<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
Commission file number: 0-14315
AEGIS COMMUNICATIONS GROUP, INC.
------------------------------------------------------
(Exact 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>
[LOGO]
-------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, AUGUST 5, 1999
-------------------------
Notice is hereby given that the Annual Meeting of Stockholders
(together with any adjournments, the "Aegis Annual Meeting") of Aegis
Communications Group, Inc. ("Aegis") will be held at the Grapevine Convention
Center, 1209 South Main Street, Grapevine, Texas 76051 on Thursday, August 5,
1999, at 10:00 a.m. (local time), for the following purposes:
1. To approve an amendment to the Aegis Amended and Restated
Certificate of Incorporation (the "Aegis Charter") classifying the
board of directors into three classes of four directors each;
2. To elect eleven directors to serve until each of their
respective successors shall have been duly elected and qualified;
3. To approve an amendment to the Aegis Charter to limit director
liability to the fullest extent permitted by the Delaware General
Corporation Law;
4. To ratify the selection of PricewaterhouseCoopers LLP to serve
as Aegis's independent auditors for the 1999 fiscal year; and
5. To transact such other business as may properly come before the
Aegis Annual Meeting.
The Board of Directors of Aegis (the "Aegis Board") has fixed the close
of business on June 30, 1999 as the record date (the "Aegis Record Date") for
the determination of stockholders of Aegis entitled to notice of, and to vote
at, the Aegis Annual Meeting. Only stockholders of record at the close of
business on the Aegis Record Date are entitled to notice of, and to vote at, the
Aegis Annual Meeting. A holder of shares of Aegis Common Stock is entitled to
one vote, in person or by proxy, for each share of Aegis Common Stock on all
matters properly brought before the Aegis Annual Meeting.
ALL HOLDERS OF AEGIS COMMON STOCK (WHETHER THEY EXPECT TO ATTEND THE
AEGIS ANNUAL MEETING OR NOT) ARE REQUESTED TO COMPLETE, SIGN, DATE AND RETURN
PROMPTLY THE PROXY CARD ENCLOSED WITH THIS NOTICE. IF YOU ATTEND THE AEGIS
ANNUAL MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
By Order of the Board of Directors,
/s/ Jerry L. Sims, Jr.
------------------------------------
Jerry L. Sims, Jr.,
Secretary
Irving, Texas
July 8, 1999
<PAGE>
AEGIS COMMUNICATIONS GROUP, INC.
7880 Bent Branch Drive, Suite 150
Irving, Texas 75063
-------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 5, 1999
-------------------------
INTRODUCTION
The accompanying proxy is solicited by the board of directors of
Aegis Communications Group, Inc., a Delaware corporation ("Aegis" or the
"Company"), for use at the Annual Meeting of Stockholders of the Company to
be held at the Grapevine Convention Center, 1209 South Main Street,
Grapevine, Texas 76051 on Thursday, August 5, 1999, at 10:00 a.m. (local
time), for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders and at any postponements or adjournments thereof. The
Company's principal executive offices are located at 7880 Bent Branch Drive,
Suite 150, Irving, Texas 75063 and its telephone number is (972) 830-1800.
Stockholders of record at the close of business on June 30, 1999, are
entitled to notice of and to vote at the meeting. This Proxy Statement and
the accompanying proxy are first being mailed to stockholders on or about
July 8, 1999.
THE MEETING
RECORD DATE AND VOTING
Only holders of record of Aegis Common Stock on the Aegis Record
Date are entitled to notice of, and to vote at, the Aegis Annual Meeting. As
of June 30, 1999, there were issued and outstanding 52,434,206 shares of
Aegis Common Stock. Each holder of Aegis Common Stock will be entitled to one
vote, in person or by proxy, for each share of Aegis Common Stock standing in
his or her name on the books of Aegis on the Aegis Record Date on any matter
submitted to a vote of the Aegis stockholders. The presence, in person or by
proxy, of holders of record of a majority of the shares entitled to vote
constitutes a quorum for action at the Aegis Annual Meeting. Under applicable
rules, brokers who hold shares in street name have the authority to vote in
favor of all matters specified in the Notice, if they do not receive contrary
voting instructions from beneficial owners. Under applicable law, if a broker
has not received voting instructions with respect to certain shares and gives
a proxy for those shares, but does not vote the shares on a particular
matter, those shares will not affect the outcome of the vote with respect to
that matter. Any stockholder that is present at the meeting, either in person
or by proxy, but abstains from voting, will be counted for purposes of
determining whether a quorum exists.
VOTE REQUIRED
The affirmative vote of the holders of shares of Aegis Common Stock,
having a plurality of the voting power of Aegis, in person or by proxy, is
required to elect directors. The affirmative vote of the holders of shares of
Aegis Common Stock, having a majority of the voting power of the total issued
and outstanding common stock of Aegis (regardless of the number of shares
actually voting at the Aegis Annual Meeting), in person or by proxy, is required
to approve the proposed amendments to the Aegis Charter. The affirmative vote of
the holders of shares of the Aegis Common Stock, having a majority of the voting
power of the shares actually voted at the Aegis Annual Meeting, either in person
or by proxy, is required to ratify the selection of Aegis's independent
auditors.
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PROXY SOLICITATION, REVOCATION AND EXPENSES
All proxies that are properly completed, signed and returned prior to
the Aegis Annual Meeting will be voted as indicated on the proxy. If the
enclosed proxy is signed and returned, it may, nevertheless, be revoked at any
time prior to the voting thereof at the pleasure of the stockholder signing it,
either by (i) filing a written notice of revocation received by the person or
persons named therein, (ii) the stockholder attending the Aegis Annual Meeting
and voting the shares covered thereby in person, or (iii) delivering another
duly executed proxy dated subsequent to the date thereof to the addressee named
in the enclosed proxy.
Shares represented by duly executed proxies in the accompanying form
will be voted in accordance with the instructions indicated on such proxies,
and, if no such instructions are indicated thereon, will be voted in favor of
each of the proposals considered and of each of the nominees for director named
herein.
The expense of preparing, printing and mailing this Proxy Statement and
the material used in this solicitation of proxies from Aegis stockholders will
be borne by the Company. In addition to the use of the mails, proxies may also
be solicited personally, by telephone or facsimile by officers and regular
employees of the Company. The Company may reimburse banks, brokers and
fiduciaries holding shares in their names or in the names of nominees for their
expenses in sending soliciting materials to the beneficial owners of such shares
and obtaining their Proxies. The cost for such reimbursement is, at this time,
unknown to the Company but is anticipated to be minimal.
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<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names and ages of all directors and
executive officers of the Company as of June 30, 1999, as well as all positions
and offices held by each such person and his term in each such position or
office:
<TABLE>
<CAPTION>
Name Age Position with the Company or Subsidiaries Held Position Since
- -------------------------- ------ -------------------------------------------------------- ----------------------
<S> <C> <C> <C>
John R. Birk 47 Chairman of the Board May 1999
Stephen A. McNeely 52 President and Chief Executive Officer August 1997
Director August 1997
Matthew S. Waller 36 Chief Financial Officer March 1997
Director October 1997
Thomas J. Flynn 47 President of Elrick & Lavidge Marketing Research October 1998
Robert B. Allen 45 Executive Vice President of Sales and Marketing January 1999
Richard M. Interdonato 50 Chief Operations Officer/Executive Vice March 1999
President of Teleservices Operations
William F. Bergeron, Jr. 38 Senior Vice President of Technology December 1996
Edward Blank 64 Director July 1998
Daniel H. Chapman 54 Director July 1998
Drew Lewis 67 Director July 1998
David L. Malcolm 44 Director July 1998
Frederic V. Malek 62 Director July 1998
Darryl D. Pounds 49 Director March 1996
Michael G. Santry 51 Director February 1986
Paul G. Stern 60 Director July 1998
</TABLE>
JOHN R. BIRK was elected as Chairman of the Board of the Company in
May 1999. Mr. Birk currently is an Operating Partner with Evercore Partners,
Inc., which, in addition to making private equity investments, provides
merger, acquisition and strategic restructuring advice to Fortune 500
companies. In 1995, Mr. Birk became President of Ideon Group, Inc. following
Ideon's acquisition of Wright Express Corp., where he was President, CEO and
a director from 1992 to 1995. From 1988 to 1992, Mr. Birk was President, COO
and a director of ADVO, Inc., the publicly-traded direct mail and marketing
services company. Prior to that, he served in a variety of senior executive
positions with Sprint, Inc. including Group President - Western Group,
President - US Sprint Northeast Division, and President of US Telecom
Communications Services Co. Mr. Birk also has held executive and management
positions with MCI, the Pepsi Cola Company and Procter & Gamble. Mr. Birk is
a past Chairman of National Leisure Group, Inc. and Wright Express
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<PAGE>
Corp. He currently serves on the boards of Specialty Products & Insulation
Co., and T. O. Richardson Mutual Funds.
STEPHEN A. MCNEELY has been President and Chief Executive Officer of
the Company since August 1997. Prior to joining the Company, between June 1996
and August 1997, he was President and CEO of Keystone Communications Group, the
leading U.S. provider of worldwide broadcast services. From 1995 to 1996, Mr.
McNeely was President and CEO of PMG Equities, Inc. From 1991 to 1995, he was
President and CEO of Patrick Media Group, Inc. Mr. McNeely has held the position
of President and CEO in the automotive industry as well, with companies such as
GE Capital Resale Service (GECARS) (from 1989 to 1991) and Tenneco Automotive
Retail Services (a division of Tenneco Automotive, Inc.) (from 1987 to 1989). In
addition, Mr. McNeely held a wide variety of senior management positions with
Exxon Corporation from 1968 to 1985. Mr. McNeely currently sits on the Board of
Directors of the Advertising Council and is the Campaign Director for the
Coalition of Organ and Tissue Donation.
MATTHEW S. WALLER has served as the Company's Chief Financial Officer
since March 1997. From 1993 to March 1997, Mr. Waller served in various
positions with Principal Financial Securities, Inc., most recently as Senior
Vice President and Head of Technology Investment Banking.
THOMAS J. FLYNN joined the Company as President of its Elrick & Lavidge
Marketing Research division in October 1998. Prior to joining Elrick & Lavidge,
Mr. Flynn was Senior Vice President of ICR Survey Research, Inc. from January
1998 to October 1998. From 1996 though 1997, he was Senior Vice President and
Director of International Research for Opinion Research Corporation. Prior to
that, Mr. Flynn was Chief Operating Officer and Managing Partner of Yankelovich
Partners, Inc. from 1992 through 1996.
ROBERT B. ALLEN assumed the role of Executive Vice President of Sales
and Marketing in January 1999. From July through December 1998, Mr. Allen was
the Company's Senior Vice President of Operations for the Company's Central
Region. Mr. Allen served as ATC's Chief Operating Officer from January 1997 to
July 1998. From 1980 through 1996, he held various management positions with
PepsiCo, Inc., most recently serving as Vice President of Sales and Marketing
for the $1.3 billion annual revenue single-serve business unit of PepsiCo's
Frito-Lay subsidiary.
RICHARD M. INTERDONATO joined the Company as Chief Operations
Officer/Executive Vice President of Teleservices Operations in March 1999. From
1996 through 1998, Mr. Interdonato was Principal of RMI Associates, Inc., which
provided management consulting services, including strategic planning, product
development and the expansion of business opportunities, to companies including
American Express, Fidelity Investments, PageNet and Credentials International.
From 1994 through 1996, Mr. Interdonato was Executive Vice President of Safecard
Services, Inc. From 1973 through 1992, he held variety of positions of
increasing responsibility with American Express Company including the
development of systems and operational structure to support the launch of the
Optima Card in the U.S. as well as the Gold Card in Tokyo, Japan.
WILLIAM F. BERGERON, JR. joined the Company's Advanced operating
subsidiary in February 1993 and has been Senior Vice President of Technology
since December 1996. From 1992 to 1993, Mr. Bergeron served in a variety of
management positions with Tandem Telecommunications Systems Inc., most recently
as Senior Member of the Technical Staff.
EDWARD BLANK, former Vice Chairman and founder of IQI, is one of the
pioneers of the telemarketing industry. He founded IQI's predecessor company in
1968, and, under his direction, IQI grew to be one of the largest telemarketers
in the U.S. Prior to establishing IQI, Mr. Blank was associated with Litton
Industries, Benton & Bowles Advertising and NBC in senior marketing research
capacities.
4
<PAGE>
DANIEL H. CHAPMAN is currently Chairman of Northern Trust Bank of Texas
and Director of National Expansion of Northern Trust Corporation and has served
in such capacities since October 1997. From August 1985 until October 1997, Mr.
Chapman was President and Chief Executive Officer of Northern Trust Bank of
Texas and its predecessor, Concorde Bank, N.A.
DREW LEWIS served as Chairman and Chief Executive Officer of Union
Pacific Corporation from 1987 to 1997. Prior to that time, Mr. Lewis served as
President and Chief Operating Officer of Union Pacific Railroad from 1986 to
1987. Prior to his career with Union Pacific, Mr. Lewis served as Chairman and
Chief Executive Officer of Warner Amex Cable Communications and served as U.S.
Secretary of Transportation in President Reagan's cabinet from 1981 through
1983. Mr. Lewis is a director of American Express Company, FPL Group, Inc.,
Gannett Co., Inc., Gulfstream Aerospace Corporation, Lucent Technologies and
Union Pacific Resources Group Inc. Mr. Lewis also has served as past Chairman of
The Business Roundtable.
DAVID L. MALCOLM currently serves as Chairman of Suncoast Financial
Corporation, a HUD approved mortgage banking company. Mr. Malcolm is also the
founder and President of West Coast Restaurant Enterprises, an owner and
operator of 18 restaurants. Mr. Malcolm also serves as a consultant and Senior
Vice President of Artemis Capital, a large municipal investment banking firm,
and is Chairman of the Board of San Diego United Port District, which owns and
operates San Diego's International Airport and all water rights and real
property on San Diego Bay. From 1994 to 1997, Mr. Malcolm served on the
California Commission for Judicial Performance, and from 1984 to 1995, on the
California Coastal Commission. Mr. Malcolm serves on the board of Giant Group
Ltd.
FREDERIC V. MALEK founded Thayer Capital Partners in 1991 and
co-founded Thayer Equity Investors III, L.P. ("Thayer") in 1995. From 1989 to
1991, Mr. Malek was President and then Vice Chairman of Northwest Airlines.
Prior to that time, Mr. Malek served as President of Marriott Hotels and Resorts
from 1980 to 1988. Mr. Malek currently serves as director of American Management
Systems, Inc., Automatic Data Processing Corp., CB Richard Ellis Services, Inc.,
FPL Group, Inc., Global Vacation Group, Inc., HCR Manor Care, Inc., Northwest
Airlines Corp., and various PaineWebber mutual funds.
DARRYL D. POUNDS is Chairman and CEO of the Managing General Partner of
G&H Manufacturing, Ltd., a Texas limited partnership, which manufactures refuse
hauling equipment. He has been a director of the Company since March 1996 and
has been a Partner of Chartwell Group, Inc., a Dallas based investment firm,
since 1996. From 1993 until 1995, Mr. Pounds served as Chairman and CEO of the
Trust Company of Texas and, from 1972 through 1993, Mr. Pounds held a variety of
positions within First City Bancorporation, including Chairman and CEO of First
City Bank of Dallas.
MICHAEL G. SANTRY has been a director of the Company since February
1986 and served as Co-Chairman of the Board from September 1996 through May
1999. Mr. Santry previously held the positions of President and Chief Executive
Officer of the Company from February 1986 through September 1996 and October
1997 through July 1998, and was Chief Financial Officer of the Company from
February 1986 through September 1996. Mr. Santry founded Chartwell Group, Inc.,
a Dallas based investment firm, in 1996 and has served as its Chairman of the
Board since that time. Since 1980, Mr. Santry has been President and a director
of Lakewood Financial Consultants, Inc., a privately held corporation providing
financial consulting services.
PAUL G. STERN has been a director of the Company since November 1996
and served as Co-Chairman from that time through May 1999. Dr. Stern co-founded
Thayer Equity Investors III, L.P. in 1995. Prior to that, Dr. Stern was a
Special Limited Partner at Forstmann Little & Co. From 1989 until 1993, Dr.
Stern served as the Chairman and CEO of Northern Telecom Ltd. Prior to that
time, Dr. Stern served as President and Chief Operating Officer of Burroughs
(later Unisys) Corporation, Corporate
5
<PAGE>
Vice President and later President of Commercial Electronics Operations at
Rockwell International Corporation and Chairman and Chief Executive Officer
of Braun AG in Germany. Dr. Stern serves on the Board of Dow Chemical
Company, MLC Holdings, Inc., Software AG Systems, Inc., and Whirlpool
Corporation.
Each director serves until the next annual meeting of the Company's
shareholders and until the director's successor is duly elected. Officers serve
at the discretion of the Board of Directors. There is no family relationship
among any of the above named officers and directors of the Company.
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
BENEFICIAL OWNERSHIP
The following table sets forth, as of June 30, 1999, certain
information with respect to the beneficial ownership of Common Stock by (i)
each person known by the Company to be a beneficial owner of five percent
(5%) or more of the Company's Common Stock, (ii) each director and nominee
for director of the Company, (iii) each of the five executive officers listed
in the Summary Compensation Table appearing elsewhere herein, and (iv) all
executive officers, directors and nominees for director who beneficially own
Common Stock as a group:
<TABLE>
<CAPTION>
Number of Shares Percent of
Name and Address of Beneficial Owner Beneficially Owned Class (1)(2)
- ---------------------------------------------------------------- ------------------ ------------
<S> <C> <C>
THAYER EQUITY INVESTORS III, L.P. (3) 30,568,233 48.40%
1445 Pennsylvania Ave., NW, Suite 350
Washington, DC 20004
PAUL G. STERN (3)(4) 30,568,233 48.40%
1445 Pennsylvania Ave., NW, Suite 350
Washington, DC 20004
FREDERIC V. MALEK (3)(4) 30,568,233 48.40%
1445 Pennsylvania Ave., NW, Suite 350
Washington, DC 20004
EDWARD BLANK (4)(5) 4,294,407 8.14%
1250 Broadway, 37th Floor
New York, NY 10001
CODINVEST LIMITED 3,319,824 6.36%
Road Town
Tortola, British Virgin Islands
ITC SERVICE COMPANY 3,058,699 5.84%
1239 O.G. Skinner Drive
West Point, GA 31833
WILLIAM H. SCOTT, III (6) 3,058,699 5.84%
1239 O.G. Skinner Drive
West Point, GA 31833
MICHAEL G. SANTRY (4)(7) 1,223,667 2.29%
STEPHEN A. MCNEELY (4)(8) 984,924 1.86%
MATTHEW S. WALLER (4)(9) 604,324 1.15%
ROBERT B. ALLEN (10) 339,600 0.65%
JOHN R. BIRK (4)(11) 250,000 0.48%
ERIC CROSON (12) 158,608 0.30%
DARRYL D. POUNDS (4)(13) 120,000 0.23%
WILLIAM F. BERGERON, JR. (14) 112,700 0.22%
DREW LEWIS (4)(15) 71,789 0.14%
CRAIG CALLAWAY (16) 31,117 0.06%
ALL DIRECTORS AND OFFICERS AS A GROUP (13 PERSONS) (17) 38,759,369 57.68%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(FOOTNOTES APPEAR ON FOLLOWING PAGE)
7
<PAGE>
(1) Reported in accordance with the beneficial ownership rules of the
Securities and Exchange Commission. Unless otherwise noted, the
shareholders listed in the table have both sole voting power and sole
dispositive power with respect to such shares, subject to community
property laws where applicable and the information contained in the other
footnotes to the table.
(2) Based on 52,173,206 shares of Common Stock outstanding at April 23, 1999.
This number excludes 261,000 unretired treasury shares held by the Company.
Each owner's percentage is calculated by dividing the number of shares
beneficially held by the sum of 52,173,206 and the number of shares such
owner has the right to acquire within 60 days.
(3) Includes (a) 19,224,493 shares owned by Thayer Equity Investors III, L.P.
("Thayer"), (b) 1,361,240 shares subject to warrants held by Thayer and
exercisable within 60 days, (c) 9,618,241 shares issuable upon conversion
of convertible subordinated debt held by a Thayer-led group, (d) 210,900
shares owned by investors in Thayer who may be deemed to be affiliates of
Thayer, and (e) 153,359 shares owned by TC Co-Investors, LLC, which may be
deemed to be an affiliate of Thayer. Each of Dr. Stern and Mr. Malek are
members of the general partner of Thayer, and may be deemed to be the
beneficial owner of its shares and those of its affiliates. Dr. Stern and
Mr. Malek disclaim such beneficial ownership.
(4) Director.
(5) Includes 288,312 shares subject to warrants exercisable within 60 days and
194,957 shares issuable upon conversion of convertible subordinated debt.
Also includes (a) 707,525 shares owned by the Edward Blank 1995 Grantor
Retained Annuity Trust (the "Blank Trust"), (b) 68,260 shares subject to
warrants exercisable within 60 days held by the Blank Trust, and (c) 46,218
shares issuable upon conversion of convertible subordinated debt held by
the Blank Trust. Mr. Blank is the trustee of the Blank Trust and therefore
may be deemed to beneficially own its shares.
(6) Includes (a) 2,835,123 shares owned by ITC Service Company ("ITC"), for
which William H. Scott, III serves as President, (b) 38,535 shares subject
to warrants held by ITC and exercisable within 60 days, and (c) 185,042
shares issuable upon conversion of convertible subordinated debt and
held by ITC. Mr. Scott disclaims any and all beneficial ownership
associated with such shares owned by ITC.
(7) 7,000 of Mr. Santry's shares are owned of record by Lakewood Financial
Consultants, Inc. which is 99% owned by Mr. Santry. Includes beneficial
ownership of 950,000 shares of Common Stock issuable upon exercise of stock
options granted pursuant to the ATC Plans and 266,667 shares of Common
Stock issuable upon exercise of stock options granted pursuant to the 1998
Plan.
(8) Includes 747,957 shares subject to options exercisable within 60 days and
236,967 shares subject to a purchase option agreement with Thayer for
shares of Common Stock held by the Thayer fund.
(9) Includes beneficial ownership of 300,000 shares of Common Stock issuable
upon exercise of stock options granted pursuant to the ATC Plans and
300,000 shares of Common Stock issuable upon exercise of stock options
granted pursuant to the 1998 Plan.
(10) Includes beneficial ownership of 300,000 shares of Common Stock issuable
upon exercise of stock options granted pursuant to the ATC Plans.
(11) Includes 100,000 shares of Common Stock purchased from the Company (out
of the Company's unretired treasury shares) at the closing price on
May 27, 1999, $1.03125, and 150,000 shares of Common Stock issuable upon
exercise of stock options granted pursuant to the 1998 Plan.
(12) Subject to options exercisable within 60 days. These options expire on
September 15, 1999. Mr. Croson is no longer employed by the Company.
(13) Subject to options exercisable within 60 days.
(14) Subject to options exercisable within 60 days.
(15) Includes 47,860 shares subject to options exercisable within 60 days.
(16) Mr. Callaway is no longer employed by the Company.
8
<PAGE>
(17) Includes beneficial ownership of 15,018,320 shares subject to warrants or
options exercisable within 60 days and shares issuable upon conversion of
convertible subordinated debt as set forth in footnotes (3), (5), (6), (7),
(8), (9), (10), (11), (12), (13), (14), and (15) above.
STOCKHOLDER AND VOTING AGREEMENTS
On July 9, 1998, ATC Communications Group, Inc. ("ATC") completed the
acquisition of IQI, Inc., a New York corporation ("IQI"). The acquisition was
effected through the merger (the "Merger") of a wholly-owned subsidiary of ATC
with and into IQI pursuant to an Agreement and Plan of Merger dated as of April
7, 1998 (the "Merger Agreement").
Pursuant to the Merger Agreement, each former holder of common stock,
$.001 par value, of IQI ("IQI Common Stock") received, in exchange for each such
share, 9.7513 shares of the common stock, par value $0.01 per share, of the
Company ("ATC Common Stock"). As a result of the Merger, ATC issued
approximately 34.2 million shares of ATC Common Stock and Common Stock
equivalents to holders of IQI Common Stock and IQI stock options and warrants in
a tax-free exchange. Thayer and its affiliates, as noted in the table above,
acquired approximately 19,588,752 shares of ATC Common Stock in the Merger, or
approximately 37.46% of the then issued and outstanding shares, and currently
beneficially own 30,568,233 shares of Common Stock (see footnote No. 3 to the
table above). The acquisition has been accounted for as a reverse purchase,
meaning that for accounting purposes, IQI is the surviving corporation and is
treated as having acquired ATC in a purchase accounting transaction. Effective
upon the Merger, the Company formally changed its name to Aegis Communications
Group, Inc. and its Nasdaq National Market System symbol to "AGIS".
At the Company's annual meeting of stockholders held on July 9, 1998,
the stockholders elected a new board of directors comprised of six nominees of
ATC and six nominees of IQI, with Michael G. Santry of ATC and Paul G. Stern of
IQI as Co-Chairmen of the board. In accordance with the Merger Agreement and
effective with the Merger, the Company also amended its bylaws to require the
approval of seven of twelve directors for certain transactions. Although
management expects that the board of directors of Aegis will be able to resolve
major business issues, there can be no assurance that, given the equal
allocation of board seats to each party to the Merger, deadlocks will not occur.
Certain stockholders who, in the aggregate, own more than a majority
of the voting stock of Aegis have entered into a Stockholders' Agreement
whereby, for a period of two years from the date of the Merger, each such
stockholder has agreed to vote its shares of Aegis capital stock in favor of
the nominees to the board of directors of Aegis selected by the
representative of the other party's stockholder group.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and beneficial owners of more than 10% of the outstanding
common stock (collectively, "insiders") to file reports with the Commission
disclosing their ownership of common stock and changes in such ownership. The
rules of the Commission require insiders to provide the Company with copies of
all Section 16(a) reports that the insiders file with the Commission. Based
solely upon the Company's review of copies of Section 16(a) reports received by
it, and written representations that no such reports were required to be filed
with the Commission, the Company believes that its insiders have complied with
all Section 16(a) filing requirements applicable to them during 1998 except that
Messrs. Stern, Malek, Blank, McNeely and Lewis filed their initial statements of
beneficial ownership on Form 3 on August 4, 1998, sixteen days after the due
date, and except that Mr. Santry made a late filing of his Form 4 (which Form 4
covered 13 transactions), which was required to be filed on January 10, 1998.
9
<PAGE>
DIRECTORS' MEETINGS AND COMPENSATION
BOARD COMMITTEES AND MEETINGS
The business of Aegis is managed under the direction of the Aegis
Board. The Aegis Board meets during Aegis's fiscal year to review significant
developments affecting Aegis and to act on matters requiring Aegis Board
approval. The Aegis Board held nine formal meetings and acted by unanimous
written consent one time during the year ended December 31, 1998. Each of the
current directors attended at least 75% of all meetings of the board of
directors called during the time he served as a director and at least 75% of all
meetings of each committee of the board of directors on which he served.
The Aegis Board has established an Audit Committee and Compensation
Committee to devote attention to specific subjects and to assist the Aegis Board
in the discharge of its responsibilities.
The functions of these committees are described below.
AUDIT COMMITTEE
During 1998, the Audit Committee was comprised of Daniel H. Chapman
(Chairman), Drew Lewis, David L. Malcolm and Frederic V. Malek. The Audit
Committee is empowered to recommend to the Aegis Board a firm of certified
public accountants to conduct audits of the accounts and affairs of Aegis,
review accounting objectives and procedures of Aegis and the findings and
reports of the independent certified public accountants, and make such reports
and recommendations to the Aegis Board as it deems appropriate. The Audit
Committee met as a committee at each formal meeting of the Aegis Board during
1998.
COMPENSATION COMMITTEE
During 1998, the Compensation Committee was comprised of Dr. Paul G.
Stern (Chairman), Frederic V. Malek and Darryl D. Pounds. The Compensation
Committee is empowered to establish and revise the compensation paid to all
executive officers of Aegis and has complete authority to (a) construe,
interpret and administer the provisions of the Aegis stock option plans and the
provisions of option agreements granted thereunder, (b) select the key
employees, consultants and directors to whom awards are granted, the number of
options, the number of shares of Aegis Common Stock with respect to each option,
the exercise price of each option, the vesting and exercise period of each
option, and such other terms and conditions of each option, if any, that are not
inconsistent with the provisions of Aegis's stock option plans, (c) prescribe,
amend and rescind rules and regulations pertaining to the Aegis stock option
plans, and (d) make all other determinations necessary or advisable for their
implementation and administration. The Compensation Committee acted by unanimous
written consent two times during 1998.
The Aegis Board does not have a standing nominating committee or any
other committee performing a similar function. The function customarily
attributable to a nominating committee is performed by the Aegis Board as a
whole.
COMPENSATION OF DIRECTORS
Directors of the Company receive no fees for serving on the Board of
Directors. Upon their initial election and as compensation for their service as
a director, each outside director is granted non-qualified options to purchase
50,000 shares of Common Stock, which vest ratably over a three-year period. As
such, in 1998, Messrs. Malcolm, Pounds and Lewis were granted options to
purchase 50,000, 25,000 and 10,000 shares of Common Stock, respectively, with an
exercise price of $1.25. The amount of the grants to Mr. Pounds and Mr. Lewis
reflected their prior status as directors of ATC and IQI,
10
<PAGE>
respectively, and their existing option grants from such service. All
directors are entitled to reimbursement for expenses incurred for attendance
at each meeting.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Dr. Paul G. Stern, Darryl D. Pounds and Frederic V. Malek served on
Aegis' Compensation Committee during the fiscal year ended December 31, 1998.
None of Dr. Stern, Mr. Pounds, nor Mr. Malek is a current officer or employee of
Aegis.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE OFFICERS OF THE COMPANY
For biographical and other information regarding the executive officers
of the Company, please see "Directors and Executive Officers of the Company".
Officers serve at the discretion of the Board of Directors. There is no family
relationship among any of the named officers and directors of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of the Company is
responsible for overseeing the Company's compensation policy, approving salaries
and annual bonuses for executive officers and administering the Company's stock
option plans. The Compensation Committee is comprised of two non-employee
directors.
COMPENSATION POLICY
The Compensation Committee's philosophy for executive compensation is
designed to enable the Company to recruit, motivate, and retain qualified
individuals to manage the Company in order to enhance shareholders' value. The
objective of this philosophy is to recognize individual contributions and
achievements while enabling individuals to share the risks and rewards of the
Company's overall performance. The Compensation Committee fulfills its
responsibilities with input from the Company's executive officers and by
evaluating compensation relative to a broad range of companies both in the
Company's peer group and in comparable lines of business. The key components of
the Company's current compensation policy are competitive base salaries, annual
cash performance bonuses and long-term equity incentives.
BASE SALARIES
Base salaries of executive officers are targeted to be competitive with
companies with similar growth and operations. The Compensation Committee also
considers the executive's contribution to operating performance and
profitability, the executive's role in developing and maintaining client
relationships, and the executive's level and complexity of responsibility in
determining annual base salaries and salary increases.
PERFORMANCE BONUSES
Cash performance bonuses are determined annually by the Compensation
Committee based on an executive's performance relative to predetermined
individual performance goals. Additionally, the Compensation Committee considers
the Company's overall financial performance, including the achievement of
targets for revenue and earnings before interest taxes depreciation and
amortization ("EBITDA"), in determining the extent to which performance bonuses
will be paid. Bonus potential
11
<PAGE>
ranges from 0% to 100% of base salary, based on the executive's level of
responsibilities, with 100% being the Chief Executive Officer's maximum bonus
potential.
LONG-TERM EQUITY INCENTIVES
The Compensation Committee believes that the use of equity-based
long-term compensation directly links executive interests to enhancing
shareholder value. Stock options are generally offered to induce executives to
accept employment with the Company. Such offerings generally vest over time and
are subject to forfeiture. The Compensation Committee establishes the number of
shares granted and the exercise price and vesting period of each grant. The
stock options granted generally have an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant thus rewarding the
executive only if the Company's common share price appreciates above the price
on the date of grant.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee set the annual base compensation of Mr.
McNeely, the Company's chief executive officer, at $350,000 per year and
believes such base salary is comparable to that paid the chief executive
officers of companies of similar size and growth potential. Additionally, Mr.
McNeely is entitled to receive annual bonus compensation of up to 100% of his
base salary based on predetermined performance goals established each year by
the Compensation Committee.
Mr. McNeely's bonus compensation for 1998 was dependent upon the
Company's achievement of specified revenue and profitability targets and certain
client business and internal operations development goals. Although the Company
achieved record revenue growth in 1998, the Company's client business
development and profitability results were adversely affected by (i) a
substantial decrease in service volumes from the Company's largest client of
approximately 13.6% and a decline in the Company's Elrick & Lavidge marketing
research division's revenues of approximately 12.0%; (ii) a material decline in
client service center capacity utilization in the fourth quarter of 1998
resulting from lower volumes of business from the Company's two largest
telecommunications clients, and (iii) the Company's restructuring efforts
following the Merger which resulted in one-time write-offs of redundant hardware
and software, write-offs of deferred loan fees, severance costs and the
consolidation of certain administrative functions including costs to relocate
offices and employees. As a result, the Company achieved some but not all of the
performance objectives upon which Mr. McNeely's 1998 bonus compensation was
based.
Submitted by the Compensation Committee of the Board of Directors.
Dr. Paul G. Stern (Chairman)
Frederic V. Malek
Darryl D. Pounds
12
<PAGE>
SUMMARY COMPENSATION TABLE
Furnished below is a table containing individual compensation
information on persons serving as Chief Executive Officer of the Company during
the fiscal year ended December 31, 1998 and the five other most highly paid
executive officers of the Company and its operating subsidiaries whose total
annual salary and bonus amounts totaled $100,000 or more for services rendered
in all capacities during the fiscal year ended December 31, 1998 (collectively,
the "Named Executive Officers").
<TABLE>
<CAPTION>
Annual Compensation Long-Term
------------------------------------------ Compensation
Awards
Other ---------- All
Annual Securities Other
Name and Fiscal Salary Bonus Compen- Underlying Compen-
Principal Position Year $ $ sation $ Options (1) sation $
- -------------------------------- ------- ------- ------- -------- ----------------- --------
<S> <C> <C> <C> <C> <C> <C>
STEPHEN A. MCNEELY 1998 325,000 100,000 26,119 (2) - 15,236 (3)
Chief Executive Officer 1997 110,769 (4) - - 1,121,936 -
and President 1996 - - - - -
MICHAEL G. SANTRY 1998 350,000 - - 800,000 -
Former Co-Chairman, 1997 175,000 (5) - - - -
former Chief Executive 1996 156,250 (5) - - 950,000 -
Officer and President
MATTHEW S. WALLER 1998 225,000 121,500 - 300,000 -
Executive Vice 1997 164,567 (6) 33,650 - 300,000 -
President and Chief 1996 - - - - -
Financial Officer
ERIC CROSON 1998 248,416 60,000 - - -
Former Chief Financial 1997 248,416 - - - -
Officer of IQI 1996 11,538 (7) - - 237,912 -
ROBERT B. ALLEN 1998 220,000 80,000 - - -
Executive Vice President 1997 210,833 (8) 44,000 - 300,000 -
of Sales and Marketing, 1996 - - - - -
former Senior Vice
President of Operations
CRAIG CALLAWAY (9) 1998 148,088 127,109 - 38,000 -
Former Senior Vice 1997 136,168 61,165 2,758 (10) 103,627 -
President of Operations 1996 123,532 15,723 3,220 (10) - -
WILLIAM F. BERGERON, JR. 1998 146,521 57,625 - 50,000 -
Senior Vice President of 1997 112,007 25,000 - 100,000 -
Technology 1996 85,926 20,000 - - -
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In connection with the Merger, each share of IQI common stock was converted
into 9.7513 shares of the Company's common stock ("Common Stock") and each
option to acquire IQI common stock was converted into options to purchase
9.7513 shares of Common Stock.
(2) Includes a $15,246 car allowance and $10,873 in relocation costs paid by
the Company on Mr. McNeely's behalf.
13
<PAGE>
(3) Includes $15,236 paid for additional life insurance and long-term
disability coverage and other perquisites paid to or on behalf of Mr.
McNeely.
(4) The amount indicated is the salary paid to Mr. McNeely from the
commencement of his employment with the Company, on August 1, 1997, through
December 31, 1997.
(5) Mr. Santry elected not to receive any salary or bonus compensation during
the period from July 1, 1996 through June 30, 1997. Effective April 1,
1996, the Compensation Committee of the Board of Directors set Mr. Santry's
annual base salary at $350,000 and his bonus compensation potential at up
to $125,000 annually. Effective with the Merger, Mr. Santry relinquished
the roles of President and CEO and assumed the role of Co-Chairman of the
Board of the Company. Mr. Santry resigned as Co-Chairman of the Company on
May 27, 1999 but remains as a Director.
(6) Mr. Waller joined the Company as Chief Financial Officer on March 24, 1997.
The amount indicated is the salary paid to Mr. Waller from the commencement
of his employment with the Company through June 30, 1997. Mr. Waller's
employment agreement with the Company specifies an annual base salary of
$225,000 and bonus compensation of up to $135,000 annually. See "Employment
Agreements and Termination of Employment Agreements."
(7) Mr. Croson joined the Company as Chief Financial Officer on December 2,
1996. The amount indicated is the salary paid to Mr. Croson from the
commencement of his employment through December 31, 1996. Mr. Croson is no
longer employed by the Company.
(8) Mr. Allen joined ATC as Chief Operating Officer on January 6, 1997. The
amount indicated is the salary paid to Mr. Allen from the commencement of
his employment through December 31, 1997.
(9) Mr. Callaway is no longer employed by the Company.
(10) Consists of commissions earned on revenues.
STOCK OPTION PLANS
In November 1996, IQI established the 1996 Incentive Stock Option Plan
(the "IQI Plan"). The Plan provided for the award of incentive stock options to
directors, officers, key employees and members of Thayer's Advisory Board. The
IQI Plan was administered by a Compensation Committee, as established by IQI's
Board of Directors. These options were incentive stock options ("ISOs") under
the Internal Revenue Code or non-statutory stock options ("NSOs") which are not
intended to qualify. IQI reserved 3,929,774 shares of common stock for issuance
under the IQI Plan.
Prior to the Merger, ATC shareholders approved two stock option plans,
which provided for the granting of options to purchase up to 5,000,000 shares of
Common Stock to key employees, officers and directors of ATC and its operating
subsidiary (the "ATC Plans"). At the date of the Merger, options to purchase
4,447,000 shares of Common Stock granted pursuant to the ATC Plans were
outstanding.
In September 1998, the Company initiated the Aegis Communications
Group, Inc. 1998 Stock Option and Restricted Stock Plan (the "1998 Plan") which
provides for the granting of options to purchase up to a maximum of 7,500,000
shares of Common Stock to key employees, officers and directors of the Company
and its operating subsidiaries. Options granted pursuant to the 1998 Plan are
exercisable for 10 years from the date of the grant subject to vesting
schedules. The Company may grant additional options at any time prior to
September 2008. As a result of the adoption of the 1998 Plan, the Company will
not grant any future options to purchase shares of Common Stock pursuant to the
IQI Plan and the ATC Plans.
14
<PAGE>
OPTION GRANTS AND HOLDINGS
1998 OPTION GRANTS
On April 7, 1998, in connection with the ATC Board's approval of the
Merger and to be effective upon completion of the Merger, the ATC Board granted
Michael G. Santry, Chairman of the Board, President and Chief Executive Officer
of ATC, nonqualified options to purchase 450,000 shares of ATC Common Stock
under the ATC Plans at an exercise price equal to 1/16th over the closing bid
price of ATC Common Stock on the closing date of the Merger, vesting one-third
on the first, second and third anniversaries of the Effective Date,
respectively, all of which were contingent upon consummation of the Merger. In
addition, ATC and IQI agreed that the Company would, upon consummation of the
Merger, grant Mr. Santry and Matthew S. Waller, Chief Financial Officer and
Director of ATC, nonqualified options to purchase 350,000 and 300,000 shares,
respectively, of Common Stock under the 1998 Plan at an exercise price equal to
1/16th over the closing bid price of Common Stock on the closing date of the
Merger. Two-thirds of the options to be granted to Mr. Waller vested on the date
of grant and one-third vest on the first anniversary of the Effective Date. The
options granted to Mr. Santry vest one-third on the first, second, and third
anniversaries of the Effective Date, respectively.
The following table sets forth certain information relating to stock
option grants made by the Company to the Named Executive Officers during the
last fiscal year. The Company has no plans that provide for the granting of
stock appreciation rights.
<TABLE>
<CAPTION>
Potential Realizable Value
Number of % of Total at Assumed Annual Rates
Securities Options of Stock Price Appreciation
Underlying Granted to for Option Term (1)(2)
Options Employees in Exercise Expiration -----------------------------
Name Granted Fiscal Year Price Date 5% 10%
- ---------------------------- ------- ----------- ----- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael G. Santry 800,000 46.57% $2.81 7/9/08 $1,415,013 $3,585,921
Matthew S. Waller 300,000 17.47% $2.81 7/9/08 $530,630 $1,344,720
William F. Bergeron, Jr. 50,000 2.91% $1.25 11/5/08 $39,306 $99,609
Craig Callaway 38,000 2.21% $1.25 11/5/08 $29,872 $75,703
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Potential realizable value is based on the assumption that the Company's
Common Stock price appreciates at the annual rate shown (compounded
annually) from the date of the grant until the end of the option term. The
amounts have been calculated based on the requirements promulgated by the
Securities and Exchange Commission. The actual value, if any, a Named
Executive Officer may realize will depend on the excess of the stock price
over the exercise price on the date the option is exercised (if the
executive were to sell the shares on the date of exercise). Accordingly,
there is no assurance that the value will be realized will be at or near
the potential realizable value as calculated in this table.
(2) These options have a term of 10 years from the date of grant.
15
<PAGE>
1998 Year-end Option Values
The following table sets forth certain information with respect to the
shares underlying unexercised options held as of December 31, 1998, by the Named
Executive Officers.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised "In-the-Money" Options as
Options as of December 31, 1998 of December 31, 1998 (1)
--------------------------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------ ----------- ------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Stephen A. McNeely 373,979 747,957 $ - $ -
Michael G. Santry 950,000 800,000 $ - $ -
Matthew S. Waller 500,000 100,000 $ - $ -
Eric Croson 158,608 79,304 $ - $ -
Robert B. Allen 300,000 - $ - $ -
Craig Callaway 77,624 64,003 $ - $ -
William F. Bergeron, Jr. 100,000 50,000 $ - $ -
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on the closing price per share of the Common Stock on December 31,
1998, as reported on the Nasdaq National Market, which was $0.8125, less
the exercise price payable for such shares. Using such calculation, no
unexercised options were "in-the-money" as of December 31, 1998.
EMPLOYMENT AGREEMENTS
MATTHEW S. WALLER entered into an employment agreement effective
March 24, 1997, pursuant to which he serves as Chief Financial Officer of the
Company. Under the employment agreement, Mr. Waller is entitled to receive an
annual base salary and an incentive bonus based upon certain financial
performance targets of the Company. The employment agreement provides for the
payment to Mr. Waller of 100% of his annual compensation if the Company
terminates Mr. Waller's employment without cause (as defined in the
employment agreement) or in the event that he is terminated after a change in
control (as defined in the employment agreement) of the Company. Mr. Waller's
options vest immediately in the event of a change in control (as defined in
the employment agreement) of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At December 31, 1998, Michael G. Santry, the Co-Chairman of the
Company, had outstanding borrowings and accrued interest of approximately $1.9
million. The borrowings bear interest at a 6% annual rate and were due in full
on March 31, 1999. In connection with the Merger, Mr. Santry paid one-half of
the principal amount of the note in July 1998. The note is secured by 7,000
shares of the Company's Common Stock and options to purchase 1,750,000 shares of
the Company's Common Stock held by Mr. Santry. Reported interest income from the
receivable amounted to approximately $58,000 in 1998. In June 1999, the Company
extended the maturity date of the note to March 31, 2000 but increased the
annual rate of interest to 7%. Mr. Santry also pledged additional collateral to
secure the note.
The Company provides services to certain clients, including its most
significant client, who, directly or through affiliates, have an ownership
interest in Thayer.
During the year ended December 31, 1998, the Company paid J. Frank
Mermoud, a former
16
<PAGE>
director of ATC, $80,000, in monthly installments, in consideration for
consulting services performed. These payments terminated at the end of 1998.
In connection with the Merger, Thayer provided the Company with $6.8
million in subordinated indebtedness (the "Subordinated Indebtedness") as well
as a guarantee for $2.0 million in bridge financing to assist in funding the
Company's working capital needs. In connection with the guarantee, and for
additional consideration of $110,000, the Company issued to Thayer warrants to
purchase 1,100,000 shares of the Company's Common Stock at an exercise price of
$1.96 (110% of the average of the high and low prices of ATC Common Stock on
April 7, 1998, the day before the announcement of the proposed Merger).
Prior to the Merger, on July 6, 1998, the Company received an
additional financing commitment from Thayer and certain other shareholders of
IQI. Under the commitment, the Thayer-led group agreed to lend the Company, at
its election, up to an additional $4.0 million in subordinated indebtedness at
any time within 90 days after the Merger. As of October 23, 1998, the Company
had drawn the full commitment amount of $4.0 million. In connection with this
commitment and effective upon the Merger, the Company issued the Thayer-led
group additional warrants to purchase up to 350,000 shares of the Company's
Common Stock at an exercise price of $2.375 per share and provided certain
anti-dilution protection. This indebtedness is convertible into the Company's
Common Stock at a conversion price of $2.375 per share, the closing price of
such stock on July 2, 1998, the date the Thayer-led group committed to provide
this financing. This debt is in addition to, and on the same basic terms as, the
subordinated debt that Thayer had previously loaned to the Company.
Subsequent to the end of the fiscal year, on March 30, 1999, Thayer
provided approximately $5.7 million in additional subordinated indebtedness to
assist in funding the Company's working capital needs. The additional
indebtedness is convertible into the Company's Common Stock at a conversion
price of $1.15 per share, which represents a 26.9% premium to the closing price
of Aegis Common Stock on March 25, 1999, the date that Thayer committed to
provide the financing.
In an effort to reduce debt and improve the Company's balance sheet,
effective June 30, 1999, the Thayer-led group agreed to convert approximately
$12.1 million of its subordinated debt into two new series of convertible
preferred stock. The 77,300 shares of new Series D Preferred Stock ($.01 par
value per share, $100 per share liquidation preference) are convertible into
Company Common Stock at $2.00 per share, and the 44,018 shares of new Series E
Preferred ($.01 par value per share, $100 per share liquidation preference)
are convertible into Company Common Stock at $2.375 per share. Both series
earn cumulative dividends (payable-in-kind in additional shares of the
respective series of Preferred Stock) at the annual rate of 15%, and are
non-voting except on specified matters. In consideration of the conversion
of the subordinated debt into preferred stock, the Company issued the
Thayer-led group warrants to purchase an additional 1,000,000 shares of
Company Common Stock at $0.90625 per share.
Paul G. Stern, Drew Lewis, and Frederic V. Malek, each directors of the
Company, are partners in and/or advisors to Thayer.
Thayer, ITC Services Company, Edward Blank and The Edward Blank 1995
Grantor Retained Annuity Trust (the "IQI Parties") and Michael G. Santry, Darryl
D. Pounds and Codinvest Limited (the "ATC Parties"), are parties to a
Stockholders' Agreement with the Company whereby, for a period of two years from
the date of the Merger Agreement, each such stockholder has agreed to vote its
shares of Company Common Stock, if any, in favor of the nominees to the board of
directors selected by the other party's stockholder group. Messrs. Stern, Lewis
and Malek, by virtue of their positions with Thayer, may be viewed as indirect
beneficiaries of this voting arrangement, and Messrs. Santry and Pounds may be
viewed as direct beneficiaries of this voting arrangement.
17
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph sets forth a comparison of the cumulative total
shareholder return on Aegis Common Stock over the five year period ended
December 31, 1998 as compared with the cumulative total return of a broad
equity market index, the Nasdaq Market Index, and a Peer Group Index. The
Peer Group consists of ACI Telecentrics, Inc., APAC Customer Services, Inc.,
Convergys Corp., ICT Group, Inc., National TechTeam, Inc., Precision Response
Corp., RMH Teleservices, Inc., Sitel Corp., Sykes Enterprises, Inc., TeleTech
Holdings, Inc., TeleSpectrum Worldwide, Inc. and West TeleServices Corp. The
total shareholder return for each company in the Peer Group has been weighted
according to the company's stock market capitalization. This graph assumes an
investment of $100 on December 31, 1993 in each of Aegis Common Stock, the
Nasdaq Market Index and the Peer Group Index, and assumes reinvestment of
dividends, if any. The stock price performance shown on the graph below is
not necessarily indicative of future stock price performance.
<TABLE>
<CAPTION>
----------------- FISCAL YEAR ENDING ---------------------
COMPANY/INDEX/MARKET 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C>
Aegis Commun Grp 100.00 248.26 262.05 1,448.20 531.01 89.65
Peer Group Index 100.00 164.91 152.63 632.13 480.22 266.56
NASDAQ Market Index 100.00 109.66 128.61 161.89 195.02 300.49
</TABLE>
18
<PAGE>
MATTERS TO BE BROUGHT BEFORE THE ANNUAL MEETING
PROPOSAL 1
AMENDMENT TO THE AEGIS CHARTER CLASSIFYING THE AEGIS BOARD INTO THREE
CLASSES OF FOUR DIRECTORS EACH
On August 14, 1998, the Aegis Board unanimously approved and voted to
recommend to the stockholders a proposed amendment to Article Seventh of the
Aegis Charter, which will divide the Aegis Board into three classes of four
directors each, with one class having an initial term of one year, one class
having an initial term of two years, and one class having an initial term of
three years. At each annual meeting of Aegis stockholders, commencing with the
annual meeting of stockholders to be held in 2000, four directors will be
elected to succeed those directors whose terms have expired, and each newly
elected director will serve for a three-year term.
As set forth in the Aegis Bylaws, any vacancy occurring in the Aegis
Board may be filled by the affirmative vote of a majority of the remaining
directors. A director so elected to fill a vacancy shall serve for the
remainder of the full unexpired term of his predecessor in office. Aegis
believes that a classified board of directors will help assure the continuity
and stability of the Aegis Board and Aegis's business strategies and policies.
The classified board provision could increase the likelihood that, in the event
of a takeover of Aegis by a third party, incumbent directors will retain their
positions. As noted, the classified board provision will help ensure that the
Aegis Board, if confronted with an unsolicited acquisition proposal from a third
party that has acquired a block of the voting stock of Aegis, will have
sufficient time to review the proposal and appropriate alternatives and to seek
the best available result for all stockholders. In addition, a classified board
could have the effect of making it more difficult for a third party to obtain
control of the Aegis Board, thereby delaying, deferring or preventing a change
in control of Aegis, although this is not the intention of this proposal.
To accomplish this change in the Aegis Charter, Article Seventh of the
Aegis Charter must be amended to be and read as follows:
"SEVENTH. NUMBER, ELECTION, AND TERMS OF DIRECTORS. Subject to the
rights, if any, of the holders of any series of Preferred Stock to
elect additional directors under circumstances specified in a Preferred
Stock designation, the number of the directors of the Company will not
be less than two nor more than twelve and will be fixed from time to
time in the manner described in the bylaws of the Company. The
directors will be divided into three classes designated as Class I,
Class II, and Class III. Each Class of directors will stand for
election at the 1999 annual stockholders' meeting for the following
terms: Class I directors will be elected for a three-year term; Class
II directors will be elected for a two-year term; and Class III
directors will be elected for a one-year term. At each following annual
stockholders' meeting, commencing with the 2000 annual stockholders'
meeting, each of the successors to the directors of the Class whose
term will expire at such annual meeting will be elected for a term
running until the third annual meeting succeeding his or her election
and until his or her successor has been duly elected and qualified."
The approval by a majority of the outstanding shares entitled to vote
with respect to this amendment is required to approve this amendment to the
Aegis Charter. A proposal to adopt a classified board amendment was submitted to
the stockholders at the July 9, 1998 annual meeting and failed to gain approval
of a majority of the shares entitled to vote at such meeting. The Aegis Board
believes, for the reasons set forth above, that a classified board is in the
best interests of Aegis and its stockholders.
THE AEGIS BOARD UNANIMOUSLY RECOMMENDS THAT AEGIS STOCKHOLDERS VOTE FOR
THIS AMENDMENT TO THE AEGIS CHARTER.
19
<PAGE>
PROPOSAL 2
ELECTION OF DIRECTORS
The Aegis Annual Meeting will include the election of directors.
Currently, each director serves until the next annual meeting of the Company's
stockholders and until the director's successor is duly elected and qualified.
In the event Proposal No. 1 is approved, the Aegis Annual Meeting will include
the election of four Class I directors to serve for an initial three-year term,
four Class II directors to serve for an initial two-year term, and three Class
III directors to serve for an initial one-year term. In the event Proposal No. 1
is not approved, the Aegis Annual Meeting will include the election of eleven
directors to serve until the next annual meeting of Aegis stockholders and until
their successors have been duly elected and qualified.
If Proposal No. 1 is approved, the nominees for the Aegis Board are
Frederic V. Malek (Class I), Michael G. Santry (Class I), Paul G. Stern
(Class I), Matthew S. Waller (Class I), John R. Birk (Class II), Drew Lewis
(Class II), David L. Malcolm (Class II), Darryl D. Pounds (Class II), Edward
Blank (Class III), Daniel H. Chapman (Class III), and Stephen A. McNeely
(Class III). One vacancy will exist in Class III. If Proposal No. 1 is not
approved, the nominees for the Aegis Board are the eleven individuals listed
above.
Shares represented by proxies returned duly executed will be voted,
unless otherwise specified, in favor of the eleven nominees for the Aegis Board
as described herein. The proxies cannot be voted for more than eleven nominees.
The nominees have indicated that they are able and willing to serve as
directors. If any (or all) such persons should be unable to serve, the persons
named in the enclosed proxy will vote the shares covered thereby for such
substitute nominee (or nominees) as the Aegis Board may select. Stockholders may
withhold authority to vote for any nominee by entering the name of such nominee
in the space provided for such purpose on the proxy card.
The company's board of directors is presently composed of eleven
members, all of whose current terms expire at this Aegis Annual Meeting. Each of
the nominees currently is serving as a director of the Company.
For biographical and other information regarding the nominees who
currently serve as directors, please see "Directors and Executive Officers of
the Company".
The affirmative vote of the holders of shares of Aegis Common Stock,
having a plurality of the voting power of Aegis, in person or by proxy, is
required to elect directors.
THE AEGIS BOARD UNANIMOUSLY RECOMMENDS THAT AEGIS STOCKHOLDERS VOTE FOR
EACH OF THE NOMINEES FOR DIRECTOR.
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<PAGE>
PROPOSAL 3
AMENDMENT TO THE AEGIS CHARTER TO LIMIT DIRECTOR LIABILITY TO THE FULLEST
EXTENT PERMITTED BY DELAWARE GENERAL CORPORATION LAW
The Delaware General Corporation Law, under which the Company is
organized, was amended in 1986 by Delaware Senate Bill 533 (the "Act") which
permits corporations and their stockholders to include in the corporation's
certificate of incorporation a provision eliminating or limiting directors'
exposure to liability for monetary damages for breaches of their fiduciary duty
of care as directors. The Act does not eliminate the directors' liability for
monetary damages for the breach of the duty of loyalty to the corporation or its
stockholders, acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law, the improper purchase or redemption of
stock, payment of improper dividends or any transaction from which a director
received an improper personal benefit. In addition, the Act does not apply to
claims made against directors by third parties or to persons who are officers as
well as directors when acting in their capacities as officers.
The Aegis Board has unanimously approved and voted to recommend to the
stockholders that the Aegis Charter be amended by adding a paragraph to Article
Seventh of the Charter which would limit directors' liability to the fullest
extent permitted by the Act. The text of the proposed amendment is as follows:
"A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director except for liability (i) for any breach
of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derives
any improper personal benefit. If the General Corporation Law of the
State of Delaware is amended to authorize the further elimination or
limitation of the liability of directors, then the liability of a
director to the Corporation shall be eliminated or limited to the
fullest extent authorized by the General Corporation Law of the State
of Delaware, as so amended. Any repeal or modification of this
paragraph shall not adversely affect any right or protection of a
director of the Corporation existing hereunder with respect to any act
or omission occurring prior to or at the time of such repeal or
modification. The provisions of this paragraph shall not be deemed to
limit or preclude indemnification of a director by the Corporation for
any liability of a director which has not been eliminated by the
provision of this paragraph."
While the proposed amendment limits the rights of stockholders and the
Company to sue the directors for monetary damages for acts of negligence,
including gross negligence, for breach of the fiduciary duty of care, it does
not change or eliminate that duty. It only eliminates monetary damage awards
occasioned by certain breaches of that duty. The Board believes that the
diligence and care exercised by directors stem primarily from their desire to
act in the best interest of Aegis and not from a fear of monetary damage awards.
Therefore, the Board believes that the level of care and diligence exercised by
the directors will not be lessened by adoption of the proposed amendment.
In discharging their responsibility for managing the business and
affairs of a corporation, directors are held under Delaware law to the fiduciary
duties of care and loyalty to the corporation and its stockholders. Under
existing Delaware case law, the fiduciary duty of care requires that the board
of directors exercise an informed business judgment, meaning that directors
inform themselves of all material information reasonably available to them and
then act with requisite care in managing the business and affairs of the
corporation. The duty of loyalty that directors owe to the corporation and its
stockholders requires that the directors act in good faith and in the honest
belief that a business decision
21
<PAGE>
under consideration is in the best interests of the corporation and that the
directors not engage in self-dealing.
Under the proposed amendment, Aegis and its stockholders will no longer
be able to recover monetary damages based on a claim of breach of the directors'
fiduciary duty of care, even if the directors' conduct involved gross
negligence, unless the conduct falls within the statutory limitations. However,
Aegis and the stockholders will retain the right to pursue equitable remedies,
such as an injunction or rescission of a contract. A remedy such as an
injunction may not be effective; however, particularly if the stockholders are
not aware of a transaction until it is completed.
If the Delaware legislature expands the coverage of the Act, the
proposed amendment will likewise be expanded without further stockholder action.
The proposed amendment will have no effect on the liability of directors for
violations of the federal securities laws or other statutory liabilities. The
proposed amendment is not being proposed in response to any specific
resignation, threat of resignation, or refusal to serve by any director or
potential director, and the Company is not aware of any threatened resignation
if the proposed amendment is not adopted.
The Board of Directors, individual members of which will personally
benefit from adoption of the proposed amendment, strongly believes that the
proposed amendment is in the best interest of Aegis and its stockholders. The
Board believes that the proposed amendment will help Aegis remain competitive in
its ability to attract qualified directors and will positively affect the
ability of directors to make the best decisions of which they are capable.
The approval by a majority of the outstanding shares entitled to vote
with respect to this amendment is required to approve this amendment of the
Aegis Charter.
THE AEGIS BOARD UNANIMOUSLY RECOMMENDS THAT AEGIS STOCKHOLDERS VOTE FOR
THIS AMENDMENT TO THE AEGIS CHARTER.
PROPOSAL 4
RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS
The Audit Committee of the Aegis Board has selected
PricewaterhouseCoopers LLP to serve as Aegis's independent auditors for the
1999 fiscal year. The same firm audited the Company's financial statements
for the fiscal year ended December 31, 1998.
A representative of PricewaterhouseCoopers LLP is expected to be
present at the Aegis Annual Meeting. The representative will have the
opportunity to make a statement, if he or she so desires, and are expected to be
available to answer appropriate questions of stockholders.
THE AEGIS BOARD UNANIMOUSLY RECOMMENDS THAT AEGIS STOCKHOLDERS VOTE FOR
THE RATIFICATION OF PRICEWATERHOUSECOOPERS LLP TO SERVE AS AEGIS' INDEPENDENT
AUDITORS FOR THE 1999 FISCAL YEAR.
22
<PAGE>
DEADLINE FOR STOCKHOLDER PROPOSALS AT 2000 ANNUAL MEETING
Stockholders proposals intended for inclusion in the Company's proxy
materials for its 2000 Annual Meeting of Stockholders must be submitted in
writing to the Company no later than April 7, 2000. Stockholder proposals should
be directed to the Secretary of Aegis, Jerry L. Sims, Jr., 7880 Bent Branch
Drive, Suite 150, Irving, Texas 75063. Under Rule 14a-8 promulgated under the
Securities Exchange Act of 1934, as amended, proposals of stockholders must
conform to certain requirements as to form and may be omitted from the proxy
materials under certain circumstances. To avoid unnecessary expenditures of time
and money by stockholders and Aegis, stockholders are urged to review this Rule
and, if questions arise, consult legal counsel prior to submitting a proposal to
the Company.
OTHER MATTERS
The Aegis Board knows of no other matters other than those matters
described herein that will be presented at the Aegis Annual Meeting. If,
however, other matters or proposals should be presented and should properly come
before the meeting for action, the proxy holders intend to vote all proxies in
accordance with their best judgment in the interest of Aegis.
ANNUAL REPORTS
The Company's 1998 Annual Report to Stockholders, including the
Company's Annual Report on Form 10-K (excluding exhibits), is being mailed
together with this Proxy Statement. Such report should not be considered as part
of the proxy materials.
PLEASE DATE, SIGN AND RETURN THE PROXY AT YOUR EARLIEST CONVENIENCE IN
THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES.
A PROMPT RETURN OF YOUR PROXY WILL BE APPRECIATED, AS IT WILL SAVE THE EXPENSE
OF FURTHER MAILINGS.
By Order of the Board of Directors,
/s/ Jerry L. Sims, Jr.
------------------------------------
Jerry L. Sims, Jr.,
Secretary
Irving, Texas
July 8, 1999
23
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Appendix A
[FRONT OF PROXY CARD]
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
AEGIS COMMUNICATIONS GROUP, INC.
PROXY PROXY
BOARD OF DIRECTORS PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS AT
THE GRAPEVINE CONVENTION CENTER,
1209 SOUTH MAIN STREET, GRAPEVINE, TEXAS 76051
The undersigned stockholder of Aegis Communications Group, Inc. (the
"Company") hereby appoints John R. Birk and Jerry L. Sims, Jr., or either of
them, as proxies, each with full powers of substitution, to vote the shares of
the undersigned at the above-stated Annual Meeting and at any postponement(s) or
adjournment(s) thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED IN
ACCORDANCE WITH THE SPECIFICATIONS MADE ON THE REVERSE SIDE. IF A CHOICE IS NOT
INDICATED WITH RESPECT TO PROPOSALS NOS. 1 THROUGH 4, THIS PROXY WILL BE VOTED
"FOR" SUCH ITEMS. THE PROXIES WILL USE THEIR DISCRETION WITH RESPECT TO ANY
MATTER REFERRED TO IN PROPOSAL NO. 5. THIS PROXY IS REVOCABLE AT ANY TIME BEFORE
IT IS EXERCISED.
Receipt herewith of the Company's Annual Report and Notice of Meeting and Proxy
Statement, dated July 8, 1999, is hereby acknowledged.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
AEGIS COMMUNICATIONS GROUP, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY /X/
1. APPROVAL OF A PROPOSAL OF THE BOARD OF DIRECTORS TO APPROVE AN AMENDMENT TO
THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION CLASSIFYING
THE BOARD OF DIRECTORS INTO THREE CLASSES OF FOUR DIRECTORS EACH.
FOR AGAINST ABSTAIN
/ /1 / /2 / /3
2. ELECTION OF DIRECTORS. If Proposal No. 1 is approved, the
nominees for the Aegis Board are Frederic V. Malek (Class I), Michael G.
Santry (Class I), Paul G. Stern (Class I), Matthew S. Waller (Class I),
John R. Birk (Class II), Drew Lewis (Class II), David L. Malcolm
(Class II), and Darryl D. Pounds (Class II), Edward Blank (Class III),
Daniel H. Chapman (Class III), and Stephen A. McNeely (Class III). One
vacancy will exist in Class III. If Proposal No. 1 is not approved, the
nominees for the Aegis Board are the eleven individuals listed above.
FOR WITHHOLD FOR ALL
ALL ALL (EXCEPT NOMINEE(S) WRITTEN BELOW)
/ /4 / /5 / /6
(INSTRUCTION: To withhold authority to vote for any individual nominee(s),
write that nominee's name here): __________________________________________
3. APPROVAL OF A PROPOSAL OF THE BOARD OF DIRECTORS TO APPROVE AN AMENDMENT TO
THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO LIMIT
DIRECTOR LIABILITY TO THE FULLEST EXTENT PERMITTED BY THE DELAWARE GENERAL
CORPORATION LAW
FOR AGAINST ABSTAIN
/ /7 / /8 / /9
4. RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP TO SERVE AS
AEGIS'S INDEPENDENT AUDITORS FOR THE 1999 FISCAL YEAR.
FOR AGAINST ABSTAIN
/ /10 / /11 / /12
5. ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING; HEREBY
REVOKING ANY PROXY OR PROXIES HERETOFORE GIVEN BY THE UNDERSIGNED.
Dated: _______________________
Signature(s):
-------------------------------------------------------------
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Please sign exactly as your name(s) appears hereon. Joint
owners should each sign personally. If signing in fiduciary or
representative capacity, 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.
YOUR VOTE IS IMPORTANT! PLEASE VOTE, SIGN, DATE AND MAIL TODAY.
