<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
APEX PC SOLUTIONS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF APEX PC SOLUTIONS, INC.:
NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders of Apex
PC Solutions, Inc. will be held at 10:00 a.m. local time on Thursday, June 25,
1998, at The Woodmark Hotel, 1200 Carillon Point, Kirkland, Washington 98033,
for the following purposes:
(1) To elect six directors for a one-year term;
(2) To ratify the appointment of Coopers & Lybrand L.L.P. as independent
accountants for the current fiscal year;
(3) To amend the Apex PC Solutions, Inc. 1995 Employee Stock Plan; and
(4) To transact such other business as may properly come before the meeting.
Shareholders of record at the close of business on May 22, 1998 will be
entitled to notice of and to vote at the meeting and any adjournment thereof.
The vote of each shareholder is important. Whether or not you plan to attend the
meeting, you are requested to date and sign the enclosed proxy card and return
it promptly.
By order of the Board of Directors,
APEX PC SOLUTIONS, INC.
[SIGNATURE]
Samuel F. Saracino, Secretary
Woodinville, Washington
May 22, 1998
<PAGE>
APEX PC SOLUTIONS, INC.
20031 - 142ND AVENUE N.E.
WOODINVILLE, WASHINGTON 98072
---------------------
PROXY STATEMENT
---------------------
INFORMATION REGARDING PROXIES
This Proxy Statement and the accompanying proxy/voting instruction card
(proxy card) are being mailed on or about May 25, 1998 to shareholders in
connection with the solicitation of proxies by the Board of Directors of Apex PC
Solutions, Inc. (the "Company") for the 1998 Annual Meeting of Shareholders. The
meeting will be held on Thursday, June 25, 1998, at 10:00 a.m. at The Woodmark
Hotel, 1200 Carillon Point, Kirkland, Washington 98033.
Only shareholders of record at the close of business on May 22, 1998 will be
entitled to vote at the meeting. At the close of business on May 22, 1998, there
were 13,453,008 outstanding shares of the Company's common stock ("Common
Stock"). Each share of outstanding Common Stock is entitled to one vote, and the
holders of a majority of the votes entitled to be cast on a matter constitute a
quorum for the transaction of business. Once a quorum exists, a director nominee
is elected or a proposal is approved if the votes cast in favor of the nominee
or the proposal exceed the votes cast against the nominee or the proposal. There
is no provision in the Company's Amended and Restated Articles of Incorporation
for cumulative voting.
If shares are not voted in person, they cannot be voted on your behalf
unless a signed proxy is given. Even if you expect to attend the Annual Meeting
in person, in order to ensure your representation, please complete, sign, date,
and mail the enclosed proxy promptly in the enclosed envelope. A shareholder
giving a proxy pursuant to this solicitation may revoke it at any time before it
is exercised by giving a subsequent proxy or by delivering to the Secretary of
the Company a written notice of revocation prior to the voting of the proxy at
the Annual Meeting. If you attend the Annual Meeting and inform the Secretary of
the Company in writing that you wish to vote your shares in person, your proxy
will not be used. If you receive two or more proxy cards, please complete, sign,
date, and return each to complete your representation. All shares represented by
each properly executed and unrevoked proxy, in the accompanying form, will be
voted unless the proxy is mutilated or otherwise received in such form or at
such time as to render it unusable.
If the enclosed proxy is properly executed and returned, it will be voted in
accordance with the instructions specified on the proxy. In the absence of
instructions to the contrary, it will be voted (i) for all of the nominees for
the Company's Board of Directors listed in this proxy statement, (ii) to ratify
the appointment of Coopers & Lybrand L.L.P. as the independent accountants for
the Company for the year ending December 31, 1998, and (iii) to amend the
Company's 1995 Employee Stock Plan.
Votes cast at the Annual Meeting will be tabulated by the persons appointed
by the Company to act as inspectors of election for the Annual Meeting. Shares
represented by proxies that reflect abstentions or "broker non-votes" (i.e.,
shares held by a broker or nominee which are represented at the meeting, but
with respect to which such broker or nominee is not empowered to vote on a
particular proposal) will be counted as shares that are present and entitled to
vote for purposes of determining the presence of a quorum. Abstentions will not
be counted either in favor of or against the election of the director nominees
or the other proposals. Under the rules of the National Association of
Securities Dealers, brokers holding stock for the accounts of their clients who
have not been given specific voting instructions as to a matter by their clients
may vote their clients' proxies in their own discretion.
The cost of this solicitation will be borne by the Company. Solicitation
will be made by mail, facsimile, telephone, or other electronic means and
personally by officers and regular employees of the Company
<PAGE>
who will not receive additional compensation for solicitation. Brokers,
nominees, and fiduciaries will be reimbursed for out-of-pocket expenses incurred
in obtaining proxies or authorizations from the beneficial owners of the Common
Stock. The Company will use the services of ChaseMellon Shareholder Services,
L.L.C., 520 Pike Street, Suite 1220, Seattle, WA, 98101, to aid in the
solicitation of proxies at an anticipated fee of $6,500.00, plus reasonable
expenses.
The purpose of the meeting and the matters to be acted upon are set forth in
the Notice of Annual Meeting of Shareholders. As of the date of this Proxy
Statement, management knows of no other business that will be presented for
consideration at the Annual Meeting. If any such other business shall properly
come before the meeting, however, votes will be cast pursuant to the proxies in
respect of any such other business in accordance with the best judgment of the
persons acting under the proxies.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors proposes the following six nominees for re-election
as Directors at the Annual Meeting: Jeffrey T. Chambers, Sterling Crum, Franz
Fichtner, Kevin J. Hafer, Edwin L. Harper, and William McAleer.
The Board of Directors consists of six members, each serving a one-year
term. Each Director will hold office until the first annual meeting of
shareholders immediately following expiration of his term of office and until
his successor is qualified and elected.
Although the Board of Directors anticipates that all of the nominees will be
available to serve as Directors of the Company, if any of the nominees does not
accept the nomination, or is otherwise unwilling or unable to serve, the proxies
will be voted for the election of a substitute nominee or nominees designated by
the Board of Directors.
INFORMATION ABOUT DIRECTORS AND NOMINEES FOR ELECTION
The names and ages of the nominees, the year in which each first became a
Director of the Company, their principal occupations, and certain other
information are as follows:
Jeffrey T. Chambers, age 43, has served as a Director of the Company since
January 1996. Mr. Chambers has been employed by TA Associates, Inc., a venture
capital firm, or its predecessor, since 1980, has been a partner of affiliated
venture funds since 1984, and is currently a Managing Director of TA Associates,
Inc. Mr. Chambers is also a director of Diamond Multimedia Systems, Inc.
Sterling Crum, age 43, has served as a Director of the Company since its
inception. From the Company's inception until June 1995, Mr. Crum served as the
Company's President. From May 1985 to February 1993, Mr. Crum served in various
capacities for the Company's predecessor, including as President and as
Director. In addition, since November 1993, Mr. Crum has served as President and
sole director of Water Sports, Inc., a water sports recreation company.
Franz Fichtner, age 46, has served as a Director of the Company since March
1998. Mr. Fichtner has been President of Diamond Multimedia Europe, a computer
hardware company, since October 1997. From January 1995 to October 1997, Mr.
Fichtner was President of 3Com Europe, a computer network company, and from
January 1991 to January 1995, Mr. Fichtner was Managing Director of 3Com GmbH.
Kevin J. Hafer, age 41, has been the President of the Company since June
1995, and has served as the Chief Executive Officer of the Company since
December 1995 and as a Director of the Company since January 1996. From February
1993 to June 1995, Mr. Hafer served as the General Manager of the Company, and
from December 1989 to January 1993, Mr. Hafer served as the Manager and
Technical Operations Director of the Company's predecessor. Prior to joining the
Company's predecessor, Mr. Hafer
2
<PAGE>
was employed at Harris Corporation from May 1979 to September 1989, serving in
various management capacities.
Edwin L. Harper, age 53, has served as a Director of the Company since
October 1996. Since June 1996, Mr. Harper has served as President and Chief
Executive Officer of SyQuest Technology, a computer hardware company. From July
1993 to June 1996, Mr. Harper was employed as President and Chief Executive
Officer of ComByte, Inc., and from June 1988 to May 1993, Mr. Harper served in
various capacities, including President and Chief Executive Officer, at Colorado
Memory Systems, Inc. Mr. Harper is also a Director of SyQuest Technology and
Network Associates, a network security management company.
William McAleer, age 46, has served as a Director of the Company since June
1996. Mr. McAleer is currently Managing Director of Voyager Capital, L.L.C.,
which provides venture financing to private information technology companies.
From 1988 through 1994, Mr. McAleer was Vice President Finance, Chief Financial
Officer and Secretary with Aldus Corporation, a publicly held software company.
Prior to joining Aldus, Mr. McAleer was Vice President, Finance and
Administration from 1987 to 1988 of Ecova Corporation and also served as a Vice
President with Westin Hotels Company from 1984 through 1987. Mr. McAleer is also
a Director of Endura Software Corporation, Primus Communications Corporation,
and Truevision, Inc.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has two standing committees: the Audit Committee and
the Compensation Committee, each of which consists entirely of independent
Directors.
The Audit Committee, which was created in December 1996, reviews with the
Company's independent accountants the scope, results, and costs of the annual
audit and the Company's accounting policies and financial reporting. The members
of the Audit Committee are William McAleer (Chairman) and Jeffrey T. Chambers.
The Compensation Committee, which was also created in December 1996,
oversees the Company's compensation and benefits practices and programs. The
members of the Compensation Committee are Edwin L. Harper (Chairman), Sterling
Crum, and Jeffrey T. Chambers.
The Board of Directors does not have any other standing committees.
BOARD AND BOARD COMMITTEE MEETINGS
During the fiscal year ended December 31, 1997, there were seven meetings of
the Board of Directors, and the Board of Directors took action by unanimous
written consent an additional five times during 1997. There was one meeting of
the Audit Committee during the fiscal year ended December 31, 1997. The
Compensation Committee took action by unanimous written consent three times
during the fiscal year ended December 31, 1997. All Directors attended all
meetings of the Board and of the Committees on which they served except that
each of two Directors did not attend one meeting of the Board.
COMPENSATION OF DIRECTORS
Directors are reimbursed for their out-of-pocket expenses for attendance at
meetings. Mr. Fichtner, Mr. Harper, and Mr. McAleer receive annual compensation
of $6,000 for their services as Directors. Each individual who was a Director of
the Company in July 1997 was also granted options at that time to purchase 4,000
shares of the Company's Common Stock at $18.750 per share. These options vest
over a one-year period beginning at various times in 1999.
3
<PAGE>
EXECUTIVE OFFICERS
The following are the executive officers of the Company. Executive officers
are elected by the Board of Directors:
Thomas M. Buiocchi, age 40, has been the Vice President of Marketing of the
Company since April 1998. From July 1997 to April 1998, Mr. Buiocchi was Vice
President, Marketing, of Enron Marketing, an energy services company. From
December 1994 to July 1997, Mr. Buiocchi was Executive Vice President and Chief
Operating Officer of FMES Incorporated, also an energy services company. From
December 1993 to December 1995, Mr. Buiocchi was Director of Planning for
Hewlett-Packard Computer Systems Organization, part of Hewlett-Packard
Corporation, a computer hardware company. From April 1992 to December 1993, Mr.
Buiocchi was Director of Marketing for HP Personal Computer Systems
Organization.
Douglas A. Bevis, age 52, has been the Vice President and Chief Financial
Officer of the Company since September 1996, and was Secretary of the Company
from December 1996 to March 1998. From September 1990 to February 1996, Mr.
Bevis was employed at CH2M HILL, Inc., a national environmental engineering
consulting firm, where he served as Vice President and Treasurer from September
1990 to April 1993 and as Senior Vice President and Chief Financial Officer from
April 1993 to February 1996.
Kevin J. Hafer. See description under "Election of Directors--Information
About Directors and Nominees for Election."
Samuel F. Saracino, age 47, has been the Vice President of Business
Development and General Counsel of the Company since February 1998, and
Secretary of the Company since March 1998. From January 1984 to February 1998,
Mr. Saracino was a partner at the Seattle law firm of Davis Wright Tremaine LLP,
the Company's outside general counsel.
Christopher L. Sirianni, age 44, has been the Vice President of Sales of the
Company since August 1996, and was Vice President of Sales and Marketing from
August 1996 to April 1998. From March 1994 to August 1996, Mr. Sirianni served
as the Company's Director of Sales and Marketing. From August 1992 to February
1994, Mr. Sirianni served as the Director of Sales of Coastal Manufacturing, a
metal fabrication company. Mr. Sirianni served as a consultant/sales executive
for National Precision Bearing, a distributor, from November 1991 to June 1992.
From September 1982 to October 1991, Mr. Sirianni served in various capacities,
including Vice President of Sales and Marketing for Augat Communications, a
telecommunications company.
OTHER SIGNIFICANT EMPLOYEES
In addition to directors and executive officers, the Company has the
following significant employees:
Danny L. Beasley, age 33, has served as the Company's Director of
Engineering since March 1994. From December 1992 to March 1994, Mr. Beasley
served as a Research and Development Engineer for the Company and its
predecessor. Mr. Beasley served as the Director of Engineering for Spectralogic,
Inc., an engineering design and product development firm, from April 1989 to
October 1992.
Stephen J. McCarthy, age 45, has served as the Company's Director of Product
Development since July 1995. From February 1994 to July 1995, Mr. McCarthy
served as the Company's Research and Development Manager, and from November 1987
to February 1994, Mr. McCarthy served as the Account Manager for the Company and
the on-site service division of the Company's predecessor.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND DIRECTORS
The following table sets forth as of April 30, 1998, certain information
with respect to the ownership of the Common Stock of the Company by (i) each
person (or group of affiliated persons) known by the Company to be the
beneficial owner of more than 5% of the Company's outstanding Common Stock, (ii)
each director of the Company, (iii) each of the Company's executive officers,
and (iv) all executive officers and directors of the Company as a group. Unless
otherwise noted, each person or group identified possesses sole voting and
investment power with respect to such shares, subject to community property
laws, where applicable.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER(1) SHARES PERCENTAGE
- --------------------------------------------------------------------- ---------- -------------
<S> <C> <C>
Sterling Crum(2)..................................................... 1,875,000 13.9%
The Equitable Companies Incorporated(3) ............................. 1,392,700 10.4%
1290 Avenue of the Americas
New York, NY 10104
Pilgrim Baxter & Associates, Ltd. ................................... 1,349,800 10.0%
825 Duportail Road
Wayne, PA 19087
Britannia Holdings Limited .......................................... 942,500 7.0%
P.O. Box 556
Main Street
Charleston, Nevis
TA Group(4) ......................................................... 541,584 4.0%
c/o TA Associates, Inc.
125 High Street
High Street Tower, Suite 2500
Boston, MA 02110
Kevin J. Hafer(5).................................................... 293,696 2.2%
Christopher L. Sirianni(6)........................................... 45,000 *
Jeffrey T. Chambers(7)............................................... 38,247 *
Douglas A. Bevis(8).................................................. 34,587 *
Edwin L. Harper(9)................................................... 13,933 *
William McAleer(10).................................................. 12,500 *
Franz Fichtner(11)................................................... 1,999 *
Samuel F. Saracino................................................... 1,000 *
All directors and executive officers as a group
(9 persons)(12).................................................... 2,315,962 17.0%
</TABLE>
- ------------------------
* Less than 1%.
(1) Except as set forth herein the address of the directors and executive
officers set forth in the table is the address of the Company, 20031 -
142nd Avenue, N.E., Woodinville, Washington 98072.
(2) Includes 942,500 shares beneficially owned by Britannia Holdings Limited
("Britannia"), whose sole shareholder is The Duvall Trust, an irrevocable
trust for the benefit of Mr. Crum and certain members of his family. Mr.
Crum disclaims beneficial ownership with respect to all of such 942,500
shares. Also includes 4,000 shares of Common Stock issuable upon exercise
of stock options currently exercisable or becoming exercisable within 60
days at $0.18375 per share. Also includes 928,500 shares beneficially owned
by the Crum Family Trust, a revocable trust for the benefit of Mr. Crum and
certain members of his family.
(3) As reported on a Schedule 13G filed on April 10, 1998, by The Equitable
Companies Incorporated under a Joint Filing Agreement among The Equitable
Companies Incorporated, Alpha Assurances
5
<PAGE>
Vie Mutuelle, AXA Assurances I.A.R.D Mutuelle, AXA Assurances Vie Mutuelle,
AXA Courtage Assurance Mutuelle, and AXA-UAP.
(4) Includes (i) 442,498 shares of Common Stock owned by Advent Atlantic and
Pacific II L.P., (ii) 80,671 shares of Common Stock owned by Advent New
York L.P., (iii) 15,435 shares of Common Stock owned by TA Associates VII
L.P., (iv) 1,490 shares of Common Stock owned by TA Associates, Inc., and
(v) 1,490 shares of Common Stock owned by TA Associates Service
Corporation. Advent Atlantic and Pacific II L.P., Advent New York L.P., TA
Associates VII L.P., TA Associates, Inc., and TA Associates Service
Corporation are part of an affiliated group of investment partnerships and
corporations referred to, collectively, as the TA Group. The general
partner of Advent Atlantic and Pacific II L.P. is TA Associates AAP II
Partners L.P. The general partner of Advent New York L.P. is TA Associates
VI L.P. The general partner of each of TA Associates VII L.P., TA
Associates AAP II Partners L.P., and TA Associates VI L.P. is TA
Associates, Inc. TA Associates Service Corporation, whose sole shareholder
is TA Associates, Inc., is a limited partner in TA Associates VII L.P. TA
Associates, Inc. exercises sole voting and investment power with respect to
all of the shares held of record by the named investment partnerships and
corporations. Individually, no stockholder, director, or officer of TA
Associates, Inc. is deemed to have or share such voting or investment
power. Principals and employees of TA Associates, Inc. (including Mr.
Chambers, a director of the Company) may be deemed to share voting and
investment power with respect to the shares of Common Stock held of record
by the TA Group. Mr. Chambers disclaims beneficial ownership of all such
shares.
(5) Includes 99,619 shares of Common Stock issuable upon exercise of stock
options currently exercisable or becoming exercisable within 60 days at a
weighted average exercise price of $4.1055 per share.
(6) Includes 11,000 shares of Common Stock issuable upon exercise of stock
options currently exercisable or becoming exercisable within 60 days at
$0.18375 per share.
(7) Includes 16,000 shares of Common Stock issuable upon exercise of stock
options currently exercisable or becoming exercisable within 60 days at
$0.18375 per share, of which Mr. Chambers disclaims beneficial ownership.
Does not include any shares beneficially owned by the members of the TA
Group, of which Mr. Chambers disclaims beneficial ownership.
(8) Includes 7,169 shares of Common Stock issuable upon exercise of stock
options currently exercisable or becoming exercisable within 60 days at
$0.18375 per share.
(9) Includes 1,333 shares of Common Stock issuable upon exercise of stock
options currently exercisable or becoming exercisable within 60 days at
$0.50 per share.
(10) Includes 4,000 shares of Common Stock issuable upon exercise of stock
options currently exercisable or becoming exercisable within 60 days at
$0.18375 per share.
(11) Includes 1,999 shares of Common Stock issuable upon exercise of stock
options currently exercisable or becoming exercisable within 60 days at
$22.4063 per share.
(12) Includes 145,120 shares of Common Stock issuable upon exercise of stock
options currently exercisable or becoming exercisable within 60 days at a
weighted average exercise price of $3.1849 per share. Also includes
942,500 shares held by Britannia. See Notes (2), (5), (6), (7), (8), (9),
(10), and (11) above.
There are no arrangements which may result in a change of control of the
Company.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors
(comprised of three non-employee directors) reviews and approves individual
officer salaries, incentive performance goals, and stock option grants. The
Committee also reviews guidelines for compensation, bonus, and stock option
grants for non-officer employees.
The Company's overall compensation philosophy is to provide competitive
levels of total compensation that will enable the Company to attract, motivate,
retain, and reward qualified employees. The
6
<PAGE>
Committee believes that compensation should promote continued performance of
corporate and personal goals and that any long-term incentive should be aligned
with the interest of the Company's stockholders. The Company's executive
compensation policies are designed to provide competitive levels of compensation
to motivate officers to achieve the Company's business objectives and to reward
these officers based on their achievements. The executive compensation program
primarily consists of (i) base salary, (ii) incentive compensation in the form
of an annual bonus, and (iii) and stock options awarded under the Company's 1995
Employee Stock Plan.
Compensation for the Company's executive officers (including the Named
Executive Officers as defined below) consists of the following components:
BASE SALARY. In setting compensation levels for executive officers, the
Committee reviews several salary surveys detailing information relating to
competitive compensation levels at other technology companies in the Pacific
Northwest and, to a lesser extent, in California. Recommendations by management
are examined by the Committee in the light of this reported information. Officer
base compensation may vary based on tenure with the Company, experience,
assessment of individual performance, duties and responsibilities, and other
factors of importance to the success of the Company.
INCENTIVE BONUSES. The incentive bonus program provides a variable
compensation opportunity for the executive officers. Bonus payments are
discretionary and based on a combination of the Company's corporate financial
performance and individual officer performance relative to achievement of
specified management and strategic objectives. Target bonuses for executive
officers range up to seventy-five percent of the base salary of the individual
executive officer.
STOCK OPTIONS. The Committee believes that stock ownership provides
significant incentive to employees by providing an opportunity to receive
additional compensation by increasing shareholder value. This compensation
element aligns the interests of employees with those of the stockholders. The
long-term incentive is realized through the granting of stock options to
employees and eligible executive officers. Stock Options have value for the
employee only if the price of the Company's Common Stock increases above the
exercise price, which is typically set at the fair market value of the Common
Stock on the date the stock option is granted. The number of shares awarded with
each stock option grant is based on the employee's current and anticipated
future performance and ability to promote achievement of strategic corporate
goals. The Committee reviews the stock option holdings of executive officers
annually to determine whether additional grants are appropriate. Stock options
generally vest over a four-year period, thus providing an incentive to remain
employed with the Company.
OTHER. In addition to the compensation paid to the Named Executive Officers
as described above, executive officers and all other participating regular
employees of the Company are eligible to receive an annual matching contribution
up to a specified percentage (which is determined annually by the Board of
Directors) of their eligible compensation under the Company's 401(k) plan. For
1997, the Company matched 100% of an employee's or officer's elective
contribution up to 5% of eligible compensation. Executive officers, subject to
plan provisions, and all other regular employees are also eligible to
participate in the Company's Employee Stock Purchase Plan (which qualifies under
Section 423 of the Internal Revenue Code).
The Compensation Committee annually reviews and approves the compensation of
Kevin J. Hafer, the Company's President and Chief Executive Officer. In setting
the compensation level for the Chief Executive Officer, the Committee reviews
competitive information reflecting compensation practices for technology
companies and examines the Chief Executive Officer's performance relative to the
Company's financial performance and his specific strategic objectives and goals.
The Committee also considers the Chief Executive Officer's achievements against
the same pre-established objectives and determines whether the Chief Executive
Officer's base salary, bonus, and total compensation approximate the competitive
range of compensation for chief executive officer positions in the technology
industry. In establishing Mr. Hafer's 1997 compensation, the Committee reviewed
Mr. Hafer's experience and past performance and compared them with chief
executive officers of other companies.
7
<PAGE>
The Committee is in the process of reviewing the Company's executive
compensation plans to determine if revisions may be necessary due to provisions
of Section 162(m) of the Internal Revenue Code, which generally disallows a tax
deduction to public corporations for compensation over $1,000,000 paid to any of
the corporation's executive officers for any fiscal year. It is the current
policy of the Committee to preserve the Company's ability to obtain a corporate
tax deduction for compensation paid to executive officers of the Company to the
extent consistent with the best interests of the Company and its shareholders.
The Committee is reviewing the Company's existing executive compensation plans
and will propose changes, if necessary and reasonable, to ensure compliance with
the provisions of Section 162(m) which allow performance-based compensation to
be excluded from the deduction limits.
COMPENSATION COMMITTEE:
Edwin L. Harper (Chairman)
Jeffrey T. Chambers
Sterling Crum
SUMMARY COMPENSATION TABLE
The following table summarizes all compensation earned by the Company's
Chief Executive Officer and by the Company's other most highly compensated
executive officers whose total annual salary and bonus exceeded $100,000
(collectively, the "Named Executive Officers") for services rendered in all
capacities during the fiscal years ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------- ------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS STOCK OPTIONS COMPENSATION
- ---------------------------------------------- --------- ---------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Kevin J. Hafer ............................... 1997 $ 200,000 $ 167,500(1) 160,250 $ 10,119(2)
President and Chief Executive Officer 1996 $ 157,692 $ 164,707(3) 24,000 $ 1,009,619(2)
Christopher L. Sirianni....................... 1997 $ 145,000 $ 108,750(4) 22,000 $ 292,422(5)
Vice President, Sales and Marketing 1996 $ 89,123 $ 148,396(6) 132,000 $ 4,456(5)
Douglas A. Bevis.............................. 1997 $ 120,000 $ 60,000(7) 17,000 $ 4,385(8)
Vice President and Chief Financial Officer
</TABLE>
- ------------------------
(1) Includes $150,000 bonus earned in 1997 and paid in 1998.
(2) Includes $1,000,000 related to the vesting of Series B Redeemable Preferred
Stock in 1996, which was paid in 1997. Also represents matching
contributions in the aggregate amounts of $8,000 and $7,500 made by the
Company in 1997 and 1996, respectively, to its 401(k) Profit Sharing Plan
and Trust on behalf of Mr. Hafer and premium payments in the aggregate
amount of $2,119 and $2,119 paid by the Company in 1997 and 1996,
respectively, towards Mr. Hafer's life insurance policy.
(3) Includes $80,000 bonus earned in 1996 and paid in 1997.
(4) Bonus earned in 1997 and paid in 1998.
(5) Represents matching contributions in the aggregate amounts of $8,000 and
$4,456 made by the Company in 1997 and 1996, respectively, to its 401(k)
Profit Sharing Plan and Trust on behalf of Mr. Sirianni, and $284,422 in
compensation related to the exercise of stock options by Mr. Sirianni in
1997.
(6) Includes $54,894 bonus earned in 1996 and paid in 1997.
(7) Includes $15,000 bonus earned in 1997 and paid in 1998.
(8) Represents matching contributions made by the Company in 1997 to its 401(k)
Profit Sharing Plan and Trust on behalf of Mr. Bevis.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to
individual grants to the Named Executive Officers of options to purchase Common
Stock of the Company made during the fiscal year ended December 31, 1997:
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE
NUMBER OF AT ASSUMED ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE FOR OPTION TERM
OPTIONS TO EMPLOYEES IN PRICE PER EXPIRATION --------------------------
NAME GRANTED(#) FISCAL YEAR SHARE DATE 5% 10%
- ----------------------------------- ----------- ----------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Kevin J. Hafer..................... 79,000 22.6% $ 18.75 6/19/07 $ 931,540 $ 2,360,731
81,250 23.3% $ 23.63 10/27/07 $ 1,207,183 $ 3,059,238
Christopher L. Sirianni............ 22,000 6.3% $ 18.75 6/19/07 $ 259,419 $ 657,419
Douglas A. Bevis................... 17,000 4.9% $ 18.75 6/19/07 $ 200,460 $ 508,005
</TABLE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to option exercises
during the fiscal year ended December 31, 1997 by the Named Executive Officers
and 1997 year-end option values:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
VALUE UNDERLYING
REALIZED UNEXERCISED VALUE OF UNEXERCISED
(MARKET PRICE OPTIONS AT IN-THE-MONEY OPTIONS
NUMBER OF AT EXERCISE FISCAL YEAR END AT FISCAL YEAR END
SHARES ACQUIRED LESS EXERCISE (EXERCISABLE/ (EXERCISABLE/
NAME ON EXERCISE PRICE) UNEXERCISABLE) UNEXERCISABLE)(1)
- ------------------------------------------- --------------- ------------- --------------- ---------------------
<S> <C> <C> <C> <C>
Kevin J. Hafer............................. -- -- 4,171/481,115 $110/$7,398,211
Christopher L. Sirianni.................... 11,576 $ 284,422(2) 0/88,000 --/$1,522,373
Douglas A. Bevis........................... -- -- 4,294/89,958 $94,208/$1,658,172
</TABLE>
- ------------------------
(1) Based upon the fair market value of the Company's Common Stock at fiscal
year end of $22.13 per share less the exercise price payable for such
shares.
(2) Based upon the net sales price received on August 7, 1997 of $24.57 per
share.
EMPLOYMENT CONTRACTS AND ARRANGEMENTS
In December 1995, the Company entered into an Employment Agreement (the
"Employment Agreement") with Mr. Hafer for a term of one year, subject to
automatic one-year renewals thereafter. Pursuant to the terms of the Employment
Agreement, the Compensation Committee of the Board of Directors set Mr. Hafer's
1997 base salary at $200,000, and awarded Mr. Hafer bonus payments of $150,000
for 1997 based on the achievement by Mr. Hafer and the Company of certain
performance objectives. In connection with his employment, Mr. Hafer was awarded
160,250 stock options in 1997 under the Company's 1995 Employee Stock Plan.
Under the Employment Agreement, if Mr. Hafer is terminated without cause (as
defined in the Employment Agreement), he is entitled to receive his salary,
benefits, bonus and accelerated vesting of his stock options for a period of one
year, during which time and for an additional one year thereafter Mr. Hafer has
agreed not to compete, directly or indirectly, with the Company.
9
<PAGE>
PERFORMANCE GRAPH
The following graph compares the total stockholder return (stock price
appreciation) on the Company's Common Stock with the cumulative total return
(including reinvested dividends) on the NASDAQ Composite Index ("NASDAQ
Composite") and the NASDAQ Computer Index ("NASDAQ Computer") for the period
beginning February 1, 1997, the first day of the month in which the Company
became a public company, and ending December 31, 1997.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CUMULATIVE TOTAL RETURN*
<S> <C> <C>
APEX PC SOLUTIONS NASDAQ COMPOSITE
2/1/97 $100.00 $100.00
12/31/97 $245.83 $113.81
*ASSUMES INITIAL INVESTMENT OF $100 AND REINVESTMENT OF DIVIDENDS
<CAPTION>
COMPARISON OF CUMULATIVE TOTAL RETURN*
<S> <C>
NASDAQ COMPUTER
2/1/97 $100.00
12/31/97 $106.14
*ASSUMES INITIAL INVESTMENT OF $100 AND REINVESTMENT OF DIVIDENDS
</TABLE>
PROPOSAL 2
TO RATIFY THE APPOINTMENT OF COOPERS & LYBRAND L.L.P.
AS THE INDEPENDENT ACCOUNTANTS FOR THE COMPANY
FOR THE YEAR ENDED DECEMBER 31, 1998
The Board of Directors has appointed the firm of Coopers & Lybrand L.L.P. to
conduct an audit in accordance with generally accepted accounting standards of
the Company's financial statements for the fiscal year ending December 31, 1998.
A representative of that firm is expected to be present at the annual meeting to
respond to appropriate questions and will be given an opportunity to make a
statement if he or she so desires. Neither the firm nor any of the partners has
any direct financial interest in the Company as independent accountants. This
appointment is being submitted for ratification at the meeting. If not ratified,
this appointment will be reconsidered by the Board, although the Board of
Directors will not be required to appoint different independent accountants for
the Company. Coopers & Lybrand L.L.P. has served the Company as its independent
accountants since December 1995.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE APPOINTMENT OF COOPERS &
LYBRAND L.L.P. AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1998, AND UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF
THIS APPOINTMENT.
10
<PAGE>
PROPOSAL 3
TO AMEND THE
APEX PC SOLUTIONS, INC. 1995 EMPLOYEE STOCK PLAN
The Company's 1995 Employee Stock Plan (the "Plan") was adopted by the Board
of Directors and approved by the shareholders of the Company in December 1995.
The purposes of the Plan are to attract and retain the best available personnel
for positions of substantial responsibility in the Company, to provide
additional incentives to officers, employees, and non-employee directors of the
Company, and to promote the success of the Company's business.
DESCRIPTION OF THE PLAN
The Plan provides for the granting to officers and employees of the Company
of options that qualify as "incentive stock options" ("ISOs") within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
and options that do not so qualify ("NQSOs"). Non-employee directors of the
Company are eligible to receive NQSOs. As of April 30, 1998, all grants of
options under the Plan have been NQSOs.
The Plan is currently administered by the Compensation Committee of the
Board of Directors, which has the discretion to determine, among other matters,
the persons to whom options will be granted, the number of shares purchasable
upon exercise of each option, whether options will be ISOs or NQSOs, the
purchase price of the shares issuable pursuant to options (which price, for
ISOs, may not be less than 100% of the fair market value of the Common Stock, as
determined in good faith by the Compensation Committee, on the date the option
is granted), and the period during which each option may be exercised (not to
exceed ten years for ISOs). The purchase price of the shares issued pursuant to
each option must be paid, as determined by the Compensation Committee, (i) in
cash, (ii) by promissory note, (iii) by surrender of shares of Common Stock held
by the participant or a combination of cash and shares, or (iv) any combination
of the foregoing methods of payment. The aggregate fair market value of the
shares of Common Stock for which ISOs may first be exercisable by a participant
during any one calendar year may not exceed $100,000.
Generally, upon termination of a participant's employment with the Company
by reason of the participant's death or "permanent and total disability" (as
defined in Section 22(e)(3) of the Code), each option held by the participant on
the date of termination shall terminate on the earlier of the fixed expiration
date of such option, or the date that is one year after the date of termination
of employment. Upon termination of a participant's employment with the Company
by reason of disability that is not permanent and total, each option held by the
participant on the date of termination shall terminate on the earlier of the
fixed expiration date of such option, or the date that is ninety (90) days after
the date of termination of employment. Upon termination of a participant's
employment with the Company by any reason other than death or disability, each
option held by the participant on the date of termination shall terminate on the
earlier of the date that is ninety (90) days after the date of termination of
employment, or the fixed expiration date of such option. In the case of Kevin J.
Hafer, the Company's President and Chief Executive Officer, Mr. Hafer continues
to vest in options for a period of one year so long as his termination is
without cause (as defined in his Employment Agreement), and options that vest
within such one-year period must be exercised within ninety (90) days following
the end of such one-year period.
In the event that the Company enters into an agreement to dispose of all or
substantially all of its assets or if the Company's shareholders dispose or
agree to dispose of 50% or more of the outstanding shares of Common Stock (an
"Acceleration Event"), each outstanding option will be exercisable immediately
preceding such Acceleration Event. Upon consummation of the Acceleration Event,
all outstanding options, whether or not so accelerated, will terminate and cease
to be exercisable.
11
<PAGE>
DESCRIPTION OF THE AMENDMENT
A total of 2,161,760 shares of the Company's Common Stock is presently
reserved for issuance under the Plan. As of April 30, 1998, 683,795 options had
been exercised under the Plan, and there were options outstanding to purchase an
aggregate of 1,459,293 shares at a weighted average exercise price of $11.4434
per share, with 18,672 shares available for future option grants. The Board of
Directors believes that the number of shares remaining available for issuance
under the Plan is insufficient to satisfy the purposes of the Plan unless
additional shares are authorized, and at the Annual Meeting, shareholders will
be requested to approve an amendment to the Plan (which was unanimously approved
by the Board) to increase by 1,500,000 the number of shares that may be issued
under the Plan. The Board has also approved two housekeeping amendments to the
Plan, neither of which requires shareholder approval, changing the name of the
Plan to the Apex PC Solutions, Inc. Employee Stock Plan and bringing the Plan
into compliance with Code Section 162.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDMENT AND
UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT OF THE COMPANY'S
1995 EMPLOYEE STOCK PLAN.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
reports of ownership of, and transactions in, the Company's securities with the
Securities and Exchange Commission and The Nasdaq Stock Market, Inc. Such
directors, executive officers and ten-percent shareholders are also required to
furnish the Company with copies of all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms received by the
Company, or written representations from certain reporting persons, the Company
believes that during fiscal 1997, all Section 16(a) filing requirements
applicable to its directors, executive officers, and ten-percent shareholders
were complied with, except that (i) Kevin J. Hafer, the Company's President, CEO
and a director, filed late one report relating to the sale of shares in
connection with the Company's IPO, (ii) Sterling Crum, a director, filed late
one report relating to the sale of shares in connection with the Company's IPO,
(iii) Britannia Holdings, Ltd., a ten-percent shareholder, filed late one report
relating to the sale of shares in connection with the Company's IPO, (iv)
Douglas A. Bevis, the Company's Chief Financial Officer, filed late one report
relating to a stock purchase, and (v) Edwin L. Harper, a director, filed late
one report relating to a stock purchase.
OTHER INFORMATION
The 1997 Annual Report of the Company for the fiscal year ended December 31,
1997 was mailed to the shareholders prior to or together with the mailing of
this Proxy Statement. Shareholders who did not receive a copy of the 1997 Annual
Report with their Proxy Statement may obtain a copy by writing to or calling
Samuel F. Saracino, Secretary, Apex PC Solutions, Inc., 20031 - 142nd Avenue
N.E., Woodinville, Washington 98072. His telephone number is (425) 402-9393.
DEADLINE FOR SHAREHOLDER PROPOSALS
Proposals which shareholders intend to present at the 1999 Annual Meeting of
Shareholders must be received by the Company no later than January 25, 1999 to
be eligible for inclusion in the proxy material for that meeting.
12
<PAGE>
OTHER BUSINESS
As of the date of this Proxy Statement, management knows of no other
business which will be presented for action at the meeting. If any other
business requiring a vote of the shareholders should come before the meeting,
the persons named in the enclosed proxy form will vote or refrain from voting in
accordance with their best judgment.
The Company's 1997 Annual Report is enclosed herewith and contains the
Company's financial statements for the year ended December 31, 1997. A COPY OF
FORM 10-KSB, THE ANNUAL REPORT FILED BY THE COMPANY WITH THE SECURITIES AND
EXCHANGE COMMISSION, WILL BE FURNISHED WITHOUT CHARGE TO ANY SHAREHOLDER WHO
REQUESTS IT IN WRITING FROM THE COMPANY AT THE ADDRESS NOTED ON THE FIRST PAGE
OF THIS PROXY STATEMENT. THE FORM 10-KSB IS ALSO AVAILABLE AT THE COMPANY'S WEB
SITE: http://www.apexpc.com.
APEX PC SOLUTIONS, INC.
Woodinville, Washington
May 25, 1998
13
<PAGE>
APEX PC SOLUTIONS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 25, 1998
The undersigned hereby appoints Kevin J. Hafer and Samuel F. Saracino,
or either of them (with full power to act alone), as proxies with full power
of substitution, to represent and to vote all of the Common Stock of APEX PC
SOLUTIONS, INC. held of record by the undersigned at the close of business on
May 22, 1998, at the annual meeting of shareholders of APEX PC SOLUTIONS,
INC. on Thursday, June 25, 1998, and at any adjournments thereof, as set
forth below and in accordance with their discretion on any other matters
which may properly come before the meeting or any adjournments thereof.
- --------------------------------------------------------------------------------
triangle FOLD AND DETACH HERE triangle
<PAGE>
Please mark /X/
your votes as
indicated in
this example
<TABLE>
<CAPTION>
Withhold
For all all For Against Abstain
<S> <C> <C> <C> <C> <C> <C>
1. Election of / / / / 2. Proposal to ratify the
Directors: appointment of COOPERS / / / / / /
& LYBRAND L.L.P. as the
independent public
Franz Fichtner, Jeffrey T. Chambers, Sterling Crum, accountants for the
Kevin J. Hafer, Edwin L. Harper, William McAleer company for the year
ending December 31, 1998.
INSTRUCTIONS: To withhold authority to vote for any The Board of Directors
individual nominee, strike a line through the nominee's unanimously recommends a
name. vote "FOR" this proposal.
For Against Abstain
3. Proposal to amend the
Apex PC Solutions, Inc. / / / / / /
1995 Employee Stock Plan.
The Board of Directors
unanimously recommends a
vote "FOR" this proposal.
4. In their discretion, the
Proxies are authorized
to vote upon such other
business as may properly
come before the meeting.
THE SHARES COVERED BY THIS PROXY WILL BE
VOTED AS SPECIFIED. IF NO SPECIFICATION
---- IS MADE, THE PROXY WILL BE VOTED IN FAVOR
| OF THE FOREGOING PROPOSALS.
|
Please mark, sign, date, and return this
proxy promptly using the enclosed envelope.
</TABLE>
Signature Signature if jointly held proxy Dated:
------------ ------------ --------
Please sign exactly as shares are registered. When shares are held by joint
tenants, both should sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
- --------------------------------------------------------------------------------
triangle FOLD AND DETACH HERE triangle
