United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended October 3, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period From _________________ to _____________________
Commission file number 0-26786
APAC CUSTOMER SERVICES, INC.
(Exact name of registrant as specified in its charter)
Illinois 36-2777140
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Parkway North Center, Suite 510
Deerfield, Illinois 60015
(Address of principal executive office) (Zip Code)
(847) 374-4980
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter periods that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No __
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Shares, $0.01 par value--47,563,167 shares outstanding as of
November 15, 1999.
Index
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets as of October 3, 1999, and
January 3, 1999 3
Consolidated Condensed Statements of Income for the Thirteen and
Thirty-Nine Weeks Ended October 3, 1999, and September 27, 1998 4
Consolidated Condensed Statements of Cash Flows for the Thirty-
Nine Weeks Ended October 3, 1999, and September 27, 1998 5
Notes to Consolidated Condensed Financial Statements as of
October 3, 1999 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II. OTHER INFORMATION
Item 1. Litigation 15
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
EXHIBIT INDEX 18
EXHIBITS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 3, JANUARY 3,
1999 1999
ASSETS (Unaudited) (Audited, Note 1)
- ------------------------------------------------------------------ ---------------------- ----------------------
(000's omitted, except share data)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $250 $3,543
Accounts receivable, net 86,955 76,618
Recoverable income taxes 4,570 5,825
Deferred income tax assets 6,930 8,790
Prepaid expenses 3,909 3,058
Net assets of discontinued operations 10,096 7,096
---------------------- ----------------------
Total current assets 112,710 104,930
PROPERTY AND EQUIPMENT 139,656 152,195
Less--accumulated depreciation 67,162 57,602
---------------------- ----------------------
Property and equipment, net 72,494 94,593
GOODWILL AND OTHER INTANGIBLE ASSETS 62,850 68,850
Less--accumulated amortization 7,403 3,975
---------------------- ----------------------
Goodwill and other intangible assets, net 55,447 64,875
OTHER ASSETS 4,019 3,104
---------------------- ----------------------
Total assets $244,670 $ 267,502
====================== ======================
LIABILITIES AND
SHARE OWNERS' EQUITY
- ------------------------------------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $17,144 $16,122
Revolving credit facility 3,625 0
Accounts payable 10,271 5,705
Other current liabilities 39,443 65,355
---------------------- ----------------------
Total current liabilities 70,483 87,182
LONG-TERM DEBT, LESS CURRENT MATURITIES 120,104 132,427
DEFERRED INCOME TAXES 0 1,670
OTHER LIABILITIES 8,894 4,399
COMMITMENTS AND CONTINGENCIES
SHARE OWNERS' EQUITY:
Preferred shares, $0.01 par value; 50,000,000 shares
authorized; none issued and outstanding 0 0
Common shares, $0.01 par value; 200,000,000
shares authorized; 49,104,350 shares issued
at October 3, 1999; 48,893,873 shares issued at
January 3, 1999 491 489
Additional paid-in capital 94,289 93,799
Retained deficit (43,940) (46,813)
Less--treasury shares at cost; 1,609,000 shares at
October 3, 1999, and January 3, 1999 (5,651) (5,651)
---------------------- ----------------------
Total share owners' equity 45,189 41,824
====================== ======================
Total liabilities and share owners' equity $244,670 $ 267,502
====================== ======================
See notes to consolidated condensed financial statements.
</TABLE>
APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN (13) WEEKS ENDED THIRTY-NINE (39) WEEKS ENDED
--------------------------------- ----------------------------------
OCTOBER 3, SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27,
1999 1998* 1999 1998*
-------------- --------------- -------------- -----------------
(000's omitted, except per share data)
NET REVENUE:
<S> <C> <C> <C> <C>
Service Solutions $66,392 $59,521 $193,154 $155,063
Sales Solutions 36,796 56,440 120,430 154,936
-------------- --------------- -------------- -----------------
Total net revenue 103,188 115,961 313,584 309,999
OPERATING EXPENSES:
Cost of services 82,775 92,601 254,550 247,195
Selling, general and administrative
expenses 11,940 13,727 35,989 37,661
Restructuring charges 1,627 0 7,600 9,000
-------------- --------------- -------------- -----------------
Total operating expenses 96,342 106,328 298,139 293,856
-------------- --------------- -------------- -----------------
Operating income 6,846 9,633 15,445 16,143
INTEREST EXPENSE, NET 3,417 2,983 10,372 5,155
-------------- --------------- -------------- -----------------
Income from continuing operations
before income taxes 3,429 6,650 5,073 10,988
PROVISION FOR INCOME TAXES 1,500 3,037 2,200 4,980
-------------- --------------- -------------- -----------------
Income from continuing operations 1,929 3,613 2,873 6,008
LOSS FROM DISCONTINUED OPERATIONS,
net of income tax benefit of
$57 and $480, respectively, for
the 13 and 39 weeks in 1998 0 (190) 0 (1,256)
-------------- --------------- -------------- -----------------
NET INCOME $ 1,929 $3,423 $2,873 $4,752
============== =============== ============== =================
INCOME (LOSS) PER SHARE:
Basic:
Continuing operations $0.04 $0.07 $0.06 $0.12
Discontinued operations 0.00 (0.00) 0.00 (0.02)
-------------- --------------- -------------- -----------------
Net income $0.04 $0.07 $0.06 $0.10
============== =============== ============== =================
Diluted:
Continuing operations $0.04 $0.07 $0.06 $0.12
Discontinued operations 0.00 (0.00) 0.00 (0.02)
-------------- --------------- -------------- -----------------
Net income $0.04 $0.07 $0.06 $0.10
============== =============== ============== =================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic 48,973 48,505 48,946 48,773
Diluted 49,572 49,956 49,198 49,590
============== =============== ============== =================
*Reclassified to conform to current year's classifications.
See notes to consolidated condensed financial statements.
</TABLE>
APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTY-NINE (39) WEEKS ENDED
----------------------------------------------
OCTOBER 3, SEPTEMBER 27,
1999 1998*
-------------------- -------------------
(000's omitted)
OPERATING ACTIVITIES:
<S> <C> <C>
Net income from continuing operations $2,873 $6,008
Depreciation and amortization 25,789 25,295
Deferred income taxes 3,140 (1,987)
Restructuring charges 7,600 9,000
Change in operating assets and liabilities (21,449) 6,005
-------------------- -------------------
Net cash provided by continuing operations 17,953 44,321
Cash used by discontinued operations (3,000) (1,885)
-------------------- -------------------
Net cash provided by operations 14,953 42,436
INVESTING ACTIVITIES:
ITI Holdings, Inc. acquisition costs, net of cash acquired 0 (149,229)
Purchases of property and equipment, net (5,583) (6,007)
-------------------- -------------------
Net cash used by investing activities (5,583) (155,236)
FINANCING ACTIVITIES:
Proceeds from term loan 0 150,000
Repayment of revolving credit facility with proceeds from
refinancing 0 (7,500)
Net borrowings (payments) under revolving
credit facilities 3,625 (14,100)
Payments on long-term debt (11,301) (3,689)
Increase (decrease) in book overdraft 3,390 (4,679)
Payment of debt issuance costs 0 (2,188)
Increase (decrease) in customer deposits (8,869) 12,229
Purchase of treasury shares 0 (5,651)
Stock and warrant transactions, including related
income tax benefits 492 1,378
-------------------- -------------------
Net cash provided (used) by financing activities (12,663) 125,800
-------------------- -------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ($3,293) $ 13,000
==================== ===================
*Reclassified to conform to current year's classifications.
See notes to consolidated condensed financial statements.
</TABLE>
APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
OCTOBER 3, 1999
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the thirteen and thirty-nine week periods ended October 3, 1999, are not
necessarily indicative of the results that may be expected for the fiscal
year ending January 2, 2000. The balance sheet at January 3, 1999, has been
derived from the audited financial statements at that date but does not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. For additional
information, refer to the financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the year ended
January 3, 1999.
2. GOODWILL AND INTANGIBLE ASSETS
At October 3, 1999, goodwill and intangible assets consisted of the
following:
<TABLE>
<CAPTION>
ACCUMULATED NET
COST AMORTIZATION BOOK VALUE
------------------ ------------------ ------------------
(000's omitted)
<S> <C> <C> <C>
Goodwill $30,757 $3,219 $27,538
Customer relationships 28,493 3,483 25,010
Assembled workforce 3,600 701 2,899
------------------ ------------------ ------------------
Total $62,850 $7,403 $55,447
================== ================== ==================
</TABLE>
In connection with the acquisition of ITI Holdings, Inc. in May 1998, the
Company recorded deferred income tax assets and provided for costs to close
facilities and terminate unfavorable contracts. During the third quarter of
fiscal 1999, the Company revalued certain deferred income tax assets and
reduced its estimates of costs to close facilities and renegotiate
contracts, resulting in a $6.0 million reduction in goodwill.
3. OTHER CURRENT LIABILITIES
The components of other current liabilities included in the consolidated
condensed balance sheets are as follows:
<TABLE>
<CAPTION>
OCTOBER 3, JANUARY 3,
1999 1999
-------------- --------------
(000's omitted)
<S> <C> <C>
Payroll and related items $20,239 $19,494
Customer deposits 2,254 11,123
Telecommunication costs 4,480 9,529
Acquisition-related costs 2,370 14,377
Restructuring charges 3,140 3,199
Other 6,960 7,633
============== ==============
Total $39,443 $65,355
============== ==============
</TABLE>
4. RESTRUCTURING CHARGES
During the first nine months of fiscal 1999, the Company recorded three
restructuring charges totaling $7.6 million associated with closing 21
Sales Solutions call centers and reducing the supporting salaried
workforce. The $2.0 million restructuring charge recorded in the first
quarter included $1.4 million for the write-down of property and equipment
and $0.6 million for employee severance costs. The $4.0 million
restructuring charge recorded in the second quarter included $2.7 million
for the write-down of property and equipment, $0.3 million for employee
severance costs and $1.0 million for lease termination costs. Finally, the
$1.6 million restructuring charge recorded in the third quarter included
$1.3 million for the write-down of property and equipment and $0.3 million
for lease termination costs. The amount remaining in the fiscal 1999
restructuring reserve at October 3, 1999, was $2.8 million. This amount is
expected to be used by January 2, 2000.
In the second quarter of fiscal 1998, the Company recorded a restructuring
charge of $9.0 million. This charge related to a restructuring plan
involving the closure of Sales Solutions call centers, reconfiguration of
certain administrative support facilities and reduction in the salaried
workforce. The restructuring charge included $4.5 million for the
write-down of property and equipment, $3.3 million for employee severance
costs and $1.2 million for lease termination costs. As of October 3, 1999,
the amount remaining in the fiscal 1998 restructuring reserve was $0.3
million. This amount is expected to be utilized by January 2, 2000.
5. LEGAL PROCEEDINGS
The Company is engaged in arbitration proceedings initiated by the former
owner of an acquired business. The Company believes the claim is without
merit. The Company has other claims against the same party which it
believes do have merit and which it intends to pursue vigorously. Although
the Company does not believe that the arbitration proceedings will result
in a material adverse effect on its consolidated financial position, no
assurance to that effect can be given.
Reference is made to Item 3 of the Company's Annual Report on Form 10-K for
the fiscal year ended January 3, 1999 for a description of a certain legal
action presently pending. On November 12, 1999, the court denied the
Company's motion to dismiss the complaint in the action, captioned "In re
APAC TeleServices, Inc. Securities Litigation, 97 Civ. 9145 (BSJ)." The
litigation is continuing.
6. DISCONTINUED OPERATIONS
In December 1998, the Company's management approved a plan to sell
Paragren. The Company expects to sell Paragren during the fourth quarter of
fiscal 1999. Accordingly, Paragren is reported as a discontinued operation,
and the consolidated condensed financial statements have been reclassified
to segregate the operating results and net assets of the business. The net
loss from discontinued operations for the first nine months of fiscal 1999
of $4.2 million has been offset against provisions for anticipated loss
recorded at January 3, 1999, and additional proceeds expected from the sale
of the net assets of the business. In fiscal 1999 the Company revised its
estimate of expected sales proceeds based upon current market estimates of
the fair value of the business. Net assets of discontinued operations at
October 3, 1999 amounted to $10.1 million and consisted of working capital
of $2.8 million, property and equipment of $1.5 million, capitalized
software of $1.7 million, and intangible assets of $4.1 million.
7. SEGMENT INFORMATION
The Company has three reportable segments organized around operating
divisions providing separate and distinct services to clients. The
operating divisions are managed separately because the service offerings
require different technology and marketing strategies and have different
operating models and performance metrics. The Service Solutions division
provides inbound customer service, direct mail response, "help" line
support and customer order processing. The Sales Solutions division
provides outbound sales support to customers and businesses, market
research, targeted marketing plan development and customer lead generation,
acquisition and retention. Paragren Technologies, Inc. ("Paragren")
specializes in software-based consumer marketing to optimize customer
relationships. In December 1998, the Company adopted a plan to sell
Paragren. Accordingly, the operating results of Paragren have been
segregated from continuing operations and are reported separately as
discontinued operations. Information about discontinued operations is
reported in Note 6 to these consolidated condensed financial statements.
All operating net revenue and expenses are included in the results of the
business segments. Other income and expense, principally interest expense
and gain and loss on the disposal of assets, are excluded from the
determination of business segment results.
Segment information for continuing operations for the thirteen and
thirty-nine weeks ended October 3, 1999 and September 27, 1998 is as
follows:
<TABLE>
<CAPTION>
SERVICE SALES
PERIOD ENDED SOLUTIONS SOLUTIONS COMBINED
----------------------------------- ------------ ------------ ------------
(000's omitted)
THIRTEEN WEEKS:
October 3, 1999:
<S> <C> <C> <C>
Net revenue $66,392 $36,796 $103,188
Operating income (loss) 7,349 (503) 6,846
Restructuring charge 0 1,627 1,627
============ ============ ============
September 27, 1998:
Net revenue $59,521 $56,440 $115,961
Operating income 6,461 3,172 9,633
============ ============ =============
THIRTY-NINE WEEKS:
October 3, 1999:
Net revenue $193,154 $120,430 $313,584
Operating income (loss) 20,402 (4,957) 15,445
Restructuring charges 0 7,600 7,600
============ ============ ============
September 27, 1998:
Net revenue $155,063 $154,936 $309,999
Operating income 12,592 3,551 16,143
Restructuring charge 2,400 6,600 9,000
============ ============ ============
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DESCRIPTION OF BUSINESS
APAC Customer Services, Inc. and Subsidiaries (the "Company") provides high
volume telephone-based sales, marketing and customer management solutions
for corporate clients operating in the consumer products, parcel delivery,
financial services, insurance, retail, and telecommunications industries
throughout the United States. The Company's client base is comprised of
large companies with the need for cost-effective means of contacting and
servicing current and prospective customers. The Company has three service
offerings. The Service Solutions division provides inbound customer
service, direct mail response, "help" line support and customer order
processing. The Sales Solutions division provides outbound sales support to
consumers and businesses, market research, targeted marketing plan
development and customer lead generation, acquisition and retention. In
August 1997, the Company acquired Paragren Technologies, Inc. ("Paragren")
which specializes in software-based consumer marketing products that help
its clients analyze market, customer and sales data on a real-time basis.
In December 1998, the Company's management approved a plan to sell
Paragren's software development business. The Company does not believe that
additional investment in the software development business is consistent
with its long-term strategic goals and objectives. Accordingly, Paragren is
reported as a discontinued operation, and the consolidated condensed
financial statements for the periods presented have been reclassified to
segregate the operating results and net assets of the business. In May
1998, the Company acquired ITI Holdings, Inc., the sole shareholder of ITI
Marketing Services, Inc. ("ITI"). ITI provides telephone-based sales,
marketing and customer management services to corporate clients. As of
October 3, 1999, the Company operated and managed approximately 11,000
workstations in 62 call centers.
RESULTS OF OPERATIONS
The following table sets forth consolidated condensed statements of income
data as a percentage of net revenue from services provided by the Company for
the thirteen and thirty-nine week periods ended October 3, 1999 and
September 27, 1998.
<TABLE>
<CAPTION>
THIRTEEN (13) WEEKS ENDED THIRTY-NINE (39) WEEKS ENDED
------------- -- ----------------- ------------- -- -----------------
OCTOBER 3, SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27,
1999 1998* 1999 1998*
------------- ----------------- ------------- -----------------
NET REVENUE:
<S> <C> <C> <C> <C>
Service Solutions 64.3% 51.3% 61.6% 50.0%
Sales Solutions 35.7 48.7 38.4 50.0
------------- ----------------- ------------- -----------------
Total net revenue 100.0 100.0 100.0 100.0
OPERATING EXPENSES:
Cost of services 80.2 79.9 81.2 79.7
Selling, general and administrative
expenses 11.6 11.8 11.5 12.2
Restructuring charges 1.6 0.0 2.4 2.9
------------- ----------------- ------------- -----------------
Total operating expenses 93.4 91.7 95.1 94.8
------------- ----------------- ------------- -----------------
Operating income 6.6 4.9 5.2
INTEREST EXPENSE, NET 3.3 2.6 3.3 1.7
------------- ----------------- ------------- -----------------
Income from continuing operations
before income taxes 3.3 5.7 1.6 3.5
PROVISION FOR INCOME TAXES 1.4 2.6 0.7 1.6
------------- ----------------- ------------- -----------------
Income from continuing operations 1.9 3.1 0.9 1.9
LOSS FROM DISCONTINUED OPERATIONS, NET 0.0 (0.1) 0.0 (0.4)
------------- ----------------- ------------- -----------------
NET INCOME 1.9% 3.0% 0.9% 1.5%
============= ================= ============= =================
*Reclassified to conform to current year's classifications.
</TABLE>
COMPARISON OF THIRD QUARTER RESULTS
The Company's net revenue decreased 11.0% in the third quarter of fiscal
1999 to $103.2 million, a decrease of $12.8 million compared to the third
quarter of fiscal 1998. Net revenue for the Company's inbound operations,
the Service Solutions division, was $66.4 million for the third quarter of
fiscal 1999, an increase of 11.5% compared to $59.5 million for the third
quarter of fiscal 1998. The increase in Service Solutions net revenue was
due to higher call volumes from existing clients and the start-up of
programs for several new clients. Net revenue for the Company's outbound
operations, the Sales Solutions division, was $36.8 million for the third
quarter of fiscal 1999, a decrease of 34.8% compared to $56.5 million for
the third quarter of fiscal 1998. In response to reduced call volume from
certain large clients over the last twelve months, the Company has adopted
a strategy of balancing Sales Solutions' call center capacity with current
client demand.
Cost of services as a percentage of net revenue increased to 80.2% in the
third quarter of fiscal 1999 from 79.9% in the third quarter of fiscal
1998. This increase reflects higher recruiting and training costs incurred
in advance of full-scale operations under new client programs in the
Service Solutions division and decreased net revenue and the cost of
underutilized capacity in the Sales Solutions division. Changes in cost of
services as a percent of net revenue also include the effects of
nonrecurring credits recorded in each quarter. During the third quarter of
fiscal 1999, the Company reversed $1.2 million of accrued telephone charges
recorded in the fourth quarter of fiscal 1998. This reversal resulted from
the Company negotiating favorable dispositions of costs associated with
certain guaranteed minimum usage telecommunications contracts during the
third quarter of fiscal 1999. During the third quarter of fiscal 1998, the
Company received $1.5 million in reimbursement of excess training costs
absorbed during the first half of fiscal 1998.
Selling, general and administrative expenses decreased 13.0% in the third
quarter of fiscal 1999 to $11.9 million, a decrease of $1.8 million
compared to the third quarter of fiscal 1998. This decrease was due to the
consolidation of the administrative functions of ITI and a reduction in the
amortization of goodwill and intangible assets. During the fourth quarter
of fiscal 1998, the Company adjusted the carrying value of the Sales
Solutions division's long-lived assets to their fair value. This adjustment
resulted in a non-cash impairment charge of $69.7 million to write-off
goodwill and intangible assets acquired with acquisition of ITI.
During the third quarter of fiscal 1999, the Company recorded a
restructuring charge of $1.6 million in connection with the continued
consolidation of Sales Solutions call centers. The restructuring charge
included $1.3 million for the write-down of property and equipment and $0.3
million for lease termination costs.
The Company generated operating income of $6.8 million during the third
quarter of fiscal 1999. Prior to the restructuring charge, operating income
for the third quarter of fiscal 1999 was $8.4 million compared with
operating income of $9.6 million for the third quarter of fiscal 1998. For
the Service Solutions division, operating income for the third quarter of
fiscal 1999 was $7.3 million, or 11.1% of net revenue, compared with
operating income of $6.5 million, or 10.9% of net revenue, for the same
period in fiscal 1998. For the Sales Solutions division, operating income
(before restructuring charge) was $1.1 million, or 3.1% of net revenue, in
the third quarter of fiscal 1999 compared with operating income of $3.2
million, or 5.6 % of net revenue, for the same period in fiscal 1998. The
reduction in Sales Solutions operating performance in fiscal 1999 was due
to decreased net revenue and the cost of underutilized call center capacity
as execution of the Company's current strategy of balancing capacity
utilization with client demand had not been in place throughout the entire
period. Partially offsetting the reduction in operating performance during
the third quarter of fiscal 1999 was the reversal of $1.2 million of
accrued telephone charges recorded in the fourth quarter of fiscal 1998.
Net interest expense for the third quarter of fiscal 1999 increased by $0.4
million compared to the same period in fiscal 1998. This increase reflects
higher interest rates assessed on the $150.0 million term loan used to
finance the purchase of ITI as a result of amendments to the Company's
credit agreement in April 1999.
Net loss on discontinued operations for the third quarter of fiscal 1998 of
$0.2 million reflects the reclassification of net loss sustained by the
Company during the quarter on the operation of its Paragren software
development business. Net loss on discontinued operations for the third
quarter of fiscal 1999 of $1.4 million has been offset against a provision
for anticipated losses during the phase-out period.
COMPARISON OF YEAR-TO-DATE RESULTS
The Company's net revenue increased 1.2% in the first nine months of fiscal
1999 to $313.6 million, an increase of $3.6 million from the first nine
months of fiscal 1998. Net revenue during the first nine months of 1999
included three full quarters of results of ITI. Net revenue for the
Company's Service Solutions division, was $193.2 million for the first nine
months of fiscal 1999, an increase of 24.6% compared to $155.1 million for
the first nine months of fiscal 1998. The increase in Service Solutions net
revenue was due to the inclusion of the results of ITI and growth in call
volumes with existing clients. Net revenue for the Company's Sales
Solutions division was $120.4 million for the first nine months of fiscal
1999, a decrease of 22.3% compared to $154.9 million for the first nine
months in fiscal 1998. This decrease reflects the Company's current
strategy to balance call center capacity with demand for outbound
telemarketing services. During the first nine months of fiscal 1999,
consolidation of certain large clients substantially reduced outbound
telemarketing call volumes available to the Company.
Cost of services as a percentage of net revenue increased to 81.2% in the
first nine months of fiscal 1999 from 79.7% in the first nine months of
fiscal 1998. This increase reflects the reduction in profit margin due to
underutilized call center capacity resulting from decreases in call volumes
in the Sales Solutions division and higher direct wages in both divisions.
Changes in cost of services as a percent of net revenue also include the
effects of nonrecurring credits recorded during the first nine months of
fiscal 1999. In the first nine months of fiscal 1999, the Company reversed
$4.9 million of accrued telephone charges recorded in the fourth quarter of
fiscal 1998. This reversal resulted from the Company negotiating favorable
dispositions of costs associated with certain guaranteed minimum usage
telecommunications contracts during the second and third quarters of fiscal
1999.
Selling, general and administrative expenses decreased 4.4% in the first
nine months of fiscal 1999 to $36.0 million, a decrease of $1.7 million
compared to the first nine months of fiscal 1998. This decrease was
principally due to reductions in workforce and related expenses achieved
through restructuring initiatives and the consolidation of the
administrative functions of ITI.
During the first nine months of fiscal years 1999 and 1998, the Company
recorded restructuring charges of $7.6 million and $9.0 million,
respectively, in connection with the consolidation of Sales Solutions call
centers and reductions in the salaried workforce. The fiscal 1999
restructuring charge included $5.4 million for the write-down of property
and equipment, $0.9 million for employee severance costs and $1.3 million
for lease termination costs. The fiscal 1998 restructuring charge included
$4.5 million for the write-down of property and equipment, $3.3 million for
employee severance costs and $1.2 million for lease termination costs.
During the past fifteen months, the Company has provided for the closure of
32 call centers containing approximately 2,600 seats and for reduction in
the salaried workforce by 100 employees.
The Company generated operating income of $15.4 million for the first nine
months of fiscal 1999. Prior to restructuring charges, operating income for
the first nine months of fiscal 1999 was $23.0 million compared to $25.1
million for the first nine months of fiscal 1998. For the Service Solutions
division, operating income for the first nine months of fiscal 1999 was
$20.4 million, or 10.6% of net revenue, compared to operating income
(before restructuring charge) of $15.0 million, or 9.7% of net revenue, for
the same period in fiscal 1998. The increase in Service Solutions operating
income was principally due to increased net revenue and a more profitable
client mix. Prior to restructuring charges, operating income for the Sales
Solutions division for the first nine months of fiscal 1999 was $2.6
million, or 2.2% of net revenue, compared to operating income of $10.2
million, or 6.6% of net revenue, for the same period in fiscal 1998. The
reduction in operating performance in the first nine months of fiscal 1999
was due to decreased net revenue, the cost of underutilized call center
capacity and higher direct wages, offset in part by the reversal of $4.9
million in accrued telephone charges recorded in the fourth quarter of
fiscal 1998.
Net interest expense for the first nine months of fiscal 1999 increased by
$5.2 million compared to the same period in fiscal 1998. This increase
principally reflects three full quarters of interest and related debt costs
in fiscal 1999 on the $150.0 million term loan used to finance the purchase
of ITI.
The provision for income taxes recognized for the nine months ended October
3, 1999 and September 27, 1998 are based upon the Company's estimated
annual effective income tax rates. The decrease in the Company's effective
income tax rate to 43.4% in fiscal 1999 from 45.3% in fiscal 1998 was due
to changes as a percentage of taxable income in the amortization of
non-deductible goodwill related to the ITI purchase and Work Opportunity
Tax Credit benefits.
Net loss on discontinued operations for the first nine months of fiscal
1998 of $1.3 million reflects the reclassification of net loss sustained by
the Company in the first nine months of fiscal 1998 on the operation of its
Paragren software development business. Net loss on discontinued operations
for the first nine months of fiscal 1999 of $4.2 million has been offset
against a provision for anticipated losses during the phase-out period.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations during the first nine months of fiscal 1999
totaled $15.0 million, a decrease of $27.5 million compared to the same
period in fiscal 1998. This decrease was principally due to higher accounts
receivable balances of $10.3 million resulting from the temporary extension
of billing cycles with several clients, payments against
acquisition-related and restructuring reserves of $7.4 million and the
non-cash reversal of $4.9 million in accrued telephone charges to income.
The Company spent $5.6 million during the first nine months of fiscal 1999
to construct additional call center capacity for Service Solutions clients
and to upgrade equipment in existing centers. These capital expenditures
were funded with cash provided by operations.
In connection with the acquisition of ITI on May 1998, the Company provided
acquisition-related reserves of $18.8 million to close facilities,
terminate unfavorable contacts, and reduce the salaried workforce. During
the first nine months of fiscal years 1999 and 1998, the Company recorded
restructuring charges of $7.6 million and $9.0 million, respectively, in
connection with the consolidation of Sales Solutions call centers and
reductions in the salaried workforce. During the first nine months of
fiscal 1999, the Company made payments against acquisition-related and
restructuring reserves amounting to $5.0 million and $2.4 million,
respectively, for employee severance and lease termination costs and
telecommunications contract penalties.
At January 3, 1999, the Company had received $11.1 million in nonrecurring
customer deposits for services to be provided in future periods. These
amounts are to be offset against future billings. During the first nine
months of fiscal 1999, $8.9 million of customer deposits were offset
against invoices for services rendered. In the second quarter of fiscal
1999, the Company received a $5.0 million refund from the Internal Revenue
Service for overpayment of estimated taxes during fiscal 1998.
The Company has a $75.0 million revolving credit facility (the "Revolving
Facility") available for general working capital purposes and capital
expenditures. Availability of up to $35.0 million of the total $75.0
million Revolving Facility is restricted subject to the attainment of
trailing four quarters EBITDA of at least $75.0 million. The Company is
also limited to $15.0 million in annual capital expenditures. As of October
3, 1999, there were $3.6 million of borrowings outstanding under the
Revolving Facility. The Company made $10.0 million of scheduled repayments
on its term loan during the first nine months of fiscal 1999 resulting in a
balance outstanding at October 3, 1999, of $134.0 million.
The Company expects that cash from future operations and available
borrowings under the Revolving Facility will be sufficient to meet normal
operating needs as well as fund any additional business growth for the
balance of fiscal 1999.
YEAR 2000 COMPLIANCE
The Year 2000 issue, common to most companies, concerns the inability of
information and non-information systems to recognize and process
date-sensitive information after 1999 due to the use of only the last two
digits to refer to a year. Time sensitive computer equipment and software
with embedded technology may recognize a date using "00" as the year 1900
rather than the year 2000. The problem could affect both computer equipment
and software and other equipment that relies on microprocessors.
On October 31, 1998, Senior Information Technology Management under the
direction of the Audit Committee of the Board of Directors completed a
company-wide evaluation of the impact of potential Year 2000 problem on its
computer systems, applications and other date-sensitive equipment.
Equipment and systems that were not Year 2000 compliant were identified. As
of October 3, 1999, 100% of the identified equipment and systems have been
remediated, tested and placed in production. Through October 3, 1999, the
Company had spent approximately $2.5 million to address Year 2000 issues.
While the estimated cost to address Year 2000 issues is subject to change
as the effort continues, total costs required to assess and remediate Year
2000 issues are currently estimated to be approximately $3.0 million and
principally consist of equipment upgrades and software code remediation.
While the Company believes that its efforts will adequately address its
internal Year 2000 concerns, it is possible that the Company will be
adversely affected by problems encountered by key clients and suppliers.
The Company initiated discussion with significant clients and suppliers in
an effort to determine and assess those parties' Year 2000 compliance
status. The Company is dependent on computer and telecommunications
companies for computer equipment and software and telephone systems and
services. On February 15, 1999, the Company completed its evaluation of
clients and suppliers. Based upon the results of this assessment,
completion of interoperability tests with all of its clients and suppliers
on September 30, 1999, and the receipt of compliance certificates from key
suppliers, the Company believes that most of its clients and suppliers are
prepared for the Year 2000. The Company continues to retest critical
systems.
Although the Company does not currently anticipate any material adverse
impact on its operations as a result of Year 2000 issues, no assurance can
be given that the Company's or its clients' failure to detect and remedy
Year 2000-related problems in its or their computer and information systems
would not have a material adverse effect on the business, financial
condition and results of operations of the Company. A reasonably likely
worst case scenario might include failure of third parties to provide
services, such as power and telecommunications services, or the loss of use
of the Company's automated call distributors or dialers. If the Company
were to lose access to outbound and/or inbound telephony capabilities, it
would experience a loss of revenue. The materiality of such revenue loss to
the Company would depend on the length of time required to restore access
to necessary services.
For clients and suppliers that failed to demonstrate Year 2000 compliance,
the Company has developed suitable contingency plans. The Company's Year
2000 Coordination Team is currently being trained to administer the
contingency plans. A complete rollout of the contingency plans is planned
for December 15, 1999.
This discussion of Year 2000 compliance is based on the Company's current
best estimates, which were derived using numerous assumptions regarding
future events, including the continued availability and future costs of
technological and other resources, third-party remediation actions and
other factors. Given the complexity of Year 2000 issues and possible
unidentified risks associated with such issues, actual results may vary
materially from those anticipated and discussed herein. Specific factors
that might cause a material variation include, among others, the
availability and the cost of personnel trained to identify and resolve Year
2000 issues, the Company's ability to locate and correct all affected
computer code, and the timing and success of Year 2000 remediation efforts
by clients and suppliers.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. This Report on Form 10-Q
may contain forward-looking statements that reflect the Company's current
views with respect to future events and financial performance. These
forward-looking statements are subject to certain risks and uncertainties,
which could cause future results to differ materially from historical
results or those anticipated. The words "believe," "expect," "anticipate,"
"intend," "estimate," "goals," "would," "could," "should," and other
expressions which indicate future events and trends identify
forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of their
dates. If no date is provided, such statements speak only as of the date of
this Report on Form 10-Q. The Company undertakes no obligation to publicly
update or revise any forward-looking statements in connection with new
information or future events or otherwise. Factors that could cause future
results to differ materially from historical results or those anticipated
include, but are not limited to, reliance by the Company on a small number
of principal clients for a substantial proportion of its total revenue;
possible changes in or events affecting the businesses of the Company's
clients, including changes in customers' interest in, and use of, clients'
products and services; fluctuations in quarterly results of operations due
to the timing of clients' initiation and termination of large programs;
changes in competitive conditions affecting the Company's industry; the
ability of the Company's clients to terminate contracts with the Company on
relatively short notice; changes in the availability and cost of qualified
employees; the potential impact of Year 2000 issues; variations in the
performance of the Company's automated systems and other technological
factors; changes in government regulations affecting the teleservices and
telecommunications industries; and competition from other outside providers
of customer relationship management solutions and in-house customer
relationship operations. See the Company's filings with the Securities and
Exchange Commission for further discussion of the risks and uncertainties
associated with the Company's business. In particular, see the discussion under
the caption "Information Regarding Forward-Looking Statements" in Item 7
(Management's Discussion and Analysis of Financial Condition and Results of
Operations) of the Company's Annual Report on Form 10-K for the fiscal year
ended January 3, 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact the financial
position, results of operations or cash flows of the Company due to adverse
changes in financial and commodity market prices and rates. The Company is
exposed to market risk in the areas of changes in U. S. interest rates.
This exposure is directly related to its normal operating and funding
activities. Because the Company's obligations under its bank credit
agreement bear interest at floating rates, the Company is sensitive to
changes in prevailing interest rates. The Company uses derivative
instruments to manage its long-term debt interest rate exposure, rather
than for trading purposes. A 10% increase or decrease in market interest
rates that affect the Company's financial instruments would not have a
material impact on earnings during the remainder of fiscal 1999, and would
not materially affect the fair value of the Company's financial
instruments.
PART II. OTHER INFORMATION
ITEM 1. LITIGATION
The Company is engaged in arbitration proceedings initiated by the former
owner of an acquired business. The Company believes the claim is without
merit. The Company has other claims against the same party which it
believes do have merit and which it intends to pursue vigorously. Although
the Company does not believe that the arbitration proceedings will result
in a material adverse effect on its consolidated financial position, no
assurance to that effect can be given.
Reference is made to Item 3 of the Company's Annual Report on Form 10-K for
the fiscal year ended January 3, 1999 for a description of a certain legal
action presently pending. On November 12, 1999, the court denied the
Company's motion to dismiss the complaint in the action, captioned "In re
APAC TeleServices, Inc. Securities Litigation, 97 Civ. 9145 (BSJ)." The
litigation is continuing.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. The following documents are furnished as exhibits and
numbered pursuant to Item 601 of Regulation S-K:
Exhibit
Number Description
------------------- -------------------------------------------------
3.1 Articles of Incorporation of APAC Customer
Services, Inc., as amended
3.2 Amended and Restated Bylaws of APAC Customer
Services, Inc., as amended through September
29, 1999
4 Specimen Common Stock Certificate
10.1* Amendment, dated September 22, 1999, to
Agreement for In-Bound Telemarketing with
United Parcel Service General Services Co.
10.2 Peter M. Leger Employment Agreement
11 Statement Re: Computation of Earnings Per Share
27 Financial Data Schedule
* Portions of this exhibit have been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
(b) REPORTS ON FORM 8-K. The Company filed a Current Report on Form 8-K,
dated September 22, 1999, disclosing that the Company had signed an
amendment to extend for three years its agreement for inbound
telemarketing with United Parcel Service General Services Co.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
APAC CUSTOMER SERVICES, INC.
Date: November 17, 1999 By: /s/ Theodore G. Schwartz
-----------------------------
Chairman and
Chief Executive Officer
Date: November 17, 1999 By: /s/ Gary S. Holter
-----------------------------
Senior Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------------------- -------------------------------------------------
3.1 Articles of Incorporation of APAC Customer
Services, Inc., as amended
3.2 Amended and Restated Bylaws of APAC Customer
Services, Inc., as amended through September
29, 1999
4 Specimen Common Stock Certificate
10.1* Amendment, dated September 22, 1999, to
Agreement for In-Bound Telemarketing with
United Parcel Service General Services Co.
10.2 Peter M. Leger Employment Agreement
11 Statement Re: Computation of Earnings Per Share
27 Financial Data Schedule
* Portions of this exhibit have been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
EXHIBIT 3.1
-----------
ARTICLES OF AMENDMENT
TO AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
APAC TELESERVICES, INC.
1. CORPORATE NAME: APAC TeleServices, Inc.
2. MANNER OF ADOPTION OF AMENDMENT:
The following amendment of the Articles of Incorporation was
adopted on May 18, 1999 in the manner indicated below.
By the shareholders, in accordance with Section 10.20, a
resolution of the board of directors having been duly adopted and submitted
to the shareholders. At a meeting of shareholders, not less than the
minimum number of votes required by statute and by the articles of
incorporation were voted in favor of the amendment.
3. TEXT OF AMENDMENT:
Article I: The name of the corporation is: APAC Customer
Services, Inc.
The undersigned corporation has caused this statement to be signed
by its duly authorized officers, each of whom affirms, under penalties of
perjury, that the facts stated herein are true.
Dated: June 3, 1999
APAC TeleServices, Inc.
by /s/ Marc S. Simon
-------------------------------------
Marc S. Simon, President
attested
by /s/ Linda R. Witte
-----------------------------------
Linda R. Witte, Vice President,
General Counsel and Secretary
ARTICLES OF AMENDMENT
TO AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
APAC TELESERVICES, INC.
1. CORPORATE NAME: APAC TeleServices, Inc.
2. MANNER OF ADOPTION OF AMENDMENT:
The following amendment of the Articles of Incorporation was
adopted on May 21, 1996 in the manner indicated below.
By the shareholders, in accordance with Section 10.20, a
resolution of the board of directors having been duly adopted and submitted
to the shareholders. At a meeting of shareholders, not less than the
minimum number of votes required by statute and by the articles of
incorporation were voted in favor of the amendment.
3. TEXT OF AMENDMENT:
"RESOLVED, that the first paragraph of ARTICLE FOURTH of the
Company's Amended and Restated Articles of Incorporation be and hereby is
amended to read in its entirety as follows:
FOURTH: The total number of shares of all classes of
stock which the Corporation will have authority to issue is
250,000,000, consisting of (i) 200,000,000 common shares, par
value $0.01 per share (the "Common Shares"), and (ii) 50,000,000
preferred shares, par value $0.01 per share (the "Preferred
Shares"). Cumulative voting in the election of Directors shall
not be permitted to holders of either of the Common Shares or the
Preferred Shares. No holder of any share of any class of stock of
the Corporation shall have any preemptive right to subscribe for
or acquire additional shares of stock of any class of the
Corporation or warrants or options to purchase, or securities
convertible into, shares of any class of stock of the
Corporation."
The undersigned corporation has caused this statement to be signed
by its duly authorized officers, each of whom affirms, under penalties of
perjury, that the facts stated herein are true.
Dated: May 21, 1996
APAC Teleservices, Inc.
by /s/ Theodore G. Schwartz
-----------------------------------
Theodore G. Schwartz, President
attested
by /s/ Marc S. Simon
-----------------------------------
Marc S. Simon, Secretary
ARTICLES OF AMENDMENT
TO AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
APAC CORPORATION
1. CORPORATE NAME: APAC Corporation
2. MANNER OF ADOPTION OF AMENDMENT:
The following amendment of the Articles of Incorporation was
adopted on September 8, 1995 in the manner indicated below.
By the shareholders, in accordance with Sections 10.20 and 7.10, a
resolution of the board of directors having been duly adopted and submitted
to the shareholders. A consent in writing has been signed by all the
shareholders entitled to vote on this amendment.
3. TEXT OF AMENDMENT:
Article I: The name of the corporation is: APAC TeleServices,
Inc.
The undersigned corporation has caused this statement to be signed
by its duly authorized officers, each of whom affirms, under penalties of
perjury, that the facts stated herein are true.
Dated: September 8, 1995
APAC Corporation
by /s/ Theodore G. Schwartz
-------------------------------------
Theodore G. Schwartz, President
attested
by /s/ Marc S. Simon
-----------------------------------
Marc S. Simon, Secretary
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
APAC TELESERVICES, INC.
The original Articles of Incorporation of Apac
Teleservices, Inc. were filed with the Secretary of State of Illinois on
May 23, 1973. The name of the Corporation under which it was originally
incorporated was Allstate Promotional Advertising Corporation. The
original Articles of Incorporation were amended on September 9, 1985 to
change the Corporation's name to "The APAC Corporation." The original
Articles of Incorporation were amended and restated on June 8, 1988 and in
connection therewith the Corporation's name was changed to "APAC
Telemarketing Corporation." The Articles of Incorporation of the
Corporation were further amended on April 4, 1992 to change the
Corporation's name to "APAC Teleservices, Inc." This Amended and Restated
Articles of Incorporation not only restates and integrates the original
Articles of Incorporation and all amendments thereto, but also includes
amendments adopted by the shareholders of APAC Teleservices, Inc. on the
date hereof. This Amended and Restated Articles of Incorporation was duly
adopted in accordance with the applicable provisions of Sections 10.20 and
7.10 of the Illinois Business Corporation Act of 1983 and shall become
effective upon filing with the Secretary of State of the State of Illinois.
EACH OF THE ARTICLES CONTAINED IN THIS AMENDED AND RESTATED ARTICLES OF
INCORPORATION HAVE BEEN BOTH AMENDED AND RESTATED.
FIRST: The name of the Corporation is APAC Corporation.
SECOND: The Corporation's registered office in the State
of Illinois is located at One Parkway North Center, Suite 510, City of
Deerfield, County of Cook 60015 and Marc S. Simon is the Corporation's
registered agent at such address.
THIRD: The purpose for which the Corporation is organized
is to carry on and to engage in any lawful act or activity for which
corporations may be organized under the Illinois Business Corporation Act
of 1983.
FOURTH: The total number of shares of all classes of
stock which the Corporation shall have authority to issue is 150,000,000,
consisting of (i) 100,000,000 common shares, par value $0.01 per share (the
"Common Shares"), and (ii) 50,000,000 preferred shares, par value $0.01 per
share (the "Preferred Shares"). Cumulative voting in the election of
Directors shall not be permitted to holders of either the Common Shares or
the Preferred Shares. No holder of any share of any class of stock of the
Corporation shall have any preemptive right to subscribe for or acquire
additional shares of stock of any class of the Corporation or warrants or
options to purchase, or securities convertible into, shares of any class of
stock of the Corporation.
SECTION A
COMMON SHARES
1. Voting Rights. Except as otherwise provided by law,
each Common Shares shall entitle the holder thereof to one (1) vote in any
matter submitted to a vote of shareholders of the Corporation.
2. Dividends and Distributions. Subject to the express
terms of the Preferred Shares outstanding from time to time, the holders of
Common Shares shall be entitled to receive such dividends and distributions
as may from time to time be declared by the Board of Directors.
SECTION B
PREFERRED SHARES
Subject to the terms contained in any designation of a
series of Preferred Shares, the Board of Directors is expressly authorized,
at any time and from time to time, to issue Preferred Shares in one or more
series, and for such consideration as the Board of Directors may determine
and to fix, by resolution or resolutions, the following provisions for
shares of any class or classes of Preferred Shares of the Corporation or
any series of any class of Preferred Shares:
1. the designation of such class or series, the number of
shares to constitute such class or series which may be increased or
decreased (but not below the number of shares of that class or series then
outstanding) by resolution of the Board of Directors, and the stated value
thereof if different from the par value thereof;
2. whether the shares of such class or series shall have
voting rights, in addition to any voting rights provided by law, and, if
so, the terms of such voting rights;
3. the dividends, if any, payable on such class or
series, whether any such dividends shall be cumulative, and, if so, from
what dates, the conditions and dates upon which such dividends shall be
payable, and the preference or relation such dividends shall bear to the
dividends payable on any shares of stock of any class or any other series
of the same class;
4. whether the shares of such class or series shall be
subject to redemption by the Corporation, and, if so, prices and other
conditions of such redemption;
5. the amount or amounts payable upon shares of such
series upon, and the rights of the holders of such class or series in, the
voluntary or involuntary liquidation, dissolution or winding up, or upon
any distribution of the assets, of the Corporation;
6. whether the shares of such class or series shall be
subject to the operation of a retirement or sinking fund and, if so, the
extent to and manner in which any such retirement or sinking fund shall be
applied to the purchase or redemption of the shares of such class or series
for retirement or other corporate purposes and the terms and provisions
relative to the operation thereof;
7. whether the shares of such class or series shall be
convertible into, or exchangeable for, shares of stock of any class or any
other series of the same class or any other securities and, if so, the
price or prices or the rates or rates of conversion or exchange and the
method, if any, of adjusting the same, and any other terms and conditions
of conversion or exchange;
8. the limitations and restrictions, if any, to be
effective while any shares of such class or series are outstanding upon the
payment of dividends or the making of other distributions on, and upon
purchase, redemption or other acquisition by the Corporation of the Common
Shares or shares or stock of any class or any other series of the same
class;
9. the conditions or restrictions, if any, upon the
creation of indebtedness of the Corporation or upon the issue of any
additional stock, including additional shares of such class or series or of
any other series of the same class or of any other class;
10. the ranking (be it pari passu, junior or senior) of
each class or series vis-a-vis any other class or series of any class of
Preferred Shares as to the payment of dividends, the distribution of assets
and all other matters; and
11. any other powers, preferences and relative,
participating, optional and other special rights, and any qualifications,
limitations and restrictions thereof, insofar as they are not inconsistent
with the provisions of this Amended and Restated Articles of Incorporation,
to the full extent permitted in accordance with the laws of the State of
Illinois.
The powers , preferences and relative, participating,
optional and other special rights of each class or series of Preferred
Shares, and the qualifications, limitations or restrictions thereof, if
any, may differ from those of any and all other series at any time
outstanding.
FIFTH: Advance notice of shareholder nominations for the
election of Directors and of new business to be brought by shareholders
before any meeting of the shareholders of the Corporation shall be given in
a manner provided by the By-laws of the Corporation.
SIXTH: Special meetings of the shareholders, for any
purpose or purposes (except to the extent otherwise provided by law or this
Amended and Restated Articles of Incorporation), may only be called by the
Chairman of the Board, the President or any three Directors.
SEVENTH: Notwithstanding the provisions of this Amended
and Restated Articles of Incorporation and any provisions of the By-Laws of
the Corporation, no amendment to this Amended and Restated Articles of
Incorporation shall amend, modify or repeal any or all of the provisions of
this Article SEVENTH, Article SIXTH or Article FIFTH of this Amended and
Restated Articles of Incorporation, unless so adopted by the affirmative
vote or consent of the holders of not less than two-thirds (66 2/3%) of the
total voting power of all then outstanding shares entitled to vote in the
election of Directors of the Corporation, voting as a single class;
provided, however, that in the event the Board of Directors of the
Corporation shall, by resolution adopted by a majority of the Directors
then in office, recommend to the shareholders the adoption of any such
amendment, the shareholders of record holding a majority of the total
voting power of all then outstanding shares entitled to vote in the
election of Directors of the Corporation, voting as a single class, may
amend, modify or repeal any or all of such provisions.
EIGHTH: In furtherance and not in limitation of the
powers conferred by the laws of Illinois, the Board of Directors is
expressly authorized and empowered to make, alter, amend and repeal the By-
laws of the Corporation in any respect not inconsistent with the laws of
the State of Illinois or with this Amended and Restated Articles of
Incorporation.
NINTH: The books of the Corporation may be kept at such
place within or without the State of Illinois as the By-laws of the
Corporation may provide or as may be designated from time to time by the
Board of Directors of the Corporation.
TENTH: A Director of the Corporation shall not be
personally liable to the Corporation or its shareholders 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 shareholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 8.65 of the Illinois Business Corporation Act, as the same exists
or hereafter may be amended, or (iv) for any transaction from which the
Director derived an improper personal benefit.
If the Illinois Business Corporation Act hereafter is
amended to authorize the further elimination or limitation of the liability
of Directors, then the liability of the Corporation's Directors shall be
eliminated or limited to the full extent authorized by the Illinois
Business Corporation Act, as so amended.
Any repeal or modification of this Article shall not
adversely affect any right or protection of a Director of the Corporation
existing at the time of such repeal or modification.
ELEVENTH: As of the date of adoption of this Amended and
Restated Articles of Incorporation, 6,000,000 Common Shares of the
Corporation are outstanding and the Corporation's paid-in-capital is
$60,000.
IN WITNESS WHEREOF, the Corporation has caused this
Amended and Restated Articles of Incorporation to be signed by its duly
authorized officers this 8th day of August, 1995.
Attest: APAC CORPORATION
/s/ Marc S. Simon /s/ Theodore G. Schwartz
--------------------- ------------------------
Marc S. Simon, Theodore G. Schwartz,
Secretary Chief Executive Officer
Exhibit 3.2
-----------
AMENDED AND RESTATED BY-LAWS
OF
APAC CUSTOMER SERVICES, INC.
(AN ILLINOIS CORPORATION)
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 - OFFICES........................................................ 1
Section 1.1 PRINCIPAL OFFICE........................................ 1
Section 1.2 REGISTERED OFFICE....................................... 1
ARTICLE 2 - MEETINGS OF SHAREHOLDERS....................................... 1
Section 2.1 PLACE OF MEETINGS....................................... 1
Section 2.2 ANNUAL MEETINGS......................................... 1
Section 2.3 SPECIAL MEETINGS........................................ 1
Section 2.4 NOTICE OF MEETINGS...................................... 1
Section 2.5 WAIVER OF NOTICE........................................ 1
Section 2.6 CLOSING OF TRANSFER BOOKS AND FIXING OF
RECORD DATE............................................. 2
Section 2.7 VOTING LISTS............................................ 2
Section 2.8 QUORUM.................................................. 2
Section 2.9 MANNER OF ACTING........................................ 2
Section 2.10 PROXIES................................................. 2
Section 2.11 VOTING OF SHARES BY CERTAIN HOLDERS..................... 3
Section 2.12 NOTICE OF SHAREHOLDER BUSINESS AND NOMINATIONS.......... 3
Section 2.13 INFORMAL ACTION BY SHAREHOLDERS......................... 5
ARTICLE 3 - DIRECTORS...................................................... 5
Section 3.1 GENERAL POWERS.......................................... 5
Section 3.2 NUMBER, TENURE AND QUALIFICATIONS....................... 5
Section 3.3 REGULAR MEETINGS........................................ 5
Section 3.4 SPECIAL MEETINGS........................................ 5
Section 3.5 NOTICE.................................................. 5
Section 3.6 QUORUM.................................................. 6
Section 3.7 MANNER OF ACTING........................................ 6
Section 3.8 VACANCIES............................................... 6
Section 3.9 RESIGNATION............................................. 6
Section 3.10 COMPENSATION............................................ 6
Section 3.11 PRESUMPTION OF ASSENT................................... 6
Section 3.12 COMMITTEES.............................................. 6
Section 3.13 REMOVAL OF DIRECTORS.................................... 7
Section 3.14 INFORMAL ACTION BY DIRECTORS............................ 7
Section 3.15 RELIANCE ON BOOKS....................................... 7
ARTICLE 4 - OFFICERS....................................................... 8
Section 4.1 NUMBER.................................................. 8
Section 4.2 ELECTION AND TERM OF OFFICE............................. 8
Section 4.3 REMOVAL................................................. 8
Section 4.4 VACANCIES............................................... 8
Section 4.5 CHAIRMAN OF THE BOARD OF DIRECTORS...................... 8
Section 4.6 THE CHIEF EXECUTIVE OFFICER............................. 8
Section 4.7 THE PRESIDENT........................................... 8
Section 4.8 CHIEF FINANCIAL OFFICER................................. 8
Section 4.9 VICE PRESIDENTS......................................... 8
Section 4.10 TREASURER............................................... 9
Section 4.11 SECRETARY............................................... 9
Section 4.12 ASSISTANT TREASURERS AND ASSISTANT SECRETARIES.......... 9
Section 4.13 SALARIES................................................ 9
ARTICLE 5 -SHARES, CERTIFICATES FOR SHARES AND TRANSFER OF SHARES.......... 9
Section 5.1 REGULATION.............................................. 9
Section 5.2 CERTIFICATES FOR SHARES................................. 9
Section 5.3 CANCELLATION OF CERTIFICATES............................ 10
Section 5.4 LOST, STOLEN OR DESTROYED CERTIFICATES.................. 10
Section 5.5 TRANSFER OF SHARES...................................... 10
Section 5.6 FACSIMILE SIGNATURE..................................... 10
ARTICLE 6 - CONTRACTS...................................................... 10
ARTICLE 7 - FISCAL YEAR.................................................... 11
ARTICLE 8 - DIVIDENDS...................................................... 11
ARTICLE 9 - SEAL........................................................... 11
ARTICLE 10 - INDEMNIFICATION............................................... 11
Section 10.1 ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE
CORPORATION............................................. 11
Section 10.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION........... 11
Section 10.3 AUTHORIZATION OF INDEMNIFICATION........................ 11
Section 10.4 PAYMENT OF EXPENSES IN ADVANCE.......................... 12
Section 10.5 SUCCESSFUL DEFENSES..................................... 12
Section 10.6 PROVISIONS NOT EXCLUSIVE................................ 12
Section 10.7 INSURANCE............................................... 12
Section 10.8 NOTICE TO SHAREHOLDERS.................................. 12
Section 10.9 DEFINITIONS............................................. 12
Section 10.10 INDEMNIFICATION OF EMPLOYEES AND AGENTS
OF THE CORPORATION..................................... 13
Section 10.11 CONTINUATION OF RIGHTS ................................ 13
Section 10.12 PAYMENTS A BUSINESS EXPENSE ........................... 13
ARTICLE 11 - AMENDMENTS.................................................... 13
<PAGE>
AMENDED AND RESTATED BY-LAWS
OF
APAC CUSTOMER SERVICES, INC.
ARTICLE 1
OFFICES
SECTION 1.1 PRINCIPAL OFFICE.
The principal office of the corporation shall be in Deerfield, Illinois,
and the corporation may have such other offices, either within or without
the State of Illinois, as it may require from time to time.
SECTION 1.2 REGISTERED OFFICE.
The registered office of the corporation required by The Business
Corporation Act (the "Act") to be maintained in the State of Illinois may
be, but need not be, identical with the principal office in the State of
Illinois, and the address of the registered office may be changed from time
to time by the Board of Directors.
ARTICLE 2
MEETINGS OF SHAREHOLDERS
SECTION 2.1 PLACE OF MEETINGS.
All meetings of the shareholders may be held at such place as shall be
designated from time to time by the Board of Directors and stated in the
notice of meeting or in a duly executed waiver of notice thereof. If no
designation is made, the place of meeting shall be the principal office of
the corporation.
SECTION 2.2 ANNUAL MEETINGS.
An annual meeting of the shareholders, commencing in 1996, shall be held
each year within 180 days after the close of the immediately preceding
fiscal year of the corporation, at such time and place as shall be
designated by the Board of Directors.
SECTION 2.3 SPECIAL MEETINGS.
Special meetings of the shareholders, for any purpose or purposes, unless
otherwise prescribed by the Act, the Articles of Incorporation or these By-
laws, may only be called by the Chairman of the Board, the President or a
majority of the total number of directors which the corporation would have
if there were no vacancies (the "Whole Board"). Such request shall state
the purpose or purposes of the proposed meeting.
SECTION 2.4 NOTICE OF MEETINGS.
Written or printed notice stating the place, day and hour of the meeting of
shareholders and, in case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than ten days (or
in a case involving a merger, consolidation, share exchange, dissolution or
sale, lease or exchange of assets, not less than twenty days) nor more than
sixty days before the meeting, either personally or by mail, by or at the
direction of the Chairman of the Board, President, the Secretary or the
officer or persons calling the meeting, to each shareholder of record
entitled to vote at the meeting. If mailed, the notice shall be deemed to
be delivered when deposited in the United States mail, addressed to the
shareholder at his or her address as it appears on the records of the
corporation, with postage thereon prepaid. Only such business shall be
conducted at a special meeting of shareholders as shall have been brought
before the meeting pursuant to the corporation's notice of meeting.
SECTION 2.5 WAIVER OF NOTICE.
Whenever any notice is required to be given under the provisions of these
By-laws or under the provisions of the Articles of Incorporation or under
the provisions of the Act or otherwise, a waiver thereof in writing, signed
by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice. Attendance at any meeting shall constitute waiver of notice thereof
unless the person at the meeting objects to the holding of the meeting
because proper notice was not given.
SECTION 2.6 CLOSING OF TRANSFER BOOKS AND FIXING OF RECORD DATE.
For the purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders, or shareholders entitled to receive
payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
corporation may provide that the share transfer books shall be closed for a
stated period, but not to exceed, in any case, sixty days. If the share
transfer books shall be closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders, such books
shall be closed for at least ten days (or in a case involving a merger,
consolidation, share exchange, dissolution or sale, lease or exchange of
assets, at least twenty days) immediately preceding the meeting. In lieu of
closing the share transfer books, the Board of Directors may fix in advance
a date as the record date for any such determination of shareholders, such
date in any case to be not more than sixty days and, in case of a meeting
of shareholders, not less than ten days (or in a case involving a merger,
consolidation, share exchange, dissolution or sale, lease or exchange of
assets, not less than twenty days) immediately preceding such meeting. If
the share transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting
of shareholders, or shareholders entitled to receive payment of a dividend,
the date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this Section, such
determination shall apply to any adjournment of the meeting.
SECTION 2.7 VOTING LISTS.
The officer or agent who has charge of the transfer books for shares of the
corporation shall make, within twenty days after the record date for a
meeting of shareholders, or ten days before each such meeting, whichever is
earlier, a complete list of shareholders entitled to vote at such meeting,
arranged in alphabetical order, with the address of and the number of
shares held by each, which list, for a period of ten days prior to such
meeting, shall be kept on file at the registered office of the corporation
and shall be subject to inspection by any shareholder, and to copying at
the shareholder's expense, at any time during usual business hours. Such
list shall also be produced and kept open at the time and place of meeting
and shall be subject to the inspection of any shareholder during the whole
time of the meeting. The original share ledger or transfer book, or a
duplicate thereof kept in the State of Illinois, shall be prima facie
evidence as to who are the shareholders entitled to examine such list or
share ledger or transfer book or to vote at any meeting of shareholders.
Failure to comply with the requirements of this section shall not affect
the validity of any action taken at such meeting.
SECTION 2.8 QUORUM.
Unless otherwise provided in the Articles of Incorporation, a majority of
the outstanding shares of the corporation, entitled to vote on a matter,
represented in person or by proxy, shall constitute a quorum for
consideration of such matter at a meeting of shareholders, but in no event
shall a quorum consist of less than one-third of the outstanding shares
entitled so to vote. If, however, such quorum shall not be present or
represented by proxy at any meeting of the shareholders, the shareholders
entitled to vote thereat, present in person or represented by proxy, the
Chairman of the Board or the President, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, except as hereinafter provided, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been
transacted at the original meeting. If the adjournment is for more than
thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given
to each shareholder of record entitled to vote at the meeting.
SECTION 2.9 MANNER OF ACTING.
If a quorum is present, the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on a matter shall be the
act of the shareholders, unless the vote of a greater number or voting by
classes is required by The Business Corporation Act of the State of
Illinois or the Articles of Incorporation or these By-laws, in which case
such express provision shall govern and control the decision of such
question.
SECTION 2.10 PROXIES.
At all meetings of shareholders, a shareholder may vote by proxy executed
in writing by the shareholder or by his duly authorized attorney-in-fact.
Such proxy shall be filed with the Secretary of the corporation before or
at the time of the meeting. No proxy shall be valid after eleven months
from the date of its execution, unless otherwise provided in the proxy.
SECTION 2.11 VOTING OF SHARES BY CERTAIN HOLDERS.
Shares registered in the name of another corporation, domestic or foreign,
may be voted by such officer, agent, proxy or other legal representative
authorized to vote such shares under the law of incorporation of such
corporation. The corporation may treat the president or other person
holding the position of chief executive officer of such other corporation
as authorized to vote such shares, together with any other person indicated
and any other holder of an office indicated by the corporate shareholder to
the corporation as a person or as an officer authorized to vote such
shares. Such persons and officers indicated shall be registered by the
corporation on the transfer books for shares and included in any voting
list prepared in accordance with Section 2.7.
Shares registered in the name of a deceased person, a minor
ward or person under legal disability may be voted by his or her
administrator, executor, or court-appointed guardian, either in person or
by proxy, without a transfer of such shares into the name of such
administrator, executor, or court-appointed guardian. Shares registered in
the name of a trustee may be voted by him or her, either in person or by
proxy.
Shares registered in the name of a receiver may be voted by
such receiver, and shares held by or under the control of a receiver may be
voted by such receiver without the transfer thereof into his or her name,
if authority to do so is contained in an appropriate order of the court by
which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the name of
the pledgee, and thereafter the pledgee shall be entitled to vote the
shares so transferred.
Shares of its own stock belonging to this corporation shall not
be voted, directly or indirectly, at any meeting and shall not be counted
in determining the total number of outstanding shares at any given time,
but shares of its own stock held by it in a fiduciary capacity may be voted
and shall be counted in determining the total number of outstanding shares
entitled to vote at any given time.
SECTION 2.12 NOTICE OF SHAREHOLDER BUSINESS AND NOMINATIONS.
(A) Annual Meetings of Shareholders. (1) Nominations of persons
for election to the Board of Directors of the corporation and the proposal
of business to be considered by the shareholders may be made at an annual
meeting of shareholders (a) by or at the direction of the Board of
Directors or (b) by any shareholder of the corporation who was a
shareholder of record at the time of giving of notice provided for in this
By-Law, who is entitled to vote at the meeting and who complies with the
notice procedures set forth in this By-Law.
(2) For nominations or other business to be properly brought
before an annual meeting by a shareholder pursuant to clause (b) of
paragraph (A)(1) of this By-Law, the shareholder must have given timely
notice thereof in writing to the Secretary of the corporation and such
other business must otherwise be a proper matter for shareholder action. To
be timely, a shareholder's notice shall be delivered to the Secretary at
the principal executive offices of the corporation not later than the close
of business on the 90th day, nor earlier than the close of business on the
120th day, prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is more than 30 days before or more than 60 days after such
anniversary date, notice by the shareholder to be timely must be so
delivered not earlier than the close of business on the 120th day prior to
such annual meeting and not later than the close of business on the later
of the 90th day prior to such annual meeting or the 10th day following the
day on which public announcement of the date of such meeting is first made
by the corporation. In no event shall the public announcement of an
adjournment of an annual meeting commence a new time period for the giving
of a shareholder's notice as described above. Such shareholder's notice
shall set forth (a) as to each person whom the shareholder proposes to
nominate for election or re-election as a director all information relating
to such person that is required to be disclosed in solicitations of proxies
for election of directors in an election contest, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange act
of 1934, as amended (the "Exchange Act") and Rule 14a-11 thereunder
(including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); (b) as to
any other business that the shareholder proposes to bring before the
meeting, a brief description of the business desired to be brought before
the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such shareholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (c) as
to the shareholder giving the notice and the beneficial owner, if any, on
whose behalf the nomination or proposal is made (i) the name and address of
such shareholder, as they appear on the corporation's books, and of such
beneficial owner and (ii) the class and number of shares of the corporation
which are owned beneficially and of record by such shareholder and such
beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this By-Law to the contrary, in the event that the
number of directors to be elected to the Board of Directors of the
corporation is increased and there is no public announcement by the
corporation naming all of the nominees for director or specifying the size
of the increased Board of Directors at least 70 days prior to the first
anniversary of the preceding year's annual meeting, a shareholder's notice
required by this By-Law shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it
shall be delivered to the Secretary at the principal executive offices of
the corporation not later than the close of business on the 10th day
following the day on which such public announcement is first made by the
corporation.
(B) Special Meetings of Shareholders. Only such business shall
be conducted at a special meeting of shareholders as shall have been
brought before the meeting pursuant to the corporation's notice of meeting.
Nominations of persons for election to the Board of Directors may be made
at a special meeting of shareholders at which directors are to be elected
pursuant to the corporation's notice of meeting (a) by or at the direction
of the Board of Directors or (b) provided that the Board of Directors has
determined that directors shall be elected at such meeting, by any
shareholder of the corporation who is a shareholder of record at the time
of giving of notice provided for in this By-Law, who shall be entitled to
vote at the meeting and who complies with the notice procedures set forth
in this By-Law. In the event the corporation calls a special meeting of
shareholders for the purpose of electing one or more directors to the Board
of Directors, any such shareholder may nominate a person or persons (as the
case may be), for election of such position(s) as specified in the
corporation's notice of meeting, if the shareholder's notice required by
paragraph (A)(2) of this By-Law shall be delivered to the Secretary at the
principal executive offices of the corporation not earlier than the close
of business on the 90th day prior to such special meeting and not later
than the close of business on the later of the 60th day prior to such
special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting.
In no event shall the public announcement of an adjournment of a special
meeting commence a new time period for the giving of a shareholder's notice
as described above.
(C) General. (1) Only such persons who are nominated in
accordance with the procedures set forth in this By-Law shall be eligible
to serve as directors and only such business shall be conducted at a
meeting of shareholders as shall have been brought before the meeting in
accordance with the procedures set forth in this By-Law. Except as
otherwise provided by law, the Chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this By-Law and, if any
proposed nomination or business is not in compliance with this By-Law, to
declare that such defective proposal or nomination shall be disregarded.
(2) For purposes of this By-Law, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this By-Law, a
shareholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this By-Law. Nothing in this By-Law shall be deemed to
affect any rights (i) of shareholders to request inclusion of proposals in
the corporation's proxy statement pursuant to Rule 14a-8 under the Exchange
Act or (ii) of the holders of any series of preferred stock to elect
directors under specified circumstances.
SECTION 2.13 INFORMAL ACTION BY SHAREHOLDERS.
With the exception of dissolution of this corporation, any action required
to be taken at a meeting of the shareholders, or any other action which may
be taken at a meeting of the shareholders, may be taken without a meeting
and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed (i) by the holders of outstanding shares having not
less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote
thereon were present and voting or (ii) by all of the shareholders entitled
to vote with respect to the subject matter thereof. If such consent is
signed by less than all of the shareholders entitled to vote, then such
consent shall become effective only if at least 5 days prior to the
execution of the consent a notice in writing is delivered to all the
shareholders entitled to vote with respect to the subject matter thereof
and, after the effective date of the consent, prompt notice of the taking
of the corporate action without a meeting by less than unanimous written
consent shall be delivered in writing to those shareholders who have not
consented in writing.
Dissolution of this corporation may be authorized by the
unanimous consent in writing of the holders of all outstanding shares
entitled to vote on dissolution.
ARTICLE 3
DIRECTORS
SECTION 3.1 GENERAL POWERS.
The business and affairs of the corporation shall be managed by or under
the direction of the Board of Directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by the
Articles of Incorporation, the Act or these Bylaws directed or required to
be exercised or done by the Shareholders.
SECTION 3.2 NUMBER, TENURE AND QUALIFICATIONS.
The number of directors which shall constitute the whole Board of the
corporation shall be fixed from time to time exclusively by the Board of
Directors pursuant to a resolution adopted by the Board of Directors but in
no event shall the number of Directors of the corporation be less than one
nor more than six. Each director shall hold office until the next
succeeding annual meeting of shareholders or until the next meeting of
shareholders at which directors are elected. Directors need not be
residents of the State of Illinois nor shareholders of the corporation.
SECTION 3.3 REGULAR MEETINGS.
A regular meeting of the Board of Directors shall be held without other
notice than this By-law, immediately after, and at the same place as, the
annual meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place, either within or without the State of
Illinois, for the holding of additional regular meetings in which case no
other notice need be given.
SECTION 3.4 SPECIAL MEETINGS.
Special meetings of the Board of Directors may be called by or at the
request of the Chairman of the Board, the President or any three directors.
The person or persons authorized to call special meetings of the Board of
Directors may fix any place, either within or without the State of
Illinois, as the place for holding any special meeting of the Board of
Directors.
SECTION 3.5 NOTICE.
Written notice of any special meeting of directors shall be given as
follows:
By mail to each director at his business address at least three
days prior to the meeting; or
By personal delivery, telegram or facsimile to each director at
his business address at least 24 hours prior to the meeting, or in the
event such notice is given on a Saturday, Sunday or holiday, to each
director at his residence address at least 24 hours prior to the meeting.
If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail so addressed, with postage thereon
prepaid. If notice is given by telegram, such notice shall be deemed to be
delivered when the telegram is delivered to the telegraph company. If
notice is given by facsimile, such notice shall be deemed given when sent
with confirmation of receipt.
Any director may waive notice of any meeting. The attendance of
a director at any meeting shall constitute a waiver of notice of such
meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the Board of Directors
need be specified in the notice or waiver of notice of such meeting.
SECTION 3.6 QUORUM.
A majority of the Whole Board shall constitute a quorum for the transaction
of business at any meeting of the Board of Directors. If less than a
majority of such directors are present at said meeting, a majority of the
directors present may adjourn the meeting from time to time without further
notice until a quorum shall be present.
Unless specifically prohibited by the Articles of
Incorporation, members of the Board of Directors or of any committee of the
Board of Directors may participate in and act at any meeting of such Board
of Directors or committee through the use of a conference telephone or
other communications equipment by means of which all persons participating
in the meeting can hear each other. Participation in such a meeting shall
constitute attendance at the meeting of the person or persons so
participating.
SECTION 3.7 MANNER OF ACTING.
The act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors unless a
greater number is required by the Articles of Incorporation.
SECTION 3.8 VACANCIES.
Any vacancy occurring in the Board of Directors that results from an
increase in the number of directors or from the death, resignation or
removal of a Director may be filled by the affirmative vote of at least a
majority of remaining directors office; though less than a quorum of the
Board of Directors. A director appointed by the Board of Directors to fill
a vacancy shall serve until the next meeting of shareholders at which
directors are to be elected.
SECTION 3.9 RESIGNATION.
A director may resign at any time by giving written notice to the Board of
Directors, its chairman, or to the president or secretary of the
corporation. A resignation is effective when the notice is given unless the
notice specifies a future date. The pending vacancy may be filled before
the effective date, but the successor shall not take office until the
effective date.
SECTION 3.10 COMPENSATION.
The Board of Directors, irrespective of any personal interest of any of the
members, shall have the authority to fix the compensation of Directors. The
Directors may be paid their expenses, if any, of attendance at each meeting
of the Board of Directors and may be paid a fixed sum for attendance at
meetings or a stated salary as Directors. These payments shall not preclude
any Director from serving the corporation in any other capacity and
receiving compensation therefor. Member of special or standing committees
may be allowed like compensation.
SECTION 3.11 PRESUMPTION OF ASSENT.
A director of the corporation who is present at a meeting of the Board of
Directors at which action on any corporate matter is taken shall be
conclusively presumed to have assented to the action taken unless his
dissent is entered in the minutes of the meeting or unless he files his
written dissent to such action with the person acting as the secretary of
the meeting before the adjournment of the meeting or forwards such dissent
by registered mail to the Secretary of the corporation immediately after
the adjournment of the meeting. Such right to dissent does not apply to a
director who voted in favor of such action.
SECTION 3.12 COMMITTEES.
The Board of Directors, by resolution, adopted by a majority of directors,
may create one or more committees and appoint members of the Board to serve
on the committee or committees. Each committee shall have two or more
members, who serve at the pleasure of the Board.
Unless the appointment by the Board of Directors requires a
greater number, a majority of any committee shall constitute a quorum and a
majority of a quorum is necessary for committee action. A committee may act
by unanimous consent in writing without a meeting and, subject to the
provisions of these By-laws or action by the Board of Directors, the
committee by majority vote of its members shall determine the time and
place of meetings and the notice required therefor.
To the extent specified by the Board of Directors or in the
Articles of Incorporation or these By-laws, each committee may exercise the
authority of the Board of Directors under the Act; provided, however, a
committee may not:
(1) authorize distributions, except for dividends to be paid with
respect to shares of any preferred or special classes or any series
thereof;
(2) approve or recommend to shareholders any act the Act requires
to be approved by shareholders;
(3) fill vacancies on the Board or on any of its
committees;
(4) elect or remove officers or fix the compensation of any
member of the committee;
(5) adopt, amend or repeal these By-laws;
(6) approve a plan of merger not requiring shareholder
approval;
(7) authorize or approve reacquisition of shares, except
according to a general formula or method prescribed by the Board;
(8) authorize or approve the issuance or sale, or contract for
sale, of shares or determine the designation and relative rights,
preferences, and limitations of a series of shares, except that the
Board may direct a committee to fix the specific terms of the issuance
or sale or contract for sale or the number of shares to be allocated to
particular employees under an employee benefit plan; or
(9) amend, alter, repeal, or take action inconsistent with any
resolution or action of the Board of Directors when the resolution or
action of the Board of Directors provides by its terms that it shall
not be amended, altered or repealed by action of a committee.
SECTION 3.13 REMOVAL OF DIRECTORS.
Any Director may be removed from office as a Director, at any time, with or
without cause, by the affirmative vote of at least a majority of the
outstanding shares then entitled to vote in the election of Directors of
the corporation, voting as a single class, except that no director shall be
removed at a meeting of shareholders unless the notice of such meeting
shall state that a purpose of the meeting is to vote upon the removal of
one or more directors named in the notice. Only the named director or
directors may be removed at such meeting.
The provisions of the first paragraph of this Section 3.13
shall not preclude the circuit court of the county in which the
corporation's registered office is located from removing a director of the
corporation from office in a proceeding commenced either by the corporation
or by shareholders of the corporation holding at least 10 percent of the
outstanding shares of any class if the court finds (1) the director is
engaged in fraudulent or dishonest conduct or has grossly abused his or her
position to the detriment of the corporation, and (2) removal is in the
best interest of the corporation. If the court removes a director, it may
bar the director from reelection for a period prescribed by the court. If
such a proceeding is commenced by the shareholders, they shall make the
corporation a party defendant.
SECTION 3.14 INFORMAL ACTION BY DIRECTORS.
Any action required to be taken at a meeting of the Board of Directors, or
any other action which may be taken at a meeting of the Board of Directors
or a committee thereof, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
directors entitled to vote with respect to the subject matter thereof or by
all the members of such committee, as the case may be.
SECTION 3.15 RELIANCE ON BOOKS.
A member of the Board of Directors or a member of any committee designated
by the Board of Directors shall, in the performance of his duties, be fully
protected in relying in good faith upon the books of account or reports
made to the corporation by any of its officers, or by an independent
certified public accountant, or by an appraiser selected with reasonable
care by the Board of Directors or by any committee, or in relying in good
faith upon other records of the corporation.
ARTICLE 4
OFFICERS
SECTION 4.1 NUMBER.
The Board of Directors shall have full discretion to appoint officers for
the corporation. These officers may include a Chairman of the Board of
Directors, a Chief Executive Officer, a President, a Chief Financial
Officer, one or more Vice Presidents, a Treasurer and a Secretary, each of
whom shall be elected by the Board of Directors. The Board of Directors
may appoint other officers if deemed necessary who shall have such
authority and shall perform such duties as from time to time may be
prescribed by the Board of Directors. Any two or more offices may be held
by the same person.
SECTION 4.2 ELECTION AND TERM OF OFFICE.
The officers of the corporation shall be elected by the Board of Directors.
Vacancies may be filled or new offices filled at any meeting of the Board
of Directors. Each officer shall hold office until his successor shall
have been duly elected and shall have qualified or until his death or until
he shall resign or shall have been removed in the manner hereinafter
provided.
SECTION 4.3 REMOVAL.
Any officer or agent of the corporation may be removed by the Board of
Directors, with or without cause, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
SECTION 4.4 VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the Board of Directors.
SECTION 4.5 CHAIRMAN OF THE BOARD OF DIRECTORS.
The Chairman of the Board shall have executive authority to see that all
orders and resolutions of the Board of Directors are carried into effect
and, subject to the control vested in the Board of Directors by statute, by
the Articles of Incorporation or by these By-Laws, shall administer and be
responsible for the overall management of the business and affairs of the
corporation. He shall preside at all meetings of the shareholders and of
the Board of Directors, and in general shall perform all duties incident to
the office of the Chairman of the Board and such other duties as from time
to time may be assigned to him by the Board of Directors.
SECTION 4.6 THE CHIEF EXECUTIVE OFFICER.
The Chief Executive Officer shall perform such duties as may from time to
time be assigned by the Board of Directors or the Chairman of the Board,
and in the absence or disability of the Chairman of the Board, shall
perform the duties of the Chairman of the Board.
SECTION 4.7 THE PRESIDENT.
The President shall perform such duties as may from time to time be
assigned by the Board of Directors, the Chairman of the Board or the Chief
Executive Officer.
SECTION 4.8 CHIEF FINANCIAL OFFICER.
The Chief Financial Officer (if any) shall act in an executive financial
capacity. He shall assist the Chairman of the Board, the Chief Executive
Officer and the President in the general supervision of the corporation's
financial policies and affairs.
SECTION 4.9 VICE PRESIDENTS.
Any one or more of the Vice Presidents may be designated by the Board of
Directors as an Executive Vice President, Senior Vice President or such
other designation as the Board of Directors may deem appropriate. In the
absence of the President or in the event of his inability or refusal to
act, the Executive Vice President shall perform the duties and exercise the
functions of the President. If there is no Executive Vice President, or if
there is more than one, the Board of Directors may determine which one or
more of the Vice Presidents shall perform any of such duties or exercise
any of such functions; if such determination is not made by the Board of
Directors, the President may make such determination. Any Vice President
may sign, with the Secretary or an Assistant Secretary, certificates for
shares of the corporation; and shall perform those other duties which from
time to time may be assigned to him by the Board of Directors or by the
Chief Executive Officer.
SECTION 4.10 TREASURER.
The Treasurer shall: (a) have charge and custody of and be responsible for
all funds and securities of the corporation; receive and give receipts for
moneys due and payable to the corporation from any source whatsoever and
deposit all such moneys in the name of the corporation in such banks, trust
companies or other depositories as shall be selected in accordance with the
provisions of Article V of these By-laws; and (b) in general, perform all
duties incident to the office of Treasurer and all other duties as from
time to time may be assigned to him by the Board of Directors or the chief
executive officer. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his duties in the sum and
with a surety or sureties as the Board of Directors shall determine.
SECTION 4.11 SECRETARY.
The Secretary shall: (a) keep the minutes of the shareholders' and of the
Board of Directors' meetings in one or more books provided for that
purpose; (b) see that all notices are duly given in accordance with the
provisions of these By-laws or as required by law; (c) be custodian of the
corporate records and, if the corporation has a corporate seal, of the seal
of the corporation and see that the seal of the corporation is affixed to
all certificates for shares prior to the issue thereof and to all
documents, the execution of which on behalf of the corporation under its
seal is duly authorized in accordance with the provisions of these By-laws;
(d) keep a register of the post office address of each shareholder which
shall be furnished to the Secretary by such shareholders; (e) sign, with
the Chief Executive Officer, the President or a Vice President,
certificates for shares of the corporation, the issue of which shall have
been authorized by resolution by resolution of the Board of Directors; (f)
have general charge of the share transfer books of the corporation; and (g)
in general, perform all duties incident to the office of Secretary and all
other duties as from time to time may be assigned to him by the Board of
Directors or the Chief Executive Officer.
SECTION 4.12 ASSISTANT TREASURERS AND ASSISTANT SECRETARIES.
The Assistant Secretaries as thereunto authorized by the Board of Directors
may sign with the Chief Executive Officer, the President or a Vice
President certificates for shares of the corporation, the issue of which
shall have been authorized by a resolution of the Board of Directors. The
Assistant Treasurers and Assistant Secretaries, in general, shall perform
such duties as shall be assigned to them by the Treasurer or the Secretary,
respectively, or by the Board of Directors or the chief executive officer.
The Assistant Treasurers shall, respectively, if required by the Board of
Directors, give bonds for the faithful discharge of their duties in sums
and with sureties as the Board of Directors shall determine.
SECTION 4.13 SALARIES.
The salaries of the officers shall be fixed from time to time by the Board
of Directors or a committee thereof, and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a Director of
the Corporation.
ARTICLE 5
SHARES, CERTIFICATES FOR SHARES AND TRANSFER OF SHARES
SECTION 5.1 REGULATION.
The Board of Directors may make such rules and regulations as it may deem
expedient concerning the issuance, transfer and registration of
certificates for shares of the corporation, including the appointment of
transfer agents and registrars.
SECTION 5.2 CERTIFICATES FOR SHARES.
The shares of the corporation shall be represented by certificates which
shall be signed by the Chairman of the Board, the President, the Chief
Financial Officer or a Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary, shall be numbered
serially for each class of shares, or series thereof, as they are issued
and may be sealed with the seal, or a facsimile of the seal, of the
corporation. If a certificate is countersigned by a transfer agent or
registrar, other than the corporation itself or its employee, any other
signatures or countersignatures on the certificate may be facsimiles. If
the corporation shall be authorized to issue shares of more than one class,
every certificate representing shares issued by the corporation shall set
forth upon the face or back of the certificate a full or summary statement
of all of the designations, preferences, qualifications, limitations,
restrictions and special or relative rights of the shares of each class
authorized to be issued and, if the corporation shall be authorized to
issue any preferred or special class in series, the variations in the
relative rights and preferences between the shares of each such series so
far as the same have been fixed and determined and the authority of the
Board of Directors to fix and determine the relative rights and preferences
of subsequent series. This statement may be omitted from the certificate if
it shall be set forth upon the face or back of the certificate that such
statement, in full, will be furnished by the corporation to any shareholder
upon request and without charge.
Each certificate representing shares shall also state the name
of the corporation, the date of issue, that the corporation is organized
under the laws of the State of Illinois, the name of the person to whom it
is issued, the number and class of shares and the designation of the
series, if any, which the certificate represents. Each certificate shall be
otherwise in such form as may be prescribed by the Board of Directors and
as shall conform to the rules of any Stock Exchange on which the shares may
be listed.
SECTION 5.3 CANCELLATION OF CERTIFICATES.
All certificates surrendered to the corporation for transfer shall be
canceled and no new certificates shall be issued in lieu thereof until the
former certificate for a like number of shares shall have been surrendered
and canceled, except as herein provided with respect to lost, stolen or
destroyed certificates.
SECTION 5.4 LOST, STOLEN OR DESTROYED CERTIFICATES.
Any shareholder claiming that his certificate for shares is lost, stolen or
destroyed may make an affidavit or affirmation of that fact and lodge the
same with the Secretary of the corporation, accompanied by a signed
application for a new certificate. Thereupon, and if requested by the Board
of Directors, upon the giving of a satisfactory bond of indemnity to the
corporation, a new certificate may be issued representing the same number,
class and series of shares as were represented by the certificate alleged
to be lost, stolen or destroyed.
SECTION 5.5 TRANSFER OF SHARES.
The corporation may from time to time enter into an agreement or agreements
with one or more of its shareholders restricting the transferability of its
shares in accordance with the general corporate purpose to have its shares
owned by persons actively engaged in the corporate business. Subject to the
terms of any such agreement, shares of the corporation shall be
transferable on the books of the corporation by the holder thereof, in
person or by his duly authorized attorney, upon the surrender and
cancellation of a certificate or certificates for a like number of shares.
Upon presentation and surrender of a certificate for shares properly
endorsed and payment of all required taxes, if any, the transferee shall be
entitled to a new certificate or certificates in lieu thereof. As against
the corporation, a transfer of shares can be made only on the books of the
corporation and in the manner hereinabove provided, and the corporation
shall be entitled to treat the holder of record of any share as the owner
thereof and shall not be bound to recognize any equitable or other claim to
or interest in such share on the part of any other person, whether or not
it shall have express or other notice thereof, except as expressly provided
by the statutes of the State of Illinois.
SECTION 5.6 FACSIMILE SIGNATURE.
Any of or all the signatures on the certificate may be facsimile. In case
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
ARTICLE 6
CONTRACTS
Except as otherwise required by law, the Articles of
Incorporation or these By-laws, any contracts or other instruments may be
executed and delivered in the name and on behalf of the corporation by such
officer or officers of the corporation as the Board of Directors may from
time to time direct. Such authority may be general or confined to specific
instances as the Board may determine.
ARTICLE 7
FISCAL YEAR
The fiscal year of the corporation shall end on the Sunday
nearest the 31st day of December in each calendar year.
ARTICLE 8
DIVIDENDS
The Board of Directors may from time to time declare, and the
corporation may pay, dividends on its outstanding shares in the manner and
upon the terms and conditions provided by law and the Articles of
Incorporation.
ARTICLE 9
SEAL
The Board of Directors may provide a corporate seal which shall
be in the form of a circle and shall have inscribed thereon the name of the
corporation and the words "Corporate Seal, Illinois."
ARTICLE 10
INDEMNIFICATION
SECTION 10.1 ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE
CORPORATION.
The corporation shall indemnify any person who was or is a party, or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he or she is or was a director or officer of the
corporation, or who is or was serving at the request of the corporation as
a director or officer of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding,
if such person acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his or her conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the
best interests of the corporation or, with respect to any criminal action
or proceeding, that the person had reasonable cause to believe that his or
her conduct was unlawful.
SECTION 10.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION.
The corporation shall indemnify any person who was or is a party, or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that such person is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit, if such
person acted in good faith and in a manner he or she reasonably believed to
be in, or not opposed to, the best interests of the corporation, provided
that no indemnification shall be made with respect to any claim, issue, or
matter as to which such person has been adjudged to have been liable to the
corporation, unless, and only to the extent that the court in which such
action or suit was brought shall determine upon application that, despite
the adjudication of liability, but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses as the court shall deem proper.
SECTION 10.3 AUTHORIZATION OF INDEMNIFICATION.
Any indemnification under Sections 10.1 and 10.2 of this Article (unless
ordered by a court) shall be made by the corporation only as authorized in
the specific case, upon a determination that indemnification of the
director or officer is proper in the circumstances because he or she has
met the applicable standard of conduct set forth in Sections 10.1. and
10.2. of this Article. Such determination shall be made (1) by the Board of
Directors by a majority vote of a quorum consisting of directors who were
not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable or, even if obtainable, a quorum of disinterested directors
so directs, by advice of independent legal counsel, or (3) by the
shareholders. In any determination denying indemnification, the burden of
proof shall be on the corporation to prove by clear and convincing evidence
that indemnification should not be allowed.
SECTION 10.4 PAYMENT OF EXPENSES IN ADVANCE.
Notwithstanding any other provisions of this Article 10, expenses incurred
in defending a civil or criminal action, suit or proceeding shall, unless
the Board of Directors determines otherwise, be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the director or officer to
repay such amount, if it shall ultimately be determined that he or she is
not entitled to be indemnified by the corporation as authorized in this
Article 10.
SECTION 10.5 SUCCESSFUL DEFENSES.
Notwithstanding any other provisions of this Article 10, to the extent that
a director or officer of the corporation has been successful, on the merits
or otherwise, in the defense of any action, suit or proceeding referred to
in Sections 10.1 and 10.2 of this Article or in defense of any claim, issue
or matter therein, such person shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by such person
in connection therewith.
SECTION 10.6 PROVISIONS NOT EXCLUSIVE.
The indemnification and advancement of expenses provided by or granted
under the other Sections of this Article 10 shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement
of expenses may be entitled under any by-law, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in
his or her official capacity and as to action in another capacity while
holding such office.
SECTION 10.7 INSURANCE.
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or
who is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against
such person and incurred by such person in any such capacity, or arising
out of his or her status as such, whether or not the corporation would have
the power to indemnify such person against such liability under the
provisions of this Article 10.
SECTION 10.8 NOTICE TO SHAREHOLDERS.
If the corporation has paid indemnity or has advanced expenses to a
director, officer, employee or agent, the corporation shall report the
indemnification or advance in writing to the shareholders with or before
the notice of the next shareholders meeting.
SECTION 10.9 DEFINITIONS.
For purposes of this Article 10, references to "the corporation" shall
include, in addition to the surviving corporation, any merging corporation
(including any corporation having merged with a merging corporation)
absorbed in a merger which, if its separate existence had continued, would
have had the power and authority to indemnify its directors, officers, and
employees or agents, so that any person who was a director, officer,
employee or agent of such merging corporation, or was serving at the
request of such merging corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article 10 with respect to the surviving corporation as such person would
have with respect to such merging corporation if its separate existence had
continued.
For purposes of this Article 10, references to "other
enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an
employee benefit plan; and references to "serving at the request of the
corporation" shall include any service as a director, officer, employee or
agent of the corporation which imposes duties on, or involves services by
such director, officer, employee, or agent with respect to an employee
benefit plan, its participants, or beneficiaries. A person who acted in
good faith and in a manner he or she reasonably believed to be in the best
interests of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interest
of the corporation" as referred to in this Article 10.
SECTION 10.10 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE
CORPORATION.
The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification, and to the advancement
of expenses, to any employee or agent of the corporation to the fullest
extent of the provisions of this Article 10 with respect to the
indemnification and advancement of expenses of directors and officers of
the corporation.
SECTION 10.11 CONTINUATION OF RIGHTS.
The indemnification and advancement of expenses provided by or granted
under this Article 10 shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee, or agent and shall inure to the benefit of the heirs, executors,
and administrators of that person.
SECTION 10.12 PAYMENTS A BUSINESS EXPENSE.
Any payments made to any indemnified party under these By-Laws or under any
other right to indemnification shall be deemed to be an ordinary and
necessary business expense of the corporation, and payment thereof shall
not subject any person responsible for the payment, or the Board of
Directors, to any action for corporate waste or to any similar action.
ARTICLE 11
AMENDMENTS
Unless the power to make, alter, amend or repeal these By-laws
is reserved to the shareholders by the Articles of Incorporation, these By-
laws may be made, altered, amended or repealed by the shareholders or the
Board of Directors, but no by-laws adopted by the shareholders may be
altered, amended or repealed by the Board of Directors.
September 29, 1999
Exhibit 4
---------
COMMON STOCK COMMON STOCK
[LOGO]
APAC TeleServices, Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS
THIS CERTIFICATE IS TRANSFERABLE CUSIP 00185E 10 6
IN THE CITIES OF CHICAGO, IL SEE REVERSE FOR CERTAIN DEFINITIONS
OR NEW YORK, NY
THIS IS TO CERTIFY THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK,
PAR VALUE $.01, OF
APAC TeleServices, Inc. transferable on the books of the Corporation by the
holder hereof in person or by duly authorized attorney, upon surrender of
this Certificate properly endorsed. This Certificate is not valid unless
countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
NAME CHANGED TO APAC CUSTOMER SERVICES, INC.
Dated:
/s/ Marc S. Simon /s/ Theodore G. Schwartz
--------------------- ------------------------
Secretary President
[SEAL]
COUNTERSIGNED AND REGISTERED:
HARRIS Trust and Savings BANK
(Chicago)
TRANSFER AGENT AND REGISTRAR,
BY
AUTHORIZED SIGNATURE
- -----------------------------------------------------------------------------
APAC TeleServices, Inc.
Upon written request, the Corporation will furnish to the holder hereof,
without charge, a full statement of all the designations, preferences,
qualifications, limitations, restrictions, and special or relative rights
of the shares of each class of authorized capital stock; and the variations
in the relative rights and preferences determined for each series; and the
authority of the Board of Directors to fix and determine the relative
rights and preferences or subsequent series.
- - - - - - - - - - - - - - - - - - - - -
ASSIGNMENT
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT --_________ Custodian ________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act_____________________________
in common (State)
UNIF TRF MIN ACT -- _______ Custodian (until age _____)
(Cust)
____________ under Uniform Transfers
(Minor)
to Minors Act ____________________
(State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
For Value Received, ______________________ hereby sell,
assign, and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
- -----------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- -----------------------------------------------------------------------------
___________________________________________________________________________
____________________ shares of the stock represented by the within
certificate, and do hereby irrevocably constitute and appoint
______________________________________________________________________________
Attorney to transfer the said shares on the books of the within named
Corporation with full power of substitution in the premises.
Dated: __________________________
AFFIX MEDALLION SIGNATURE
GUARANTEE IMPRINT BELOW
_____________________________________
_____________________________________
ABOVE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF
THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT, OR ANY CHANGE
WHATEVER.
THE SIGNATURES(S) MUST BE
GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION. SUCH AS A SECURITIES
BROKER/DEALER, COMMERCIAL BANK,
TRUST COMPANY, SAVINGS ASSOCIATION
OR A CREDIT UNION PARTICIPATING IN
A MEDALLION PROGRAM APPROVED BY THE
SECURITIES TRANSFER ASSOCIATION,
INC.
Exhibit 10.1
------------
AMENDMENT, DATED SEPTEMBER 22, 1999, TO
AGREEMENT FOR IN-BOUND TELEMARKETING
WITH UNITED PARCEL SERVICE GENERAL SERVICES CO.
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission.
The omissions have been indicated by an asterisk ("*"), and the omitted
text has been filed separately with the Securities and Exchange Commission.
<PAGE>
APAC CUSTOMER SERVICES, INC.
UPS/APAC AMENDMENT POINTS
SEPTEMBER 22, 1999
1. DETAILS:
o UPS recommended wage rates per position by site (see #5) will be
implemented upon agreement of communication strategy.
Implementation will be at the beginning of the next pay period
and no later than September 30, 1999.
o Management increases of * to be implemented within 45 days due
to the evaluation with UPS involvement of APAC Regional and Site
management staff associated with the UPS program.
o APAC will assume responsibility for replacement training
beginning on the effective date of the hourly wage increases.
o UPS will pay for growth training for volume increases of 5% over
previous month beginning October 1, 1999.
o Billable rate for agreed upon volume ramp-up training will be at
* of total billable rate for the workgroup/site.
o UPS will pay COLA each year pursuant to the current contract
terms. COLA will be based on site specific cost of living
adjustments. APAC agrees that * of COLA *.
o APAC will have the Regional HR Manager and two (2) ERM personnel
per site in place within the next *.
o * will directly interface with *.
o Accuvision will be continued only in Newport News on the
effective date of the hourly wage increase
o UPS' future plans are to * throughout the term of the contract,
and *.
BILLABLE RATES
SITE SEGMENT BILLABLE RATE
_____________________________________________________________
High Point Customer Service *
Newport News Customer Service *
Newport News Package Information *
Newport News Claims *
Newport News New Processes *
Fort Worth Customer Service *
Fort Worth Package Information *
Fort Worth Claims *
o The new billable rates are effective on the day the new
hourly wages are in effect in the sites.
o New Processes billable rates will be determined once
these positions have been defined.
2. SCHEDULE ADHERENCE CRITERIA:
o Call projections will include a baseline forecast for a rolling
90-day period of time, including intra-day and segmented
allocations.
o APAC will receive final call projections a minimum of 4
weeks prior to the stated time period.
o APAC will be responsible for meeting committed staffing
requirements if final projections are within 10% of the 90-day
call projections. If call volumes are in excess of 10% of
previous month, APAC will require a mutually agreed upon ramp
up period and there will be no schedule adherence penalty or
incentive for that month.
o Previously defined UPS required assumptions and look back
periods will be used in developing staffing requirements.
o SCHEDULE ADHERENCE SERVICE LEVEL DEFINITION. Schedule adherence
attainment will be determined by calculating the percentage of
15- minute intervals for all segmented groups over the week
within a site which are greater than or equal to 94% of the
required staffing as shown in the staffing plan. The total
15-minute intervals that achieved 94% or greater staffing, for
all segmented groups, will then be divided by the total
15-minute intervals available for all segmented groups to
determine schedule adherence attainment. Intervals waived
by UPS Support Manager for the purposes of providing relief due
to absent call volume will be deemed as an interval attained by
APAC.
THE PENALTY/INCENTIVE AMOUNTS AND PERCENTS ARE AS
FOLLOWS AND
ARE CALCULATED BY SITE:
% SCHEDULE ADHERENCE BONUS/PENALTY
98 - 100.00% * bonus
95 - 97.99% * bonus
93 - 94.99 % * bonus
88 - 92.99% * penalty
less than 87.99% * penalty
o Implementation to occur January 1, 2000.
o APAC agrees that we will waive the bonus amount for the weekly
measurement period for the specific site if we achieved a bonus
for that period without meeting the service level requirement.
3. QUALITY SCORECARD CRITERIA:
o APAC agrees to implement an incentive/penalty program designed
around the current UPS quality scorecard process with defined
and statistically valid measurement criteria.
o Incentive and penalties will be calculated monthly.
o The Customer Service Scorecard currently in use will be used
for Customer Service.
o Separate Package Information and Claims Scorecards will be
established, implemented and rolled out in line with the CS
Quality Scorecard.
o Modifications and/or changes to the Quality Scorecard will
require UPS to provide APAC a 3-month notice. UPS will ensure
the Quality Scorecard is administered consistently with other
internal sites and measurements.
THE SCORE RANGES AND PENALTY/INCENTIVE AMOUNTS ARE AS FOLLOWS
AND ARE CALCULATED FOR CUSTOMER SERVICE ONLY:
QUALITY SCORE RANGES BONUS/PENALTY
9.00 - 10.00 * bonus
8.00 - 8.99 * bonus
7.00 - 7.99 * bonus
6.00 - 6.99 * penalty
less than 6.00 * penalty
o Implementation to occur January 1, 2000.
4. CONTRACT TERM:
o Term of contract to be 3 years commencing the effective date of
the wage increases and will include automatic 1-year renewals.
Senior Management of APAC and UPS will meet yearly to review
the previous year's performance. Termination for convenience
clause to include termination of specific workgroup(s) or
entire relationship upon written notification. Termination for
Convenience can be for any reason, at any time and for any type
of work performed. Termination ramp down to be no less than 9
months from the date of notice. UPS shall use it's best efforts
to ramp down revenue no greater than one third per quarter
during the 9 month ramp down period. During ramp down UPS has
the right for UPS or its designee to co-exist with APAC in each
site.
5. WAGES. THE FOLLOWING HOURLY WAGES ARE MUTUALLY AGREED TO:
FORT WORTH
Starting Wages
Current New Difference
* $ * $ * $ *
* $ * $ * $ *
* $ * $ * $ *
Average Wages
Current New Difference
* $ * $ * $ *
* $ * $ * $ *
* $ * $ * $ *
NEWPORT NEWS
Starting Wages
Current New Difference
* $ * $ * $ *
* $ * $ * $ *
* $ * $ * $ *
* NA $ *
* NA $ *
* NA $ *
* NA $ *
Average Wages
Current New Difference
* $ * $ * $ *
* $ * $ * $ *
* $ * $ * $ *
* NA $ *
* NA $ *
* NA $ *
* NA $ *
HIGH POINT
Starting Wages
Current New Difference
* $ * $ * $ *
Average Wages
Current New Difference
* $ * $ * $ *
6. PACKAGE INFORMATION WAGE PROGRESSION:
o Job descriptions, definitions, wage rates, and certification
procedures will be provided to APAC by UPS.
Wage Rates
o * $ *
o * $ *
o * $ *
o * $ *
o * $ *
o * $ *
o * $ *
o * $ *
7. CLAIMS WAGE PROGRESSION:
o Job descriptions, definitions, wage rates, and certification
procedures will be provided to APAC by UPS.
Wage Rates
o * $ *
o * $ *
o * $ *
o * $ *
o * $ *
8. THE REMAINING PROVISIONS OF THE AGREEMENT DATED AUGUST 8, 1995,
INCLUDING POLICY STATEMENTS PRESENTLY IN FORCE REMAIN IN FORCE. IN
THE EVENT OF A CONFLICT WITH THIS AMENDMENT AND THE AGREEMENT DATED
AUGUST 8, 1995 OR ANY POLICY STATEMENT THIS AMENDMENT WILL
CONTROL.
9. CHANGE OF CONTROL CLAUSE (SECTION 49 PARAGRAPH D) FROM BASE CONTRACT
TO BE DELETED.
10. UPS TO CONSIDER ALLOCATING FUTURE ELIGIBLE EARNED TRAINING CREDITS OR
JOBS CREATION TO APAC.
11. UPS AGREES TO ALLOW APAC TO EXTERNALLY ANNOUNCE THE CONTRACT
EXTENSION, AS ATTACHED, AND THAT UPS ACKNOWLEDGES THAT APAC IS
SUBJECT TO OBLIGATIONS UNDER LAW OR MAKE PROPER DISCLOSURE OF
MATERIAL DEVELOPMENTS.
12. APAC'S SERVICING OF ENTITIES COMPETITIVE TO UPS WILL BE COVERED IN
ACCORDANCE WITH SECTION 21 PARAGRAPH B OF THE CURRENT AGREEMENT WITH
THE ADDITION OF LANGUAGE ALLOWING APAC TO SOLICIT COMPETITIVE
BUSINESS IMMEDIATELY UPON NOTICE OF TERMINATION OF THE AMENDED
AGREEMENT BY UPS.
Accepted By:
/s/ Wayne Herring /s/ Theodore G. Schwartz
- ------------------------- -------------------------
Wayne Herring for UPS Ted Schwartz for APAC
Dated: September 22, 1999 Dated: September 22, 1999
Exhibit 10.2
------------
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") made effective as of 11:59
p.m. September 21, 1999, by and between APAC Customer Services, Inc., an
Illinois corporation (the "Company"), and Peter M. Leger, a resident of the
State of Illinois (the "Executive").
In consideration of the mutual covenants contained in this Agreement,
the parties hereby agree as follows:
SECTION I
EMPLOYMENT
The Company agrees to employ the Executive, and the Executive agrees
to be employed by the Company for the Period of Employment as provided in
Section III below upon the terms and conditions provided in this Agreement.
SECTION II
POSITION, RESPONSIBILITIES AND DUTIES
From the effective date hereof through September 30, 1999, the
Executive shall perform such duties and shall receive such compensation as
are mutually agreed upon by the Executive and the Company. From and after
October 1, 1999, the Executive shall devote all of his business time,
attention and skill to the business and affairs of the Company and its
subsidiaries, and shall report to the Board of Directors of the Company
(the "Board of Directors"). The Executive may serve on corporate, civic or
charitable boards or committees so long as, in the judgment of the Board of
Directors, such activities do not interfere with the Executive's
responsibilities hereunder. The Compensation Committee of the Board of
Directors (the "Compensation Committee") shall annually establish
reasonable, mutually agreed upon, written performance management objectives
with the Executive which shall be formally reviewed annually, with informal
reviews to be performed quarterly. The reasonable, mutually agreed upon,
performance management objectives for fiscal year 2000 shall be established
as soon as practicable.
From and after October 1, 1999, the Executive shall serve as Chief
Operating Officer of the Company; from and after the date described in
Section III, the Executive shall serve as Chief Executive Officer of the
Company. In either case, the Executive shall be responsible for the
typical management responsibilities expected of an officer holding such
position and such other responsibilities consistent with his position as
may be assigned to the Executive from time to time by the Board of
Directors. In performing his duties as Chief Operating Officer or Chief
Executive Officer hereunder, the Executive shall report directly to the
Chairman and have the President of the Company reporting to him, and shall
have the authority customarily held by others holding positions with
similar reporting relationships, in similar businesses, subject to the
general and customary supervision of the Board of Directors.
On or before the date on which the Executive commences as Chief
Executive Officer, the Company shall amend its by-laws to separate the
offices of Chairman and Chief Executive Officer. No later than October 31,
1999, the Company shall nominate for and cause the Executive to be elected
to the Board of Directors and, thereafter while he is employed hereunder,
to be reelected to the Board of Directors at the end of each term; provided
that, the Executive shall resign from the Board of Directors upon his
termination of employment if so requested by the Company.
The Board of Directors expects that, taking into account the current
state of the Company's planning process (strategic, operational and
financial plans) for fiscal year 2000, the Executive will contribute his
best efforts toward (i) identifying a management team (including any open
positions to be recruited) within sixty (60) days of the full-time
commencement date specified in Section III, and (ii) establishing a
strategic, operational and financial plan no later than December 31, 1999.
This plan would include a threshold budget and an organizational reporting
structure including the desired reports of the Executive and any open
positions. This plan would be presented to the Board of Directors within
the first two weeks of December to allow for its comments and should be
finalized by year end. The Executive and Board of Directors also shall
establish reasonable and mutually agreed upon threshold, target and maximum
goals and Incentive Bonus Plan award levels in connection with such
strategic, operational and financial plan.
SECTION III
TERM
The Executive shall commence as a non-officer employee of the Company
as of the effective date hereof. The Executive shall commence as Chief
Operating Officer on October 1, 1999 (the "full-time commencement date"),
with his service as Chief Executive Officer as provided in Section II
commencing on a date determined by the Company that is not later than sixty
(60) days after the full-time commencement date (or a later date that the
Executive and the Company reasonably and mutually agree upon in writing, as
being in the best interests of the Company, but in no event later than
April 1, 2000), and he shall continue as Chief Executive Officer of the
Company, subject to the terms hereof through December 31, 2004, subject to
earlier termination as provided in this Agreement (the "Period of
Employment"). Effective January 1, 2005 (and each succeeding January 1
that is two (2) years later), the Period of Employment will be extended for
two (2) years, unless either the Executive or the Company shall have given
the other written notice, no later than the January 1 preceding the
December 31 that would otherwise be the last day of the Period of
Employment, of his or its desire to not extend the Period of Employment
(with the Executive's termination on the last day of the Period of
Employment in such case not constituting a termination of the Executive's
employment for purposes of Section VIII.A-D, but constituting a termination
of employment for purposes of the Company's plans and programs, unless his
employment with the Company otherwise continues).
The Executive agrees that, prior to the full-time commencement date,
he will cooperate in connection with transitional matters, including the
issuance of press releases by the Company and meetings and communications
with its bank lenders. Press releases related to the Executive's
commencement of employment hereunder shall be subject to the reasonable
review and approval of the Executive.
Notwithstanding any provision of this Agreement to the contrary, in
the event that the Executive fails to commence as Chief Operating Officer
of the Company on October 1, 1999, for any reason whatsoever (other than
because of the Company's refusal to permit the Executive to so commence
when he is ready, willing and able to do so), the Company shall have the
right, in its sole discretion, to void this Agreement by written notice to
the Executive and, thereafter, shall have no monetary or other obligations
to the Executive under this Agreement whatsoever, but shall pay on behalf
of the Executive the legal fees described in Section IV.D, and shall pay to
the Executive the amounts described in the first sentence of Section II.
Notwithstanding the foregoing, (i) if the Executive may not commence
employment as a result of short-term illness, the October 1, 1999 date
specified above shall be extended until the Executive recovers, but not
beyond November 1, 1999; and (ii) if the Executive has provided transition
services to the Company in anticipation of commencing employment, but does
not commence employment other than because of his wilful refusal to
commence employment, he shall be compensated for such services by the
Company, as an independent contractor (within 30 days after his
presentation of an itemized bill), at the rate of $250 for each hour of
such services.
SECTION IV
COMPENSATION AND BENEFITS
A. Compensation
During the Period of Employment, the Company agrees to pay the
Executive a base salary at an annual rate of (i) through January 1, 2001,
Five Hundred Thousand Dollars ($500,000.00); (ii) from and after January 2,
2001 and through December 30, 2001, Five Hundred Twenty-Five Thousand
Dollars ($525,000.00); and (iii) from and after December 31, 2001 and
through December 31, 2002, Five Hundred Fifty Thousand Dollars
($550,000.00). Thereafter, the Executive's Base Salary shall be reviewed
at least annually by the Compensation Committee and may be increased (but
not decreased) as it deems appropriate. The base salary amount in effect
from time to time during the Period of Employment shall hereinafter be
referred to as "Base Salary." Such Base Salary shall be payable according
to the customary payroll practices of the Company as in effect from time to
time, but in no event less frequently than once each month.
B. Annual Incentive and Other Bonus
(1) The Executive will be eligible for an annual incentive bonus
("Annual Incentive Bonus"). For the Period of Employment through January
1, 2001, the Executive shall be entitled to receive an Annual Incentive
Bonus in the amount of Five Hundred Seventy-Five Thousand Dollars
($575,000.00) (the "Guaranteed Bonus"), with Three Hundred Thousand Dollars
($300,000.00) of such Guaranteed Bonus payable on the full-time
commencement date; One Hundred Thousand Dollars ($100,000.00) of such
Guaranteed Bonus payable on each of the ninetieth (90th) and one hundred
eightieth (180th) day after the full-time commencement date; and Seventy-
Five Thousand Dollars ($75,000.00) of such Guaranteed Bonus payable on the
two hundred seventieth (270th) day after the full-time commencement date;
provided in each case that the Executive is then in the employ of the
Company or his employment has terminated due to death, Disability, by the
Company Without Cause, or by the Executive for Good Reason After Change in
Control, all as defined below. If the Executive terminates his employment
with the Company before January 2, 2001, other than for Good Reason After
Change in Control, he shall only be entitled to the Guaranteed Bonus to the
extent it has been paid as of the date of his termination, and if the
Executive's employment is terminated by the Company With Cause before
January 2, 2001, he shall only be entitled to such portion of the
Guaranteed Bonus equal to the sum of (i) Three Hundred Thousand Dollars
($300,000.00), plus (ii) a portion of the remainder of the bonus determined
by multiplying Two Hundred Seventy-Five Thousand Dollars ($275,000.00) by a
fraction, the numerator of which is the number of days he was employed
hereunder and the denominator of which is the number of days from the full-
time commencement date specified in Section III through January 2, 2001,
and, he shall not be entitled to any remaining portion of the Guaranteed
Bonus, and, to the extent necessary to accomplish the foregoing, he shall
return the Guaranteed Bonus that he has already received (in four equal
installments on the first day of each of the first four months after his
termination).
(2) From and after January 3, 2001, for each fiscal year of the
Period of Employment, the Executive will be eligible for an Annual
Incentive Bonus under the Company's Incentive Bonus Plan and this Agreement
with a threshold award of thirty percent (30%), a target award of sixty
percent (60%) and a maximum award of ninety percent (90%) of the
Executive's Base Salary for such fiscal year, payable to the Executive in
accordance with the Company's Incentive Bonus Plan based on the achievement
of reasonable, mutually agreed upon operational and financial goals (with
corresponding goals established for the payment of threshold, target and
maximum awards, and awards between the goals determined by straight line
interpolation) as established by the Executive and approved by the Board of
Directors and the Compensation Committee in a manner that will cause such
awards to constitute performance-based compensation for purposes of Section
162(m) of the Internal Revenue Code (the "Code").
C. Equity Incentives
(1) As of the effective date hereof, (i) the Company shall grant
to the Executive a nonstatutory stock option (one that is not intended to
be an incentive stock option under Section 422 of the Code) (an "NSO")
under the APAC TeleServices, Inc. Amended and Restated 1995 Incentive Stock
Plan (the "Stock Plan") covering One Hundred Thousand (100,000) shares of
the Common Stock of the Company at an exercise price equal to the mean
between the high and low prices at which the Company's Common Stock traded
on the date of grant, as reported on the NASDAQ National Market System, and
(ii) the Company shall grant to the Executive an NSO under the Stock Plan
covering One Million (1,000,000) shares of the Common Stock of the Company
at an exercise price equal to the mean between the high and low prices at
which the Company's Common Stock traded on the date of grant, as reported
on the NASDAQ National Market System; provided that, the grant under this
clause (ii) shall not be exercisable unless shareholder approval of the
amendment to the Stock Plan's limits necessary to permit the grant is
secured and shall only be exercisable as otherwise provided in this
Agreement.
Subject to the Executive's continuing employment with the Company
through the date(s) on which specified portion(s) of the foregoing options
become exercisable (as hereinafter described), and except as otherwise
provided with respect to options becoming exercisable pursuant to Section
VIII.A-C, the foregoing options shall become exercisable with respect to
40% of the shares subject thereto on the second anniversary of the full-
time commencement date, and cumulatively as to an additional 20% of the
shares subject to the options on each succeeding anniversary, so that it
shall be fully exercisable on the fifth such anniversary. Commencing in
the March following the first anniversary of the full-time commencement
date, and continuing thereafter on the schedule applicable to other senior
executives, the Company will make additional option grants to the Executive
based on the Compensation Committee's assessment of his performance, with
each such option grant anticipated to cover between Seventy Five Thousand
(75,000) (if the Executive's and the Company's performances have been at a
target level under the Annual Incentive Plan) and One Hundred Thousand
(100,000) shares of the Company's Common Stock (if the maximum goal used
for such purpose has been met or exceeded), with grant sizes between target
and maximum performance determined by straight line interpolation. If a
Change in Control, as defined below, occurs, then to the extent any option
previously granted to the Executive is then not exercisable, its
exercisability shall accelerate as to fifty percent (50%) of the previously
unexercisable portion, and such option shall thereafter become additionally
exercisable (if at all) to the extent it would have been exercisable
without such acceleration.
(2) The Company shall submit the above-described amendment to
the Stock Plan to a vote of its shareholders no later than the 2000 Annual
Meeting of Shareholders.
D. Additional Benefits
The Executive will be entitled to participate in all compensation or
employee benefit plans or programs and receive all benefits and perquisites
for which the Chairman or any direct report to the Executive ("senior
executive") is eligible under any existing or future plan or program
established by the Company for senior executive employees. The Executive
will participate to the extent permissible under the terms and provisions
of such plans or programs in accordance with plan or program provisions,
subject in each case to the conditions, limitations and restrictions
imposed on the receipt of benefits under such plan or program. These may
include group medical, life or other insurance, tax qualified pension,
savings, thrift and profit sharing plans, termination pay programs, sick
leave plans, travel or accident insurance, short and long term disability
insurance, and contingent compensation plans including capital accumulation
programs, restricted stock programs, stock purchase programs and stock
option plans. Nothing in this Agreement will preclude the Company from
amending or terminating any of the plans or programs applicable to senior
executive employees of the Company. Notwithstanding the foregoing
sentence, no such amendment or termination shall reduce or otherwise
adversely affect the Executive's rights under Section IV.C. of this
Agreement. In addition to the foregoing benefits, the Executive shall be
entitled to receive a paid vacation of four (4) weeks during each year of
the Period of Employment; provided that such vacation shall be prorated for
partial calendar years and may be carried over or cashed out, if at all,
only in accordance with general Company policies as in effect from time to
time.
In addition, the Company shall pay, on behalf of the Executive, the
reasonable attorneys' fees incurred by him in connection with the
negotiation and preparation of this Agreement.
SECTION V
BUSINESS EXPENSES
The Company will reimburse the Executive for all reasonable travel and
other business expenses incurred by the Executive in connection with the
performance of his duties and responsibilities under this Agreement. The
Executive must support all expenditures with customary receipts and expense
reports subject to review in accordance with the Company's regular policy
regarding expense reimbursement.
SECTION VI
DISABILITY
The Executive's employment hereunder may be terminated by the Company
during the Period of Employment if (i) the Executive becomes physically or
mentally incapacitated, (ii) the Executive is unable for a period of one
hundred eighty (180) consecutive days to perform his material duties and
responsibilities and (iii) a physician appointed by the Chief of Medicine
of Evanston Northwestern Healthcare Hospital, Evanston, Illinois, or
another health professional designated by the Executive and agreed upon by
the Company determines that the Executive's incapacity is continuing beyond
such one hundred eighty (180) day period (such continued incapacity is
hereinafter referred to as "Disability"). Upon any such termination for
Disability, the Executive shall be entitled to receive (i) his Base Salary
through the date on which the Executive is first eligible to receive
payment of long term disability benefits under the Company's long term
disability benefit plan as then in effect covering the Executive; (ii) if
such date is on or before January 2, 2001, the remaining payments of his
Guaranteed Bonus as described in Section IV.B(1); (iii) if such date is
after January 2, 2001, his Annual Incentive Bonus at target, prorated
through such date; and (iv) his accrued benefits under the terms of the
plans, policies and procedures of the Company, including any plans or
programs in which he participates pursuant to Section IV.D.
SECTION VII
DEATH
In the event that the Executive's employment is terminated because of
his death during the Period of Employment, (i) the Executive's estate shall
be entitled to receive his Base Salary through the date of the Executive's
death; (ii) the Executive's estate shall be entitled to receive (A) if such
date is on or before January 2, 2001, the remaining payments of his
Guaranteed Bonus as described in Section IV.B(1); or (B) if such date is
after January 2, 2001, his Annual Incentive Bonus at target, prorated
through such date, and (iii) the Executive's designated beneficiary or
estate, as the case may be, shall be entitled to his accrued benefits,
including, but not limited to, life insurance proceeds, under the terms
of the plans, policies and procedures of the Company, including any plans
or programs in which he participates pursuant to Section IV.D.
SECTION VIII
EFFECT OF TERMINATION OF EMPLOYMENT
A. Termination Without Cause
If the Company terminates the Executive's employment Without Cause on
or before December 31, 2001, the Executive shall be entitled to receive
continued payment of an amount equal to his Base Salary, through December
31, 2002; provided that, if the Executive's employment terminates Without
Cause before January 1, 2001, the total amount of such payments that would
have been continued through December 31, 2002 shall instead be allocated
equally over a twenty-four (24) month period. If the Company terminates
the Executive's employment Without Cause after December 31, 2001 and before
the end of the Period of Employment, the Executive shall be entitled to
receive continued payment of an amount equal to his Base Salary, for a
period of one (1) year. In either case, such continued Base Salary shall
be payable according to the customary payroll practices of the Company, but
in no event less frequently than once each month. Notwithstanding the
foregoing, if a Change in Control occurs after the Executive's termination
Without Cause, the Company shall use its best efforts to pay the remaining
payments due to him under this paragraph in a lump sum as soon as
practicable and, if reasonably feasible, before consummation of the Change
in Control, but in any event not later than within thirty (30) days after
the Change in Control.
In addition, if the Company terminates the Executive's employment
Without Cause before the end of the Period of Employment, the Executive
shall (i) if the termination occurs after January 2, 2001, receive an
amount equal to the prorated Annual Incentive Bonus, if any, payable under
the Company's Incentive Bonus Plan based on actual performance for the year
in which the termination of employment occurred (based on the number of
days in such year through the date of termination), payable at the same
time that bonuses are paid for such year, (ii) receive his accrued benefits
under the terms of the plans, policies and procedures of the Company,
including any plans or programs in which he participates pursuant to
Section IV.D, (iii) have, for vesting schedule purposes only, the vesting
of each Company stock option granted to the Executive determined as if the
Executive's employment had terminated on the next anniversary of the date
of grant (provided that, if a stock option by its terms shall not have
vested in any respect as of such anniversary, it shall nonetheless be
exercisable with respect to no fewer than twenty percent (20%) of the
shares subject thereto), (iv) receive payment for all accrued but unused
vacation, and (v) be entitled to payment, when due, by the Company of any
premiums for continued Company health care coverage under Section 4980B of
the Code, to the extent elected by the Executive and in effect.
B. Termination for Nonperformance
If the Company terminates the Executive for Nonperformance, the
Executive shall be entitled to receive continued payment of an amount equal
to his Base Salary for one-half (1/2) of the period that would then apply
if the Company had terminated his employment Without Cause, or if greater,
for one (1) year. In addition, the Executive shall (i) receive an amount
equal to the one-half (1/2) of a prorated Annual Incentive Bonus, if any,
payable under the Company's Incentive Bonus Plan based on actual
performance for the year in which the termination of employment occurred
(based on the number of days in such year through the date of termination),
payable at the same time that bonuses are paid for such year, (ii) receive
his accrued benefits under the terms of the plans, policies and procedures
of the Company, including any plans or programs in which he participates
pursuant to Section IV.D, (iii) have, for vesting schedule purposes only,
the vesting of one-half (1/2) of each Company stock option granted to the
Executive pursuant to this Agreement determined as if the Executive's
employment had terminated on the next anniversary of the date of grant
(provided that, if a stock option by its terms shall not have vested in any
respect as of such anniversary, it shall nonetheless be exercisable with
respect to no fewer than ten percent (10%) of the shares subject thereto),
(iv) receive payment for all accrued but unused vacation, and (v) be
entitled to payment, when due, by the Company of any premiums for continued
Company health care coverage under Section 4980B of the Code, to the extent
elected by the Executive and in effect.
C. Termination for Good Reason After Change in Control
If the Executive terminates his employment with the Company for Good
Reason After Change in Control, (i) the Executive shall be entitled to
receive a lump sum payment, within thirty (30) days after termination,
equal to the sum of (A) two (2) years' Base Salary, at the Base Salary rate
in effect on the date of the Executive's termination, and (B) if the
termination occurs (I) on or before January 2, 2001, in addition to the
remaining payments of the Guaranteed Bonus described in Section IV.(B), one
year's Annual Incentive Bonus at target (i.e., 60% of Base Salary), and
(II) after January 2, 2001, two years' Annual Incentive Bonus at target, at
the Base Salary rate in effect on the date of the Executive's termination,
(ii) all then outstanding stock options granted to the Executive shall
become exercisable (or comparable arrangements shall be made if such
options cannot be made exercisable), (iii) the Executive shall be entitled
to his accrued benefits under the terms of the plans, policies and
procedures of the Company, including any plans or programs in which he
participates pursuant to Section IV.D, (iv) the Executive shall
receive payment for all accrued but unused vacation, and (v) the Company
shall pay, when due, any premiums for continued Company health care
coverage under Section 4980B of the Code, to the extent elected by the
Executive and in effect.
D. Termination With Cause
If the employment of the Executive is terminated by the Company With
Cause, (i) the Executive shall be entitled to receive his Base Salary
prorated through the date of termination, and (ii) the Executive shall be
entitled to his accrued benefits under the terms of the plans, policies and
procedures of the Company, including any plans or programs in which he
participates pursuant to Section IV.D.
E. Effect of Terminations
Upon termination of the Executive's employment, the Period of
Employment and the Company's obligation to make payments under this
Agreement will cease as of the date of termination, except as otherwise
expressly provided in this Agreement, and any stock options held by him
that are then exercisable shall only remain exercisable for a period of
ninety (90) days. The Executive shall have the right to voluntarily
terminate this Agreement, other than for Good Reason After Change in
Control, upon sixty (60) days' prior written notice to the Company. If the
Executive voluntarily terminates his employment with the Company, other
than for Good Reason After Change in Control, (i) the Executive shall be
entitled to receive his Base Salary prorated through the date of the
Executive's voluntary termination, (ii) his Guaranteed Bonus shall be
governed by Section IV.(B), and (iii) the Executive shall be entitled to
his accrued benefits under the terms of the plans, policies and procedures
of the Company, including any plans or programs in which he participates
pursuant to Section IV.D.
F. Offset
No amount to which the Executive is entitled under this Section
shall be subject to offset for any income which he derives from employment
and/or consulting or from any other source.
G. Definitions
For this Agreement, the following terms have the following meanings:
(1) Termination "With Cause" means termination of the
Executive's employment by the Board of Directors acting in good faith by
written notice by the Company to the Executive specifying the event relied
upon for such termination, due to (A) gross misconduct or gross negligence
in the performance of the Executive's employment duties, (B) willful
disobedience by the Executive of the lawful directions received from or
policies established by the Board of Directors, which continues for more
than seven (7) days after the Company notifies the Executive of its
intention to terminate his employment on account of such
disobedience, or (C) commission by the Executive of a crime involving fraud
or moral turpitude that can reasonably be expected to have an adverse
effect on the business, reputation or financial situation of the Company.
(2) Termination "for Nonperformance" means termination, after
January 2, 2001, of the Executive's employment by the Board of Directors
acting in good faith by written notice by the Company to the Executive
specifying the event relied upon for such termination, due to failure of
the Executive and/or the Company to achieve overall financial and/or
operational objectives that are reasonable and have been established
mutually by the Executive and the Board of Directors and that are
consistent with the threshold goals described in Section IV.B.1.
(3) Termination "Without Cause" means termination by the Company
of the Executive's employment other than due to death, Disability, or
termination With Cause or termination for Nonperformance.
(4) Termination for "Good Reason After Change in Control" means
termination of the Executive's employment by the Executive (a) within three
(3) months after the Executive has (i) except as provided in clause (b)(i),
failed to be elected or reelected to the Board of Directors, or (ii) failed
to be elected or maintained as Chief Executive Officer as and when
(including agreed upon extensions) described in Section III (irrespective
of whether a Change in Control has occurred or is anticipated to occur in
the future), or (b) within twelve (12) months following a Change in Control
as defined in Section VII.G.5, but only if, after notice by the Executive
to the Company and a fifteen (15) day opportunity by the Company to cure,
(i) the Executive is not elected, reelected or otherwise continued in the
office of Chief Executive Officer and/or as a member of the Board of
Directors or (if the Board of Directors consists of only one (1) member,
the Executive Committee of the Company), (ii) the Executive's principal
place of work (not including regular business travel) is relocated by more
than fifty (50) miles, (iii) the Executive's duties, responsibilities or
authority as an executive employee are materially reduced or diminished
from those in effect on the full-time commencement date without the
Executive's written consent; provided that any reduction or diminishment in
any of the foregoing resulting merely from the acquisition of the Company
and its existence as a subsidiary or division of another entity shall not
be sufficient to constitute Good Reason After Change in Control if the
Executive is still in the senior executive position of such subsidiary or
division, (iv) the compensation received by the Executive is reduced in the
aggregate, and such reduction is not remedied within thirty (30) days of
the Executive's notice to the Company thereof, (v) a determination is made
by the Executive in good faith that as a result of the Change in Control,
and a change in circumstances thereafter and since the date of this
Agreement significantly affecting his position, he is unable to carry out
the authorities, powers, functions or duties attached to his position and
contemplated by Section II of this Agreement and the situation is not
remedied within thirty (30) days after receipt of the Company of written
notice from the Executive of such determination, (vi) the Company violates
the material terms of the Agreement, or (vii) there is a liquidation,
dissolution, consolidation or merger of the Company or transfer of all or a
significant portion of its assets unless a successor or successors (by
merger, consolidation or otherwise) to which all or a significant portion
of its assets have been transferred shall have assumed all duties and
obligations of the Company under this Agreement.
(5) A "Change in Control" shall be deemed to have occurred if
(i) a tender offer shall be made and consummated for the ownership of more
than 50% of the outstanding voting securities of the Company, (ii) the
Company shall be merged or consolidated with another corporation and as a
result of such merger or consolidation less than 50% of the outstanding
voting securities of the surviving or resulting corporation shall be owned
in the aggregate by the former shareholders of the Company, as the same
shall have existed immediately prior to such merger or consolidation, (iii)
the Company shall sell all or substantially all of its assets to another
corporation which is not a wholly-owned subsidiary or affiliate, (iv) as
the result of, or in connection with, any contested election for the Board
of Directors, or any tender or exchange offer, merger or business
combination or sale of assets, or any combination of the foregoing (a
"Transaction"), the persons who were Directors of the Company before the
Transaction shall cease to constitute a majority of the Board of Directors
of the Company, or any successor thereto, or (v) a person, within the
meaning of Section 3(a)(9) or of Section 13(d)(3) (as in effect on the date
hereof) of the Securities and Exchange Act of 1934 ("Exchange Act"), other
than any employee benefit plan then maintained by the Company, shall
acquire more than 50% of the outstanding voting securities of the Company
(whether directly, indirectly, beneficially or of record). For purposes
hereof, ownership of voting securities shall take into account and shall
include ownership as determined by applying the provisions of Rule 13d-
3(d)(1)(i) (as in effect on the date hereof) pursuant to the Exchange Act.
Notwithstanding the foregoing, (i) a Change in Control will not occur for
purposes of this Agreement merely due to the death of Theodore G. Schwartz,
or as a result of the acquisition, by Theodore G. Schwartz, alone or with
one or more affiliates or associates, as defined in the Exchange Act, of
securities of the Company, as part of a going-private transaction or
otherwise, unless Mr. Schwartz or his affiliates, associates, family
members or trusts for the benefit of family members (collectively, the
"Schwartz Entities") do not control, directly or indirectly, at least
twenty-seven percent (27%) of the resulting entity, and (ii) if the
Schwartz Entities control, directly or indirectly, less than twenty-seven
percent (27%) of the Company's voting securities while it is a public
company, then "33-1/3%" shall be substituted for "50%" in clauses (i), (ii)
and (v) of the first sentence of this paragraph.
SECTION IX
OTHER DUTIES OF THE EXECUTIVE DURING
AND AFTER THE PERIOD OF EMPLOYMENT
A. Cooperation During and After Employment
The Executive will, with reasonable notice during or after the Period
of Employment, furnish information as may be in his possession and
cooperate with the Company as may reasonably be requested in connection
with any claims or legal actions in which the Company is or may become a
party.
B. Restrictive Covenant Agreement
The Executive agrees that in order to protect the business interests
of the Company, he shall, contemporaneously with his execution of this
Agreement, execute the Restrictive Covenant Agreement, a copy of which is
appended to this Agreement as Attachment I and made a part hereof and
incorporated herein in its entirety by reference. The Executive further
agrees that he will execute such modifications to the Restrictive Covenant
Agreement as may be reasonably requested by the Company in order to conform
such Restrictive Covenant Agreement to applicable law.
SECTION X
INDEMNIFICATION
The Company will indemnify the Executive to the fullest extent
permitted by the laws of the state of incorporation in effect at that time,
or certificate of incorporation and by-laws of the Company, whichever
affords the greater protection to the Executive. The Company will obtain
and maintain customary directors and officers liability insurance covering
executive employees of the Company.
SECTION XI
WITHHOLDING TAXES
The Company may directly or indirectly withhold from any payments
under this Agreement all federal, state, city or other taxes that shall be
required pursuant to any law or governmental regulation.
SECTION XII
EFFECT OF PRIOR AGREEMENTS
This Agreement contains the entire understanding between the Company
and the Executive with respect to the subject matter and supersedes any
prior term sheet, letter of understanding, employment, severance, or other
similar agreements between the Company, its predecessors and its
affiliates, and the Executive. This Agreement and the matters contemplated
hereby do not contravene any other agreement to which either the Executive
or the Company is a party
SECTION XIII
CONSOLIDATION, MERGER OR SALE OF ASSETS
Nothing in this Agreement shall preclude the Company from
consolidating or merging into or with, or transferring all or substantially
all of its assets to, another corporation which assumes this Agreement and
all obligations and undertakings of the Company hereunder. Upon such a
consolidation, merger or sale of assets, the term "the Company" as used
will mean the other corporation and this Agreement shall continue in full
force and effect. This Section XIII is not intended to modify or limit the
rights of the Executive hereunder, including without limitation, the rights
of the Executive under Section VIII. As of the date of this Agreement, no
such transaction is contemplated by the Company.
SECTION XIV
SECTION 280G
Notwithstanding any provision of this Agreement to the contrary, in
the event that:
(i) the aggregate payments or benefits to be made or afforded to the
Executive under this Agreement or from the Company in any other
manner (the "Termination Benefits") would be deemed to include an
"excess parachute payment" under Section 280G of the Code, or any
successor thereto, and
(ii) if such Termination Benefits were reduced to an amount (the
"Non-Triggering Amount"), the value of which is one dollar
($1.00) less than an amount equal to three (3) times the
Executive's "base amount," as determined in accordance with said
Section 280G, and the Non-Triggering Amount would be greater than
the aggregate value of the Termination Benefits (without such
reduction) minus the amount of tax required to be paid by
Executive thereon by Section 4999 of the Code, then the
Termination Benefits under this Agreement shall be reduced so
that the Termination Benefits are not more than the
Non-Triggering Amount. The application of said Section 280G, and
the allocation of the reduction required by this Section, shall
be determined by the Company's auditors.
SECTION XV
MODIFICATION
This Agreement may not be modified or amended except in writing signed
by the parties. No term or condition of this Agreement will be deemed to
have been waived, except in writing by the party charged with waiver. A
waiver shall operate only as to the specific term or condition waived and
will not constitute a waiver for the future or act on anything other than
that which is specifically waived.
SECTION XVI
GOVERNING LAW; ARBITRATION
This Agreement has been executed and delivered in the State of
Illinois and its validity and interpretation shall be governed by the laws
of that State, without giving effect to its conflicts of law provisions.
Any dispute among the parties hereto shall be settled by arbitration in
accordance with the then applicable rules of the American Arbitration
Association and judgment upon the award rendered may be entered in any
court having jurisdiction thereof.
SECTION XVII
NOTICES
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered or
mailed first-class postage prepaid by registered mail, return receipt
requested, or when delivered if by hand, overnight delivery services or
confirmed facsimile transmission, to the following:
(i) If to the Company, at:
APAC Customer Services, Inc.
One Parkway North Center
Deerfield, IL 60015
Attn: Chairman
With a copy to:
David M. Weiner, Esq.
Seyfarth, Shaw, Fairweather & Geraldson
55 East Monroe Street
Suite 4200
Chicago, IL 60603
or at such other address as may have been furnished to the Executive by the
Company in writing; or
(ii) If to the Executive, at his home address as reflected on the
Company's records, with a copy to:
William W. Merten, Esq.
McDermott, Will & Emery
227 West Monroe Street
Chicago, IL 60606
or such other address as may have been furnished to the Company by the
Executive in writing.
SECTION XVIII
BINDING AGREEMENT
This Agreement shall be binding on the parties' successors, heirs and
assigns, however this Agreement, and the rights and obligations hereunder,
may not (except as contemplated by Sections VIII.G(4) and XIII) be assigned
by either party without the prior express written consent of the other
party.
SECTION XIX
MISCELLANEOUS
A. Multiple Counterparts; Facsimile Signatures
This Agreement may be executed in multiple counterparts with the same
force and effect as if both parties had executed the same document. The
signature of a party furnished by facsimile shall be as effective as the
party's original signature on the document.
B. Severability
If any phrase, clause or provision of this Agreement is declared
invalid or unenforceable by a court of competent jurisdiction, such phrase,
clause or provision shall be deemed severed from this Agreement, but will
not affect any other provisions of this Agreement, which shall otherwise
remain in full force and effect. In addition, there will be automatically
substituted herein for such severed phrase, clause or provision a phrase,
clause or provision as similar as possible which is valid and enforceable.
C. Headings
The headings and subheadings of this Agreement are inserted for
convenience of reference only and are not to be considered in construction
of the provisions hereof.
D. Construction
The Company and the Executive acknowledge that this Agreement was the
result of arm's-length negotiations between sophisticated parties each
afforded representation by legal counsel. Each and every provision of this
Agreement shall be construed as though both parties participated equally in
the drafting of same, and any rule of construction that a document shall be
construed against the drafting party shall not be applicable to this
Agreement.
E. Survivorship
The provisions of Sections IV-XIX shall survive the termination or
expiration of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
COMPANY
APAC CUSTOMER SERVICES, INC.
By: Theodore G. Schwartz
Its: Chief Executive Officer
EXECUTIVE
/s/ Peter M. Leger
-----------------------------
Peter M. Leger
ATTACHMENT I
RESTRICTIVE COVENANT AGREEMENT
This Agreement made as of the 21st day of September, 1999, in
Deerfield, Illinois by and between APAC Customer Services, Inc., an
Illinois corporation on behalf of itself and its subsidiaries ("Employer")
and Peter M. Leger ("Employee").
WHEREAS, the Employer is in the business of performing telephone based
outsourcing services, including but not limited to inbound, outbound,
interactive and customer optimization services, and the Employer may
provide other related services on an internet or other basis; and
WHEREAS, Employer's telephone based outsourcing services are utilized
by a wide range of clients engaged in various business endeavors throughout
the continental United States, and Employer has, in the course of its
business, established a client base, a client list and an ongoing
relationship with its customers; and
WHEREAS, the employment relationship of the parties is being
established pursuant to the terms of an Employment Agreement of even date
herewith; and
WHEREAS, in consideration of the employment of Employee under such
Employment Agreement, and the payments provided to Employee thereunder, and
other good and valuable consideration, the receipt and sufficiency of which
are hereof acknowledged, Employee and Employer agree to execute and be
bound by this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
promises and covenants contained herein the parties agree as follows:
1. Recitals. Each of the above recitals are incorporated in this
Agreement and are binding upon the parties hereof. This Agreement
supersedes any and all previous agreements, understandings and commitments
between Employer and Employee with respect to the subject matter hereof.
Each such agreement, understanding and commitment is hereby revoked and
canceled.
2. Employee's Representation. Employee hereby represents and
warrants to and with employer that Employee is not subject to any
covenants, agreements or restrictions including without limitation any
covenants, agreement or restrictions arising out of Employee's prior
employment or independent contractor relationships, which would be breached
or violated by Employee's execution of this Agreement or by Employee's
performance of his duties hereunder. Employee acknowledges that it is
Employer's express policy and procedure to abstain from the use or
disclosure of the trade secrets and proprietary information of third
parties, and Employee hereby expressly covenants that he will not, in the
performance of his duties hereunder, use or disclose the trade secrets or
proprietary information of third parties.
3. Confidentiality. Employee acknowledges that by virtue of his
employment or continued employment with Employer, he has been and/or will
be exposed to or has had or will have access to confidential information
regarding Employer's business of the most sensitive nature, including but
not limited to, trade secrets and proprietary information, all of which are
proprietary to Employer. Employee further acknowledges that it would be
possible for an employee, upon termination of his association with Employer
to use the knowledge or information obtained while working for or with
Employer to benefit other individuals or entities. Employee acknowledges
that Employer has expended considerable time and resources in the
development of certain confidential information used in connection with its
businesses, including without limitation business strategies and goals,
accounting methodology, pricing systems, advertising brochures and
materials, graphic and other designs, telemarketing programs and
techniques, copyrighted and non-copyrighted software source codes or object
codes, technology applications and advances, client and client prospect
lists or records, telephone calling lists, hiring, screening, training,
quality assurance and supervisory techniques, methods and know-how, client
information, client mark-ups, information regarding independent
contractors, use and utilization of copyrights, confidential information
and trade secrets of third parties, marketing techniques, supplier
information, and, generally, the confidential information of Employer which
gives, or may give, Employer an advantage in the marketplace against its
competitors (all of the foregoing being herein referred to collectively as
"Proprietary Information"), and which have been disclosed to or learned by
Employee solely for the purpose of Employee's employment with Employer.
Employee acknowledges that Employer's Proprietary Information constitutes a
proprietary and exclusive interest of Employer, and, therefore, Employee
agrees to hold and keep secret the Proprietary Information as described
herein and the confidential information of the clients of the Employer
which Employee has learned in his capacity as an employee of Employer (the
"Client Information"), as to which Employee is now or any time during his
employment shall become informed, and Employee shall not directly or
indirectly disclose any Proprietary Information or Client Information to
any person, firm, court, governmental agency or corporation or use the same
except in connection with the business and affairs of Employer.
4. Non-Competition. Employee agrees that during his employment and
for a period of twenty-four (24) months after the termination thereof for
any reason whatsoever, Employee will not participate, either directly or
indirectly, for himself or for any third party, in soliciting, selling,
administering, managing, or performing telephone based or internet based,
outsourcing, for or on behalf of: (a) any customer of Employer which was a
customer during any part of Employee's employment; (b) any person,
corporation, or other entity to whom the Employer made a written or oral
bid or presentation during Employee's employment; or (c) any person,
corporation, or other entity regarding which Employer had developed
confidential information and Employee became aware of such confidential
information as a result of his employment.
5. Non-Disturbance of Employees; Non-Disparagement. Employee
covenants that during his employment and for a period of twenty-four (24)
months after the termination thereof, for any reason whatsoever, Employee
shall not, directly or indirectly, as an employee, agent, salesman or
member of any person, corporation, firm or otherwise (a) solicit any
employee or agent of Employer or make such other contact with the employees
or agents of Employer, the product of which contact will or may yield a
termination of the employment or agency relationship of such employees or
agents from Employer or (b) make or cause others to make, whether in
writing or orally, disparaging statements or inferences with respect to the
Employer, its business, officers or shareholders.
6. Return of Materials. Employee will, at any time upon the request
of Employer, and in any event upon the termination of his employment, for
whatever reason, immediately return and surrender to Employer originals and
all copies of all records, notes, memoranda, electronic files, personal
computers, computer discs, computer equipment, telephones, price lists,
client and client prospects lists, business plans, recordings and other
documents and other property belonging to Employer, created or obtained by
Employee as a result of or in the course of or in connection with
Employee's employment with Employer hereunder. Employee acknowledges that
all such materials are, and will always remain, the exclusive property of
Employer.
7. Inventions. If at any time or times during his employment
hereunder, the Executive shall (either alone or with others) make,
conceive, discover or reduce to practice any invention, modification,
discovery, design, development, improvement, process, software program,
work of authorship, documentation, formula, data, technique, know-how,
secret or intellectual property right whatsoever or any interest therein
whether or not patentable or registrable under copyright or similar
statutes or subject to analogous protection) (herein called "Developments")
that (a) relates to the business of the Company or any customer of or
supplier to the Company or any of the products or services being developed,
manufactured or sold by the Company or which may be used in relation
therewith, (b) results from tasks assigned to the Executive by the Company
or (c) results from the use of premises or personal property (whether
tangible or intangible) owned, leased or contracted for by the Company,
such Developments and the benefits thereof shall immediately become the
sole and absolute property of the Company and its assigns, and the
Executive shall promptly disclose to the Company (or any persons designated
by it) each such Development and the Executive hereby assigns any rights he
may have or acquire in the Developments and benefits and/or rights
resulting therefrom to the Company and its assigns without further
compensation and shall communicate, without cost or delay, and without
publishing the same, all available information relating thereto (with all
necessary plans and models) to the Company.
Upon disclosure of each Development to the Company, the Executive
will during his employment and at any time thereafter, at the request and
cost of the Company, sign, execute, make and do all such deeds, documents,
acts and things as the Company and its duly authorized agents may
reasonable require:
(a) to apply for, obtain and vest in the name of the Company
alone (unless the Company otherwise directs) letters patent,
copyrights or other analogous protection in any country throughout the
world and when so obtained or vested to renew and restore the same;
and
(b) to defend any opposition proceedings in respect of such
applications and any opposition proceedings or petitions or
applications for revocation of such letters patent, copyright or other
analogous protection.
8. Remedies.
(a) Employee further acknowledges that in the event his
employment with Employer terminates for any reason, he will be able to
earn a livelihood without violating the foregoing restrictions and
that his ability to earn a livelihood without violating such
restrictions is a material condition to his employment with Employer.
(b) Employee acknowledges that compliance with the restrictive
covenants set forth in Paragraphs 2 through 7 herein is necessary to
protect the business, goodwill and Proprietary Information of Employer
and that a breach of these restrictions will irreparably and
continually damage Employer for which month damages may not be
adequate. Consequently, Employee agrees that, in the event that he
breaches or threatens to breach any of these covenants, Employer shall
be entitled to both (1) a temporary, preliminary or permanent
injunction in order to prevent the continuation of such harm and (2)
money damages insofar as they can be determined. Nothing in this
Agreement, however, shall be construed to prohibit Employer from also
pursuing any other remedy, the parties having agreed that all remedies
are to be cumulative. The parties expressly agree that the Employer
may, in its sole discretion, choose to enforce the restrictive
covenants in Paragraphs 2 through 7 hereof, in part, or to enforce any
of said restrictive covenants to a lesser extent than set forth
herein. As money damages for the period of time during which Employee
violates these covenants, Employer shall be entitled to recover the
amount of fees, compensation or other remuneration earned by Employee
as a result of any such breach.
9. Revision. In the event that any of the provisions, covenants,
warranties or agreements in this Agreement are held to be in any respect an
unreasonable restriction upon or are otherwise invalid, for whatsoever
cause, then the court so holding shall reduce and is so authorized to
reduce, the territory to which it pertains and/or the period of time in
which it operates, or the scope of activity to which it pertains or effect
any other change to the extent necessary to render any of the restrictions
of this Agreement enforceable.
10. General Provisions.
(a) Severability. Each of the terms and provisions of this Agreement
is to be deemed severable in whole or in part and, if any term or
provisions of the application thereof in any circumstances should be
invalid, illegal or unenforceable, the remaining terms and provisions or
the application thereof to circumstances other than those as to which it is
held invalid, illegal or unenforceable, shall not be affected thereby and
shall remain in full force and effect.
(b) Binding Agreement. This Agreement shall be binding upon the
parties, their heirs, successors, personal representatives and assigns.
Employer may assign this Agreement to any successor in interest to the
business, or part thereof, of Employer. Employee may not assign any of his
obligations or duties hereunder.
(c) Controlling Law and Jurisdiction. This Agreement shall be
governed by and interpreted and construed according to the laws of the
State of Illinois. Employee hereby consents to the jurisdiction of the
state and federal courts in Illinois in the event that any disputes arise
under this Agreement.
(d) Failure to Enforce. The failure to enforce any of the provisions
of this Agreement shall not be construed as a waiver of such provisions.
Further, any express waiver by any party with respect to any breach of any
provisions hereunder by any other party shall not constitute a waiver of
such party's right to thereafter fully enforce each and every provision of
the Agreement.
(e) Survival. The obligations contained in this Agreement shall
survive the termination, for any reason whatsoever, for cause or otherwise,
of Employee's employment with Employer.
(f) Gender. The masculine, feminine or neuter pronouns used herein
shall be interpreted without regard to gender, and the use of the singular
or plural shall be deemed to include the other whenever the context so
requires.
(g) Attorney's Fees. In the event, Employer must retain an attorney
to enforce the terms of this Agreement, Employee shall be liable to
Employer for the amount of such reasonable attorney's fees and other costs
incurred by Employer.
WHEREFORE, the parties have executed this Agreement on the date and
year first above written.
EMPLOYER: EMPLOYEE:
By: APAC Customer Services, Inc.
By: Theodore G. Schwartz /s/ Peter M. Leger
---------------------------- ----------------------------
Its Chief Executive Officer Peter M. Leger
<TABLE>
<CAPTION>
Exhibit 11
----------
APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
THIRTEEN (13) WEEKS ENDED THIRTY-NINE (39) WEEKS ENDED
------------------------------ ------------------------------
OCTOBER 3, SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27,
1999 1998* 1999 1998*
(000's omitted, except per share data)
Basic shares:
<S> <C> <C> <C> <C>
Average shares outstanding 48,973 48,505 48,946 48,773
Income (loss):
Continuing operations $1,929 $3,613 $2,873 $6,008
Discontinued operations 0 (190) 0 (1,256)
------- ------- ------- -------
Net income $1,929 $3,423 $2,873 $4,752
======= ======= ======= =======
Income (loss) per share:
Continuing operations $0.04 $0.07 $0.06 $0.12
Discontinued operations 0.00 (0.00) 0.00 (0.02)
------- ------- ------- -------
Net income $0.04 $0.07 $0.06 $0.10
======= ======= ======= =======
Diluted shares:
Average shares outstanding 48,973 48,505 48,946 48,773
Net effect of dilutive stock
options-based upon the
treasury stock method using
quarter-end market price 599 1,451 252 817
------- ------- ------- -------
Total shares 49,572 49,956 49,198 49,590
======= ======= ======= =======
Income (loss):
Continuing operations $1,929 $3,613 $2,873 $6,008
Discontinued operations 0 (190) 0 (1,256)
------- ------- ------- -------
Net income $1,929 $3,423 $2,873 $4,752
======= ======= ======= =======
Income (loss) per share:
Continuing operations $0.04 $0.07 $0.06 $0.12
Discontinued operations 0.00 (0.00) 0.00 (0.02)
------- ------- ------- -------
Net income $0.04 $0.07 $0.06 $0.10
======= ======= ======= =======
*Reclassified to conform to current year's classifications.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS AS OF OCTOBER 3, 1999 AND FOR THE
THIRTY-NINE WEEKS ENDED OCTOBER 3, 1999 CONTAINED IN THE
COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED
OCTOBER 3, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> Jan-02-2000 Jan-03-1999
<PERIOD-END> Oct-03-1999 Sep-27-1998<F1>
<CASH> 250 13,017
<SECURITIES> 0 0
<RECEIVABLES> 86,955 80,839
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 112,710 120,692
<PP&E> 139,656 153,340
<DEPRECIATION> 67,162 57,829
<TOTAL-ASSETS> 244,670 352,684
<CURRENT-LIABILITIES> 70,483 78,871
<BONDS> 120,104 137,143
0 0
0 0
<COMMON> 490 489
<OTHER-SE> 44,699 125,055
<TOTAL-LIABILITY-AND-EQUITY> 244,670 352,684
<SALES> 0 0
<TOTAL-REVENUES> 313,584 309,999
<CGS> 0 0
<TOTAL-COSTS> 254,550 247,195
<OTHER-EXPENSES> 43,589 46,661
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 10,372 5,155
<INCOME-PRETAX> 5,073 10,988
<INCOME-TAX> 2,200 4,980
<INCOME-CONTINUING> 2,873 6,008
<DISCONTINUED> 0 (1,256)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,873 4,752
<EPS-BASIC> 0.06 0.10
<EPS-DILUTED> 0.06 0.10
<FN>
<F1> Period ended September 27, 1998, reclassified for discontinued operations
to conform to current year's classifications.
</TABLE>
