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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

 

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CSG Systems International, Inc.
9555 Maroon Circle
Englewood, Colorado 80112

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF CSG SYSTEMS INTERNATIONAL, INC.

        Agenda:    

1.

To elect three Class II Directors nominated by our Board of Directors.



2.

To approve, on an advisory basis, our executive compensation.



3.

To approve an amendment to increase the number of shares authorized for issuance under our Amended and Restated 2005 Stock Incentive Plan.



4.

To ratify the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2014.



5.

To transact any other business that properly comes before the meeting or any adjournment or postponement of the meeting.

        Record Date:    The Board of Directors fixed the close of business on March 28, 2014, as the record date for determining the stockholders of the Company who are entitled to notice of and to vote at the meeting and any adjournment thereof.

        All stockholders are cordially invited to attend the meeting.

April 10, 2014

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IMPORTANT NOTICE REGARDING THE
AVAILABILITY OF PROXY MATERIALS
FOR THE STOCKHOLDER MEETING
TO BE HELD ON MAY 22, 2014

The proxy statement and the Company's Annual Report on Form 10-K are available at www.proxyvote.com.

        THE SECURITIES AND EXCHANGE COMMISSION ("SEC") HAS ADOPTED A "NOTICE AND ACCESS" RULE THAT ALLOWS COMPANIES TO DELIVER A NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS ("NOTICE OF INTERNET AVAILABILITY") TO STOCKHOLDERS IN LIEU OF A PAPER COPY OF THE PROXY STATEMENT, RELATED MATERIALS AND THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS (THE "PROXY MATERIALS").

        THE NOTICE OF INTERNET AVAILABILITY PROVIDES INSTRUCTIONS AS TO HOW STOCKHOLDERS CAN ACCESS THE PROXY MATERIALS ONLINE, CONTAINS A LISTING OF MATTERS TO BE CONSIDERED AT THE MEETING, AND SETS FORTH INSTRUCTIONS AS TO HOW SHARES CAN BE VOTED. SHARES MUST BE VOTED EITHER BY TELEPHONE, ONLINE OR BY COMPLETING AND RETURNING A PROXY CARD. SHARES CANNOT BE VOTED BY MARKING, WRITING ON AND/OR RETURNING THE NOTICE OF INTERNET AVAILABILITY. ANY NOTICES OF INTERNET AVAILABILITY THAT ARE RETURNED WILL NOT BE COUNTED AS VOTES. INSTRUCTIONS FOR REQUESTING A PAPER COPY OF THE PROXY MATERIALS ARE SET FORTH ON THE NOTICE OF INTERNET AVAILABILITY.

        ALL STOCKHOLDERS ARE WELCOME TO ATTEND THE ANNUAL MEETING. IF YOU ATTEND THE MEETING AND ARE A STOCKHOLDER OF RECORD, YOU MAY VOTE IN PERSON. IF YOU WISH TO ATTEND AND VOTE AT THE MEETING AND YOUR SHARES ARE HELD IN "STREET NAME," YOU WILL NEED TO OBTAIN A PROXY FROM THE INSTITUTION THAT HOLDS YOUR SHARES AND SHOULD ADVISE SUCH INSTITUTION NOT TO VOTE YOUR SHARES. A PROXY WHICH YOU GIVE WILL NOT BE USED IF YOU ATTEND THE MEETING IN PERSON AND SO REQUEST.

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CSG Systems International, Inc.
2014 Proxy Summary

This summary highlights information contained in this Proxy Statement. It is intended to assist you in your review of the proposals to be acted upon, and provide key information about the Company. For more complete information on any specific topic, please refer to the Table of Contents on the previous pages.

 

 

 

 

 

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•

Achieved solid performance in 2013 delivering strong financial and operating results, and executing on many of our key initiatives to advance our business;



•

Expanded portfolio of solutions used in our clients' businesses—helping them roll out new products and services, drive cost efficiencies and enhance their customers' experience—while continuing to invest in our people and our products in a prudent and thoughtful manner;



•

Renewed long-term contracts into 2017 with two of our largest clients, Comcast Corporation and Time Warner Cable, Inc., together accounting for 30% of our total 2013 revenues;



•

Secured several long-term contracts for our new international managed services offering and expanded our client list for our content management and monetization platform, Content Direct; and



•

Initiated a quarterly cash dividend to stockholders for the first time in company history.

        Our compensation program is designed to create incentive compensation opportunities for our executives that align with the strategic goals of our Company and our stockholders' long-term interests. Here are the 2013 highlights:

•

Named executive officers (NEOs) received at target or slightly below target compensation under our incentive compensation programs as a result of the Company's 2013 performance against specified internal operational financial and stock price targets;



•

Performance-based component of our NEO long-term incentive restricted stock awards increased from 50% to 60%, making each NEO's total target compensation 50% or more performance-based; and



•

91% of the votes cast at our 2013 annual meeting approved of, on an advisory basis, the compensation paid to our NEOs.

•

All directors independent (other than our CEO);



•

Independent board chair and regular executive sessions of independent directors;



•

Each director attended at least 75% of the board and applicable committee meetings;



•

Three active standing board committees comprised solely of independent directors;



•

Regular succession planning discussions;



•

Meaningful director and executive stock ownership guidelines; and



•

Directors may not stand for election after age 75.

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CSG Systems International, Inc.
9555 Maroon Circle
Englewood, Colorado 80112

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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
May 22, 2014
Sofitel Chicago Water Tower Hotel, 20 East Chestnut Street, Chicago, Illinois 60611
8:00 a.m. local time

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QUESTIONS AND ANSWERS ABOUT THE 2014 ANNUAL MEETING AND VOTING

Q:    Why am I receiving these materials?

A:

CSG Systems International, Inc. ("we," "us," "our" or the "Company") will hold our 2014 Annual Meeting of Stockholders on May 22, 2014. These proxy materials explain the items of business that will be brought to a vote.

As a stockholder, you are invited to attend and vote at our Annual Meeting, or at any adjournment or postponement thereof. To ensure your vote is counted, the Board of Directors (the "Board") is soliciting your proxy to vote on your behalf.

Q:    What information is contained in this proxy statement?

A:

This proxy statement explains the proposals to be voted on at the Annual Meeting and the voting process, and provides information about corporate governance, our Board and the compensation of our directors and certain executive officers.

Q:    How do I get electronic access to the proxy materials?

A:

You may view our proxy materials at www.proxyvote.com.

Q:    What items of business will be voted on at the Annual Meeting?

A:

There are four proposals scheduled to be voted on at the Annual Meeting:

Each of these proposals is discussed in this proxy statement.

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

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Q:    What shares can I vote?

A:

You are entitled to one vote for each share of our common stock that you own as of the close of business on March 28, 2014 (the "record date"). You also can vote all shares for which you hold a valid proxy. At the close of business on the record date, there were [34,086,903] shares of our common stock outstanding and entitled to vote at the Annual Meeting.

Q:    May I attend the Annual Meeting?

A:

You may attend the Annual Meeting only if you were a stockholder of the Company as of the record date or you hold a valid proxy for the Annual Meeting. You can vote your shares even if you do not attend the Annual Meeting, and we encourage you to do so.

Q:    May I vote my shares in person at the Annual Meeting?

A:

If you are a stockholder of record—meaning you hold our common stock in your name—you may vote those shares in person at the Annual Meeting. If you are a beneficial owner—meaning that a broker, bank, trustee, or other nominee holds your common stock in "street name"—you can vote at the Annual Meeting only if you obtain a legal proxy from the record holder giving you the right to vote the shares.

Even if you plan to attend the Annual Meeting, we recommend that you submit your proxy or voting instructions as described below so that your vote will be counted if you later decide not to attend.

Q:    May I vote my shares without attending the Annual Meeting?

A:

You may direct how your shares are voted without attending the Annual Meeting. If you are a stockholder of record, you will receive a "Notice of Internet Availability" which provides instructions as to how stockholders can access the Proxy Materials online, contains a listing of matters to be considered at the meeting, and sets forth instructions as to how shares can be voted by telephone, online or by completing and returning a proxy card. If you hold shares beneficially in street name, your broker, bank, trustee or nominee has the right to vote the shares, but should provide you a means to give voting instructions.

Q:    May I change my vote?

A:

You may change your vote at any time before we take the vote at the Annual Meeting.

If you are the stockholder of record, there are three ways to change your vote: (1) deliver a new proxy bearing a later date (which automatically revokes your earlier proxy) by mail, telephone, or over the Internet, (2) provide a written notice of revocation to our Secretary, or (3) attend the Annual Meeting, specifically revoke your proxy, and vote in person. If you attend the Annual Meeting but do not specifically revoke your previously granted proxy, that proxy will remain in effect.

If you are a beneficial owner, you may change your vote by submitting new voting instructions to your broker, bank, trustee or nominee. Alternatively, if you have obtained a legal proxy from your broker, bank, trustee or nominee giving you the right to vote your shares, you can attend the Annual Meeting and vote in person.

Q:    How many shares must be present or represented to conduct business at the Annual Meeting?

A:

We can hold the Annual Meeting and transact business if a majority of the issued and outstanding shares of common stock entitled to vote are present in person or represented by proxy.

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Abstentions are counted for the purpose of determining whether there is a quorum. "Broker non-votes" are counted for the purpose of determining whether there is a quorum so long as the bank, broker, or nominee uses its "discretionary authority" to vote on Proposal 4. Broker non-votes and discretionary authority are described below.

Q:    What is the voting requirement to approve each of the proposals?

A:

For Proposal 1, the election of directors, the three individuals who receive the highest number of affirmative FOR votes at the Annual Meeting will be elected. Each of Proposals 2, 3 and 4 will be approved if the proposal receives the affirmative FOR vote of a majority of the votes cast on the proposal.

Abstentions are considered votes cast, and thus have the same effect as AGAINST votes. Broker non-votes are not considered votes cast with respect to Proposals 1, 2 and 3, and will not affect the outcome on those matters.

Q:    How are votes counted?

A:

Votes cast in person or by proxy will be tabulated by the inspector appointed for the Annual Meeting. In the election of directors, you may vote FOR all or some of the nominees or your vote may be WITHHELD with respect to one or more of the nominees. If you provide specific instructions on your proxy card, your shares will be voted as you instruct. If you do not give instructions, your shares will be voted as recommended by the Board.

Q:    Is cumulative voting permitted for the election of directors?

A:

No. You may not cumulate your votes for the election of directors.

Q:    What happens if additional matters are presented at the Annual Meeting?

A:

We are not aware of any business to be acted upon at the Annual Meeting other than the four proposals described in this proxy statement. If you grant a proxy, the individuals named as proxy holders, Peter E. Kalan and Joseph T. Ruble, and each or either of them, will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If for any reason a nominee is not available as a candidate for director, the proxy holders will vote your proxy for such other candidate or candidates as the Board may nominate.

Q:    Who will bear the cost of soliciting votes for the Annual Meeting?

A:

We will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials and soliciting votes. If you choose to access the proxy materials or vote over the Internet, you are responsible for Internet access charges you may incur. If you choose to vote by telephone, you are responsible for telephone charges you may incur. Our directors, executives and regular employees, without additional remuneration, and their appointed agents, may solicit proxies or votes in person, by telephone or by electronic communication. We will request banks, brokers, and other fiduciaries to forward proxy materials to the owners of stock held in their names and will reimburse the reasonable out-of-pocket expenses incurred in connection with that distribution.

Q:    Where can I find the voting results of the Annual Meeting?

A:

We intend to announce voting results on a Current Report on Form 8-K filed with the SEC no later than four business days after the Annual Meeting.

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CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

Directors

        Our current directors include: David G. Barnes, Ronald H. Cooper, John L. M. Hughes, Peter E. Kalan, Janice I. Obuchowski, Donald B. Reed, Bernard W. Reznicek, Frank V. Sica, Donald V. Smith and James A. Unruh. Mr. Reznicek's term will end at our Annual Meeting in accordance with our director retirement age policy as detailed in our Corporate Governance Guidelines (located at http://ir.csgi.com/documents.cfm).

Director Independence

        The Board has determined that every Board member except Mr. Kalan, our President and Chief Executive Officer (CEO), is an "independent director" as defined in the applicable rule of The Nasdaq Stock Market, Inc., or NASDAQ. We believe that having a Board made up predominantly of independent, experienced directors with independent oversight by a non-executive Chair (as further described below) benefits our Company and our stockholders.

Communications with the Board

        We invite stockholders to send written communications to the Board or to individual Board members. Please send your letter in care of the Secretary of the Company at the address shown on the first page of this proxy statement. If a letter relates to publicly available information about the Company or our stock, the Secretary will respond to the writer directly. If a letter is primarily commercial in nature or relates to an improper or irrelevant topic, the Secretary will make a record of it, but will not transmit the communication to the Board. Any letter that relates to accounting, internal accounting controls, or auditing matters will be forwarded to the Chair of the Audit Committee. All other letters will be forwarded to the entire Board or to the individual Board member(s) to whom they are addressed.

Annual Meeting Attendance

        Historically, very few stockholders have attended the Company's annual meetings of stockholders; almost all stockholders who vote do so by proxy. Accordingly, directors are not required to attend our annual meetings. We expect employee directors to attend if their schedules permit, and non-employee directors are welcome to attend if they wish. All of our directors attended our 2013 Annual Meeting. The Board has scheduled our 2014 Annual Meeting to coincide with a regular quarterly meeting of the Board so that all members present at the quarterly meeting of the Board can attend the Annual Meeting as well.

Director Attendance at Board Meetings

        During 2013, the Board held five meetings. All directors attended at least 75% of the total number of meetings of the Board and of the committees on which they served. In addition, the Board held four executive sessions during 2013 during which only independent directors were present.

Board Committees

Audit Committee

        The Audit Committee is presently composed of Mr. Barnes, Ms. Obuchowski, Mr. Reed and Mr. Reznicek (Chair). The Audit Committee's primary purposes are to oversee our accounting and financial reporting processes, the audits of our financial statements, and our risk and compliance management programs.

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        As required by the Audit Committee Charter (located at http://ir.csgi.com/documents.cfm), all members of the Audit Committee satisfy all NASDAQ requirements applicable to audit committee members and are "independent" as defined by the rules promulgated by the SEC under the Exchange Act, and by NASDAQ. The Board has determined that Messrs. Reed, Barnes and Reznicek are "audit committee financial experts" as defined by applicable rules. The Audit Committee held four meetings during 2013.

        Risk and Compliance Oversight.     To administer our risk management program, we established a Business Risk Committee comprised of our NEOs (see the Compensation Discussion and Analysis beginning on page 20), chaired by our Chief Financial Officer, and coordinated by our internal audit department. The internal audit department reports directly to the Audit Committee, and prepares a quarterly report for the Audit Committee summarizing material existing and emerging business risks.

        We also maintain a formal risk assessment and risk mitigation program that is administered by our Chief Financial Officer. Executive officers, in conjunction with members of our internal audit department, review this program periodically throughout the year. This program is intended to: (1) identify those risks that are most likely to affect our business, (2) assign an executive to be responsible for monitoring and mitigating those risks, and (3) provide a formal mechanism for the assigned executive to report back periodically on the adequacy and effect of mitigation efforts. The Audit Committee and the Board review the results of this program at each regularly scheduled meeting. In addition, our Chief Compliance Officer reports to the Audit Committee on an annual basis and is authorized to personally communicate with the Audit Committee on all matters relating to our compliance program.

Compensation Committee

        The Compensation Committee presently is, and in 2013 was, composed of Messrs. Cooper, Hughes, Sica (Chair), Smith and Unruh. The Compensation Committee's primary purposes are to review and recommend senior management compensation and benefits policies generally, evaluate the performance of our executive officers, and review and recommend the compensation of our executive officers. In addition, the Compensation Committee has independent authority to administer and grant equity awards under our equity plans and our Performance Bonus Program for executive officers. The Compensation Committee also is responsible for ongoing oversight and evaluation of our compensation policies and practices for employees generally as they relate to risk management.

        As required by the Compensation Committee Charter (located at http://ir.csgi.com/documents.cfm), all members of the Compensation Committee are "outside directors" for purposes of Section 162(m) of the Internal Revenue Code of 1986 and are "independent" as defined by the rules promulgated by the SEC under the Exchange Act, and by NASDAQ. The Compensation Committee meets at least quarterly, and held four meetings during 2013.

        Determining Executive Officer Compensation and Use of Independent Compensation Consultant.     To assist it with its responsibilities, the Compensation Committee retains an independent compensation consultant, consults with our Chief Executive Officer and Senior Vice President of Human Resources, and draws upon the extensive business experience of its members. The Compensation Committee directs the independent compensation consulting firm to prepare a comprehensive formal assessment of the competitiveness of our executive officer compensation program, including a comparison of the principal components of our program (base salaries, performance bonuses and equity awards) with those of a peer group of other public companies. The Compensation Committee considers this assessment and other data provided by the consultant in arriving at its decisions or recommendations to the Board with respect to base salaries, performance bonuses and long-term incentives for our executive officers. For additional information about our executive compensation program, see the Compensation Discussion and Analysis beginning on page 20.

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        The Compensation Committee periodically evaluates the qualifications of its independent compensation consultant. In August 2011, the Compensation Committee selected Pearl Meyer & Partners ("PM&P") as its independent compensation consultant. During 2013, PM&P provided only executive compensation guidance to the Compensation Committee and did not provide any other services to the Company. During 2013, the Compensation Committee requested information from PM&P, our executives and our Board members in order to assess the independence of PM&P as the Committee's compensation consultant and to determine whether PM&P's work raised any conflict of interest. Based on the information provided, the Compensation Committee determined that PM&P was independent and that the work of PM&P did not raise a conflict of interest.

        Determining Non-Employee Director Equity Awards.     In making equity awards to our non-employee directors, the Compensation Committee considers relevant information provided by the independent compensation consultant and the recommendations of our Nominating and Corporate Governance Committee and the Board.

        Risks Related to Compensation Policies and Practices for All Employees.     The Compensation Committee does not believe that any risks arising from our compensation policies and practices are reasonably likely to have a material adverse effect on the Company. A number of the factors considered by the Compensation Committee when it develops executive compensation recommendations have the effect of mitigating risk. Additionally, executive officers and certain members of senior management regularly review our employee compensation policies and practices, including the elements of our compensation programs, to determine whether any element or program design encourages excessive risk taking. The Board and senior management consider the following factors that reduce the likelihood of excessive risk taking:

•

Our compensation program consists of a balance of multiple elements, including base salary, annual cash incentive programs and, for some employees, long-term equity incentive awards that are earned over a number of years.



•

The structure of our annual cash incentives for senior executives includes multiple performance measures that are objective and quantifiable with a corresponding minimum and maximum payout range and our sales compensation plan includes provisions to mitigate risk to the Company.



•

A significant portion of our executive officers' pay is tied to long-term equity awards based on the achievement of pre-determined financial measures that we believe link the long-term interests of our executives with those of our stockholders.



•

Our executive officers are subject to stock ownership guidelines and must comply with our insider trading policy.



•

We have effective management processes, including a formal risk assessment process and strong internal controls.



•

Our Board and Audit Committee maintain regular oversight of our risk management program.

        Compensation Committee Interlocks and Insider Participation.     No member of the Compensation Committee has ever been an officer or employee of the Company. In 2013, no member of the Compensation Committee had any relationship or transaction with the Company that would require disclosure as a "related person transaction" under SEC rules. During 2013, none of our executive officers served on the board of directors or compensation committee of any other entity whose executive officer(s) served as a member of our Board or Compensation Committee.

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Nominating and Corporate Governance Committee

        The Nominating and Corporate Governance Committee presently is composed of Mr. Cooper (Chair), Mr. Hughes, Ms. Obuchowski and Mr. Smith. The Nominating and Corporate Governance Committee's primary purposes are to identify individuals qualified to become Board members, recommend to the Board nominees for election as directors and directors for appointment to Board committees, evaluate the Board's performance, review and recommend the compensation of our directors, and develop and recommend for Board approval our Corporate Governance Guidelines and Code of Conduct.

        The Nominating and Corporate Governance Committee Charter (located at http://ir.csgi.com/documents.cfm) requires that a majority of the members be independent directors. The Nominating and Corporate Governance Committee held four meetings during 2013.

        What We Look for in Director Nominees.     In recommending nominees for election as directors, the Nominating and Corporate Governance Committee reviews the present composition of the Board to determine the qualities, skills and areas of expertise needed to enable the Board and its committees to properly discharge their responsibilities. The Nominating and Corporate Governance Committee historically has relied upon members of the Board and our Chief Executive Officer to recommend potential candidates for service on the Board. The Nominating and Corporate Governance Committee considers it necessary for the Board to have at least one independent member who qualifies as an "audit committee financial expert" and takes that requirement into account when recommending nominees. When identifying and assessing a candidate's qualifications, the Nominating and Corporate Governance Committee considers, among other things, the number and type of other boards on which the candidate serves; the candidate's other business and professional commitments and potential conflicts of interest; the candidate's ability and willingness to devote the required amount of time to service as a Board member and as a member of one or more Board committees; and the candidate's age, background, reputation, independence, experience, skills and judgment.

        Our Nominating and Corporate Governance Committee considers the diversity of the Board's membership when nominating directors. We interpret the term "diversity" in its broadest sense and believe it encompasses many attributes, including age, background, experience, skills, substantive expertise, gender, ethnicity, geography and education. Our Board is particularly interested in maintaining a collective group of individuals with experience in operations, finance, accounting, marketing, human resources, sales and international business, particularly in the technology and communication service provider and related industries. We also consider whether nominees are active or retired executive officers of public or private companies and whether they have ever served on the board of a public company.

        Our Board members also should display the personal attributes necessary to be effective directors: integrity, sound judgment, independence, ability to operate collaboratively, and a fiduciary commitment to the Company and our stockholders. We believe the current members of our Board have a diverse set of business and personal experiences, backgrounds and expertise, and that they all share the personal attributes described above.

        Shareholder Recommended Director Candidates.     The Nominating and Corporate Governance Committee will consider qualified nominees recommended by our stockholders for election as directors. A stockholder who wishes to recommend a nominee for the Board should submit the recommendation in writing to the Secretary of the Company at the address shown on page 62 of this proxy statement, indicating the proposed nominee's qualifications and other relevant biographical information and providing written confirmation that the proposed nominee consents to serve as a director if nominated and elected. The Secretary of the Company will forward qualifying recommendations from stockholders to the chair of the Nominating and Corporate Governance Committee for further review and consideration. Our bylaws provide that stockholder nominations for election to the Board are subject to

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certain advance notice and informational requirements. Stockholders may obtain a copy of the relevant bylaw provisions from the Secretary of the Company.

Board Leadership Structure

        Since 2005, an independent director has served as non-executive Chair of the Board. Currently, Mr. Reed serves in that position. We believe it is beneficial to separate the roles of Board Chair and Chief Executive Officer for two reasons: the responsibilities of each position can be clearly delineated, and each individual can devote more time to a single position.

        Our Corporate Governance Guidelines permit the Board to modify this leadership structure. In the future, if the Board believes it would be in the best interest of the Company and our stockholders, the Board may decide that one person should serve as both Chief Executive Officer and Board Chair.

Code of Conduct

        Our Board has adopted a Code of Conduct applicable to all directors, officers and employees of the Company and our subsidiaries. Our Code of Conduct and Corporate Governance Guidelines are available on our website under Investor Relations, Corporate Governance, located at http://ir.csgi.com/documents.cfm. Information on our website is not incorporated by reference in this proxy statement. We will disclose on our website any amendments to our Code of Conduct, or any waiver of a provision of our Code of Conduct that is required to be disclosed under applicable rules of the SEC. Historically, we have had minimal changes to our Code of Conduct, and there have not been any waivers that are required to be disclosed.

COMPENSATION OF DIRECTORS

        During 2013, each non-employee director of the Company received an annual fee of $75,000, payable in quarterly installments. Additionally, each non-employee director receives an annual equity grant of restricted stock as determined by the Compensation Committee which vests on the first anniversary of grant. The annual Chair retainers in 2013, also paid in quarterly installments, were as follows:

•

Chair of the Board: $50,000



•

Chair of the Audit Committee: $16,000



•

Chair of the Nominating and Corporate Governance Committee: $10,000



•

Chair of the Compensation Committee: $16,000

        A director who is an officer or employee of the Company does not receive additional compensation for serving as a director or committee member. Mr. Kalan is the only current officer or employee of the Company who serves as a director, and he does not currently serve on any Board committee.

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2013 Director Compensation

        The following table contains information concerning the compensation of the Company's non-employee directors for 2013. All amounts have been rounded to the nearest dollar.

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PROPOSAL 1
ELECTION OF DIRECTORS

        The Board is divided into three classes presently consisting of three Class I Directors, four Class II Directors and three Class III Directors whose present terms continue until the annual meetings of stockholders of the Company to be held in 2016, 2014 and 2015, respectively, and until their respective successors are elected and qualified.

        Unless the proxy is marked otherwise, the person acting under the accompanying proxy will vote to elect Messrs. Barnes, Hughes and Smith, as the Class II Directors to serve until 2017. The proxy may not be voted for more than three directors. If a nominee is unable to serve, then the person acting under the proxy may vote the proxy for the election of a substitute nominee. The Company presently expects that all of the three nominees will be able to serve.

The Board recommends that stockholders vote FOR the election of
Messrs. Barnes, Hughes and Smith as Class II Directors.

        The following information relates to the Board's nominees for election at the Annual Meeting and to the other directors of the Company whose terms of office will continue after the Annual Meeting:

Nominees for Class II Directors—Term Expires in 2017:

        Mr. Barnes currently serves as the Chief Financial Officer and a director for MWH Global, a private, employee-owned global provider of environmental engineering, construction and strategic consulting services. From 2006 to 2008, he was Executive Vice President of Western Union Financial Services. From 2004 to 2006, Mr. Barnes served as Chief Financial Officer of Radio Shack Corporation. From 1999 to 2004, he was Vice President, Treasurer and U.S. Chief Financial Officer for Coors Brewing Company. Mr. Barnes holds an M.B.A. degree from the University of Chicago and a B.A. degree from Yale University.

Skills and Qualifications

        Corporate Governance—Significant knowledge of public company governance functions such as approval of annual budgets and compensation, and experience being accountable to stakeholders for the organization's financial performance, gained through executive financial positions at public companies. Also serves as a director of MWH Global.

        Financial Experience—Almost 30 years' experience in finance and strategic development gained from a wide spectrum of well-known and respected companies, including Western Union Financial Services, Radio Shack Corporation and Coors Brewing Company. Hands-on strategic, financial and business development experience in emerging and mature markets at both domestic and global companies.

        Leadership Experience—Oversaw all financial activities for the United States business and performed the global investor relations function at Coors. Extensive experience in driving shareholder value in a variety of complex international businesses.

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        Mr. Hughes previously served as Chairman of the board of directors for Intec Telecom Systems plc for nearly six years until it was acquired by us in 2010. Mr. Hughes currently serves as Chairman for several public corporations and for privately-held Just-Eat Group Holdings Limited. He also is a director for privately-held Scorpion Ventures Limited. Mr. Hughes has been an advisor to Oakley Corporate Finance since 2012 and previously served as an advisor to Advent International, a private equity fund, from 2008 to 2011. Prior to his board positions, from 2000 to 2004, Mr. Hughes served as Executive Vice President and Chief Operating Officer for Thales Group, a European provider of complex systems for the defense, aerospace and commercial markets. Prior to 2000, he served as President of GSM/UMTS Wireless Networks of Lucent Technologies, and as a director of Convex Global Field Operations and Vice President and Managing Director of Convex Europe, a division of Hewlett-Packard Company. Mr. Hughes holds a B.S. degree in Electrical and Electronic Engineering from the Hatfield Polytechnic (now the University of Hertfordshire).

Skills and Qualifications

        Corporate Governance—Extensive knowledge of public company governance functions including monitoring the performance of chief executive officers, approving annual budgets and compensation, and being accountable for the organization's performance, gained through roles as chairman and director for several companies.

        Financial Experience—Extensive experience in leading global companies, making and integrating acquisitions, implementing restructuring programs, and enhancing shareholder value through effective management selection and development, sales growth strategies and operational excellence.

        Leadership Experience—Several chairman and director positions for large, global communications and technology companies, as well as senior executive positions at various international communications and technology companies including lengthy periods living and working in the United States and France. Direct responsibility for major joint ventures in Japan and Australia and large development centers in India and China.

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        Mr. Smith is presently retired. Previously, he served as Senior Managing Director of Houlihan Lokey Howard & Zukin, Inc., an international investment banking firm with whom he had been associated from 1988 through 2009, and where he served on the board of directors. From 1978 to 1988, he served as a Principal with Morgan Stanley & Co. Inc., where he headed the company's valuation and reorganization services. He also serves on the board of directors of several non-profit organizations. Mr. Smith holds an M.B.A. degree from the Wharton Graduate School of the University of Pennsylvania and a B.S. degree from the United States Naval Academy.

Skills and Qualifications

        Corporate Governance—Significant experience serving as a director of several public and non-profit companies.

        Financial Experience—Over 40 years of expertise in financial, investment and valuation analysis as an executive with international investment firms, notably as Senior Managing Director of Houlihan Lokey Howard & Zukin, Inc. and as Principal with Morgan Stanley & Co. Inc., dealing with corporate finance, mergers, acquisitions, financial restructurings and other financial activities. Provided international investment banking advice and service to clients in various industries around the world.

        Industry Experience—Significant advisory experience in markets directly related to our core competency, namely business services, data processing, software and information technology.

Class I Directors—Term Expires in 2016:

        Mr. Cooper is presently retired. He most recently served as the President and Chief Executive Officer of Clear Channel Outdoor Americas, Inc. from 2009 through 2012. Previously, he was a Principal at Tufts Consulting LLC from 2006 through 2009. He spent nearly 25 years in the cable and telecommunications industry, most recently at Adelphia Communications where he served as President and Chief Operating Officer from 2003 to 2006. Prior to Adelphia, Mr. Cooper held a series of executive positions at AT&T Broadband, RELERA Data Centers & Solutions, MediaOne and its predecessor Continental Cablevision, Inc. He has served on various boards of directors and committees with the National Cable Television Association, California Cable & Telecommunications Association, Cable Television Association for Marketing, New England Cable Television Association and Outdoor Advertising Association of America. Mr. Cooper holds a B.A. degree from Wesleyan University.

Skills and Qualifications

        Corporate Governance—Director and committee positions with various industry associations and non-profit boards of directors.

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        Industry Experience—Nearly 25 years of experience in the communications industry serving in executive positions at Adelphia, AT&T Broadband, RELERA Data Centers & Solutions, MediaOne and its predecessor Continental Cablevision.

        Leadership Experience—Served in multiple senior executive roles, including as President and Chief Executive Officer of Clear Channel Outdoor Americas, Inc. and as President and Chief Operating Officer at Adelphia Communications. Experience in the acquisition and development of executive talent.

        Ms. Obuchowski is the founder and President of Freedom Technologies, Inc., a research and consulting firm providing public policy and strategic advice to companies in the communications sector, government agencies and international clients, since 1992. She was previously Chairman and the founder of Frontline Wireless, Inc., a public safety network start-up from 2007 through 2008. In 2003, Ms. Obuchowski was appointed by President George W. Bush to serve as Ambassador and Head of the U.S. Delegation to the World Radiocommunication Conference. She has served as Assistant Secretary for Communications and Information at the Department of Commerce, as Administrator for the National Telecommunications and Information Administration (NTIA) and as the head of international government relations at NYNEX. She also has served on several non-profit boards. She holds a J.D. degree from Georgetown University and a B.A. degree from Wellesley College, and also attended the University of Paris.

Skills and Qualifications

        Corporate Governance—Broad governance experience from her service as a director of multiple public companies and non-profit organizations.

        Industry Experience—Extensive knowledge and expertise on various facets of the competitive landscape and government regulations impacting the communications sector. Experience in international business affairs through her current and prior board positions, government appointments supporting international communications policies, and as head of international government relations at NYNEX.

        Leadership Experience—Current President of Freedom Technologies, Inc. and former Chairman of Frontline Wireless. Led the NTIA, a government agency with policy, spectrum management, and government research facility responsibilities. Responsible for major United States delegations and support personnel at international conferences.

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        Mr. Reed is retired, having served as Chief Executive Officer of Cable & Wireless Global from May 2000 to January 2003. Cable & Wireless Global, a subsidiary of Cable & Wireless plc, is a provider of internet protocol (IP) and data services to business customers in the United States, United Kingdom, Europe and Japan. From June 1998 until May 2000, Mr. Reed served Cable & Wireless in various other executive positions. Mr. Reed's career includes 30 years at NYNEX Corporation (now part of Verizon), a regional telephone operating company. From 1995 to 1997, Mr. Reed served NYNEX Corporation as President and Group Executive with responsibility for directing the company's regional, national and international government affairs, public policy initiatives, legislative and regulatory matters, and public relations. Mr. Reed holds a B.A. degree in History from Virginia Military School.

Skills and Qualifications

        Corporate Governance—Significant experience serving as a director of multiple public companies, including large multinationals, and his current position as Chairman of privately-held Oceus Networks Inc.

        Financial Experience—Held executive management positions at several multi-billion dollar corporations where he developed expertise in financial management, risk assessment, investment knowledge and strategic business development.

        Leadership Experience—Over 30 years of experience in the domestic and international telecommunications industry including executive leadership positions as Chief Executive Officer for Cable & Wireless Global and as President and Group Executive for NYNEX Corporation. Extensive experience in developing and implementing strategies and policies for the acquisition and development of executive talent.

Class III Directors—Term Expires in 2015:

        Mr. Kalan currently serves as our President and Chief Executive Officer. He joined the Company in January 1997, was appointed as our Chief Financial Officer in August 2000, and named an Executive Vice President in 2004. In April 2005, he became our Executive Vice President of Business and Corporate Development. In December 2007, Mr. Kalan was appointed President and Chief Executive Officer and a member of our Board. Prior to joining the Company, he was the Chief Financial Officer at Bank One, Chicago. He also held various other financial management positions with Bank One in Texas and Illinois from 1985 through 1996. Mr. Kalan holds a B.A. degree in Business Administration from the University of Texas at Arlington.

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Skills and Qualifications

        Financial Experience—In-depth experience in financial planning, corporate accounting, tax, budgeting, financial reporting, ethics, compliance and risk management, having served as our Chief Financial Officer and at Bank One, Chicago.

        Industry Experience—Extensive knowledge of the businesses and markets we serve, which provides our Board with an acute understanding of business practices and special industry concerns.

        Leadership Experience—Our current Chief Executive Officer and President. Brings executive level leadership, strategic thinking, business development and strong financial oversight skills to the Board.

        Mr. Sica is currently a Managing Partner of Tailwind Capital. From 2004 to 2005, Mr. Sica was a Senior Advisor to Soros Private Funds Management. From 2000 until 2003, he was President of Soros Private Funds Management, where he oversaw the direct real estate and private equity investment activities of Soros. In 1998, he joined Soros Fund Management where he was a Managing Director responsible for Soros' private equity investments. Mr. Sica was previously Managing Director for Morgan Stanley Merchant Banking Division. Mr. Sica holds an M.B.A. degree from the Tuck School of Business at Dartmouth College and a B.A. degree from Wesleyan University.

Skills and Qualifications

        Corporate Governance—Broad experience serving as a director of multiple large public companies.

        Financial Experience—Wide-ranging experience in venture capital, private equity, mergers and acquisitions, capital markets, management recruitment, executive compensation and strategic planning across a broad range of commercial industries from his work at Morgan Stanley, Soros and now at Tailwind Capital. Experience in investment banking serving global clients and in structuring international mergers and acquisitions.

        Industry Experience—Comprehensive understanding of our business and markets, having served as a director of our Company for nearly 20 years.

        Mr. Unruh became a founding Principal of Alerion Capital Group, LLC (a private equity investment company) in 1998 and currently holds such position. Mr. Unruh was an executive with

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Unisys Corporation from 1987 to 1997, including serving as its Chairman and Chief Executive Officer from 1990 to 1997. From 1982 to 1986, Mr. Unruh held various executive positions, including Senior Vice President—Finance and Chief Financial Officer with Burroughs Corporation, a predecessor of Unisys Corporation. Prior to 1982, Mr. Unruh was Chief Financial Officer with Memorex Corporation and also held various executive positions with Fairchild Camera and Instrument Corporation, including Chief Financial Officer. He holds an M.B.A. degree from the University of Denver and a B.S. degree from Jamestown College.

Skills and Qualifications

        Corporate Governance—Significant experience serving as a director of several public and private companies with global operations.

        Financial Experience—Broad-based understanding of investments and corporate development in pursuing long-term strategic business objectives as a principal of Alerion Capital Group and as Senior Vice President—Finance and Chief Financial Officer with Burroughs Corporation.

        Leadership Experience—Unique combination of expertise in information technology together with business and financial management experience gained through executive positions held at multinational technology firms; Chairman and Chief Executive Officer with Unisys Corporation and Senior Vice President—Finance and Chief Financial Officer with Burroughs Corporation.

Other Board Information

        There are no family relationships between any of our directors or executive officers. There are no arrangements between any director, nominee or executive officer of the Company and any other person pursuant to which such director, nominee or executive officer was selected for such position. None of our directors have been involved in any legal proceedings during the past 10 years required to be disclosed in this proxy statement.

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BENEFICIAL OWNERSHIP OF COMMON STOCK

        The table below sets forth each stockholder known by us to own beneficially more than 5% of our outstanding common stock as of February 28, 2014.

Principal Stockholders

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Directors and Executive Officers

        The table below sets forth to our knowledge the beneficial ownership of common stock held by each director and each executive officer of the Company named in the 2013 Summary Compensation Table on page 36, individually, and by all directors and executive officers of the Company as a group as of February 28, 2014.

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Share Ownership Guidelines

        The Board established share ownership guidelines for our directors and executive officers in 2007 and amended the guidelines in 2012. The guidelines currently provide that: (1) each director should own at least 13,000 shares of common stock, (2) the Chief Executive Officer should own at least that number of shares of common stock which is equal in value to three times his base salary, and (3) each other executive officer should own at least that number of shares of common stock which is equal in value to one times his base salary. Each individual is expected to attain the minimum ownership level within four years of his or her date of appointment. As of February 28, 2014, each of our executive officers and Board members owned shares consistent with the applicable ownership guidelines.

Hedging and Pledging Prohibition

        As part of our insider trading policy, all employees, including our executive officers, and non-employee directors (and their designees) are prohibited from engaging in short sales of our securities, establishing margin accounts or otherwise pledging our securities and engaging in transactions that are designed to hedge or offset any decrease in the market value of our stock.

Section 16(a) Beneficial Ownership Reporting Compliance

        Section 16(a) of the Securities Exchange Act of 1934 requires our officers (as defined in the applicable regulations) and directors, and persons who beneficially own more than 10% of a class of the Company's equity securities registered under such Act, to file certain reports of ownership and changes of ownership of the Company's equity securities with the SEC. Officers, directors and stockholders who own more than 10% of such shares are required by SEC regulation to furnish to the Company copies of all Section 16(a) forms which they file.

        Based solely on our review of the copies of such forms submitted to us and written representations from certain reporting persons, we believe that all filing requirements applicable to our officers and directors were complied with for the year ended December 31, 2013.

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EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

        This section explains our executive compensation program as it relates to the following named executive officers, or NEOs, whose compensation information is presented in the tables following this discussion:

Executive Summary

Company Overview and Business Strategy

        We are one of the world's largest and most established business support solutions providers. We primarily serve the communications industry, whose businesses have evolved from a single product offering to highly complex, highly competitive, multi-service product offerings. Our proven approach and solutions are based on our broad and deep experience in serving clients in evolving industries. Our approach is to use the best technology to enable service providers to meet ever-changing market demands.

        Our solutions help service providers streamline and scale operations, introduce and adapt products and services to meet customer demands, and address the challenges and opportunities brought about by change. Our broad suite of solutions helps our clients improve their business operations by creating more compelling product offerings and an enhanced customer experience through more relevant and targeted interactions, while at the same time, more efficiently managing the service provider's cost structure. Over the years, we have focused our research and development (R&D), and acquisition investments on expanding our solution set to address the ever expanding needs of communications service providers to provide a differentiated, real-time, and personal experience for their consumers. This extensive suite of solutions includes revenue management, content management and monetization, customer interaction management and business intelligence.

        Our business strategy is to grow our revenues, profitability and stockholder value by focusing on the following:

•

creating recurring client relationships within our core communications industry;



•

expanding our product and services portfolio through continuous innovation;



•

increasing our value proposition through continuous improvement and efficiency;



•

delivering on our commitments; and



•

bringing new skills and products to market.

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Our Overall 2013 Performance

        We enjoyed solid performance in 2013, delivering strong financial and operating results, and executing on many of our key initiatives to advance our business. In particular, we expanded the portfolio of our solutions used in our clients' businesses—helping them roll out new products and services, drive cost efficiencies and enhance their customers' experience—while continuing to invest in our people and our products in a prudent and thoughtful manner. We also added new clients, products, employees and expertise through our own internal efforts as well as through an acquisition.

        Key highlights of our 2013 performance include the following:

•

Generated approximately $748 million in revenues, a one percent decline over the prior year, attributable to the impact of the pricing discounts associated with the Comcast and Time Warner contract renewals, and, to a lesser degree, the divestiture of a small print operation. The impact of these revenue reductions have been offset by the full year impact of the revenues from our Ascade acquisition and growth in other areas of our business.



•

Secured long-term contract renewals into 2017 with two of our largest clients, Comcast Corporation (which represented 19% of our total 2013 revenues), and Time Warner Cable, Inc. (which represented 11 percent of our total 2013 revenues).



•

Divested a small print and mail facility in July 2013 and our marketing analytics business effective December 31, 2013. 2014 revenue levels will be approximately $14 million lower as compared to our 2013 revenues generated from these businesses. Although these divestitures will negatively impact our revenues going forward, these businesses were not considered core to our longer-term strategy and, as a result, we believe these divestures will improve our overall performance in the future.



•

Continued to expand product and services offerings during the year to better position us for future growth opportunities.



•

Announced our first major contract with a large Asia-Pacific client for our managed services offering, building on our deep and proven heritage of running high-scale, complex solutions for our North American cable and satellite customers.



•

Acquired certain key assets of Volubill in December, which we expect will expand our current billing and revenue management portfolio with enhanced capabilities that enable communication service providers to monetize their network and provide an improved customer experience.



•

Expanded our client list for our content management and monetization platform, Content Direct, with the majority of the largest movie studios in the world, several of our North American cable clients and our first big-box retailer.



•

Developed an enterprise security offering and finalized our go-to-market plan during 2013, and formally introduced this offering to the market in early 2014.



•

Delivered profitable operations during 2013 with $127 million in operating cash flows, and further strengthened our capital position, ending the year with a year-end balance of approximately $211 million of cash, cash equivalents and short-term investments. Our strong operating model and financial position allows us to return capital to shareholders, and also allows us to continue to invest in the long-term growth of our business.



•

Initiated a quarterly dividend in June, with dividends totaling $15 million ($0.45 per common share) paid to stockholders through three dividend payments. Going forward, we expect to pay dividends each year in March, June, September, and December, with the amount and timing subject to the Board's approval.

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•

Repurchased approximately 500,000 shares of our common stock, under our Stock Repurchase Program, for approximately $10 million, allowing us to offset shares we issued under our employee incentive plans for the year.



•

Paid down our long-term debt by $15 million during the year and made capital expenditures of approximately $30 million.

In summary, we continue to execute in a challenging environment. In 2013, we solidified our relationships with two of our largest clients, continued to invest in our business strategy to drive future revenue growth and returned cash to stockholders while strengthening our balance sheet.

2013 Executive Compensation Highlights

        We modified the equity compensation program for our NEOs in 2013, increasing the percentage of each NEO's equity award that is performance-based. Accordingly, 60% of the restricted shares granted to our NEOs in 2013 vest ratably over a three-year period only upon achievement of specific performance-based criteria and the other 40% of the shares granted vest ratably over a four-year period. We believe this change further strengthens the alignment between our NEO compensation program and our stockholder interests.

        After considering compensation competitiveness within our peer group and consulting with PM&P, the Compensation Committee ("Committee") made an independent assessment of the value and competitiveness of each NEO's various pay components in the aggregate. The following summary highlights key aspects of the 2013 executive compensation programs and how our 2013 financial performance impacted specific NEO compensation elements:

•

Base Salary:  Following our annual review of competitive salary data, including a review of our peer group and the external market, we increased the base salaries of our NEOs in the aggregate by 7.9% during 2013 to bring their salaries more in line with the corresponding median levels within our peer group.



•

Annual Incentive Program:  For 2013, we did not fully achieve our performance-based targets for both Revenue and Adjusted Operating Income measures. As a result, our NEOs earned a below target payout of 89% under the Annual Performance Bonus Plan for 2013.



•

Long-Term Incentive, or LTI, Program:  60% percent of our LTI program was delivered in the form of performance-based stock that vests ratably over three years contingent upon the achievement of predetermined financial targets and the other 40% percent was delivered in the form of time-based restricted stock scheduled to vest over four years. For 2013, we did not fully achieve our financial targets. As a result, the NEOs' vesting in the first one-third of the 2013 performance-based restricted stock awards was 90% of the potentially available amount.



•

Other:  NEOs are generally entitled to the same benefits as our other employees, and may also participate in our nonqualified deferred compensation plans.

NEO Pay-for-Performance Compensation Program

        Our executive compensation program is intended to create a strong link between pay and the Company's performance, as well as to attract and retain qualified executives. The 2013 performance measures selected for our annual and long-term incentive plans are designed to align executive pay with stockholder return over both the short and long term. The program is designed such that 50% or more of each NEO's total target compensation is based on performance against pre-selected measures.

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        In 2013, NEO compensation payouts aligned with Company performance. The table below shows how our 2013 results compare to the predetermined targets for the performance-based measures used in the Annual Performance Bonus and Long-Term Incentive Awards programs.

        As a result of our performance-based measures, our NEOs earned a below target payout of 89% under the Annual Performance Bonus Plan for 2013. Additionally, based on the 2013 Revenue and Adjusted EPS targets, the NEO's vesting in the first one-third of the 2013 performance-based restricted stock awards was 90% of the available amount. The Company attained the specified 2011 and 2012 Stock Price Measure targets and the 2012 Adjusted EPS target, and therefore, vested in the final one-third of the 2011 and the second one-third of the 2012 performance-based restricted stock awards. For more information see 2013 Compensation beginning on page 27.

Company Response to 2013 Say-on-Pay Results

        Ninety-one percent (91%) of the votes cast at our 2013 annual meeting of stockholders approved of, on an advisory basis, the compensation paid to our NEOs. The Committee considered the results of this advisory vote when making compensation decisions for the NEOs, along with other factors, such as the Company's pay-for-performance philosophy and a competitive market analysis of peer companies. In addition, the Committee instructed PM&P to review our base pay, annual performance bonus and long-term incentive awards programs for alignment with stockholder interests and repetitive company performance. We believe our incentive programs demonstrate a strong link between the pay of our NEOs, company performance and stockholder returns.

Solid Governance and Compensation Practices

        In addition to providing a compensation program that focuses on pay-for-performance, we believe that the following governance and compensation practices reinforce our business strategy, culture and values:

•

Our performance-based compensation is designed to promote the achievement of our business strategy and enhancement of stockholder value. The financial performance metrics for performance-based compensation are: Revenue, Adjusted Operating Income, Adjusted EPS and a specified Stock Price Measure, all of which represent key financial metrics that reflect execution of our long-term business strategy. For additional information about our business strategy see Company Overview and Business Strategy on page 20.

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•

We place an emphasis on the long term.  We award a significant portion of our total compensation in the form of long-term equity awards, 60% of which is in the form of performance-based stock that vests over a three-year period only upon achievement of specific financial or stock price measures.



•

We seek to align the financial interests of our executives with our stockholders through equity awards and share ownership guidelines. Our NEOs maintain share ownership levels consistent with our share ownership guidelines. They are also prohibited from pledging their CSG equity as collateral. For additional information see Share Ownership Guidelines below.



•

We have a policy prohibiting hedging and pledging transactions involving our stock.  Our NEOs and other insiders are prohibited from selling our stock short or entering into transactions in puts or calls that raise similar concerns regarding speculation of our stock. For additional information see Hedging and Pledging Prohibition on page 19.



•

We provide only limited perquisites and other benefits.  Our NEOs are eligible for only limited perquisites and benefits including Company 401(k) plan contributions. For additional information see the 2013 Summary Compensation Table on page 36.



•

Independent Compensation Consultant.  The Committee has engaged an independent compensation consultant that does not provide any services to management and that had no relationship with management prior to the engagement.

Share Ownership Guidelines

        We have share ownership guidelines for our NEOs and Board members. Each individual is expected to attain the minimum ownership level within four years of his or her date of appointment. Below is a summary of the minimum share ownership levels:

        Ownership levels are determined based on the common stock owned by each individual, excluding any unvested shares of restricted stock. As of February 28, 2014, all of our executive officers and Board members owned shares in excess of those specified in our guidelines. Messrs. Hughes and Barnes have not yet reached their four year anniversary.

Our Compensation Process

Determining Executive Compensation

        The Committee evaluates and recommends to the Board the base salary for each of our NEOs. The Committee has independent authority to establish annual incentive bonus targets and to make grants and awards under our equity incentive plan and Performance Bonus Program. When making compensation decisions and recommendations, the Committee considers the following key factors: (1) competitive peer group, market information and guidance provided by PM&P, (2) our audited financial results, (3) individual performance reviews provided by our CEO, (4) Committee and Board evaluations of the CEO, and (5) levels of attainment of the performance-based criteria for the annual performance bonus and long-term incentive awards. The Committee and our Board also evaluate our executives based on direct observation of their performance.

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Role of the Independent Compensation Consultant and Management

        The Committee has sole authority and discretion to retain and terminate compensation consultants, independent legal counsel and other advisors to assist the Committee in the performance of its responsibilities. Additionally, it has the sole authority to approve the fees, scope and other terms of engagement with its compensation consultant and other advisers with full funding provided by the Company. The Committee is also responsible for determining the independence of its compensation consultant and other advisers. Our management is available at the request of the Committee to assist the consultant by providing historical pay data and management's perspective on the Company's competitive environment for recruiting managerial talent. Our CEO provides performance evaluations and makes recommendations for the compensation of other NEOs. As required by the Committee's charter, the CEO may not be present during Committee deliberations or voting regarding CEO compensation.

        For 2013, the Committee engaged PM&P to advise it on executive compensation matters. The Committee instructed PM&P to take a broad view of the competitive compensation landscape to assist the Committee in structuring a compensation program for our NEOs. We believe that this broader view of compensation practices has enabled us to attract and retain a highly talented executive team with a balance of short- and long-term compensation that aligns NEO focus with stockholder returns. PM&P reviewed compensation data available from peer company proxy statements and published survey sources using position matches and data analyses that are selected as best representative of comparable positions in our industry. For additional information regarding the peer group component companies and pay of our NEOs compared to the peer group see Peer Group and NEO Compensation on page 32.

Compensation Mix

        The Committee has established and annually evaluates three core components of each NEO's compensation package:

•

base salary;



•

target total cash compensation (base salary plus target annual performance bonus); and



•

total direct compensation (target total cash compensation plus an annualized value of any long-term incentives granted).

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        The table below describes the three core components and illustrates the percentage of compensation the NEOs would receive, if paid at target level, by component:

Components of NEO Total Direct Compensation

Overview of Core Compensation Components

        Base Salary.     The objectives used for determining base salary are selected to provide a base salary that is:

•

Competitive with individuals holding similar positions in our peer group; and



•

Consistent with the position, responsibilities and individual performance of the NEO.

        For 2013, the Committee considered a base salary for a NEO to be competitive generally if it was near the median (or 50^th percentile) of the peer group. As noted above, the Committee recognizes that these comparisons may not align perfectly because executive titles and responsibilities at peer group companies frequently are not entirely comparable to responsibilities of our NEOs with similar titles.

        Annual Performance Bonus.     The objectives for the annual performance bonus are to:

•

Provide a cash performance bonus opportunity to the NEOs in an amount which would result in total annual cash compensation for the year (base salary plus cash bonus) that is competitive with the peer group; and



•

Structure the annual Performance Bonus Program to promote achievement of annual financial objectives related to Revenue and Adjusted Operating Income at a level which advances the Company's long-term success and enhances stockholder value.



•

Take into consideration individual performance objectives once the company financial measures are achieved.

        The Committee considered the information and advice provided by PM&P before making its own assessment and then recommended base salaries and annual bonus targets to the Board for each of the NEOs. Together, the base salary and target annual performance bonus amounts are intended to bring the total annual cash compensation of each NEO generally between the 50^th and 75^th percentile of peer

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group compensation (assuming that performance bonuses are earned in an amount at 100% of target). In 2013, PM&P reviewed and discussed with the Committee both the peer group data and benchmark survey data for similar positions.

        Long-Term Incentive Awards.     The objective for the long-term incentive awards is to align overall NEO compensation with long-term stockholder return by providing an equity component that directly coincides with stockholder value. Beginning in 2013, our equity component includes annual grants of restricted stock, of which 60% vests ratably over a three-year period only upon achievement of specific performance-based criteria and the other 40% of the shares vests ratably over a four-year period. We believe this program design encourages retention and aligns the financial interests of our NEOs with those of our stockholders.

        Equity grants to our NEOs are generally made annually, concurrent with their individual performance reviews. The Committee considers equity awards together with the other elements of our NEOs' compensation package. In determining the amount of restricted stock to award our NEOs, the Committee considers awards competitive with our peer group. Because the comparative data with respect to performance-based equity awards is limited, the Committee makes an independent assessment after consultation with PM&P (based on available data and the members' extensive business experience) as to the number of shares to grant to each NEO. The amount of the award is based on the value of the shares at the time of the grant in relation to: (1) the NEOs' cash compensation; (2) the performance targets for the performance-based grants and the potential difficulty in their achievement; and (3) the corporate position and responsibilities of each NEO.

        Total Direct Compensation.     The Committee targets total direct compensation (the sum of all three core compensation components) for our NEOs between 65-75% of our peer group's total direct compensation.

2013 Compensation

2013 Annual Base Salaries

        As part of our regular compensation review process, base salary decisions consider: competitive peer group information, scope of each NEO's role, tenure and experience, as well as individual performance. After considering the competitive information provided by PM&P, recommendations from the CEO with respect to other NEOs and its own evaluation of NEO performance, the Committee recommended to the Board (and the Board approved) the following 2013 base salaries for the NEOs:

        These increases reflect changes in the external market and performance for the previous year. As shown above, two of our NEOs received slightly higher base salary increases in an effort to bring their base salaries into better market alignment and with their respective peers from the peer group. See Peer Group and NEO Compensation on page 33. In aggregate, the base salaries for our NEOs increased 7.9% in 2013.

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2013 Annual Performance Bonuses

        Annual performance bonuses are awarded under the terms of our Performance Bonus Plan. Each year, the Committee establishes pre-determined objectives for the Company that apply to each NEO.

        The annual performance bonus for each NEO is determined as shown below. The base salary is multiplied by the target bonus percentage for each NEO. This result is then multiplied by: (1) the Company Performance Percentage achieved (which is the same for all NEOs) and (2) the NEO Individual Performance Percentage achieved. If the Company minimum threshold is missed, no annual performance bonus will be paid under the Performance Bonus Plan even if the NEO achieves his individual performance objectives.

        NEO Target Bonus Percentage.     After considering the competitive information provided by PM&P, during 2013 the Committee recommended no changes in NEO target levels to the Board. The 2013 target bonus (and comparable 2012 target) as a percentage of base salary for each NEO is as follows:

        Under the structure of the 2013 Performance Bonus Plan, our CEO's 2013 Annual Performance Bonus cannot exceed 200% of base salary (per the terms of the Performance Bonus Program approved by stockholders in May 2011) and the remaining NEO's 2013 Annual Performance Bonus cannot exceed 176% of base salary.

        2013 Company Performance Percentage.     The table below shows the Company's performance against the 2013 financial performance measures which consisted of targets for Revenue and Adjusted Operating Income. If the Company achieves the target levels of performance for Revenue and Adjusted Operating Income, the Company target bonus payout percentage is 100%. If the Company misses the minimum threshold for either of the target levels of performance for Revenue or Adjusted Operating Income, the Company target bonus percentage is 0%.

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        The predetermined target levels were established based upon the Company's initial internal targets for 2013 Revenue and Adjusted Operating Income. The Committee also established minimum threshold levels (see table above) necessary for the NEOs to receive any performance bonus. The 2013 results, for the purposes of the Annual Performance Bonus Program, are derived from the 2013 audited financial information of the Company as provided in the Company's 2013 Form 10-K.

        Based on the Company's actual 2013 financial performance for Revenue and Adjusted Operating Income as compared to their targets (as shown in the table above), the NEOs' bonus earned was 89% of the targeted amount. The Committee reviewed the 2013 results and has certified this level of attainment of our financial performance goals for purposes of the 2013 Annual Performance Bonus Plan, and as a result NEOs were eligible to receive a bonus payment under the plan.

        2013 NEO Individual Performance Percentage.     The final element of the annual performance bonus is a determination by the Committee of each NEO's achievement of his individual performance objectives up to 100%.

        The Committee may not rate any NEO as achieving more than 100% of his individual performance goals. The individual performance of each executive was evaluated compared to the agreed upon common and unique objectives described below. These non-financial objectives are important to our success and are designed to enhance stockholder value over the long term.

        Common Objectives.    Common elements of NEO objectives included:

•

Operational and Functional Responsibilities.    Each NEO has multiple objectives associated with the stewardship of his own areas of responsibility. The particular objectives vary by NEO, but typically include the achievement of both near and long-term business unit objectives, meeting budget expectations and the professional development of staff.

        Unique Objectives.    The following are examples of categories of individual objectives unique to one or more of the NEOs based on area of responsibility within the Company:

•

Deliver on Key Development Initiatives.    As a technology company, we have a technology product road map requiring significant software development investments aimed at achieving specified feature and functional milestones.



•

Key Client Relationships.    A significant portion of our revenue is derived from a small number of key clients, and a key objective is to ensure that these relationships remain strong and, when applicable, key contracts are renewed under terms satisfactory to both parties.



•

Growth Initiatives.    Implementation of the Company's long-term strategic plan is a key objective, including execution on the Company's merger, acquisition and partnership strategies, and when applicable, the successful integration of acquired assets.



•

Increasing Cost Efficiency.    NEOs are expected to identify and implement potential cost savings and process efficiencies in identified areas of the Company.

        The Committee met in February 2014 to consider the 2013 performance of each NEO as compared to the individual's performance goals. Mr. Kalan, our CEO, reviewed the 2013 performance

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of the other NEOs and presented information to the Committee for consideration. The Committee determined that the NEOs achieved the following results for their 2013 individual performance objectives: Mr. Kalan 90%, Mr. Griess 95%, Mr. Wiese 95%, Mr. Ruble 100% and Mr. Henderson 85%.

        Calculations of 2013 Annual Performance Bonuses.     See Footnote (3) of the 2013 Summary Compensation Table on page 36 for the calculations of 2013 Annual Performance Bonuses for our NEOs.

Long-Term Incentive Awards

        2013 Long-Term Incentive Awards.     In 2013, the Committee made restricted stock awards to our NEOs in two forms: 60% of the shares granted are performance-based awards which vest over a three-year period (if the specified performance thresholds are met), and 40% of the shares granted are time-based awards which vest in equal increments over a four-year period beginning on the first anniversary of the grant date. In conjunction with the rollout of the 2013 performance-based restricted stock awards, the Committee implemented the following 2013 performance measures and vesting requirements associated with those awards:

•

The financial performance target levels for vesting are based on Revenue and Adjusted EPS.



•

The performance-based restricted stock awards vest ratably over three years contingent upon the achievement of predetermined financial targets, with actual vesting ranging from 50% to 100% of each year's vesting potential, if the Company achieves the minimum specified performance thresholds for 2013, 2014 and 2015.



•

Each of the second and third year's specified performance targets reflect a meaningful growth rate over the previous year's measures.



•

If the NEOs do not achieve 100% vesting based on achievement of the performance thresholds for a particular year, but the Company's stock price exceeds the stock price target established by the Committee for the first thirty trading days after the Company's public announcement of 2015 financial results, then any unvested shares based on the level of the performance thresholds achieved in the respective year will vest in addition to the shares scheduled to vest in the current year. In other words, if a particular year's performance targets are missed at less than 100%, those shares can still vest up to the 100% level, if the Company's 2015 Stock Price Measure is met. The common stock price target reflects a meaningful three-year growth rate over the Company's common stock price from the date when the performance shares were originally granted.

        In determining the number of shares of restricted stock to be granted and the balance between performance-based and time-based vesting provisions, the Committee considered information and advice received from PM&P, as well as the views of executive officers and certain members of senior management concerning the use of performance-based vesting for restricted stock. See the 2013 Grants of Plan-Based Awards table on page 38 for additional information regarding the details of the 2013 restricted stock awards to our NEOs.

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        2013 Performance-Based Awards.     The table below shows the Company's performance against the 2013 financial performance measures which consisted of targets for Revenue and Adjusted EPS.

        The predetermined target levels were established based upon the Company's initial internal targets for 2013 Revenue and Adjusted EPS. The Committee also established minimum thresholds (see table above) necessary for the NEOs to receive any vesting in each of the three-year vesting periods. The 2013 actual amounts, for the purposes of the 2013 performance-based restricted stock awards, are derived from the 2013 audited financial information of the Company as provided in our 2013 Form 10-K and are certified by the Committee.

        Based on the Company's 2013 financial performance as shown in the table above, the NEOs' vesting in the first one-third of the 2013 performance-based restricted stock awards, based on the predetermined Revenue and Adjusted EPS financial objectives, was 90% of the available amount. As noted above, this 10% vesting shortfall on the current year vesting can now only occur at the 100% level if the Company's 2015 Stock Price Measure is met.

        2012 and 2011 Long-Term Incentive Awards.     In 2012 and 2011, our NEOs received restricted stock awards in two forms: 50% of the shares granted were time-based awards which vest in equal increments over a four-year period beginning on the first anniversary of the grant date and 50% of the shares granted were performance-based awards which vest over a three-year period if the Company attains one of the specified performance goals. Each of the second and third year's performance targets reflect a meaningful growth rate over the previous year's measures. If the Company does not attain any of the performance goals for a particular year, but does attain one of the performance targets in a subsequent year, then the unvested shares for the earlier year will vest in addition to the shares scheduled to vest in the current year. In other words, if a particular year's performance targets are missed, those shares can still vest in a subsequent year if any of the cumulative performance targets are met.

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        2012 and 2011 Performance-Based Awards.     Based upon our 2013 financial results as certified by the Committee, the Company attained the specified 2011 and 2012 Stock Price Measure targets and the 2012 Adjusted EPS target, and therefore vested the final one-third of the 2011 and the second one-third of the 2012 performance-based restricted stock awards. This information is detailed in the table below:

        Accrued Dividends on Unvested Shares.     Our restricted stock award agreements provide for the accrual of dividends for unvested shares of restricted stock. The accrued dividends are subject to the same vesting schedule as the underlying shares and are forfeited if the underlying shares are forfeited. Beginning in June 2013, the Company initiated a quarterly cash dividend. In accordance with our equity award agreements, all employees participating in the long-term equity program, including our NEOs, are eligible to receive accrued dividends on shares upon vesting of these awards.

Peer Group and NEO Compensation

Role of Benchmarking in Determining Compensation

        To assist the Committee in establishing 2013 compensation for our NEOs, PM&P provided a competitive assessment using peer group compensation information and industry survey data for the three primary elements of our NEO compensation packages:

•

base salary;

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•

target total cash compensation (base salary plus target annual performance bonus); and



•

total direct compensation (target total cash compensation plus an annualized value of any long-term incentives granted).

        This process involved identification of a peer group for comparison purposes, analysis of the projected total cash compensation of our NEOs for the prior year, and comparison with the equivalent peer group positions and industry survey data. The Committee recognizes that the peer group comparisons and the industry survey data may not be perfectly aligned because the executive titles and responsibilities at the peer group companies are not entirely comparable to the responsibilities of our NEOs with similar or equivalent titles. Despite these limitations, the Committee believes this information is one important factor when determining executive compensation.

Peer Group Used for Benchmarking

        The peer group used for benchmarking is reviewed annually to ensure that its composition and characteristics remain consistent with our objectives. PM&P reviewed companies with a reasonable range of annual revenue within the data processing and outsourced services and application software industries. In addition to providing written materials to the Committee, PM&P discussed with the Committee its experiences and observations regarding the compensation practices and philosophies of other companies.

        Except as noted below, for 2013, PM&P recommended no changes to the peer group used in 2012 which continue to be reflective of the Company's position as a global data processing, application software and managed services provider. Our 2013 peer group was comprised of the following companies that ranged in size from $219 million to $2.385 billion in revenues for the year-end 2012:

        As a result of corporate status changes, Stream Global Service, Inc. has been removed as a benchmark company and Comverse Technology Inc. is now publicly listed as Comverse Inc.

NEO Compensation Compared to the Peer Group

        The following is a summary comparison of base salary, total cash compensation and target total direct compensation compared to peer group companies and survey data based on PM&P information available in February 2013.

•

Base Salary.  For 2013, the Committee generally considered a base salary for an NEO to be competitive if such salary was near the market median (or 50^th percentile).



•

Total Cash Compensation.  For 2013, the Committee generally considered targeted total cash compensation for an NEO to be competitive if such targeted total cash compensation was between the 50^th and 75^th percentile, assuming that the Company performance goals have been met or exceeded.



•

Total Direct Compensation.  For 2013, the Committee generally considered targeted total direct compensation (total cash compensation plus the value of any equity awards granted to the NEO

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during the past year) for an NEO to be competitive if such total direct compensation was between the 65^th and 75^th percentile.

        The table below shows how our NEOs' compensation compares (on a percentile basis) to our peer group company information for base salary, total cash compensation (base plus eligible annual performance bonus), and total direct compensation (base salary plus eligible annual performance bonus plus value of equity awards granted during the past year).

Other Benefits

        The Committee does not believe that perquisites and other benefits should play a major role in the overall compensation program of our NEOs. We offer our NEOs the opportunity to defer a portion of their annual base salary and annual performance bonus through a 401(k) plan that is generally available Company-wide and through a more restricted (i.e., participation is limited to vice presidents and above) non-qualified deferred compensation program, both of which include Company matching contributions. The Committee views these deferral programs as individual retirement planning options for our NEOs and not as a long-term compensation program. The amount of our contributions for each NEO is reported in a footnote to the 2013 Summary Compensation Table on page 36, along with the details of various items of other NEO compensation. The maximum amount the Company matched under its 401(k) plan during 2013 (including pre-tax, discretionary and service matches) was $16,575 and under the nonqualified deferred compensation program it was $6,250.

        Our executive officers also have employment agreements with the Company. See Employment Agreements below for additional information.

Section 162(m) Requirements

        Section 162(m) of the Internal Revenue Code imposes a $1 million limit on the amount that a public company may deduct for federal income tax purposes for compensation paid to its NEOs who are employed as of the end of the year. This limitation does not currently apply to the compensation of a CFO or to compensation that qualifies under Section 162(m) as "performance-based" compensation (i.e., compensation paid only if the compensation is based on achievement of pre-established objective performance goals, the material terms of the performance goals are approved by stockholders and other Section 162(m) requirements are satisfied). In February 2013, the Committee established certain objective performance goals for our NEOs under our stockholder-approved Amended and Restated

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2005 Stock Incentive Plan (the "Stock Incentive Plan") and our Performance Bonus Program. The material terms of the performance goals used under the Performance Bonus Program and the Stock Incentive Plan were approved by the Company's stockholders in May 2011. The Committee is responsible for the administration of both our Stock Incentive Plan and our Performance Bonus Program.

COMPENSATION COMMITTEE REPORT

        The following Compensation Committee Report is not deemed to be "soliciting material" or to be "filed" with the SEC or subject to Regulation 14A, other than as provided below, or to the liabilities of Section 18 of the Exchange Act. This report shall not be deemed to be incorporated by reference into any prior or subsequent filing by the Company with the SEC under the Securities Act of 1933 or the Securities Exchange Act of 1934, notwithstanding any general statement contained in any such filings incorporating this Proxy Statement by reference, except to the extent that the Company specifically requests that such information be incorporated by reference or treated as soliciting material.

        We have reviewed and discussed with management of the Company the Compensation Discussion and Analysis which appears in this Proxy Statement and is required by Item 402(b) of SEC Regulation S-K.

        Based upon such review and discussions, we recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

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EXECUTIVE COMPENSATION TABLES

2013 Summary Compensation Table

        The following table contains information concerning compensation of our CEO, CFO, and three other most highly compensated executive officers. All dollar values have been rounded to the nearest dollar.

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2013 Grants of Plan-Based Awards

        The following table contains information concerning grants of non-equity and equity incentive plan-based awards by the Company during 2013 to the persons named in the 2013 Summary Compensation Table. These amounts are not realized income. All dollar values have been rounded to the nearest dollar.

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Outstanding Equity Awards at December 31, 2013

        The following table contains information concerning all unvested restricted stock held at December 31, 2013, by the persons named in the 2013 Summary Compensation Table. There were no outstanding stock options held by the NEOs at December 31, 2013. All dollar values have been rounded to the nearest dollar.

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