<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 24,
1999, at The Woodmark Hotel, 1200 Carillon Point, Kirkland, Washington 98033,
for the following purposes:
(1) To elect four directors for a one-year term;
(2) To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants for the Company for the current fiscal year; and
(3) To transact such other business as may properly come before the meeting.
Shareholders of record at the close of business on April 26, 1999, 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.
/s/ SAMUEL F. SARACINO, SECRETARY
Samuel F. Saracino, Secretary
Redmond, Washington
May 14, 1999
<PAGE>
APEX PC SOLUTIONS, INC.
9911 WILLOWS ROAD N.E.
REDMOND, WASHINGTON 98052
---------------------
PROXY STATEMENT
---------------------
INFORMATION REGARDING PROXIES
This Proxy Statement and the accompanying proxy/voting instruction card
(proxy card) are being mailed on or about May 14, 1999, to shareholders in
connection with the solicitation of proxies by the Board of Directors of Apex PC
Solutions, Inc. (the "Company") for the 1999 Annual Meeting of Shareholders. The
meeting will be held on Thursday, June 24, 1999, 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 April 26, 1999, will
be entitled to vote at the meeting. At the close of business on April 26, 1999,
there were 20,554,510 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, and (ii) to
ratify the appointment of PricewaterhouseCoopers LLP as the independent
accountants for the Company for the year ending December 31, 1999.
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 that 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 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 currently consists of five members (one position is
vacant): Jeffrey T. Chambers, Franz Fichtner, Kevin J. Hafer, Edwin L. Harper,
and William McAleer, each serving a one-year term. Mr. Chambers has decided not
to seek another term as a director of the Company, and the Board of Directors
therefore proposes the following four nominees for re-election as Directors at
the Annual Meeting: Franz Fichtner, Kevin J. Hafer, Edwin L. Harper and William
McAleer. Each Director will hold office for a one-year term until the first
annual meeting of shareholders immediately following expiration of his term of
office and until his successor is qualified and elected. The Board is also
looking for additional Board members to fill the vacancies that will exist on
the Board after the 1999 Annual Meeting of Shareholders.
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:
Franz Fichtner, age 47, 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, was Managing Director of 3Com GmbH.
Kevin J. Hafer, age 42, has been President of the Company since June 1995,
and has served as 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, he served as the Manager and Technical Operations Director
of the Predecessor. Prior to joining the Company's predecessor, Mr. Hafer was
employed at Harris Corporation from May 1979 to September 1989, serving in
various management capacities.
Edwin L. Harper, age 54, has served as a Director of the Company since
October 1996. From June 1996 through December 1998, Mr. Harper served as
President and Chief Executive Officer of SyQuest Technology, a computer hardware
company that filed a petition under Chapter 11 of the Bankruptcy Code in
November 1998. 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
Network Associates, a network security management company, serving in various
management capacities.
2
<PAGE>
William McAleer, age 47, has served as a Director of the Company since June
1996. Mr. McAleer is currently Managing Director of Voyager Capital, which
provides venture financing to private information technology companies. From
1988 through 1994, he was Vice President Finance, Chief Financial Officer and
Secretary with Aldus Corporation, a publicly held software company. Prior to
joining Aldus, he 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.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has two standing committees: the Audit Committee and
the Compensation Committee.
The Audit Committee 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 current members of the Audit Committee are
William McAleer (Chairman) and Jeffrey T. Chambers, and after the Annual
Meeting, the members will be William McAleer (Chairman) and Edwin L. Harper.
The Compensation Committee oversees the Company's compensation and benefits
practices and programs. The current members of the Compensation Committee are
Edwin L. Harper (Chairman) and Jeffrey T. Chambers, and after the Annual
Meeting, the members will be Edwin L. Harper (Chairman) and William McAleer.
BOARD AND BOARD COMMITTEE MEETINGS
During the fiscal year ended December 31, 1998, there were five meetings of
the Board of Directors, and the Board of Directors took action by unanimous
written consent an additional five times during 1998. There were three meetings
of the Audit Committee during the fiscal year ended December 31, 1998. There
were two meetings of the Compensation Committee during the year ended December
31, 1998, and the Compensation Committee took action by unanimous written
consent an additional eight times during the fiscal year ended December 31,
1998. All Directors attended all meetings of the Board and of the Committees on
which they served except that one Director did not attend one meeting of the
Board.
COMPENSATION OF DIRECTORS
Directors are reimbursed for their out-of-pocket expenses for attendance at
meetings. During the fiscal year ended December 31, 1998, Mr. Fichtner, Mr.
Harper, and Mr. McAleer received annual compensation of $6,000 for their
services as Directors, and effective April 1, 1999, the compensation for outside
Directors is $15,000 per year. On his election as a director in March 1998, Mr.
Fichtner was initially granted options to purchase 36,000 shares of the
Company's Common Stock at $14.94 per share, exercisable pro rata over thirty-six
(36) months commencing April 1, 1998. Each individual who was a Director of the
Company in August 1998 was also granted options at that time to purchase 12,000
shares of the Company's Common Stock at $11.42 per share. These options vest
monthly over a one-year period after the expiration of the vesting period for
currently outstanding options.
EXECUTIVE OFFICERS
The following are the executive officers of the Company. Executive officers
are elected by the Board of Directors:
Kevin J. Hafer. See description under "Election of Directors--Information
About Directors and Nominees for Election."
Thomas M. Buiocchi, age 41, has been 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
3
<PAGE>
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.
Barry L. Harmon, age 45, has been Vice President, Chief Financial Officer
and Treasurer of the Company since January 1999. From February 1992 to January
1999, Mr. Harmon was employed at Electro Scientific Industries, Inc., and served
as Vice President and Chief Financial Officer from January 1994 to January 1995,
and as Senior Vice President and Chief Financial Officer from January 1995 to
January 1999. Prior to 1992, Mr. Harmon spent six years with Citibank Global
Private Bank as a Divisional Controller and Chief Financial Officer. Mr. Harmon
also worked for Arthur Andersen LLP for seven years, serving as an Audit Manager
for three years.
C. David Perry, age 44, has been Vice President of Worldwide Sales of the
Company since November 1998. From March 1997 to September 1998, he served as
Acer America Corporation's Vice President of Sales--Commercial Division. Mr.
Perry was employed by Texas Instruments from 1979 until March 1997, and served
as Director of North American channel sales for Texas Instruments from 1993
until 1997.
Samuel F. Saracino, age 48, has been 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 45, has been a Vice President of the Company
since August 1996. 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:
Mary L. Flynn, age 52, has served as the Company's Director of
Administration and Operations since January 1999. From November 1995 to December
1998, she was Director of Administration. Ms. Flynn joined the Company, on a
full-time basis, in January 1994 and served as an administrative assistant
through October 1995.
Stephen J. McCarthy, age 46, 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth as of April 26, 1999, 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
named under "Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act Executive Officers and
Directors" and (iv) all executive officers and directors of the Company as a
group.
4
<PAGE>
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>
Alliance Capital Management L. P. ................................... 3,294,450 16.0%
1290 Avenue of the Americas
New York, NY 10104
J. & W. Seligman & Co., Inc. ........................................ 2,559,450 12.5
100 Park Avenue
New York, NY 10006
Pilgrim Baxter & Associates, Ltd. ................................... 1,330,500 6.5
825 Duportail Road
Wayne, PA 19087
Nicholas Applegate Capital Management ............................... 1,141,553 5.6
600 West Broadway, Suite 2900
San Diego, CA 92101
Kevin J. Hafer(2).................................................... 662,257 3.2
Samuel F. Saracino(3)................................................ 94,100 *
Christopher L. Sirianni(4)........................................... 91,500 *
Thomas M. Buiocchi(5)................................................ 87,500 *
Jeffrey T. Chambers(6)............................................... 73,357 *
Edwin L. Harper(7)................................................... 32,900 *
William McAleer(8)................................................... 25,500 *
Franz Fichtner(9).................................................... 14,999 *
C. David Perry....................................................... 12,350 *
Barry L. Harmon...................................................... -- 0.0
All directors and executive officers as a group
(10 persons)(10)................................................... 1,094,463 5.2%
</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, 9911 Willows
Road, N.E., Redmond, Washington 98052.
(2) Includes 248,142 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 $4.06 per share. Also includes 5,100
shares owned by an irrevocable trust for the benefit of Mr. Hafer's
children, and 61 shares owned by Mr. Hafer as custodian under various
Uniform Transfer to Minors Accounts for the benefit of his nieces and
nephews, and Mr. Hafer disclaims beneficial ownership of all such 5,161
shares.
(3) Includes 87,500 shares of Common Stock issuable upon exercise of stock
options currently exercisable or becoming exercisable within 60 days at
$14.94 per share. Also includes 5,100 shares owned by an irrevocable trust
for the benefit of Mr. Hafer's children, of which Mr. Saracino is trustee,
and Mr. Saracino disclaims beneficial ownership of all such 5,100 shares.
(4) Includes 49,500 shares of Common Stock issuable upon exercise of stock
options currently exercisable or becoming exercisable within 60 days at
$0.1225 per share.
(5) Includes 87,500 shares of Common Stock issuable upon exercise of stock
options currently exercisable or becoming exercisable within 60 days at
$14.94 per share.
(6) Includes 36,000 shares of Common Stock issuable upon exercise of stock
options currently exercisable or becoming exercisable within 60 days at
$0.1225 per share, of which Mr. Chambers disclaims
5
<PAGE>
beneficial ownership. Also includes 6,987 shares owned by two irrevocable
trusts for the benefit of Mr. Chambers' children, of which Mr. Chambers is
a co-trustee. Mr. Chambers disclaims beneficial ownership of all such 6,987
shares.
(7) Includes 14,000 shares of Common Stock issuable upon exercise of stock
options currently exercisable or becoming exercisable within 60 days at
$0.33 per share.
(8) Includes 18,000 shares of Common Stock issuable upon exercise of stock
options currently exercisable or becoming exercisable within 60 days at
$0.1225 per share.
(9) Includes 14,999 shares of Common Stock issuable upon exercise of stock
options currently exercisable or becoming exercisable within 60 days at
$14.94 per share.
(10) Includes 555,641 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 $6.95 per share. See Notes (2), (3),
(4), (5), (6), (7), (8) and (9) above.
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 two 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 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)
stock options awarded under the Company's 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 the
pre-established 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.
6
<PAGE>
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 Named Executive Officers. Stock options have value for
the employee only if the price of the Company's 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 and anticipated future performance. The Committee reviews Named Executive
Officers' stock option holdings annually to determine whether additional grants
are appropriate. Initial stock options granted generally vest over a four-year
period commencing one year after the option grant, and subsequent grants are
generally exercisable at the end of the initial vesting 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
1998, 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 1998 compensation, the Committee reviewed
Mr. Hafer's experience and past performance and compared them with chief
executive officers of other companies.
COMPENSATION COMMITTEE:
Edwin L. Harper (Chairman)
Jeffrey T. Chambers
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
7
<PAGE>
bonus exceeded $100,000 (collectively, the "Named Executive Officers") for
services rendered in all capacities during the fiscal years ended December 31,
1998, 1997 and 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -------------
------------------------- STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- ---------------------------------------------- --------- ---------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Kevin J. Hafer................................ 1998 $ 278,402 $ 120,313(1) 199,500 $ 8,000(2)
President and Chief Executive Officer 1997 $ 200,000 $ 167,500(3) 240,375 $ 10,119(2)
1996 $ 157,692 $ 164,707(4) 36,000 $ 1,009,619(2)
Christopher L. Sirianni....................... 1998 $ 155,769 $ 37,500(5) -- $ 7,788(6)
Vice President 1997 $ 145,000 $ 108,750(7) 33,000 $ 8,000(6)
1996 $ 89,123 $ 148,396(8) 198,000 $ 4,456(6)
Thomas M. Buiocchi(9)......................... 1998 $ 128,077 $ 53,633(10) 300,000 $ 2,241(11)
Vice President of Marketing
Samuel F. Saracino(12)........................ 1998 $ 157,296 $ 66,828(13) 300,000 $ 2,577(14)
Vice President of Business Development,
General Counsel and Secretary
Douglas A. Bevis(15).......................... 1998 $ 131,866 -- -- --
Former Vice President and Chief 1997 $ 120,000 $ 60,000(17) 25,500 $ 4,385(16)
Financial Officer
</TABLE>
- ------------------------
(1) Includes $120,313 in bonus earned in 1998 and paid in 1999.
(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, $8,000 and $7,500 made by
the Company in 1998, 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 $150,000 in bonus earned in 1997 and paid in 1998.
(4) Includes $80,000 bonus earned in 1996 and paid in 1997.
(5) Includes $18,750 bonus earned in 1998 and paid in 1999.
(6) Represents matching contributions made by the Company to its 401(k) Profit
Sharing Plan and Trust on behalf of Mr. Sirianni.
(7) Bonus earned in 1997 and paid in 1998.
(8) Includes $54,894 bonus earned in 1996 and paid in 1997.
(9) Mr. Buiocchi joined the Company in March 1998.
(10) Includes $32,783 bonus earned in 1998 and paid in 1999.
(11) Represents matching contributions made by the Company in 1998 to its
401(k) Profit Sharing Plan and Trust on behalf of Mr. Buiocchi.
(12) Mr. Saracino joined the Company in February 1998.
(13) Includes $36,278 bonus earned in 1998 and paid in 1999
(14) Represents matching contributions made by the Company in 1998 to its
401(k) Profit Sharing Plan and Trust on behalf of Mr. Saracino.
8
<PAGE>
(15) Mr. Bevis left the Company in November 1998.
(16) Represents matching contributions made by the Company in 1997 to its
401(k) Profit Sharing Plan and Trust on behalf of Mr. Bevis.
(17) Includes $15,000 bonus earned in 1997 and paid in 1998.
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, 1998:
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE AT
NUMBER OF ASSUMED ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE FOR OPTION TERM
OPTIONS TO EMPLOYEES PRICE PER EXPIRATION ----------------------------
NAME GRANTED IN FISCAL YEAR SHARE DATE 5% 10%
- ------------------------------ -------------- --------------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kevin J. Hafer................ 12,000 0.6% $11.42 8/31/08 $ 86,159 $ 218,343
187,500 9.4% $11.42 8/31/08 $ 1,346,227 $ 3,411,605
Samuel F. Saracino............ 300,000 15.0% $14.94 3/9/08 $ 2,818,240 $ 7,141,974
Thomas M. Buiocchi............ 300,000 15.0% $14.94 3/9/08 $ 2,818,240 $ 7,141,974
</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, 1998 by the Named Executive Officers
and 1998 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.......................... 82,500 $931,769 233,786/611,143 $3,789,212/$6,751,870
Christopher L. Sirianni................. -- -- 41,250/90,750 $789,216/$1,327,817
Samuel F. Saracino...................... -- -- --/300,000 --/$1,295,240
Thomas M. Buiocchi...................... -- -- --/300,000 --/$1,295,240
Douglas A. Bevis........................ 41,845 $796,574 --/-- --/--
</TABLE>
- ------------------------
(1) Based upon the fair market value of the Company's Common Stock at fiscal
year end of $19.25 per share less the exercise price payable for such
shares.
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
1998 base salary at $275,000, and awarded Mr. Hafer bonus payments of $120,313
for 1998 based on the achievement by Mr. Hafer and the Company of certain
performance objectives. In connection with his employment, Mr. Hafer was awarded
187,500 stock options in 1998
9
<PAGE>
under the Company's 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.
TEN-YEAR OPTION/SAR REPRICING
The following table sets forth information regarding the cancellation of and
a replacement grant of a stock option to an executive officer:
<TABLE>
<CAPTION>
LENGTH OF
MARKET PRICE EXERCISE ORIGINAL OPTION
SECURITIES UNDERLYING OF STOCK AT PRICE AT TERM REMAINING
NUMBER OF TIME OF TIME OF NEW AT DATE OF
OPTIONS/SARS REPRICING OR REPRICING OR EXERCISE REPRICING
NAME DATE REPRICED OR AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
- -------------------------------------- ------ --------------------- ------------ ------------ -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Samuel F. Saracino(1)................. 3/9/98 300,000 $14.94 $17.75 $ 14.94 10 Years
Vice President of Business
Development, General Counsel and
Secretary
</TABLE>
- ------------------------
(1) Mr. Saracino was originally expected to join the Company in February 1998,
and on February 18, 1998, was initially awarded options to purchase 300,000
shares of Company Common Stock at $17.75 per share, exercisable over 36
months commencing March 1, 1999. Because of continuing obligations to his
prior employer, Mr. Saracino was not able to commence full-time employment
with the Company until after the end of February, and as a result, his
original stock option grant was cancelled (and was relinquished by him).
Subsequently, on March 9, 1998 (at a time when the Compensation Committee
granted a number of other stock options), Mr. Saracino was awarded options
to purchase 300,000 shares at $14.94 per share exercisable over 36 months
commencing April 1, 1999.
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 US Index ("NASDAQ US") 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 on December 31, 1998.
10
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CUMULATIVE TOTAL RETURN*
<S> <C> <C> <C>
APEX NASDAQ COMPUTER NASDAQ U.S.
2/1/97 100.00 100.00 100.00
12/31/97 246.11 106.14 114.39
12/31/98 320.83 194.59 161.19
*Assumes Initial Investment of $100 and Reinvestment of
Dividends
</TABLE>
PROPOSAL 2
TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP
AS THE INDEPENDENT ACCOUNTANTS FOR THE COMPANY
FOR THE YEAR ENDED DECEMBER 31, 1999
The Board of Directors has appointed the firm of PricewaterhouseCoopers LLP
to conduct an audit in accordance with generally accepted auditing standards of
the Company's financial statements for the fiscal year ending December 31, 1999.
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. PricewaterhouseCoopers LLP, or its predecessor, has served the
Company as its independent accountants since December 1995.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1999, AND UNANIMOUSLY RECOMMENDS A VOTE "FOR"
APPROVAL OF THIS APPOINTMENT.
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
11
<PAGE>
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 1998, all Section 16(a) filing requirements
applicable to its directors, executive officers and ten-percent shareholders
were complied with, except that (i) Thomas M. Buiocchi, the Company's Vice
President of Marketing, filed SEC Form 3, relating to his initial ownership of
securities in the Company, late and (ii) Franz Fichtner, a director, filed SEC
Form 3, relating to his initial ownership of securities in the Company, late.
OTHER INFORMATION
The 1998 Annual Report of the Company for the fiscal year ended December 31,
1998, was mailed to the shareholders of record as of April 26, 1999 together
with the mailing of this Proxy Statement. Shareholders who did not receive a
copy of the 1998 Annual Report with their Proxy Statement may obtain a copy by
writing to or calling Samuel F. Saracino, Secretary, Apex PC Solutions, Inc.,
9911 Willows Road N.E., Redmond, Washington 98052. His telephone number is (425)
861-5858.
DEADLINE FOR SHAREHOLDER PROPOSALS
Proposals which shareholders intend to present at the 2000 Annual Meeting of
Shareholders must be received by the Company no later than January 25, 2000 to
be eligible for inclusion in the proxy material for that meeting.
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 1998 Annual Report is
enclosed herewith and contains the Company's financial statements for the year
ended December 31, 1998. A COPY OF FORM 10-K, THE ANNUAL REPORT FILED BY THE
COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION, ACCOMPANIES THIS MAILING
AND MAY BE OBTAINED 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-K IS ALSO AVAILABLE AT THE COMPANY'S WEB SITE: http://www.apex.com.
APEX PC SOLUTIONS, INC.
Redmond, Washington
May 14, 1999
12
<PAGE>
APEX PC SOLUTIONS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 24, 1999
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
April 26, 1999, at the annual meeting of shareholders of APEX PC SOLUTIONS,
INC. on Thursday, June 24, 1999, 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.
_______________________________________________________________________________
-- FOLD AND DETACH HERE --
<PAGE>
Please mark
your votes as / X /
indicated in
this example
For all
For all Withhold all except:
1. Election of Directors: / / / / / /
Franz Fichtner, Kevin J. Hafer,
Edwin L. Harper, William McAleer
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the "For all except" box and strike a line through the nominee's name.
For Against Abstain
2. Proposal to ratify the appointment of / / / / / /
PricewaterhouseCoopers LLP as the
independent public accountants for the
company for the year ending December 31, 1999.
The Board of Directors unanimously recommends a vote "FOR" this proposal.
3. 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>
<S><C>
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.
_______________________________________________________________________________________________________
-- FOLD AND DETACH HERE --
</TABLE>
