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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] Amendment No. 1 to Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
for the transition period from to
Commission file number 1-10993
SPS TRANSACTION SERVICES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 36-3798295
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2500 Lake Cook Road, Riverwoods, IL 60015
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 847/405-3700
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
Common Stock, $0.01 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 31, 1998, the Registrant had 27,277,357 shares of Common Stock
outstanding. The aggregate market value of voting stock held by non-affiliates
of the Registrant as of March 31, 1998 was approximately $186,288,164.
Documents Incorporated by Reference
Portions of the Registrant's Annual Report to Stockholders mailed to
stockholders on or about March 31, 1998 for the year ended December 31, 1997
are incorporated by reference in Parts I, II and IV.
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The undersigned hereby amends Items 10, 11, 12 and 13 of its Annual Report
on Form 10-K for the fiscal year ended December 31, 1997 as set forth in this
Amendment No. 1 to the Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
Philip J. Purcell, 54, has served as a director of the Company since its
formation and served as its Chairman of the Board from its formation to April
1997. Mr. Purcell has been the Chairman of the Board and Chief Executive
Officer of MSDW, an indirect parent of the Company, Dean Witter Reynolds Inc.
("DWR"), a direct subsidiary of MSDW, and NOVUS Credit Services Inc. ("NCSI"),
a direct subsidiary of MSDW, since May 1997. He served as Chairman of the
Board and Chief Executive Officer of Dean Witter, Discover & Co. ("DWD") from
1986 to May 1997.
Robert L. Wieseneck, 60, has served as President, Chief Executive Officer
and a director of the Company since its formation. He has served as President
of SPS Payment Systems, Inc. ("SPS"), a wholly-owned subsidiary of the Company,
since 1987 and as a director of SPS since 1988. Mr. Wieseneck has also served
as President and as a director of Hurley State Bank ("HSB"), a wholly owned
subsidiary of the Company, since 1989. He has served as a director of NCSI
since 1991 and as an Executive Vice President of NCSI from December 1986 to
April 1987 and since April 1988.
Frank T. Cary, 77, has served as a director of the Company since 1992.
Mr. Cary served as Chief Executive Officer of International Business Machines
Corporation ("IBM") from 1973 until 1981 and as its Chairman of the Board from
1973 until 1983. Mr. Cary serves on the boards of directors of Celgene
Corporation, Cygnus Therapeutic Systems, ICOS Corporation, Lexmark
International, Inc., Lincare, Inc., Seer Technology Inc. and Teltrend Inc.
Christine A. Edwards, 45, has served as a director of the Company since
1997 and as its General Counsel since 1993. She served as Secretary of the
Company from its formation until 1997. She has served as Executive Vice
President, Chief Legal Officer and Secretary of MSDW since May 1997 and served
as Executive Vice President, General Counsel and Secretary of DWD from 1991 to
May 1997. She has also served as a director, Executive Vice President, General
Counsel and Secretary of DWR since January 2, 1991. She has been General
Counsel of NCSI since 1988, a director since 1990 and Executive Vice President
and Secretary since 1991.
Mitchell M. Merin, 44, has served as a director of the Company since 1994.
Mr. Merin has served as President and Chief Executive Officer of Dean Witter
Inter Capital since 1998, as Executive Vice President and Chief Administrative
Officer of DWD from 1994 until 1997, as an Executive Vice President of DWR
since 1990, as Chief Administrative Officer of DWR since 1994, as an Executive
Vice President of NCSI since 1994 and as a director of NCSI since 1994.
Charles F. Moran, 68, has served as a director of the Company since its
formation. Mr. Moran has been a director of HSB since January 1996. He served
as the Senior Vice President, Administration of Sears, Roebuck and Co. ("Sears")
from 1989 until his retirement in 1993. Mr. Moran is also a director of
Thermadyne Holdings Inc., Donnelley Enterprise Solutions Inc. and Advantica
Restaurant Group Inc.
Thomas C. Schneider, 60, has served as Chief Financial Officer and a
director of the Company since its formation and as its Chairman of the Board
since April 29, 1997. Mr. Schneider has served as an Executive Vice President
and Chief Strategic and Administrative Officer and director since 1997 and
served as Executive Vice President and Chief Financial Officer of DWD from 1987
to May 1997. He has also served as Executive Vice President and Chief
Financial Officer of NCSI since 1987 and as a director of NCSI since 1986. Mr.
Schneider has been Chief Financial Officer of DWR since 1987, an Executive Vice
President of DWR since 1984 and a director of DWR since 1981.
Dennie M. Welsh, 55, has served as a director of the Company since 1993.
Mr. Welsh has been Senior Vice President and Group Executive, IBM Global
Services since April 1997 and served as General Manager, IBM Global Services
from January 1995 until April 1997. Mr. Welsh has been Chairman of the Board
of Integrated Systems Solutions Corporation, a wholly owned subsidiary of IBM,
and was its President and Chief Executive Officer from 1991 until 1993.
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There are no family relationships between any of the foregoing persons.
EXECUTIVE OFFICERS
The information concerning executive officers required by Item 10 is set
forth in Part I, Item 1 of this Annual Report on Form 10-K.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder require that directors, officers
and beneficial owners of more than 10% of the Common Stock file certain reports
regarding their beneficial ownership of Common Stock with the Securities and
Exchange Commission. The Company believes that all such required reports were
timely filed during and for 1997, except for a report that was timely filed for
Mr. Peterson, but which inadvertently excluded an option grant that was made to
Mr. Peterson in April 1997. The transaction has been subsequently reported to
the Securities and Exchange Commission.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Under the Formula Plan, non-affiliate directors are granted options to
purchase the number of shares of Common Stock equal to $40,000 divided by the
fair market value of a share of Common Stock (determined at the time of each
grant) on the first day of the month following the month in which such
non-affiliate director was elected or appointed to the Board of Directors and at
the close of business on the date of the annual meeting of stockholders, if at
least two months following any previous grant. The exercise price per share of
Common Stock is 100% of the fair market value of a share of Common Stock at the
time of grant. Non-affiliate directors also receive an annual retainer of
$12,000 and $3,000 for each committee on which such director serves and a $1,000
fee for each Board of Directors meeting attended, a $500 fee for each committee
or related meeting attended and reimbursement of out-of-pocket expenses incurred
to attend such meetings. With respect to the Board's Special Committee (which
was disbanded in 1997), each non-affiliate director received an annual retainer
of $12,000, the chairman received an additional $5,000 annual retainer and each
committee member received a $1,000 fee for each committee meeting attended.
Affiliate directors are eligible to receive grants of options to purchase shares
of Common Stock pursuant to the Company's Amended and Restated 1992 Employees
Stock Plan (the "Stock Plan") and the Company's 1995 Omnibus Equity Plan (the
"Omnibus Equity Plan).
SUMMARY COMPENSATION TABLE
The following summary compensation table specifies the components of the
compensation packages of the Company's Chief Executive Officer and four other
most highly compensated executive officers (the "named executive officers") for
the years ended December 31, 1995, 1996 and 1997.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------------------- ---------------------------------- ------------
NUMBER OF ALL
OTHER ANNUAL RESTRICTED SECURITIES LTIP OTHER
NAME AND BONUS COMPENSATION STOCK AWARDS UNDERLYING PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($)(1) ($)(3) ($) ($) OPTIONS/SARS(#)(4) ($) ($)(5)
- -------------------- ---- ----------------- -------- ------------- ------------ -------------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert L. Wieseneck 1997 295,000 250,000 -0- -0- 85,591 -0- 1,300
(CEO and President). 1996 285,000 55,000 -0- -0- 72,000 -0- 900
1995 275,000 260,000 -0- -0- 100,000 -0- 3,216
Richard F. Atkinson. 1997 207,000 140,000 -0- -0- 30,909 -0- 1,300
(Senior Vice 1996 198,000 40,000 -0- -0- 36,000 -0- 900
President-Private 1995 192,000 150,000 -0- -0- 50,000 -0- 3,216
Label Consumer)
Robert W. Archer.... 1997 207,000 122,000 -0- -0- 16,200 -0- 1,300
(Senior Vice 1996 198,000 40,000 -0- -0- 36,000 -0- 900
President-Sales/ 1995 192,000 150,000 -0- -0- 50,000 -0- 3,216
Operations)
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Serge Uccetta....... 1997 176,000 87,000 -0- -0- -0- -0- 1,300
(Vice President- 1996 170,000 13,000 -0- -0- 14,000 -0- 900
Private Label 1995 165,000 65,000 -0- -0- 5,500 -0- 3,067
Commercial)
David J. Peterson... 1997 166,667(2) 100,000 -0- -0- 15,000 -0- 1,300
(Senior Vice 1996 150,000 35,000 -0- -0- 14,000 -0- 900
President-Commercial 1995 140,000 72,000 -0- -0- 1,500 -0- 3,216
Technology Services)
</TABLE>
_______________________
(1) Includes $8,000 earned in 1997 and $6,000 earned in 1996 by each named
executive officer, and $9,000 earned in 1995 by Messrs. Wieseneck,
Atkinson, Archer and Peterson and $8,444 earned in 1995 by Mr. Uccetta,
but deferred at each such executive's election pursuant to the SPS START.
(2) Mr. Peterson was compensated at an annual salary of $160,000 until May 1,
1997, at which time he was promoted and his annual salary was increased to
$170,000.
(3) All bonuses earned in 1997, 1996 and 1995 include amounts equal to 20% of
each named executive officer's bonus for such year that were deferred
pursuant to each such executive's participation in the Tax Deferred Equity
Plan during such years. Pursuant to the Tax Deferred Equity Plan, all such
deferred bonus amounts were directed to the purchase for the account of
each named executive officer of shares of Common Stock at a price per
share of $17.560 in 1997, $12.847 in 1996 and $22.069 in 1995, each of
which price represents 80% of the average fair market value of such shares
(as defined in each applicable Plan) during the fourth quarter of 1997,
1996 and 1995, as applicable. Purchase of Common Stock in 1997 resulted
in awards of approximately 2,847 shares to Mr. Wieseneck, 1,595 shares to
Mr. Atkinson, 1,390 shares to Mr. Archer, 991 shares to Mr. Uccetta and
1,139 shares to Mr. Peterson. Purchases of Common Stock made pursuant to
the Tax Deferred Equity Plan in 1996 resulted in awards of approximately
856 shares to Mr. Wieseneck, 623 shares to Messrs. Atkinson and Archer,
202 shares to Mr. Uccetta and 545 shares to Mr. Peterson. Purchases of
Common Stock made pursuant to the Tax Deferred Equity Plan in 1995
resulted in awards of approximately 2,356 shares to Mr. Wieseneck, 1,359
shares to each of Messrs. Atkinson and Archer, 589 shares to Mr. Uccetta
and 652 shares to Mr. Peterson. All such shares of Common Stock vest two
years after the date of award and are distributed five years after such
date.
(4) All grants made in 1995 and Non-ROR grants in 1997 were options to
purchase MSDW common stock pursuant to the MSDW Equity Incentive Omnibus
Plan (the "MSDW Omnibus Plan") and 1997 Restoration Option Right ("ROR")
grants were options to purchase MSDW common stock pursuant to the MSDW
Employee's Equity Accumulation Plan.
(5) Consists of the amount of any employer matching contributions under the
SPS START.
The following tables disclose, for the named executive officers,
information regarding stock options granted during, held at the end of or
exercised in 1997 pursuant to the Stock Plan, the MSDW Omnibus Plan and the
MSDW Replacement Stock Plan. There were no stock appreciation rights granted
or exercised during such year.
OPTION/SAR GRANT TABLE
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF SECURITIES % OF TOTAL POTENTIAL REALIZABLE VALUE
UNDERLYING OPTIONS/SARS OPTIONS/SARS AT ASSUMED ANNUAL RATES OF
GRANTED (#) GRANTED TO EXERCISE OR STOCK PRICE APPRECIATION FOR
-------------------------- EMPLOYEES IN BASE PRICE EXPIRATION OPTION TERM
NAME NON ROR(1) ROR(2) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ------------------- ---------- -------- ------------ ----------- ----------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert L. Wieseneck 50,000 - 0.22% 35.500 1/16/07 1,116,288 2,828,893
- 6,547 0.03% 45.8125 1/31/01 64,638 139,200
- 29,044 0.13% 45.8125 2/21/03 452,524 1,026,622
Richard F. Atkinson 16,200 - 0.07% 35.500 1/16/07 361,677 916,561
- 2,157 0.01% 52.4375 1/31/01 24,375 52,493
- 12,552 0.06% 52.4375 2/21/03 223,849 507,838
Robert W. Archer... 16,200 - 0.07% 35.500 1/16/07 361,677 916,561
Serge Uccetta...... - - - - - - -
David J. Peterson.. 15,000(3) - 35.79% 17.375 4/28/07 163,906 415,369
</TABLE>
___________________
(1) Except as otherwise noted, all options granted to the named executive
officers in the year ended December 31, 1997 were options to purchase MSDW
common stock at an exercise price equal to the closing price of a share of
MSDW common stock as reported on the NYSE Composite Tape on January 17,
1997, the award date. Such options are exercisable at a rate of one-third
per year over a three-year period beginning on January 17, 1998.
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(2) RORs were granted with respect to options previously received by these
executive officers which provide that in the event a "change of control" of
the Company occurs or the recipient terminates employment with the Company
as a result of a "full career retirement," any unvested portion of the
award will immediately vest and become exercisable. An ROR entitles the
grantee in respect of an underlying option (an "Underlying Option"), upon
exercise of such Underlying Option at a time when the grantee is an
employee of the Company or a related employer, and upon tendering shares of
Common Stock to the Company in satisfaction of the exercise price of such
Underlying Option, to the automatic grant of an additional option (a
"Restoration Option") to acquire the number of shares of Common Stock
equal to the numbers of shares of Common Stock delivered to pay the
exercise price of the Underlying Option, and delivered or withheld to pay
taxes owed as a result of such exercise, at a per share price equal to the
closing price of a share of Common Stock as reported on the NYSE Composite
Tape on the exercise date of such Underlying Option. Each such option is
vested upon grant and has the same expiration date and transferability
provisions as its Underlying Option. All of the Restoration Options listed
were granted on July 7, 1997 and July 31, 1997, the date of exercise of the
Underlying Options.
(3) Options granted to Mr. Peterson in the year ended December 31, 1997 were
options to purchase Common Stock at an exercise price equal to the closing
price of a share of Common Stock as reported on the NYSE Composite Tape on
April 29, 1997, the award date. Such options are exercisable at a rate of
one-third per year over a three-year period beginning on April 29, 1998.
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR, AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
FY-END (#) AT FY-END($)
SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(1) ($)(1) UNEXERCISABLE UNEXERCISABLE(2)
- ------------------- ---------------- --------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Robert L. Wieseneck 0/58,206 0/1,883,577 329,189/98,000(3) 7,630,781/1,181,250
Richard F. Atkinson 0/34,764 0/1,101,848 144,507/40,200(4) 3,229,822/382,725
Robert W. Archer... 0/3,000 0/105,656 124,384/40,200(5) 2,611,842/382,725
Serge Uccetta...... 0/0 0/0 13,166/9,334(6) 228,594/0
David J. Peterson.. 0/375 0/14,027 18,291/24,334(7) 67,539/77,813
</TABLE>
______________________
(1) Options exercised to purchase Common Stock are listed first, and options
exercised to purchase MSDW common stock are listed second.
(2) Value is based on the closing price of Common Stock on December 31, 1997
($22.5625) or the closing price of MSDW common stock on December 31, 1997
($59.125), as the case may be, minus the exercise or base price.
(3) Includes options to purchase 142,908 shares of Common Stock and 186,281
shares of MSDW common stock that were exercisable as of December 31, 1997
and options to purchase 48,000 shares of Common Stock and 50,000 shares of
MSDW common stock that were not exercisable as of December 31, 1997.
(4) Includes options to purchase 64,916 shares of Common Stock and 79,591
shares of MSDW common stock that were exercisable as of December 31, 1997
and options to purchase 24,000 shares of Common Stock and 16,200 shares of
MSDW common stock were not exercisable as of December 31, 1997.
(5) Includes options to purchase 72,384 shares of Common Stock and 52,000
shares of MSDW common stock that were exercisable as of December 31, 1997
and options to purchase 24,000 shares of Common Stock and 16,200 shares of
MSDW common stock that were not exercisable as of December 31, 1997.
(6) Includes options to purchase 7,666 shares of Common Stock and 5,500 shares
of MSDW common stock that were exercisable as of December 31, 1997 and
options to purchase 9,334 shares of Common Stock and 0 shares of MSDW
common stock that were not exercisable as of December 31, 1997.
(7) Includes options to purchase 16,666 shares of Common Stock and 1,625 shares
of MSDW common stock that were exercisable as of December 31, 1997 and
options to purchase 24,334 shares of Common Stock and 0 shares of MSDW
common stock that were not exercisable as of December 31, 1997.
PENSION PLANS
The named executive officers are covered under a number of different
pension plans, principally because of the Company's corporate history. The
following narrative indicates estimated annual benefits payable upon retirement
to each of the named executive officers, as of December 31, 1997, for the
specified final average compensation and years of service classifications under
the pension plans and formulas applicable to each such executive officer. Such
plans include the Sears, Roebuck and Co. Pension Plan (the "Sears Pension
Plan"), the NOVUS Credit Services Inc.
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Pension Plan (the "NCSI Pension Plan"), the NOVUS Credit Services Inc.
Supplemental Retirement Income Plan (the "NCSI Supplemental Plan") and the Dean
Witter Reynolds Inc. Pension Plan (the "DWR Pension Plan"). The Sears Pension
Plan, the NCSI Pension Plan and the DWR Pension Plan are defined benefit
pension plans intended to qualify under Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). The NCSI Supplemental Plan is a
nonqualified, unfunded retirement plan intended to pay certain participants in
the NCSI Pension Plan, whose benefits under such plan as of April 6, 1992 have
been limited by certain restrictions imposed by the Code, benefits equal to the
benefits that would have been payable to such participants under the NCSI
Pension Plan if it were not for such limitations, provided that such benefits
shall not exceed those that would have been payable if a participant's earnings
had increased by 5% annually per year from 1994 until the year of his
retirement.
Compensation or "earnings" under the Sears Pension Plan, the NCSI Pension
Plan and the DWR Pension Plan generally refers to total annual cash
compensation for services rendered to Sears, MSDW, and the Company and their
affiliates, including certain pre-tax salary deferrals, but excluding specified
items such as incentive and long-term executive compensation plan awards, the
value of stock awards and employer contributions to profit sharing plans.
"Earnings" used to calculate benefits under the NCSI Pension Plan also include
amounts deferred on and after January 1, 1995 under the Tax Deferred Equity
Plan and the MSDW Tax Deferred Equity Participation Plan (the "MSDW TDEPP").
"Earnings" used to calculate benefits under the NCSI Supplemental Plan include
earnings otherwise disregarded under the NCSI Pension Plan due to limitations
set forth in the Code with respect to highly compensated employees.
Mr. Wieseneck participates in the Sears Pension Plan, the NCSI Pension
Plan and the NCSI Supplemental Plan, but because the benefits payable to him
under the NCSI Pension Plan have been limited by certain restrictions on
benefits and compensation imposed by the Code, the benefits he would have
received under the NCSI Pension Plan without regard to such limitations are
provided under the NCSI Supplemental Plan. Mr. Wieseneck's projected annual
pension benefit from the Sears Pension Plan, the NCSI Pension Plan and the NCSI
Supplemental Plan at retirement at age 65 is $265,242.
Mr. Atkinson participates in the Sears Pension Plan, the NCSI Pension Plan
and the NCSI Supplemental Plan, but because the benefits he has accrued prior
to December 31, 1993 would have been limited by current restrictions on
compensation imposed by the Code, these benefits are provided under the NCSI
Supplemental Plan subject to the compensation limits in effect as of December
31, 1993. Mr. Atkinson's projected annual pension benefit from the Sears
Pension Plan, the NCSI Pension Plan and the NCSI Supplemental Plan at
retirement at age 65 is $106,677.
Mr. Archer participates in the Sears Pension Plan, the NCSI Pension Plan
and the NCSI Supplemental Plan, but his benefits under the NCSI Pension Plan
are calculated under a "grandfather" provision that, in general, provides for a
greater benefit accrual rate and pension benefit than would otherwise be
available under the NCSI Pension Plan. Mr. Archer's projected annual pension
benefit from the Sears Pension Plan, the NCSI Pension Plan and the NCSI
Supplemental Plan at retirement at age 65 is $103,754.
Mr. Uccetta participates in the NCSI Pension Plan. Mr. Uccetta projected
annual pension benefit from the NCSI Pension Plan at retirement at age 65 is
$40,269.
Mr. Peterson participates in the DWR Pension Plan and the NCSI Pension
Plan. His projected annual pension benefit from the DWR Pension Plan and the
NCSI Pension Plan at retirement at age 65 is $78,874.
Current covered compensation in 1997 under the NCSI Pension Plan and,
except for Messrs. Uccetta and Peterson, the NCSI Supplemental Plan, was
$350,000 for Mr. Wieseneck and $160,000 for each of Messrs. Atkinson, Archer,
Uccetta and Peterson. As of December 31, 1997, Messrs. Wieseneck, Atkinson,
Archer, Uccetta and Peterson had 34.5, 37.6, 41.1, 3.3 and 10.5 years of
benefit service, respectively. Benefits are computed on a straight life
annuity basis and are subject to deductions for Social Security benefits and
benefits accrued under the Sears Pension Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, the Compensation Committee of the Board of Directors was
composed of Messrs. Cary, Moran, Purcell and Welsh, none of whom were officers
or employees of the Company during such year.
During 1997, Mr. Schneider served on the Compensation Committee of NCSI,
five of whose executive officers during 1997, Thomas Butler and Messrs.
Wieseneck, Purcell, Schneider and Merin, served, and (except for Mr. Butler)
continue to serve, as directors of
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the Company, and one of whose executive officers, Mr. Purcell, served, and
continues to serve, on the Compensation Committee of the Board of Directors.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for establishing general
compensation policies and specific compensation levels for the Company's
executive officers. The Board administers the Company's stock-based incentive
compensation plans, which consist of the Stock Plan, the Formula Plan, the
Omnibus Equity Plan, the Stock Purchase Plan and the Tax Deferred Equity Plan.
In order to attract and retain qualified persons to serve as executive
officers, the Company seeks to offer executive officers total compensation
levels (taking into account annual salary and benefits, annual bonuses and
long-term incentives) that are comparable to those of its competitors, which
include all of the companies that comprise the Company's peer group for the
Performance Graph, in addition to certain other high technology companies,
financial services organizations and other non-manufacturing organizations with
annual revenues comparable to those of the Company.
The ranges set by the Compensation Committee for salary, annual incentive
compensation and long-term incentive compensation for each executive officer
position are based on previous studies of the Company's competitors, which the
Compensation Committee believes continue to offer a fair representation of the
Company's competitive market. Actual salary for each position falls slightly
below the midpoint of the range of salaries offered by such competitors for
such positions. Adjustments within this range are based on a discretionary
evaluation of a combination of the following factors: individual job
performance, changes in the competitive range of salaries and the current
location of a particular executive's salary within the salary target range.
The Company pays annual cash bonuses as annual incentive compensation.
The Compensation Committee believes that basing annual incentive compensation
amounts on the achievement of corporate performance goals creates a desirable
link between value created for stockholders and executive compensation.
Accordingly, the Compensation Committee annually establishes bonus targets for
executive officers that are higher than the median for the Company's
competitive group (as compared with the actual salary, which is slightly lower
than such median) in order to tie the total cash compensation received by
executive officers more directly to corporate performance as measured by net
income and revenue growth, while keeping the total cash compensation package
(without regard to amounts of annual cash bonuses deferred pursuant to awards
made under the Tax Deferred Equity Plan as described below) at or about the
median offered by the Company's competitors. In addition, the Company's
performance generally has to meet designated threshold amounts for net income
and revenue growth designated by the Compensation Committee before any bonuses
can be awarded, although the Compensation Committee has the discretion to award
bonuses of up to 30% of the aggregate initial bonus targets. The size of the
bonus pool is determined by the Company's performance as measured by net income
and revenue growth, further strengthening the link between annual incentive
compensation and the creation of stockholder value.
Bonus targets for 1997, which are expressed as a percentage of base
salary, ranged from 30% to 60% of base salary. The actual bonuses paid, which
may exceed target amounts if the Company's overall performance surpasses its
objectives, depend upon (i) the Company's financial performance compared to
expected performance for the year and historical performance in the previous
year (principally in terms of net income and revenue growth), (ii) the
achievement of specified performance priorities (principally on a company-wide
basis) and (iii) a discretionary review of the executive officer's annual
performance by the Chief Executive Officer of the Company and the Compensation
Committee (or, in the case of the Chief Executive Officer's annual performance,
by the Chairman of the Board of Directors and the Compensation Committee). For
1997, the total amount of actual bonuses paid (including amounts deferred
pursuant to awards made under the Tax Deferred Equity Plan) constituted
approximately 134% of the aggregate initial bonus targets. These bonus awards
reflect the Compensation Committee's discretionary review of the performance of
each executive officer as well as the Company's financial performance during
1997 in light of the business and competitive factors affecting the Company,
including the ongoing adverse credit environment.
Pursuant to the Tax Deferred Equity Plan, a percentage of certain
executive officers' annual cash bonuses (which is fixed annually by the Board
and which was 20% in 1997) is deferred and applied toward the grant of awards
of Common Stock to such executives at 80% of the Common Stock's fair market
value (as determined by the Tax Deferred Equity Plan). Common Stock awarded
pursuant to the Tax Deferred Equity Plan vests two years after the date of
award and is generally distributed five years after the date of award, so that
its value to the executives is dependent
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<PAGE> 8
on the degree to which the Common Stock's price has increased during such
periods. Awards of Common Stock made under the Tax Deferred Equity Plan
thereby add an element of long-term incentive compensation to the annual cash
compensation of executive officers. The Company believes that by increasing
executive officers' ownership of Common Stock, this additional component of
long-term incentive compensation also increases executive officers' incentives
to enhance stockholder value through improved Company performance.
The Company paid all long-term incentive compensation in 1997 in the form
of Common Stock options pursuant to the Omnibus Equity Plan. Such options are
valued by utilizing an industry-modified Black-Scholes valuation model, against
which the Company sets the aggregate size of option grants so as to approximate
the median projected value of options offered in the Company's competitive
market. The Company views options granted pursuant to the Omnibus Equity Plan
as incentives to motivate executives to maximize the long-term growth and
profitability of the Company, which will be reflected in the market performance
of the Common Stock. Under the Omnibus Equity Plan, options may not be granted
for less than the fair market value of the Common Stock on the date of grant,
so that executives will recognize value from the grants only if the price of
the Common Stock increases after the date of grant. The vesting schedule of
option grants made pursuant to the Omnibus Equity Plan is within the discretion
of the Board. All options granted under the Stock Plan in 1997, as shown in
the Summary Compensation Table, provide for vesting over a period of three
years.
Policies with respect to the compensation of the Chief Executive Officer
are the same as those discussed for executive officers generally, except that
the historical and plan comparisons and performance priorities on which his
annual incentive compensation is based are tied exclusively to company-wide
goals. Mr. Wieseneck's salary for 1997 was slightly below the median for the
Company's competitive market. Mr. Wieseneck's annual incentive compensation of
$250,000 for 1997 represented 141.2% of his initial bonus target of 60% of base
salary. Mr. Wieseneck's bonus award reflects the Compensation Committee's
discretionary review of Mr. Wieseneck's performance as well as the Company's
financial performance during 1997 in light of the business and competitive
factors affecting the Company, including the ongoing adverse credit
environment.
The Company does not currently maintain any policy with respect to
qualifying annual salary and bonus compensation paid to the named executive
officers for deductibility under Section 162(m) of the Code, which was added to
the Code in August 1993 and which limits the ability of the Company to deduct
any such compensation in excess of $1,000,000 per year for federal income tax
purposes unless certain conditions are met. For purposes of Section 162(m) of
the Code, compensation includes salary, bonus and income resulting from the
exercise of an option. The Company does not currently have any executive
officers, including the Chief Executive Officer, who receive more than
$1,000,000 in annual total compensation, but the Company is reviewing and will
continue to explore the possibility of instituting a policy that would aim to
preserve the deductibility of any such compensation in excess of the Section
162(m) limit should the need arise in the future. The Company intends that
long-term incentive compensation granted pursuant to the Omnibus Equity Plan in
the form of options and stock appreciation rights will satisfy the conditions
necessary for deductibility under Section 162(m).
Frank T. Cary
Charles F. Moran
Philip J. Purcell
Dennie M. Welsh
STOCK PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return on an investment of $100 since February 26, 1992, the Company's initial
trading date, with that of the S&P 500 Index and a group of peer issuers
selected on an industry or line-of-business basis consisting of Automatic Data
Processing, Concord EFS Inc., Envoy Corporation, Equifax Inc., First Financial
Management Corporation (through and including 1994), FISERV, Inc., Electronic
Data Systems Corporation (previously General Motors (Class E Common Stock)),
Household International, Inc., MBNA Corporation, National Data Corporation and
Total System Services, Inc. VeriFone, Inc. is not included in the Company's
peer group for 1997 because it was merged into another company (with the other
company being the surviving corporation) during such year.
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<PAGE> 9
TOTAL STOCKHOLDERS' RETURN
DECEMBER 31, 1992 - DECEMBER 31, 1997
[GRAPH]
<TABLE>
<CAPTION>
DEC. 31 DEC. 31 DEC. 31 DEC. 31 DEC. 31 DEC. 31
1992 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Peer Group $ 100 $ 106 $ 127 $ 183 $ 214 $ 265
- --------------------------------------------------------------------------------
S&P 500 100 110 111 153 189 252
- --------------------------------------------------------------------------------
SPS Transaction 100 139 121 137 70 104
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 10
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following information with respect to the outstanding shares of Common
Stock of the Company and of common stock of MSDW beneficially owned by each
director and nominee for director of the Company, the Chief Executive Officer
and four other most highly compensated executive officers of the Company, the
directors and executive officers of the Company as a group and all beneficial
owners of more than 5% of the Common Stock is furnished as of December 31,
1997. As of December 31, 1997, the Company was a 73.5% majority owned
subsidiary of NCSI, which in turn is a wholly owned, direct subsidiary of MSDW.
<TABLE>
<CAPTION>
COMPANY MSDW
COMMON STOCK COMMON STOCK
------------------------------ -----------------------------
NUMBER OF PERCENT NUMBER OF PERCENT
NAME SHARES(1) OF CLASS(2) SHARES (1) OF CLASS(2)
---- ----------------- ----------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Philip J. Purcell................... 22,052 (3) * 2,659,866 (4) *
Robert W. Archer.................... 97,614 (5) * 67,400 (6) *
Richard F. Atkinson................. 87,590 (7) * 98,560 (8) *
Serge Uccetta....................... 13,170 (9) * 5,816 (10) *
David J. Peterson................... 22,478 (11) * 4,129 (12) *
Robert L. Wieseneck................. 209,036 (13) * 246,970 (14) *
Frank T. Cary....................... 15,508 (15) * 0 --
Charles F. Moran.................... 8,395 (16) * 19,076 (17) *
Mitchell M. Merin................... 500 * 554,718 (18) *
Thomas C. Schneider................. 1,002 * 1,117,801 (19) *
Dennie M. Welsh..................... 7,404 (20) * 0 --
Christine A. Edwards................ 2,002 571,976 (21)
NOVUS Credit Services Inc........... 20,000,000 73.5 0 --
2500 Lake Cook Road
Riverwoods, IL 60015
All directors and executive officers
as a group (17 persons)............. 564,270 2.1 5,163,495 *
</TABLE>
________________________
(1) To the knowledge of the Company, each holder has sole voting and investment
power with respect to the shares listed unless otherwise indicated. The
number of shares includes shares of Common Stock owned through the
Company's START Plan (Savings Today Affords Retirement Tomorrow) (the "SPS
START") and the Company's Employee Stock Purchase Plan (the "Stock Purchase
Plan") and shares of MSDW common stock owned through the SPS
- 9 -
<PAGE> 11
START, the Dean Witter START Plan (Savings Today Affords Retirement
Tomorrow) and the MSDW Stock Purchase Plan as of December 31, 1997. The
number of shares has been rounded to the nearest whole share.
(2) Shares subject to options exercisable within 60 days of December 31, 1997
are considered outstanding for the purpose of determining the percent of
the class held by the holder of such option, but not for the purpose of
computing the percentage held by others. Percentages less than one
percent are denoted by an asterisk.
(3) Includes 2,050 shares held in custodial accounts on behalf of Mr.
Purcell's children for which he is custodian, as to which Mr. Purcell
disclaims beneficial ownership.
(4) Includes 22,605 shares owned by Mr. Purcell's spouse, 10,344 shares held
in custodial accounts on behalf of Mr. Purcell's children for which he is
custodian, as to which Mr. Purcell disclaims beneficial ownership, and
1,407,737 shares subject to options.
(5) Includes 84,384 shares subject to options and 10,000 shares held through a
partnership.
(6) Includes 57,400 shares subject to options.
(7) Includes 76,916 shares subject to options.
(8) Includes 84,991 shares subject to options.
(9) Includes 12,333 shares subject to options.
(10) Includes 5,500 shares subject to options.
(11) Includes 21,333 shares subject to options.
(12) Includes 1,625 shares subject to options.
(13) Includes 166,908 shares subject to options, 15,763 owned jointly with Mr.
Wieseneck's spouse, 10,000 shares owned jointly with his brother and
12,936 shares owned by Mr. Wieseneck's children.
(14) Includes 202,947 shares subject to options, 33,716 shares owned jointly
with Mr. Wieseneck's spouse, 6,206 shares owned jointly with his brother
and 4,101 shares owned by Mr. Wieseneck's children.
(15) Includes 5,912 shares subject to options.
(16) Includes 4,248 shares subject to options.
(17) Includes 19,076 shares owned jointly with Mr. Moran's spouse.
(18) Includes 304,403 shares subject to options.
(19) Includes 489,344 shares subject to options.
(20) Includes 7,404 shares subject to options.
(21) Includes 339,372 shares subject to options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT SERVICES AGREEMENT WITH NCSI
The Company and NCSI are parties to a Management Services Agreement dated
as of January 1, 1992, pursuant to which NCSI furnishes certain executive,
accounting, financial, legal, tax, organizational, regulatory, insurance,
personnel, employee benefit plans, management information systems, sales,
marketing, purchasing, real estate and other
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<PAGE> 12
services to the Company upon the Company's request. The nature and extent of
the services provided by NCSI under the Management Services Agreement and the
annual rates charged for such services are made in accordance with the same
policies and procedures under which NCSI establishes such charges for its other
subsidiaries and divisions. The Management Services Agreement is automatically
renewed for successive one-year terms unless terminated as of the end of any
term by either party upon 180 days' written notice. The rates charged
historically have reflected the Company's proportionate share of direct
expenses (based upon estimates of time the various personnel have allocated to
the Company) and the Company's proportionate share of allocated expenses (based
upon a pre-determined formula that considers the relative level of personnel,
revenues and income of the Company). The Management Services Agreement does
not prohibit the Company from obtaining similar services from third parties.
FINANCING AGREEMENTS WITH MSDW; INTEREST RATE SWAP AND CAP AGREEMENTS
Effective September 1, 1995, the Company and MSDW entered into an Amended
and Restated Borrowing Agreement (the "Borrowing Agreement"), an Amended and
Restated Bridge Agreement (the "Bridge Funding Agreement") and a facility fee
letter agreement (the "Facility Fee Agreement") (collectively, the "Financing
Agreements"), pursuant to which MSDW has agreed to provide loans to the
Company. Such loans may be either long- or short-term, as determined by MSDW
and the Company, but will in any event mature upon the termination of the
Borrowing Agreement. The maximum amount available under the Borrowing
Agreement is $1.2 billion. The interest rate to be paid by the Company is
equal to MSDW's actual cost of funds. The Borrowing Agreement expires on April
11, 1998. The Company expects to renew or replace the Financing Agreements
prior to the expiration dates of such Financing Agreements. The Company is
continuing to evaluate alternative sources of financing to replace all or a
portion of its financing arrangements with MSDW.
In connection with the Company's financing agreements with MSDW, under the
Facility Fee Agreement, the Company has agreed to pay certain monthly facility
fees to MSDW. In addition, the Company or SPS may enter into interest rate
swap and cap agreements from time to time with either MSDW or NCSI pursuant to
which the cost of funds borrowed on a floating rate basis by the Company, SPS
or HSB may effectively be fixed.
THIRD PARTY PROCESSING AND COOPERATIVE NETWORK SERVICE AGREEMENT AND TERMINAL
SERVICE AGREEMENT WITH NOVUS
Pursuant to a Third Party Processing and Cooperative Network Service
Agreement dated as of January 2, 1992, as amended, NOVUS Services, Inc.
("NOVUS," successor to Discover Card Services, Inc.), an affiliated entity, and
the Company share electronic data links for VISA, MasterCard and American
Express for the purposes of authorizing and completing NOVUS' transaction
processing services. Effective January 1, 1998, the Company and NOVUS amended
the Third Party Processing and Cooperative Network Service Agreement to extend
its initial term through January 1, 2003. The Agreement will continue in
effect thereafter unless terminated by either party upon 180 days written
notice. In addition, pursuant to a Terminal Service Agreement dated as of
January 1, 1992, as amended, the Company provides terminal maintenance, repair
and preparation services to NOVUS. The Terminal Service Agreement is renewed
for successive one-year terms unless the parties fail to agree on pricing for
the additional term at least 180 days prior to the commencement of any
additional term. The rates charged for the services provided by and to the
Company under the Third-Party Processing and Cooperative Network Service
Agreement are determined by an allocation of costs (based on proportionate
transaction volume). Such rates can only be changed by the mutual agreement of
the parties. Under the Terminal Service Agreement, maintenance and repair fees
are charged on a per item basis.
SYSTEM ACCESS AGREEMENT WITH NOVUS
The Company and NOVUS both participate in the transaction processing
industry. Each sells and leases terminals to its customers and provides credit
card transaction processing services through these terminals. Both processing
programs utilize the same communications network. NOVUS and the Company
entered into a System Access Agreement effective August 1, 1992, as amended.
Pursuant to the System Access Agreement, the Company provides NOVUS with access
to certain applications of the Company's point-of-sale transaction processing
system that will assist NOVUS in its marketing of third-party transaction
processing services. NOVUS pays the Company a per transaction fee for all
point-of-sale transactions processed through the network by the Company and
NOVUS for NOVUS clients, except for those transactions generated by certain
large NOVUS clients that have a direct interface with the NOVUS authorization
system. NOVUS has agreed to annual minimum usage requirements. The term of
the System Access Agreement expires on August 1, 2000. As contemplated by the
agreement, NOVUS may compete with the Company in the processing of certain
transactions, although the Company will receive fees from NOVUS for such
transactions.
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<PAGE> 13
SERVICE AGREEMENT WITH NOVUS
Effective September 1, 1996, the Company entered into a Service Agreement
with NOVUS in connection with NOVUS' co-brand and affinity card programs,
whereby the Company provides NOVUS credit card processing services, including
credit review, authorization, collection and other related services for the
specified programs. NOVUS pays the Company a fee based upon the services
provided, which fee can be increased if NOVUS does not achieve certain monthly
minimum usage requirements. As long as NOVUS meets such minimum usage
requirements, the Company has agreed not to provide certain similar services to
any third-party direct competitor of NOVUS. The initial term of the Service
Agreement expires on September 1, 1999, if a specified minimum usage
requirement is achieved during the first year of the term, or if later, on the
date two years after such requirement is first achieved. Thereafter, the term
of the Agreement will be renewed for additional one-year terms unless
terminated by either party upon 90 days written notice prior to the end of any
term.
DEBIT CARD PROCESSING LETTER AGREEMENT AND SALES LEAD LETTER AGREEMENT WITH
NOVUS
Pursuant to a Debit Card Processing Letter Agreement dated August 30,
1994, NOVUS forwards requests for debit card transaction processing services
from its merchant customers to the Company, and the Company provides such
services pursuant to separate agreements with such merchants. The Company then
pays NOVUS a per transaction fee for each debit transaction so processed (for
which the Company receives a separate fee from the merchant customers), and a
per location fee for each new merchant location established on the Company's
system through the Debit Card Processing Letter Agreement. Such Letter
Agreement has an initial term of three years and will remain in effect for
successive one-year terms thereafter unless terminated by either party upon 90
days written notice before the end of any term. In addition, pursuant to a
Sales Lead Letter Agreement dated January 26, 1995, NOVUS provides the Company
with sales lead referrals for merchants in connection with the Company's
electronic transaction processing services business. For each such referred
merchant, the Company pays NOVUS an amount equal to 10% of the annual net
profit attributed to the transaction processing services provided by the
Company to such merchant. The Letter Agreement is renewed for one-year terms
each January 1 unless terminated by either party upon 60 days written notice
prior to the end of any term.
MARKETING SERVICES AGREEMENT WITH NCSI
Effective January 1, 1996, the Company entered into an Amended and
Restated Marketing Services Agreement with NCSI pursuant to which the Company
provides marketing and sales services to NCSI for the benefit of one of NCSI's
subsidiaries, MountainWest Financial Corporation ("MountainWest"). As
compensation for such services, NCSI has agreed to pay to the Company an annual
fee based on MountainWest's after-tax return on certain of its assets. The
Marketing Services Agreement will continue until such time as the Company no
longer provides services to MountainWest under the Service Agreement between
the Company and MountainWest.
SERVICE AGREEMENT WITH MOUNTAINWEST
The Company and MountainWest are parties to a Service Agreement dated as
of November 1, 1990, as amended, pursuant to which the Company provides an
accounts receivable system and various credit services for MountainWest. Under
the Service Agreement, the Company administers the programs for private label
credit cards issued by MountainWest, which owns the credit card loans that are
generated through use of such credit cards. The Company generally charges
MountainWest one all-inclusive fee for the services it provides with respect to
consumer accounts, and one all-inclusive fee for those it provides with respect
to commercial accounts, in each case under the programs owned by MountainWest.
The fee for commercial accounts is generally based on the total number of such
accounts and related customer inquiries under the programs for such accounts.
The fee for consumer accounts is based on a percentage of the outstanding
receivables relating to consumer accounts under the programs for such accounts.
These all-inclusive fees are derived from historical component pricing for
individual services. Effective January 1, 1996, the Company and MountainWest
amended the Service Agreement to extend its term through December 31, 1998.
The term of the Service Agreement continues thereafter for consecutive one-year
periods unless terminated by either party upon 180 days written notice prior to
January 1 of any year.
OPERATIONAL OUTSOURCING SERVICE AGREEMENT WITH MOUNTAINWEST
Pursuant to a Service Agreement dated as of February 1, 1994, as amended,
between the Company and MountainWest, the Company handles customer telephone
inquiries in connection with MountainWest's Prime Option
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<PAGE> 14
credit card program, including inquiries regarding matters such as account
activation and balances, sales activity, payment history, billing statements
and lost and stolen cards. The Company generally charges MountainWest on a per
call basis based on volume service levels and the type of services provided.
The fees for services are consistent with the pricing methodology that the
Company uses to charge other operational outsourcing clients. The term of the
Service Agreement expires February 1, 1998 and will be automatically renewed
for additional one-year terms unless terminated by either party upon 60 days
written notice prior to the term's expiration.
HEADQUARTERS LEASE WITH NCSI
The Company leases its headquarters, which cover approximately 94,950
square feet in Riverwoods, Illinois, from NCSI pursuant to a Lease Agreement
made February 1, 1993, for a specified base rent that includes real estate
taxes and administrative and operating expenses and is subject to adjustments
so that the base rental will not exceed the base rental charged to any NCSI
subsidiary or affiliate that is also headquartered in the building. Effective
February 1, 1997, the Company and NCSI amended the Lease Agreement to extend
its term through January 31, 2000, to increase the square footage under the
Lease Agreement, and to provide that the Lease Agreement is renewable at the
Company's option for one three-year term at a specified base rental per square
foot. The Company also has a lease for approximately 2,400 additional square
feet of office space in the same building in Riverwoods, Illinois, from NCSI
pursuant to a Lease Agreement made January 1, 1997, for a specified base rent
that includes real estate taxes and administrative and operating expenses and
is subject to adjustments so that the base rental will not exceed the base
rental charged to any NCSI subsidiary or affiliate that is also headquartered
in the building. The term of the lease covering this additional space also
expires January 31, 2000, and the lease is renewable at the Company's option
for one three-year term at a specified base rental per square foot.
SERVICE AGREEMENT WITH NEW CASTLE
The Company and Discover Card Bank of New Castle ("New Castle") are
parties to a Service Agreement dated as of January 1, 1991, pursuant to which
the Company provides New Castle with an accounts receivable system and performs
certain credit services for New Castle in connection with its private label
credit card program. As compensation for such services, New Castle pays the
Company a fee calculated as a specified percentage of the monthly average of
the accounts receivable balance for each private label program serviced
pursuant to this Agreement. The term of the Service Agreement commences
January 1, 1991, and continues in effect thereafter unless terminated by either
party by notice given at least 180 days prior to an anniversary date of this
Agreement.
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<PAGE> 15
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on April 30, 1998.
SPS TRANSACTION SERVICES, INC.
By: /s/ Robert L. Wieseneck
---------------------------------------
Robert L. Wieseneck,
President and Chief Executive Officer
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