named Officers do not currently have any role in determining or recommending the form or amount of compensation paid to our Named Officers.

 

Executive Compensation Program Objectives and Overview

 

The Company’s current executive compensation programs are intended to achieve three fundamental objectives: (1) attract, motivate, reward and retain high caliber talent; (2) create a meaningful direct relationship between pay and performance; and (3) create appropriate incentives for the executives to maximize stockholder value over time. In structuring our current executive compensation programs, we are guided by the following basic philosophies:

 

 

As described in more detail below, the material elements of our current executive compensation programs for Named Officers include a base salary, an annual incentive compensation opportunity, a long-term equity incentive opportunity and potential severance and other benefits payable in connection with a termination of employment or change in control. We believe that each element of our executive compensation program helps us to achieve one or more of our compensation objectives, as illustrated by the table below.

 

 

The individual compensation elements are intended to create a total compensation package for each Named Officer that we believe achieves our compensation objectives and provides competitive compensation opportunities relative to companies in our comparative peer group. In 2006, with the help of Mercer Human Resource Consulting, we selected the following twelve companies as our peer group companies for our 2006 fiscal year: BearingPoint, Inc., Robert Half International, Inc., Hewitt Associates, Inc., MPS Group, Inc., Watson Wyatt Worldwide, Inc., KForce, Inc., Navigant Consulting, Inc., Korn/Ferry International, FTI Consulting, Inc., Heidrick & Struggles International, CRA International, Inc., and Huron Consulting Group, Inc. In fiscal year 2008, the CGN&C Committee determined that it would continue to rely on the peer review performed in 2006 for purposes of fiscal

year 2008 compensation. We believe that these peer group companies are comparable either in terms of product or industry, revenue levels, market capitalization or business model delivery. We believe these peer group companies, which are generally publicly-traded professional services companies, compete with us for executive talent and provide relevant comparative compensation data for the Company. Our benchmarking process generally involved comparing the base salaries, annual incentive compensation opportunities, total cash compensation and long-term equity incentive opportunities provided to the Named Officers to similar compensation opportunities provided to comparable executives at our peer group companies. Based on this analysis and other information, we believe that we have crafted a fair and equitable compensation plan for our Named Officers.

 

Current Executive Compensation Program Elements

 

Base Salaries

 

The CGN&C Committee generally reviews the base salary paid to each Named Officer on an annual basis. The starting point for the CGN&C Committee’s review is each Named Officer’s then current base salary, as the Company historically has not decreased base salaries for Named Officers or other employees absent a significant reduction in responsibilities. In determining whether base salary increases for fiscal 2008 were appropriate, we considered the base salary increases awarded to our other employees, each Named Officer’s length of service, our performance and growth, any minimum base salary amount provided for in a Named Officer’s employment agreement or offer letter, a subjective determination of each Named Officer’s past performance and expected future contributions, and the base salaries and total cash compensation and equity awards earned by comparable executives at our peer group companies (based on their published data). When determining the appropriate base salary to pay Mr. Franke, who commenced employment during fiscal 2008, we considered many of these same factors, and also considered the base salary then being paid to each of the other Named Officers. Column C of the Summary Compensation Table — Fiscal 2008 and 2007 shows the base salary paid to each Named Officer for fiscal 2008 and 2007.

 

Annual Incentive Compensation Opportunity

 

For fiscal 2008, none of the Named Officers was entitled to a pre-set fixed minimum annual or target bonus pursuant to their employment agreements or otherwise. Instead, as in prior years, the CGN&C Committee established an executive incentive bonus plan for our 2008 fiscal year that the Named Officers were eligible to participate in and receive an annual incentive compensation opportunity under. The executive incentive bonus plan sets forth each Named Officer’s target annual incentive compensation opportunity and the overall bonus structure and mechanics for the fiscal year. The CGN&C Committee set each Named Officer’s target and maximum annual incentive compensation opportunity for our 2008 fiscal year as a percentage of his or her base salary. The Named Officer’s target and maximum bonus percentages were generally determined based on several factors, including comparable bonus opportunities in effect at our peer group companies (based on their published data), total cash compensation and equity awards earned by comparable executives at our peer group companies (based on their published data), internal comparability with percentage targets of other executives, and the Company’s objective of creating appropriate incentives to maximize stockholder value. Mr. Murray’s fiscal 2008 target annual incentive compensation opportunity was set at 65% of his base salary, and his maximum incentive compensation opportunity was set at 200% of his base salary. The fiscal 2008 target annual incentive compensation opportunity for the other Named Officers was set at 50% of their respective base salaries, while their maximum incentive compensation opportunities were equal to 150% of their respective base salaries.

 

Under the executive incentive bonus plan, each Named Officer’s annual incentive compensation opportunity has a quantitative component and a discretionary component. The first 75% of each Named Officer’s target annual incentive compensation opportunity becomes earned based on quantitative financial performance measures tied to revenue and net income growth. The Company selected these performance measures because we believe they are closely correlated to our annual business objectives and growth in stockholder value, and are straightforward to administer and communicate. The Company considers the specific revenue and net income targets to be confidential commercial and financial information, the disclosure of which could result in competitive harm to the Company; however, the Company believes that the targets, while difficult to attain, were reasonably attainable if the Company

achieved its planned performance objectives for the year. The remaining 25% of each Named Officer’s target annual incentive compensation opportunity becomes earned based on discretionary factors determined by the CGN&C Committee. Such factors include the Company’s financial performance for the year against plan, the individual Named Officer’s performance for the year, whether any Named Officer completed any special projects or transactions during the year and other qualitative performance assessments. The Company believes this mix of predominantly quantitative components coupled with a smaller discretionary component allows the Company to achieve its compensation objectives.

 

The amounts paid to each Named Officer in respect of the quantitative component of his or her annual incentive compensation opportunity are presented in Column (g) of the Summary Compensation Table — Fiscal 2008 and 2007 below. The amounts paid to each Named Officer in respect of the discretionary component of his or her annual incentive compensation opportunity are presented in Column (d) of the Summary Compensation Table — Fiscal 2008 and 2007 below. Mr. Murray’s actual annual incentive compensation payout was equal to 175% of his target amount. The actual annual incentive compensation paid to Ms. Duchene, Ms. Ferguson, and Mr. Cherbak was equal to 173% of their respective target amounts. Mr. Franke received a pro rata portion of his actual incentive compensation equal to 86% of his respective target amount given his partial year of service in fiscal 2008. Mr. Giusto did not receive any actual incentive compensation payment due to his termination of employment during fiscal 2008.

 

Long-Term Equity Incentive Awards

 

The Company’s view is that the Named Officers’ long-term compensation should be directly linked to the value provided to our stockholders. The Named Officers’ long-term compensation is currently awarded in the form of nonqualified stock options having an exercise price equal to the closing price of the Company’s common stock on the grant date. Stock options are our preferred equity award because the options will not have any value unless the shares of the Company’s common stock appreciate in value following the grant date. The Company’s shareholder-approved 2004 Plan permits us to grant restricted shares or units and other “full value” awards. However, we have used these types of awards only occasionally, typically in special circumstances such as the grant of restricted shares to Mr. Cherbak in connection with his commencement of employment with us. While historically we have favored the use of stock options over time-vested restricted shares or units because our stock option grants put more compensation “at risk” and provide for real return to the Company, we continue to assess the potential future use of restricted shares. In order to maximize the Company’s tax deduction in respect of employee stock options, the Company’s policy is currently only to grant nonqualified options where the “spread” value on exercise is generally deductible by the Company. Incentive stock options, where this same spread value is generally not deductible, are not currently being granted even though these awards are permitted to be granted under the 2004 Plan.

 

Stock option grants to our Named Officers typically vest in a series of installments over a four-year vesting period. We believe this four-year vesting period provides an incentive for the Named Officers to remain in our employ, and also focuses the Named Officers on the long-term performance and business objectives of the Company for the benefit of our stockholders. We believe the four-year vesting period together with annual grants expected to be made in successive years helps create a long-term incentive and strikes an appropriate balance between the interests of the Company, our stockholders and the individual Named Officers in terms of the incentive, value creation and compensatory aspects of these equity awards.

 

We considered several factors when determining the size of each Named Officer’s fiscal 2008 stock option award. These factors included (i) the Company’s and the individual Named Officer’s performance during our fiscal year, (ii) the total cash compensation paid to the Named Officers in our 2007 fiscal year, (iii) the number and value of options previously granted, (iv) dilution effects on our stockholders and ensuring that an appropriate number of shares would be available for option awards to less-senior employees, (v) the number and value of long-term equity awards made to comparable executives at our peer group companies (based on their published data) and (vi) ensuring that the Named Officers were provided with total long-term equity compensation and total compensation amounts that we thought were appropriate and competitive. When determining the size of the stock option award granted to Mr. Franke in connection with his commencement of employment, we considered many of these same factors, and also considered the size of the stock option awards previously granted to the other Named Officers and our desire to attract Mr. Franke to the Company. We believe the size of each Named Officer’s stock option award

is consistent with our compensation objectives of paying for performance and putting a significant portion of total compensation “at risk.” The number of options granted to each Named Officer during fiscal 2008 and the grant-date fair value of these options as determined under FAS 123R for purposes of the Company’s financial statements is presented in the “Grants of Plan-Based Awards in Fiscal 2008” table below. A description of the material terms of the fiscal 2008 stock option awards is presented in the narrative section following the “Grants of Plan-Based Awards in Fiscal 2008” table below.

 

Perquisites

 

Certain of our Named Officers received an automobile allowance during fiscal 2008, but we did not otherwise provide the Named Officers with any perquisites or personal benefits. We do not believe that perquisites or personal benefits were a material element of our executive compensation program for fiscal 2008.

 

Severance and Other Benefits

 

The Company believes that severance protections can play a valuable role in attracting and retaining high caliber talent. In the competitive professional services industry that we operate in, where executives are commonly being recruited by both more established companies and by start-up ventures, severance and other termination benefits are an effective way to offer executives financial security to offset the risk of foregoing an opportunity with another company. Pursuant to their employment agreements, or offer letter, as applicable, in effect during fiscal year 2008, Messrs. Murray, Giusto, Cherbak, and Ms. Ferguson would be entitled to severance payments if their employment was terminated by the Company without cause (and Mr. Murray and Ms. Ferguson would also have been entitled to lesser severance benefits if their employment terminated because of their death or disability). The level of each Named Officer’s severance benefits differs because, consistent with our objective of utilizing severance benefits to attract and retain executives, we generally provide each Named Officer with amounts and types of severance benefits that we believe will permit us to attract and/or continue to employ the individual Named Officer. For example, Mr. Murray, who was our Chief Executive Officer at the end of fiscal 2008, was entitled to greater severance benefits at the end of fiscal 2008 than our other Named Officers because of his value and importance to the Company.

 

Under their employment agreements in effect at the end of fiscal 2008, Mr. Murray and Ms. Ferguson were also entitled to their severance benefits if their employment was terminated by them for a good reason. The good reason definition in their agreements is different; however, we believe that, except as described below for Ms. Ferguson, Mr. Murray and Ms. Ferguson would only have had a good reason to resign if the Company reduced or diminished their compensation, position or work location in a manner that would result in a constructive termination of their employment. Under her employment agreement in effect at the end of fiscal 2008, Ms. Ferguson would have had a good reason to terminate her employment if either Mr. Murray or certain other individuals ceased serving as the Company’s Chief Executive Officer. However, if Mr. Murray were to resign voluntarily (other than for good reason) or if his employment terminated because of his death or disability, the amount of Ms. Ferguson’s severance benefits would have been cut in half.

 

Pursuant to the terms of his employment agreement in effect at the end of fiscal 2008, Mr. Murray was entitled to reimbursement for the full amount of any excise taxes imposed on his severance payments and any other payments under Section 4999 of the Internal Revenue Code. We also provided Mr. Murray with a “gross-up” for any parachute payment excise taxes that may be imposed because we determined the appropriate level of his severance protections without factoring in the adverse tax effects that may result under Section 4999 of the Internal Revenue Code. The excise tax gross-up is intended to make Mr. Murray whole for any adverse tax consequences he may become subject to under Section 4999 of the Internal Revenue Code, and to preserve the level of his severance protections that we have determined to be appropriate.

Subsequent Compensation Actions

 

On June 1, 2008, the first day of fiscal 2009, the Company entered into an employment agreement with its new President and Chief Executive Officer, Thomas D. Christopoul, and an amended employment agreement with its Executive Chairman and former President and Chief Executive Officer, Donald B. Murray. Mr. Christopoul’s appointment reflects the Company’s ongoing succession planning process and global leadership development, and Mr. Murray continues to serve as an employee of the Company and a member of the Board of Directors. Mr. Christopoul’s employment agreement sets forth the terms of his employment with the Company, including his base salary, annual incentive compensation opportunity, long-term equity compensation, perquisites and severance and other benefits. Mr. Murray’s new employment agreement sets forth the terms of his employment as Executive Chairman, and generally provides for the same severance and other types of benefits as under his employment agreement in effect at the end of fiscal 2008. In connection with Mr. Christopoul’s appointment, Mr. Murray separately acknowledged that the appointment of Mr. Christopoul as the Company’s President and Chief Executive Officer does not constitute good reason for purposes of his employment agreement. The terms and conditions of Messrs. Christopoul’s and Murray’s employment agreements may be found in their entirety in the Company’s Form 8-K filing dated June 3, 2008.

 

On July 17, 2008, the Company entered into new or amended employment agreements with the other Named Officers who remained employed by the Company at that time. The agreements for Mmes. Duchene and Ferguson and Messrs. Cherbak and Franke each became effective as of August 1, 2008. The new agreements set forth the terms of each executive’s employment with the Company, including his or her base salary, annual incentive compensation opportunity, long-term equity compensation, perquisites and severance and other benefits. Consistent with the Company’s objective of retaining high caliber talent, the severance and change of control benefits provided under the new agreements exceed the benefits previously provided to these executives (particularly for Ms. Duchene and Mr. Franke, who previously were not entitled to any severance benefits at all). A summary of the material terms of the benefits that may become payable under the new or amended agreements in connection with certain terminations of these Named Officers’ employment and/or a change in control of the Company is included in the “Potential Payments Upon Termination of Change In Control Section” below. The terms and conditions of Mmes. Duchene’s and Ferguson’s and Messrs. Cherbak’s and Franke’s employment agreements may be found in their entirety in the Company’s Form 8-K filing dated July 21, 2008.

 

Section 162(m) Policy

 

Under current IRS guidance, Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for compensation over $1,000,000 paid for any year to the corporation’s chief executive officer and other three most highly compensated executive officers (not including the principal financial officer). However, Section 162(m) exempts qualifying performance-based compensation from the deduction limit if certain other requirements are met. To the extent readily determinable and as one of the factors in its consideration of compensation matters, the CGN&C Committee considers the anticipated tax treatment to the Company and to the executives of various payments and benefits. Action will be taken to qualify most compensation approaches to ensure deductibility, except in those limited cases in which the CGN&C Committee believes stockholder interests are best served by retaining flexibility. In such cases, the CGN&C Committee will consider various alternatives to preserving the deductibility of compensation payments and benefits to the extent reasonably practicable and to the extent consistent with its other compensation objectives. We have intended to structure stock option grants to the Company’s executive officers under the 2004 Plan as qualifying performance-based compensation for Section 162(m) purposes. However, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued thereunder, no assurance can be given, notwithstanding the Company’s efforts, that compensation intended by the Company to satisfy the requirements for deductibility under Section 162(m) does in fact do so.

The following report of the Corporate Governance, Nominating and Compensation Committee does not constitute soliciting material and shall not be deemed filed with the SEC under the Securities Act of 1933 or the Securities Exchange Act of 1934 or incorporated by reference in any document so filed.

 

CORPORATE GOVERNANCE, NOMINATING AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION

 

The CGN&C Committee has certain duties and powers as described in its charter. The CGN&C Committee is currently composed of the three non-employee directors named at the end of this report, each of whom is independent as defined by NASDAQ listing standards.

 

The CGN&C Committee has reviewed and discussed with management the disclosures contained in the Compensation Discussion and Analysis section of this Proxy Statement. Based upon this review and our discussions, the CGN&C Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis section be included in this Proxy Statement.

 

The Corporate Governance, Nominating and Compensation Committee of the Board of Directors

 

Thomas Christopoul⁵, Chairperson

A. Robert Pisano

Jolene Sykes-Sarkis

 

CORPORATE GOVERNANCE, NOMINATING AND COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION

 

All of the CGN&C Committee members whose names appear on the CGN&C Committee Report above served as members of the CGN&C Committee during all of our 2008 fiscal year. No member of the CGN&C Committee during the 2008 fiscal year was an executive officer or employee of the Company during or prior to the 2008 fiscal year, or had any relationships requiring disclosure by the Company under the SEC’s rules requiring disclosure of certain relationships and related-party transactions. None of the Company’s executive officers served as a director or a member of the CGN&C Committee (or other committee serving an equivalent function) of any other entity, the executive officers of which served as a director or member of the CGN&C Committee during our 2008 fiscal year.

 

 

⁵ Effective June 1, 2008, Mr. Christopoul assumed the position of President and Chief Executive Officer of the Company and no longer serves as an independent director or member of the CGN&C Committee.

 

SUMMARY COMPENSATION TABLE — FISCAL 2008

 

The following table presents information regarding compensation of our Named Officers for services rendered during fiscal 2008. To the extent any Named Officers were also named officers for fiscal 2007, compensation information for fiscal 2007 is also presented for such Named Officers.

 

 

 

 

 

Compensation of Named Officers

 

The Summary Compensation Table — Fiscal 2008 and 2007 above quantifies the value of the different forms of compensation earned by or awarded to our Named Officers during our 2008 and 2007 fiscal year. The primary elements of each Named Officer’s total compensation reported in the table are base salary, an annual incentive compensation opportunity (which has both a discretionary component and a quantitative component) and long-term equity incentives consisting of stock options, and for Mr. Cherbak, shares of restricted stock granted during our 2006 fiscal year in connection with his commencement of employment. Named Officers also earned or were paid the other benefits listed in Column (i) of the Summary Compensation Table — Fiscal 2008 and 2007, as further described in footnote (4) to the table.

 

The Summary Compensation Table — Fiscal 2008 and 2007 should be read in conjunction with the tables and narrative descriptions that follow. A description of the material terms of each Named Officer’s base salary and the discretionary component of his or her annual incentive compensation opportunity is provided immediately following this paragraph. The Grants of Plan-Based Awards in Fiscal 2008 table, and the description of the material terms of the nonqualified stock options granted in fiscal 2008 and of the quantitative component of Named Officers’ annual incentive compensation opportunity that follows it, provides information regarding the stock options and incentive bonus opportunities awarded to Named Officers during our 2008 fiscal year. The Outstanding Equity Awards at Fiscal 2008 Year-End and Option Exercises and Stock Vested in Fiscal 2008 tables provide further information on the Named Officers’ potential realizable value and actual value realized with respect to their equity awards. The discussion of the potential payments due upon a termination of employment or change in control that follows is intended to further explain the potential future payments that are, or may become, payable to our Named Officers under certain circumstances.

 

Description of Base Salary and Bonus Amounts

 

Base Salary.  As discussed in more detail in the Compensation Discussion and Analysis, our CGN&C Committee reviews each Named Officer’s base salary on at least an annual basis to determine whether any increase in base salary is warranted. In making its determination, the CGN&C Committee considers the factors discussed above under “Compensation Discussion and Analysis — Current Executive Compensation Program Elements.” Each Named Officer’s base salary earned for the Company’s 2008 fiscal year was the amount reported for the officer in the Summary Compensation Table above.

 

Discretionary Component of Bonus.  As discussed in more detail in the Compensation Discussion and Analysis, each Named Officer’s annual incentive compensation opportunity has a quantitative component and a discretionary component. For the Company’s 2008 fiscal year, 25% of each Named Officer’s target annual incentive compensation opportunity became payable based on discretionary factors determined by the Committee, which factors generally took into account both the Company’s and the Named Officer’s performance during the year. For the Company’s 2008 fiscal year, the actual amounts paid in respect of the discretionary component of the Named Officer’s annual incentive compensation opportunity were approved by the Committee after the end of the fiscal year and are reported in the “bonus” column of the Summary Compensation Table above. In accordance with SEC rules, we have reported amounts paid in respect of the quantitative component of the Named Officers’ annual

incentive compensation opportunity as “non-equity incentive plan compensation,” and have included a narrative description of the material terms of this component of the bonus opportunity following the Grants of Plan-Based Awards in Fiscal 2008 table below.

 

The sum of the fiscal 2008 base salaries of Messrs. Murray, Giusto, Franke, and Cherbak and Mmes. Ferguson and Duchene, plus the amounts payable (if any) in respect of the discretionary component of their annual incentive compensation opportunity for fiscal 2008 represented 41.1%, 0%, 78.2%, 52.8%, 50.4% and 50.9%, of their respective total compensation amounts reported in the Summary Compensation Table for fiscal 2008. These percentages would be higher if payments in respect of the quantitative component of the annual incentive compensation opportunity were also included.

 

GRANTS OF PLAN-BASED AWARDS IN FISCAL 2008

 

The following table presents information regarding the (i) nonqualified stock options that were granted to the Named Officers during our 2008 fiscal year under our 2004 Performance Incentive Plan and (ii) potential threshold, target and maximum amounts payable in respect of the quantitative component of the Named Officers’ annual incentive compensation opportunity for our 2008 fiscal year. The material terms of each of these compensation opportunities are described below.

 

 

 

 

Description of Plan-Based Awards

 

Nonqualified Options.  Each stock option granted during fiscal 2008 may be exercised to purchase one share of our common stock at an exercise price equal to the fair market value of the underlying common stock on the grant date. Each Named Officer’s stock option award has an ordinary term of ten years, and is subject to a four-year vesting period. Subject to each Named Officer’s continued employment, one-fourth of his or her stock option award will vest and become exercisable on each of the first four anniversaries of the grant date. The Named Officers’ stock option awards may also become vested under the circumstances described in the Potential Payments Upon

Termination or Change in Control section below. Upon a Named Officers’ termination of employment, the unvested portion of his or her stock option award (after giving effect to any vesting occurring in connection with the termination of employment) will immediately terminate. Vested options will generally remain outstanding and exercisable for three months after a Named Officer’s termination of employment, although this period may be extended or reduced depending on the circumstances of the termination of employment. Any vested options that are not exercised within the applicable post-termination of employment exercise window will terminate, and both vested and unvested options will immediately terminate upon a Named Officer’s termination of employment for cause.

 

Pursuant to the terms of the 2004 Performance Incentive Plan, if there is a corporate transaction such as a dissolution, recapitalization, merger, combination, reorganization, spin-off, exchange of common stock or other similar unusual or extraordinary transaction where the Company does not survive (or does not survive as a public company), each Named Officer’s stock option award will become fully vested and exercisable, unless the CGN&C Committee determines that the vesting of the options should not be accelerated because it has provided for the substitution, assumption, exchange or other continuation of outstanding options. In addition, the CGN&C Committee has the discretion under the 2004 Performance Incentive Plan to accelerate the vesting of each Named Officer’s (and other employees’) stock option award in connection with a change in control as defined in the 2004 Performance Incentive Plan and the Named Officers may also become vested in their stock options upon such a change in control under the circumstances described in the Potential Payments Upon Termination or Change in Control section below. Any options that become vested in connection with a corporate transaction described above (including a change in control) generally must be exercised prior to the transaction, or they will be “cashed-out” and terminated in connection with the transaction.

 

Each Named Officer’s stock option award was granted under, and is subject to the terms of, the 2004 Performance Incentive Plan. The Plan is administered by the CGN&C Committee, and the Committee has the ability to interpret and make all required determinations under the plan. This authority includes making required proportionate adjustments to outstanding stock options to reflect the corporate transactions described above, and making provision to ensure that participants satisfy any required withholding taxes.

 

The Named Officers are not entitled to any dividend equivalent rights on their stock option award, and stock option awards are generally only transferable to a beneficiary of a Named Officer upon his death or as approved by the CGN&C Committee.

 

Quantitative Component of Bonus.  As discussed in more detail in the Compensation Discussion and Analysis, for our 2008 fiscal year, Mr. Murray had a target annual incentive compensation opportunity equal to 65% of his base salary, while the other Named Officers had a target annual incentive opportunity equal to 50% of their respective base salaries. The first 75% of each Named Officer’s target annual incentive compensation opportunity became payable based on quantitative financial performance measures tied to revenue and net income growth. The Company considers the specific revenue and net income targets to be confidential commercial and financial information, the disclosure of which could result in competitive harm to the Company; however, the Company believes that the targets, while difficult to attain, were reasonably attainable if the Company achieved its planned performance objectives for the year. The Company must achieve at least 85% of the annual revenue target for the Named Officers to receive any payment in respect of the quantitative component of their annual incentive compensation opportunity. If this revenue threshold is achieved, then 50% of the quantitative component will become payable based on the Company’s annual revenue performance and the other 50% will become payable based on the Company’s annual net income performance. For each quantitative performance measure, a threshold payment will be made at Company performance levels equal to 85% of the target amounts listed above, the target payment will be made if the Company achieves the target performance levels, and the maximum payment will be made if the Company achieves performance levels equal to 140% or more of the target performance levels. For each performance measure, the threshold payout is equal to 30% of the target annual incentive compensation opportunity attributable to the performance measure, the target payout is equal to 100% of such target amount attributable to the performance measure and the maximum payout is equal to 300% of the target amount attributable to the performance measure. The amounts payable for performance levels in between the threshold, target and maximum performance levels are determined based on straight line interpolation. The Grants of Plan Based Awards in fiscal 2008 table above shows the potential amounts that were payable for our 2008 fiscal year in respect of the

quantitative component of the Named Officers’ annual incentive compensation opportunity, assuming the revenue and net income performance measures were each attained at threshold, target and maximum performance levels. The actual amounts paid in respect of the quantitative component of the Named Officers’ annual incentive compensation opportunity for the Company’s 2008 fiscal year are reported in the “non-equity incentive plan compensation” column of the Summary Compensation Table above.

 

OUTSTANDING EQUITY AWARDS AT FISCAL 2008 YEAR-END

 

The following table presents information regarding the outstanding equity awards held by each Named Officer as of the end of our 2008 fiscal year on May 31, 2008.

 

 

 

 

OPTION EXERCISES AND STOCK VESTED IN FISCAL 2008

 

The following table presents information regarding the exercise of stock options by the Named Officers during our 2008 fiscal year, and on the vesting during our 2008 fiscal year of restricted stock awards held by the Named Officers.