<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED APRIL 2, 2000
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 (I.R.S. Employer
of Incorporation or organization) Identification No.)
SIX PARKWAY NORTH CENTER, SUITE 400, DEERFIELD, ILLINOIS 60015
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (847) 374-4980
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 49,412,458 shares outstanding as of May 12,
2000.
===============================================================================
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets as of April 2, 2000, and
January 2, 2000. ....................................................................... 3
Consolidated Condensed Statements of Operations for the Thirteen Weeks Ended
April 2, 2000, and April 4, 1999. ...................................................... 4
Consolidated Condensed Statements of Cash Flows for the Thirteen Weeks
Ended April 2, 5 2000, and April 4, 1999. .............................................. 5
Notes to Consolidated Condensed Financial Statements. .................................. 6-8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations... 9-13
Item 3. Quantitative and Qualitative Disclosures About Market Risk ............................. 13
PART II. OTHER INFORMATION
Item 1. Litigation .............................................................................. 14
Item 2. Changes in Securites .................................................................... 14
Item 6. Exhibits and Reports on Form 8-K ........................................................ 14
</TABLE>
Page 2
<PAGE>
APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 2, JANUARY 2,
2000 2000
ASSETS (Unaudited) (Audited, Note 1)
- ------------------------------------------------------------------ ---------------------- ----------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 27,630 $ 18,876
Accounts receivable, net 71,368 72,031
Net assets of discontinued operations - 10,028
Other current assets 14,031 14,346
---------------------- ----------------------
Total current assets 113,029 115,281
PROPERTY AND EQUIPMENT 135,920 133,960
Less--accumulated depreciation 75,176 68,076
---------------------- ----------------------
Property and equipment, net 60,744 65,884
GOODWILL AND OTHER INTANGIBLE ASSETS 61,009 61,009
Less--accumulated amortization 9,533 8,468
---------------------- ----------------------
Goodwill and other intangible assets, net 51,476 52,541
OTHER ASSETS 6,911 2,774
---------------------- ----------------------
Total assets 232,160 236,480
====================== ======================
LIABILITIES AND
SHARE OWNERS' EQUITY
- ------------------------------------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 16,482 $ 16,808
Accounts payable 4,628 7,588
Other current liabilities 43,973 38,928
---------------------- ----------------------
Total current liabilities 65,083 63,324
LONG-TERM DEBT, LESS CURRENT MATURITIES 100,873 115,987
DEFERRED INCOME TAXES 2,636 2,623
OTHER LIABILITIES 5,694 5,924
COMMITMENTS AND CONTINGENCIES
SHARE OWNERS' EQUITY:
Preferred shares, $0.01 par value; 50,000,000 shares
authorized; none issued and outstanding - -
Common shares, $0.01 par value; 200,000,000
shares authorized; 49,370,371 shares issued
at April 2, 2000; 49,079,617 shares issued at
January 2, 2000 494 491
Additional paid-in capital 98,074 94,945
Accumulated deficit (37,492) (41,163)
Less--treasury shares at cost; 913,348 and 1,609,000 shares at
April 2, 2000, and January 2, 2000, respectively (3,202) (5,651)
---------------------- ----------------------
Total share owners' equity 57,874 48,622
---------------------- ----------------------
Total liabilities and share owners' equity $232,160 $236,480
====================== ======================
</TABLE>
See notes to consolidated condensed financial statements
Page 3
<PAGE>
APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THIRTEEN (13) WEEKS ENDED
-------------------------------
APRIL 2, APRIL 4,
2000 1999
------------ ---------------
<S> <C> <C>
NET REVENUE: $118,364 $107,420
OPERATING EXPENSES:
Cost of services 91,022 90,448
Selling, general and administrative
expenses 18,680 11,920
Restructuring charge - 1,987
------------ ----------------
Total operating expenses 109,702 104,355
------------ ----------------
Operating income 8,662 3,065
INTEREST EXPENSE, NET 2,736 3,407
------------ ----------------
Income from continuing operations
before income taxes 5,926 (342)
PROVISION FOR INCOME TAXES 2,370 (140)
------------ ----------------
Income from continuing
operations 3,556 (202)
DISCONTINUED OPERATIONS
Gain on Sale of Paragren Technologies,
Inc. less income tax provision of $77 115 -
------------ ----------------
NET INCOME 3,671 (202)
============ ================
INCOME (LOSS) PER SHARE:
Basic:
Continuing operations $ 0.07 $ (0.00)
Discontinued operations 0.00 (0.00)
------------ ----------------
Net income $ 0.07 $ (0.00)
============ ================
Diluted:
Continuing operations $ 0.07 $ (0.00)
Discontinued operations 0.00 (0.00)
------------ ----------------
Net income $ 0.07 $ (0.00)
============ ================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic 47,638 48,915
Diluted 51,425 49,114
</TABLE>
See notes to consolidated condensed financial statements.
Page 4
<PAGE>
APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTEEN (13) WEEKS ENDED
----------------------------------------------
APRIL 2, APRIL 4,
2000 1999
-------------------- -------------------
(000's omitted)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income from continuing operations $ 3,671 $ (202)
Depreciation and amortization 9,316 9,156
Deferred income taxes 107 590
Restructuring charge - 1,987
Change in operating assets and liabilities (7,915) (6,504)
-------------------- -------------------
Net cash provided by continuing operations 5,179 5,027
Cash used by discontinued operations - (3,413)
-------------------- -------------------
Net cash provided by operations 5,179 1,614
INVESTING ACTIVITIES:
Proceeds from sale of Paragren Technologies, Inc. 17,000 -
Purchases of property and equipment, net (2,650) (4,439)
-------------------- -------------------
Net cash provided (used) by investing activities 14,350 (4,439)
FINANCING ACTIVITIES:
Borrowings under revolving credit facilities - 10,000
Payments on long-term debt (15,440) (3,381)
Decrease in customer deposits (916) (3,764)
Sale of treasury shares 5,000 -
Stock and warrant transactions, including related
income tax benefits 581 217
-------------------- -------------------
Net cash (used) provided by financing activities (10,775) 3,072
-------------------- -------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 8,754 $ 247
==================== ===================
</TABLE>
See notes to consolidated condensed financial statements.
Page 5
<PAGE>
APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT AS OTHERWISE INDICATED)
(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 week period ended April 2,
2000, are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 2000. The balance sheet at January 2, 2000, 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 2, 2000.
2. GOODWILL AND INTANGIBLE ASSETS
At April 2, 2000, goodwill and intangible assets consisted of the following:
<TABLE>
<CAPTION>
ACCUMULATED NET
COST AMORTIZATION BOOK VALUE
----------------- ------------------ ------------------
(In thousands)
<S> <C> <C> <C>
Goodwill $28,916 $3,920 $24,996
Customer relationships 28,493 4,657 23,836
Assembled workforce 3,600 956 2,644
----------------- ------------------ ------------------
Total 61,009 $9,533 $51,476
================= ================== ==================
</TABLE>
3. OTHER CURRENT LIABILITIES
The components of other current liabilities included in the consolidated
condensed balance sheets are as follows:
<TABLE>
<CAPTION>
APRIL 2, JANUARY 2,
2000 2000
-------------- --------------
(000's omitted)
<S> <C> <C>
Payroll and related items $22,430 $22,248
Accrued Relocation 3,077 998
Telecommunication costs 3,470 3,619
Accrued professional fees 2,365 977
Acquisition-related costs 857 1,145
Customer deposits 803 1,489
Restructuring charges 1,611 2,250
Other 9,360 6,202
-------------- --------------
Total $43,973 $38,928
============== ==============
</TABLE>
Page 6
<PAGE>
APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--CONTINUED
(DOLLARS IN THOUSANDS EXCEPT AS OTHERWISE INDICATED)
(UNAUDITED)
4. RESTRUCTURING CHARGE
During the first quarter of fiscal 1999, the Company recorded a
restructuring charge of $2.0 million. This restructuring plan involved closing 7
Sales Solutions Customer Contact Centers and reducing the salaried workforce by
approximately 15 employees. The $2.0 million restructuring charge included $1.4
million for the write-down of property and equipment and $0.6 million for
employee severance costs. The remaining restructuring reserve of $0.6 million at
April 4, 1999, was used prior to the end of fiscal 1999.
During the first quarter of fiscal 2000 the Company utilized $0.6
million of the $2.2 million restructuring accruals related to fiscal 1999
restructuring charges recorded in the second and third quarters of fiscal 1999.
The remaining balance of $1.6 million at April 2, 2000 represents $1.1 million
for the write-down of property and equipment, $0.1 million for employee
severance costs and $0.4 million for lease termination costs. The remaining
accruals will be utilized during fiscal 2000.
5. LEGAL PROCEEDINGS
The Company was previously engaged in two arbitration proceedings and
one lawsuit, all with the former owner of Paragen Technologies, Inc. In April
2000 all proceedings against such former owner were settled. The settlement did
not have a material impact on the Company's results of operations or
consolidated financial position.
On January 5, 2000, APAC, Inc. filed suit against the Company in the
U.S. District Court for the Northern District of Georgia (Atlanta Division)
alleging that the Company's use of "APAC" in the Company's name infringes a
trademark of APAC, Inc. The suit asserts violations of the federal Lanham Act
and various Georgia state statutes, as well as a breach by the Company of an
agreement between APAC, Inc. and the Company. The Company has answered the
complaint and intends to defend itself vigorously.
Additionally, the Company is subject to occasional lawsuits,
governmental investigations and claims arising out of the normal conduct of its
business. Management does not believe the outcome of any pending claims will
have a materially adverse impact on the Company's consolidated financial
position.
6. DISCONTINUED OPERATIONS
In December 1998, the Company's management approved a plan to sell Paragren.
Accordingly, Paragren was 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 three months of fiscal 1999 of $2.3
million was offset against provisions for anticipated loss recorded at January
3, 1999.
In January 2000, pursuant to an agreement executed in December 1999, the Company
sold the stock of Paragren Technologies, Inc. and received $17 million in cash
proceeds. In addition, the Company may receive up to an additional $3 million in
proceeds subject to the terms of escrow and earn-out agreements. After selling
expenses and other costs, $11 million of the proceeds were used to reduce
outstanding borrowings under the Term Loan in accordance with the financial
covenants concerning the sale of assets. The operations and anticipated disposal
of Paragren did not affect the Company's results of operations in the first
quarter of fiscal 2000 as the loss provision established in fiscal 1998, was
sufficient to absorb this. The Company recorded a gain on the sale of Paragren
of $0.1 million in the first quarter of fiscal 2000.
Page 7
<PAGE>
APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--CONTINUED
(DOLLARS IN THOUSANDS EXCEPT AS OTHERWISE INDICATED)
(UNAUDITED)
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 Customer Care division provides inbound customer service, direct
mail response, "help" line support and customer order processing. The Customer
Acquisition division provides outbound sales support to customers and
businesses, market research, targeted marketing plan development and customer
lead generation, acquisition and retention. CustomerAssistance.com provides Web
based customer relationship management products and services for Fortune 1000
and "dot.com" companies. 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 weeks ended April
2, 2000, and April 4, 1999, is as follows:
<TABLE>
<CAPTION>
CUSTOMER CUSTOMER
PERIOD ENDED CARE ACQUISITION CUSTOMERASSISTANCE.COM
------------------------------------ -------------------- --------------------- ------------------------
(In thousands)
<S> <C> <C> <C>
THIRTEEN WEEKS:
April 2, 2000
Net revenue $74,170 $43,523 $671
Operating income 14,666 10,505 (1,688)
April 4, 1999*:
Net revenue $66,223 41,197 -
Operating income (loss) 5,907 (2,842) -
Restructuring charge - 1,987 -
</TABLE>
*Restated to conform to current year presentation.
Page 8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DESCRIPTION OF BUSINESS
The Company provides multi-channel customer relationship management ("CRM")
solutions for corporate clients operating in the parcel delivery, financial
services, insurance, retail, health care and pharmaceuticals, and
telecommunications industries throughout the United States. The Customer Care
business unit, provides inbound customer service, direct mail response,
integrated voice response, "help" line support and customer order processing
through its own customer interaction centers as well as through facilities
managed by the Company but owned /operated by its clients. The Customer
Acquisition business unit, provides customer lead generation, acquisition and
retention through outbound sales support to consumers and businesses, market
research and targeted marketing plan development. In December 1999, the Company
formed a wholly-owned subsidiary, CustomerAssistance.com, Inc., which provides
electronic CRM ("e-CRM") products and services including e.PACTM, a
multi-channel platform that supports a broad range of integrated,
e-commerce-based interaction capabilities. As of January 2, 2000, the Company
operated and managed approximately 10,500 workstations in 56 customer
interaction centers.
In January 2000, pursuant to an agreement executed in December 1999, the Company
sold the stock of Paragren Technologies, Inc. and received $17 million in cash
proceeds. In addition, the Company may receive up to an additional $3 million in
proceeds subject to the terms of escrow and earn-out agreements. After selling
expenses and other costs, $11 million of the proceeds were used to reduce
outstanding borrowings under the Term Loan in accordance with the financial
covenants concerning the sale of assets. The operations and anticipated disposal
of Paragren did not affect the Company's results of operations in the first
quarter of fiscal 2000 as the loss provision established in fiscal 1998, was
sufficient to absorb these losses. The Company recorded a gain on the sale of
Paragren of $0.1 million in the first quarter of fiscal 2000.
Page 9
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth consolidated condensed statements of income data
as a percent of net revenue from services provided by the Company for the
thirteen week periods ended April 2, 2000, and April 4, 1999.
<TABLE>
<CAPTION>
THIRTEEN (13) WEEKS ENDED
------------- -- -----------------
APRIL 2, APRIL 4,
2000 1999*
------------- -----------------
<S> <C> <C>
NET REVENUE:
Customer Care 62.7% 61.6%
Customer Acquisition 36.7 38.4
CustomerAssistance.com 0.6
------------- -----------------
Total net revenue 100.0 100.0
OPERATING EXPENSES:
Cost of services 76.9 84.2
Selling, general and administrative
expenses 15.8 11.1
Restructuring charges - 1.8
------------- -----------------
Total operating expenses 92.7 97.1
------------- -----------------
Operating income 7.3 2.9
INTEREST EXPENSE, NET 2.3 3.2
------------- -----------------
Income from continuing operations
before income taxes 5.0 (0.3)
PROVISION FOR INCOME TAXES 2.0 (0.1)
------------- -----------------
Income from continuing operations
GAIN ON SALE OF PARAGREN TECHNOLOGIES,
INC., NET .2 -
------------- -----------------
NET INCOME 3.2% (0.2)%
============= =================
</TABLE>
*Restated to conform to current year presentation.
COMPARISON OF FIRST QUARTER RESULTS
Net revenue increased 10% to $118.4 million in the first quarter of fiscal
2000 from $107.4 million in the same period of fiscal 1999, an increase of
$11.0 million. Customer Care net revenue increased by $7.9 million or 12.0%
over comparable fiscal 1999 levels. The increase in Customer Care net revenue
was due primarily to volume from new clients. Customer Acquisition net
revenue increased by $2.4 million or 5.6 %. This increase in Customer
Acquisition net revenue was primarily due to rate increases for existing
clients and a more favorable business mix. CustomerAssistance.com contributed
$0.7 million of revenue.
Cost of Services increased $0.6 million in the first quarter of fiscal 2000, or
0.6% to $91.0 million from $90.4 million in the first quarter of fiscal 1999.
This modest increase on a 10% revenue growth was due to operational improvements
in both Customer Care and Customer Acquisition. Customer Acquisition gross
profit margins improved to 26.9% in the first quarter of fiscal 2000 from 9.6%
in the previous year on improved business mix, better capacity utilization,
increased productivity and a reduction in fixed costs which resulted from the
restructuring plans implemented in the first quarter of fiscal 1999 that reduced
the number of workstations and corresponding excess capacity. Customer Care also
contributed with an increase in gross
Page 10
<PAGE>
profit to 21.6% in fiscal 2000 from 19.7% in the first quarter of fiscal
1999. This increase resulted from improvements in personnel efficiencies
through workforce management and better capacity utilization.
Selling, general and administrative expenses increased to $18.7 million in
the first three months of fiscal 2000 from $11.9 million in fiscal 1999
before restructuring charges, an increase of $6.8 million or 57.1%. As a
percent of net revenue, selling, general and administrative expenses
increased to 15.8% in fiscal 2000 from 11.1% in fiscal 1998. This increase
was primarily due to investments in the areas of people, technology and
facilities specifically, adding marketing, salesforce and senior management
personnel, new product development and technology platform, management and
infrastructure required for CustomerAssistance.com, and the new headquarters
facilities and associated personnel relocation.
During the first quarter of fiscal 1999, the Company recorded a restructuring
charge of $2.0 million in connection with the closure of 7 customer
interaction centers and reductions in the salaried workforce. The facility
closure charge included $1.4 million for the write-down of property and
equipment and $0.6 million for employee severance costs. This accrual was
completely utilized by the end of fiscal 1999.
The Company generated operating income of $8.7 million in the first quarter
of fiscal 2000 compared to $5.1 million (before restructuring charges) for
fiscal 1999. For the Customer Care business unit, operating income for the
first quarter of 2000 was $14.7 million, or 19.8% of net revenue, compared to
operating income of $5.9 million, or 8.9% of net revenue, for the same period
in the prior year, principally due to increased net revenue and improved
gross margins. The Customer Acquisition business unit generated operating
income of $10.5 million in the first quarter of fiscal 2000, compared to an
operating loss of $0.9 million before restructuring charges, for the same
period in fiscal 1999. The positive operating performance of the Customer
Acquisition business unit in fiscal 2000 was primarily due to increased net
revenue and the significant improvement in gross margins related to the
successful implementation of the restructuring plans initiated in fiscal 1999
to reduce excess capacity and improve operating performance.
Net interest expense for the first quarter of fiscal 2000 decreased by $0.7
million compared to the same period in fiscal 1999. This decrease reflects
the reduction in term debt from the end of the first quarter of fiscal 1999
to April 2, 2000 and positive results from the Company's working capital
management efforts that have contributed to increased cash balances.
The Company's effective income tax rate is 40.0 % at the end of the first
quarter of fiscal 2000 which is in line with the overall effective rate of
40% for fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth consolidated statements of cash flow data for
the Company for the thirteen week periods ended April 2, 2000, and April 4,
1999 respectively.
<TABLE>
<CAPTION>
2000 1999
----------- -------------
(In millions)
<S> <C> <C>
Net cash provided by operating activities $ 5.2 $ 1.6
Net cash provided (used) by investing activities 14.4 (4.4)
Net cash provided (used) by financing activities (10.8) 3.0
----------- -------------
Net increase in cash $ 8.8 $ .2
=========== =============
</TABLE>
Page 11
<PAGE>
Cash provided by operations during the first quarter of fiscal 2000 totaled
$5.2 million, an increase of $3.6 million from the comparable period in
fiscal 1999. This increase was principally due to improved operating results,
and the elimination of cash usage by Paragren Technologies, Inc., a
discontinued operation. The Company spent $2.7 million and $4.4 million
during the first three months of fiscal 2000 and 1999, respectively, for
capital expenditures, primarily information technology in fiscal 2000, and
construction of additional call center capacity for Customer Care clients and
to upgrade equipment in existing centers in 1999. These capital expenditures
were funded with cash provided by operations. In conjunction with the move to
the new headquarters facility in Deerfield, the Company has committed to
spend approximately $5 million for furniture, renovations and technology
equipment of which $1.0 million was incurred in the first quarter of fiscal
2000. On March 28, 2000 the Company sold an aggregate of 695,652 common
shares held in treasury to Clark E. McLeod for $5,000,000 in cash, or $7.1875
per share.
At January 2, 2000, the Company had a $75.0 million Revolving Credit Facility
("Revolving Facility") available for general working capital purposes and
capital expenditures. On January 20, 2000, the Company amended the Credit
Facility, reducing the Revolving Facility to $50.0 million. Availability of
up to $10.0 million of the $50.0 million total is restricted subject to the
attainment of trailing four quarters EBITDA of at least $60.0 million. As of
April 2, 2000, there were no borrowings outstanding under the Revolving
Facility. The Company made $15.0 million of repayments on its term loan
during the first three months of fiscal 2000, $11 million of which was made
as a result of the sale of Paragren, resulting in a balance outstanding at
April 2, 2000, of $115.0 million. $12.0 million in principal payments will be
made over the remainder of fiscal 2000.
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 planned capital expenditures during fiscal year
2000.
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; 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 the discussion under the caption "Information Regarding
Forward-Looking Statements" in Item 7 (Management's Discussion and Analysis of
Page 12
<PAGE>
Financial Condition and Results of Operations) of the Company's Annual Report
on Form 10-K for the fiscal year ended January 2, 2000.
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 effect the Company's
financial instruments would not have a material impact on earnings during the
remainder of fiscal 2000, and would not materially affect the fair value of
the Company's financial instruments.
Page 13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LITIGATION
The Company was previously engaged in two arbitration proceedings
and one lawsuit, all with the former owner of Paragen Technologies, Inc. In
April 2000 all proceedings against such former owner were settled. The
settlement did not have a material impact on the Company's results of
operations or consolidated financial position.
On January 5, 2000, APAC, Inc. filed suit against the Company in the
U.S. District Court for the Northern District of Georgia (Atlanta Division)
alleging that the Company's use of "APAC" in the Company's name infringes a
trademark of APAC, Inc. The suit asserts violations of the federal Lanham Act
and various Georgia state statutes, as well as a breach by the Company of an
agreement between APAC, Inc. and the Company. The Company has answered the
complaint and intends to defend itself vigorously.
Additionally, the Company is subject to occasional lawsuits,
governmental investigations and claims arising out of the normal conduct of
its business. Management does not believe the outcome of any pending claims
will have a materially adverse impact on the Company's consolidated financial
position.
ITEM 2. CHANGES IN SECURITES
On March 28, 2000 the Company sold an aggregate of 695,652 common
shares held in treasury to Clark E. McLeod for $5,000,000 in cash, or $7.1875
per share, in reliance on the exemption from registration provided by Section
4(2) of the Securities Act of 1933. The sale of the shares did not involve
any underwriters, underwriting discounts or commissions. In connection with
this transaction, a restrictive legend was affixed to the stock certificate
representing the shares, and the purchaser made representations to the
Company regarding his qualifications as an "accredited investor" within the
meaning of Regulation D under the Securities Act and his intention to acquire
the shares for investment and not with a view to any distribution thereof.
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:
<TABLE>
<CAPTION>
Exhibit
Number Description
------------------- -----------------------------------------------------------------------------------------
<S> <C>
3.2 Amended and Restated Bylaws of APAC Customer Services, Inc. as amended through April
30, 2000.
10.1 Second Amended and Restated 1995 Incentive Stock Plan
27.1 Financial Data Schedule
</TABLE>
(b) REPORTS ON FORM 8-K. None.
Page 14
<PAGE>
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: May 17, 2000 By: /s/ Peter M. Leger
---------------------------------
President and
Chief Executive Officer
(Principal Executive Officer)
Date: May 17, 2000 By: /s/ Gary S. Holter
-----------------------------------
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: May 17, 2000 By: /s/ Kenneth R. Batko
------------------------------------
Vice President and Controller
(Principal Accounting Officer)
Page 15
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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 twelve. 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
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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.
April 30, 2000
<PAGE>
EXHIBIT 10.1
APAC CUSTOMER SERVICES, INC.
SECOND AMENDED AND RESTATED
1995 INCENTIVE STOCK PLAN
1. PURPOSE. The APAC CUSTOMER SERVICES, INC. Second Amended and
Restated 1995 Incentive Stock Plan (the "Plan") is the result of the merger of
the APAC Teleservices, Inc. Amended and Restated 1995 Non-Employee Director
Stock Option Plan (the "Director Plan") and the APAC Teleservices, Inc. Amended
and Restated 1995 Incentive Stock Plan (the "Prior Plan") and is intended to
provide incentives which will attract and retain highly competent persons as
officers and key employees of APAC Customer Services, Inc. (formerly known as
"APAC Teleservices, Inc.") (the "Company") and members of its Board of
Directors, as well as independent contractors providing consulting or advisory
services to the Company, by providing them opportunities to acquire Common
Shares of the Company ("Common Shares") or to receive monetary payments based on
the value of such shares pursuant to the Awards described herein.
2. ADMINISTRATION. The Plan will be administered by the Compensation
Committee (the "Committee") appointed by the Board of Directors of the Company
from among its members and, with respect to the participation of non-employee
directors, may be administered by a committee consisting of members of the Board
of Directors who are employees (who, for such purpose, will be within the
contemplation of the term "Committee"). As long as Common Shares are registered
under the Securities Exchange Act of 1934, members of the Committee must qualify
as non-employee directors within the meaning of Securities and Exchange
Commission Regulation Section 240.16b-3 and outside directors within the meaning
of Section 162(m) of the Internal Revenue Code . The Committee is authorized,
subject to the provisions of the Plan, to establish such rules and regulations
as it deems necessary for the proper administration of the Plan and to make such
determinations and interpretations and to take such action in connection with
the Plan and any Awards granted hereunder as it deems necessary or advisable.
All determinations and interpretations made by the Committee shall he binding
and conclusive on all participants and their legal representatives. No member of
the Board, no member of the Committee and no employee of the Company shall be
liable for any act or failure to act hereunder, by any other member or employee
or by any agent to whom duties in connection with the administration of this
Plan have been delegated or, except in circumstances involving his bad faith,
gross negligence or fraud, for any act or failure to act by the member or
employee.
3. PARTICIPANTS. Participants will consist of such officers and key
employees of the Company, members of its Board of Directors, and independent
contractors providing consulting or advisory services to the Company, as the
Committee in its sole discretion determines to be significantly responsible for
the success and future growth and profitability of the Company and whom the
Committee may designate from time to time to receive Awards under the Plan.
Designation of a participant in any year shall not require the Committee to
<PAGE>
designate such person to receive an Award in any other year or, once
designated, to receive the same type or amount of Awards as granted to the
participant in any year. The Committee shall consider such factors as it
deems pertinent in selecting participants and in determining the type and
amount of their respective Awards.
4. TYPES OF AWARDS. Awards under the Plan may be granted in any one or
a combination of (a) Stock Options, (b) Stock Appreciation Rights, (c) Stock
Awards, (d) Performance Shares, and (e) Performance Units, all as described
below (collectively "Awards").
5. SHARES RESERVED UNDER THE PLAN. There is hereby reserved for
issuance under the Plan a number of Common Shares equal to the aggregate number
of shares reserved under the Director Plan and the Prior Plan reduced by the
number of shares previously used under either Plan, which may be authorized but
unissued shares; provided that no such shares attributable to the Director Plan
may be subject to Incentive Stock Options (defined below). In addition, any
Common Shares subject to options currently outstanding as of the original date
of adoption of the Prior Plan under the Company's agreements with employees of
the Company which lapsed, expired or are terminated shall be available for
Awards hereunder. Any shares subject to Stock Options or Stock Appreciation
Rights or issued under such options or rights or as Stock Awards may thereafter
be subject to new options, rights or awards under this Plan if there is a lapse,
expiration or termination of any such options, or rights prior to issuance of
the shares or the payment of the equivalent or if shares are issued under such
options or rights or as such awards, and thereafter are reacquired by the
Company pursuant to rights reserved by the Company upon issuance thereof;
provided that no such shares attributable to the Director Plan may be subject to
Incentive Stock Options.
6. STOCK OPTIONS. Stock Options will consist of awards from the
Company, in the form of agreements, which will enable the holder to purchase a
specific number of Common Shares, at set terms and at a fixed purchase price.
Stock Options may be "incentive stock options" within the meaning of Section 422
of the Internal Revenue Code ("Incentive Stock Options") or Stock Options which
do not constitute Incentive Stock Options ("Nonqualified Stock Options"). The
Committee will have the authority to grant to any participant one or more
Incentive Stock Options, Nonqualified Stock Options, or both types of Stock
options (in each case with or without Stock Appreciation Rights). On the date of
each annual meeting of the shareholders of the Company ("Annual Meeting"), each
member of the Board of Directors of the Company who is not a salaried officer or
employee of the Company or any of its direct or indirect subsidiaries (a
"Nonemployee Director") in office on adjournment of the Annual Meeting, will
automatically be awarded a Nonqualified Stock Option to purchase five thousand
(5,000) Common Shares (a "Director Option"). Each Stock option shall be subject
to such terms and conditions consistent with the Plan as the Committee may
impose from time to time, subject to the following limitations:
(A) EXERCISE PRICE. Each Stock Option granted hereunder shall
have such per-share exercise price as the Committee may determine at the date of
grant provided, however, that (i) subject to paragraph (E), the per-share
exercise price for Incentive Stock options shall not be less than 100% of the
Fair Market Value of the Common Shares on the date the option is
granted; and (ii) the per-share exercise price for Nonqualified Stock Options
shall not be less than 85% of the Fair Market Value of the Common Shares on
the date the option is
2
<PAGE>
granted; and (iii) the per-share exercise price for a Director Option shall
be the Fair Market Value of a Common Share on the date of the applicable
Annual Meeting.
(B) PAYMENT OF EXERCISE PRICE. The option exercise price may
be paid by check or, in the discretion of the Committee, by the delivery (or
certification of ownership) of Common Shares of the Company then owned by the
participant; provided, however, that option agreements may provide that payment
of the exercise price by delivery of Common Shares of the Company then owned by
the participant may be made only if such payment does not result in a charge to
earnings for financial accounting purposes as determined by the Committee. In
the discretion of the Committee, if Common Shares are readily tradeable on a
national securities exchange or other market system at the time of option
exercise, payment may also be made by delivering a properly executed exercise
notice to the Company together with a copy of irrevocable instructions to a
broker to deliver promptly to the Company the amount of sale or loan proceeds to
pay the exercise price. To facilitate the foregoing, the Company may enter into
agreements for coordinated procedures with one or more brokerage firms.
(C) EXERCISE PERIOD. Stock Options granted under the Plan
shall be exercisable at such times and subject to such terms and conditions as
shall be determined by the Committee. Any Director Option may be exercised in
whole or in part, from time to time after the date granted, subject to the
following limitations:
i. No Director Option may be exercised during the first year
following the date such option was granted. Thereafter, each Director Option may
be exercised:
a. to a maximum cumulative extent of one-third
(1/3) of the total shares covered by the option on or after
the first anniversary of the date the option was granted;
b. to a maximum cumulative extent of two-thirds (2/3)
of the total shares covered by the option on or after the
second anniversary of the date the option was granted; and
c. to a maximum cumulative extent of 100% of the
total option shares on or after the third anniversary of the
date the option was granted.
ii. Notwithstanding the above limitations, any option granted
under this Plan shall become fully exercisable upon the death of the Nonemployee
Director while serving on the Board or upon the retirement of the Nonemployee
Director if such death or Retirement occurs on or after the first anniversary of
the date such option was issued. For these purposes, "Retirement" means a
Nonemployee Director's termination of service as a member of the Board after age
70 or at any time with the consent of the Board.
iii. Any Director Option may not be exercised after the
earliest to occur of any of the following events:
a. more than ninety (90) days after termination of
any Nonemployee Director's service as a member of the Board
for any reason other than death or
3
<PAGE>
Retirement (and, subject to paragraph (D), then only to the
extent that the Nonemployee Director could have exercised
such option on the date of termination);
b. more than one hundred eighty (180) days after a
Nonemployee Director's Retirement from the Board (and, subject
to paragraph (D), then only to the extent that the Nonemployee
Director could have exercised such option on the date of
Retirement);
c. more than twelve months after death of a
Nonemployee Director (and, subject to paragraph (D), then only
to the extent that the Nonemployee Director could have
exercised such option on the date of death); or
d. more than ten (10) years from the date the option
is granted.
In addition, Nonqualified Stock Options shall not be exercisable later than
fifteen years after the date they are granted and (subject to paragraph (E))
Incentive Stock Options shall not be exercisable later than ten years after the
date they are granted. All Stock Options shall terminate at such earlier times
and upon such conditions or circumstances as the Committee shall in its
discretion set forth in such option at the date of grant.
(D) CHANGE IN CONTROL. Notwithstanding the provisions of
paragraph (C), if (i) there is a Change in Control of the Company, and (ii)
the Committee does not declare, by resolution, that the pooling treatment of
a transaction to which the Company is a party would be adversely affected by
application of the following, then all Stock Options granted under the Plan
that have not previously terminated (including those granted before the date
that this Second Amended and Restated Plan was adopted, but not including
those subject to provisions that would result in the Stock Option's becoming
exercisable to a greater extent) shall be subject to the following: (i) as of
the date of the Change in Control, to the extent any such Stock Option is not
exercisable, it shall become exercisable as to one-half of the shares subject
to the unexercisable portion of the Stock Option; and (ii) if the employment
of the holder of the Stock Option is terminated by the Company other than
With Cause or such holder terminates such employment with Good Reason (or, in
the case of a Nonemployee Director, his service as a member of the Board
terminates for any reason), then such Stock Option, to the extent not
previously terminated and not exercisable at the date such employment (or
service) terminates, shall become fully exercisable. For purposes of the
foregoing:
(a) 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
4
<PAGE>
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) 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) pursuant to the Exchange Act.
Notwithstanding the foregoing, (I) a Change in Control
will not occur for purposes of the Plan 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.
(b) Termination with "Good Reason" means termination of the
Stock Option holder's employment by the Stock Option holder
within twelve (12) months following a Change in Control, as
defined above, but only if, after notice by the Stock
Option holder to the Company and a fifteen (15) day
opportunity by the Company to cure, (I) the Stock Option
holder's principal place of work (not including regular
business travel) is relocated by more than fifty (50)
miles, (II) the Stock Option holder's duties,
responsibilities or authority as an executive employee are
materially reduced or diminished without the Stock Option
holder'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, (III) the
compensation received by the Stock Option holder is reduced
in the aggregate, and such reduction is not remedied within
thirty (30) days of the Stock Option holder's notice to the
Company thereof, (IV) a determination is made by the Stock
Option holder in good faith that as a result of the Change
in Control, and a change in circumstances thereafter,
significantly affecting his position, he is unable to carry
out the authorities, powers, functions or duties attached
to his position and the situation is not remedied within
thirty (30) days after
5
<PAGE>
receipt of the Company of written notice from the Stock
Option holder of such determination, (V) if the Stock
Option holder and the Company have entered into a
written Employment Agreement, the Company violates the
material terms of such Employment Agreement, or (VI)
there is a liquidation, dissolution, consolidation or
erger 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 such Employment
Agreement, if any.
(c) Termination "With Cause" means termination of the Stock
Option holder's employment by the Board of Directors acting
in good faith by written notice by the Company to the Stock
Option holder specifying the event relied upon for such
termination, due to (I) gross misconduct or gross
negligence in the performance of the Stock Option holder's
employment duties, (II) willful disobedience by the Stock
Option holder 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 Stock Option holder of its intention to
terminate his employment on account of such disobedience,
or (III) commission by the Stock Option holder 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.
(E) LlMITATIONS ON INCENTIVE STOCK OPTIONS. Incentive Stock
Options may be granted only to participants who are employees of the Company or
one of its subsidiaries (within the meaning of Section 424(f) of the Internal
Revenue Code) at the date of grant. The aggregate Fair Market Value (determined
as of the time the option is granted) of the Common Shares with respect to which
Incentive Stock Options are exercisable for the first time by a participant
during any calendar year (under all option plans of the Company) shall not
exceed $100,000. Incentive Stock Options may not be granted to any participant
who, at the time of grant, owns stock possessing (after the application of the
attribution rules of Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company, unless the option
price is fixed at not less than 110% of the Fair Market Value of the Common
Shares on the date of grant and the exercise of such option is prohibited by its
terms after the expiration of five years from the date of grant of such option.
(F) REDESIGNATION AS NONQUALIFIED STOCK OPTIONS. Options
designated as "incentive stock options" that fail to continue to meet the
requirements of Section 422 of the Internal Revenue Code shall be redesignated
as nonqualified options for Federal income tax purposes automatically without
further action by the Committee on the date of such failure to continue to meet
the requirements of Section 422 of the Code.
(G) LIMITATION OF RIGHTS IN SHARES. The recipient of a Stock
Option shall not be deemed for any purpose to be a shareholder of the Company
with respect to
6
<PAGE>
any of the shares subject thereto except to the extent that the Stock Option
shall have been exercised and, in addition, a certificate shall have been
issued and delivered to the participant.
(H) INDIVIDUAL LIMITATION ON NUMBER OF SHARES. The number of
shares subject to Stock Options which may he granted during any calendar year to
any one participant shall not exceed one million one hundred thousand
(1,100,000) shares.
7. STOCK APPRECIATION RIGHTS. The Committee may, in its discretion,
grant Stock Appreciation Rights to the holders of any Stock Options granted
hereunder. In addition, Stock Appreciation Rights may be granted
independently of and without relation to options. The number of shares
subject to Stock Appreciation Rights which may be granted during any calendar
year to any one participant shall not exceed seven hundred seventy thousand
(770,000) shares. Each Stock Appreciation Right shall be subject to such
terms and conditions consistent with the Plan as the Committee shall impose
from time to time, including the following:
(A) A Stock Appreciation Right relating to a Nonqualified
Stock Option may be made part of such option at the time of its grant or at
any time thereafter up to six months prior to its expiration, and a Stock
Appreciation Right relating to an Incentive Stock Option may be made part of
such option only at the time of its grant.
(B) Each Stock Appreciation Right will entitle the holder
to elect to receive the appreciation in the Fair Market Value of the shares
subject thereto up to the date the right is exercised. In the case of a right
issued in relation to a Stock Option, such appreciation shall be measured
from not less than the option price and in the case of a right issued
independently of any Stock Option, such appreciation shall be measured from
not less than 85% of the Fair Market Value of the Common Shares on the date
the right is granted. Payment of such appreciation shall be made in cash or
in Common Shares, or a combination thereof, as set forth in the award, but no
Stock Appreciation Right shall entitle the holder to receive, upon exercise
thereof, more than the number of Common Shares (or cash of equal value) with
respect to which the right is grant.
(C) Each Stock Appreciation Right will be exercisable at
the times and to the extent set forth therein, but no Stock Appreciation
Right may be exercisable earlier than six months after the date it was
granted or later than the earlier of (i) the term of the related option, if
any, or (ii) fifteen years after it was granted. Exercise of a Stock
Appreciation Right shall reduce the number of shares issuable under the Plan
(and the related option, if any) by the number of shares with respect to
which the right is exercised. Each Stock Appreciation Right shall also be
subject to the terms of Section 6(D).
8. STOCK AWARDS. Stock Awards will consist of Common Shares transferred
to participants without other payment therefor as additional compensation for
services to the Company. Stock Awards shall be subject to such terms and
conditions as the Committee determines appropriate, including, without
limitation, restrictions on the sale or other disposition of such shares and
rights of the Company to reacquire such shares for no consideration upon
termination of the participant's employment within specified periods. The
Committee may require the participant to deliver a duly signed stock power,
endorsed in blank, relating to the
7
<PAGE>
Common Shares covered by such an Award. The Committee may also require that
the stock certificates evidencing such shares be held in custody until the
restrictions thereon shall have lapsed. The participant shall have, with
respect to the Common Shares subject to a Stock Award, all of the rights of a
holder of Common Shares of the Company, including the right to receive
dividends and to vote the shares.
9. PERFORMANCE SHARES.
(A) Performance Shares may be awarded either alone or in addition
to other Awards granted under this Plan and shall consist of the right to
receive Common Shares or cash of an equivalent value at the end of a
specified Performance Period (defined below). The Committee shall determine
the participants to whom and the time or times at which Performance Shares
shall be awarded, the number of Performance Shares to be awarded to any
person, the duration of the period (the "Performance Period") during which,
and the conditions under which, receipt of the Common Shares will be
deferred, and the other terms and conditions of the Award in addition to
those set forth in this Section 9. The Committee may condition the grant of
Performance Shares upon the attainment of specified performance goals or such
other factors or criteria as the Committee shall determine.
(B) Performance Shares awarded pursuant to this Section 9 shall
be subject to the following terms and conditions:
(I) Unless otherwise determined by the Committee at the time of
the grant of the Award, amounts equal to any dividends
declared during the Performance Period with respect to the
number of Common Shares covered by a Performance Share Award
will not be paid to the participant.
(II) Subject to the provisions of the Performance Share Award and
this Plan, at the expiration of the Performance Period, share
certificates and/or cash of an equivalent value (as the
Committee may determine) shall be delivered to the
participant, or his or her legal representative, in a number
equal to the vested shares covered by the Performance Share
Award.
(III) Subject to the applicable provisions of the Performance Share
Award and this Plan, upon termination of a participant's
employment with the Company for any reason during the
Performance Period for a given Performance Share Award, the
Performance Shares in question will vest or be forfeited in
accordance with the terms and conditions established by the
Committee.
10. PERFORMANCE UNITS.
(A) Performance Units may be awarded either alone or in
addition to other Awards granted under this Plan and shall consist of the right
to receive a fixed dollar amount payable in cash or Common Shares or a
combination of both. The Committee shall determine the participants to whom and
the time or times at which Performance Units shall be awarded, the number of
Performance Units to be awarded to any person, the duration of the period (the
"Performance Cycle") during which, and the conditions under which, a
participant's right to
8
<PAGE>
Performance Units will be vested, the ability of participants to defer the
receipt of payment of such Performance Units, and the other terms and
conditions of the Award in addition to those set forth in Section 10. The
Committee may condition the vesting of Performance Units upon the attainment
of specified performance goals or such other factors or criteria as the
Committee shall determine.
(B) The Performance Units awarded pursuant to this Section 10
shall be subject to the following terms and conditions:
(I) At the expiration of the Performance Cycle, the Committee
shall determine the extent to which the performance goals have
been achieved, and the percentage of the Performance Units of
each participant that have vested.
(II) Subject to the applicable provisions of the Performance Unit
Award and this Plan, at the expiration of the Performance
Cycle, cash and/or share certificates of an equivalent value
(as the Committee may determine) shall be delivered to the
participant, or his or her legal representative, in payment of
the vested Performance Units covered by the Performance Unit
Award.
(III) Subject to the applicable provisions of the Performance Unit
Award and this Plan, upon termination of a participant's
employment with the Company for any reason during the
Performance Cycle for a given Performance Unit Award, the
Performance Units in question will vest or be forfeited in
accordance with the terms and conditions established by the
Committee.
11. ADJUSTMENT PROVISIONS.
(A) If the Company shall at any time change the number of
issued Common Shares without new consideration to the Company (such as by stock
dividend, stock split, recapitalization, reorganization, exchange of shares,
liquidation, combination or other change in corporate structure affecting the
Common Shares) or make a distribution of cash or property which has a
substantial impact on the value of issued Common Shares, the total number of
shares available for Awards under this Plan shall be appropriately adjusted and
the number of shares covered by each outstanding Award and the reference price
or Fair Market Value for each outstanding Award shall be adjusted so that the
net value of such Award shall not be changed.
(B) In the case of any sale of assets, merger, consolidation,
combination or other corporate reorganization or restructuring of the Company
with or into another corporation which results in the outstanding Common Shares
being converted into or exchanged for different securities, cash or other
property, or any combination thereof (an "Acquisition"), subject to the
provisions of this Plan and any limitation applicable to the Award:
(I) any participant to whom a Stock Option has been granted shall
have the right thereafter and during the term of the Stock
Option, to receive upon exercise thereof the Acquisition
Consideration (as defined below) receivable upon the
Acquisition by a holder of the number of Common Shares which
might have been obtained upon exercise of the Stock Option or
portion thereof, as the case may be,
9
<PAGE>
immediately prior to the Acquisition;
(II) any participant to whom a Stock Appreciation Right has been
granted shall have the right thereafter and during the term of
such right of the Acquisition Consideration receivable upon
such acquisition by a holder of the number of Common Shares
which are covered by such right and the aggregate reference
price of such right; and
(III) any participant to whom Performance Shares or Performance
Units have been awarded shall have the right thereafter and
during the term of the Award, upon fulfillment of the terms of
the Award, to receive on the date or dates set forth in the
Award, the Acquisition Consideration receivable upon the
Acquisition by a holder of the number of Common Shares which
are covered by the Award.
The term "Acquisition Consideration" shall mean the kind and
amount of securities, cash or other property or any
combination thereof receivable in respect of one Common Share
upon consummation of an Acquisition.
(C) Notwithstanding any other provision of this Plan, the
Committee may authorize the issuance, continuation or assumption of Awards or
provide for other equitable adjustments after changes in the Common Shares
resulting from any other merger, consolidation, sale of assets, acquisition of
property or stock, recapitalization, reorganization or similar occurrence upon
such terms and conditions as it may deem equitable and appropriate.
(D) In the event that another corporation or business entity
is being acquired by the Company, and the Company assumes outstanding employee
stock options and/or stock appreciation rights and/or the obligation to make
future grants of options or rights to employees of the acquired entity, the
aggregate number of Common Shares available for Awards under this Plan shall be
increased accordingly.
12. NONTRANSFERABILITY.
(A) Each Award granted under the Plan to a participant shall
not be transferable by him otherwise than by law or by will or the laws of
descent and distribution, and shall be exercisable, during his lifetime, only by
him. In the event of the death of a participant while the participant is
rendering services to the Company, each Stock Option or Stock Appreciation Right
theretofore granted to him shall be exercisable during such period after his
death as the Committee shall in its discretion set forth in such option or right
at the date of grant (but not beyond the stated duration of the option or right)
and then only:
(I) By the executor or administrator of the estate of the deceased
participant or the person or persons to whom the deceased
participant's rights under the Stock Option or Stock
Appreciation Right shall pass by will or the laws of descent
and distribution; and
10
<PAGE>
(II) Subject to Section 6(D), to the extent that the deceased
participant was entitled to do so at the date of his death.
(B) Notwithstanding Section 12(A), in the discretion of the
Committee, Awards granted hereunder may be transferred to members of the
participant's immediate family (which for purposes of this Plan shall be
limited to the participant's children, grandchildren and spouse), or to one
or more trusts for the benefit of such family members or partnerships in
which such family members and/or trusts are the only partners, but only if
the Award expressly so provides.
13. OTHER PROVISIONS. Awards under the Plan may also be subject to such
other provisions (whether or not applicable to any other Awards under the Plan)
as the Committee determines appropriate, including without limitation,
provisions for the installment purchase of Common Shares under Stock Options,
provisions for the installment exercise of Stock Appreciation Rights, provisions
to assist the participant in financing the acquisition of Common Shares,
provisions for the forfeiture of, or restrictions on resale or other disposition
of Shares acquired under any form of Award, provisions for the acceleration of
exercisability or vesting of Awards in the event of a change of control of the
Company, provisions for the payment of the value of Awards to participants in
the event of a change of control of the Company, provisions for the forfeiture
of, or provisions to comply with Federal and state securities laws, or
understandings or conditions as to the participant's employment in addition to
those specifically provided for under the Plan.
14. FAIR MARKET VALUE. For purposes of this Plan and any Awards
hereunder, Fair Market Value of Common Shares shall be the mean between the
highest and lowest sale prices for the Company's Common Shares as reported on
the NASDAQ National Market System (or such other consolidated transaction
reporting system on which such Common Shares are primarily traded) on the date
of calculation (or on the next preceding trading date if Common Shares were not
traded on the date of calculation), provided, however, that if the Company's
Common Shares are not at any time readily tradeable on a national securities
exchange or other market system, Fair Market Value shall mean the amount
determined in good faith by the Committee as the fair market value of the Common
Shares of the Company.
15. WITHHOLDING. All payments or distributions made pursuant to the
Plan shall be net of any amounts required to be withheld pursuant to applicable
federal, state and local tax withholding requirements. If the Company proposes
or is required to distribute Common Shares pursuant to the Plan, it may require
the recipient to remit to it an amount sufficient to satisfy such tax
withholding requirements prior to the delivery of any certificates for such
Common Shares. The Committee may, in its discretion and subject to such rules as
it may adopt, permit an optionee or award or right holder to pay all or a
portion of the federal, state and local withholding taxes arising in connection
with (a) the exercise of a Nonqualified Stock Option or a Stock Appreciation
Right, (b) the receipt or vesting of Stock Awards, or (c) the receipt of Common
Shares upon the expiration of the Performance Period or the Performance Cycle,
respectively, with respect to any Performance Shares or Performance Units, by
electing to have the Company withhold Common Shares having a Fair Market Value
equal to the amount to be withheld.
11
<PAGE>
16. TENURE. A participant's right, if any, to continue to serve the
Company as an officer, employee, independent contractor, or otherwise, shall not
be enlarged or otherwise affected by his designation as a participant under the
Plan, nor shall this Plan in any way interfere with the right of the Company,
subject to the terms of any separate employment agreement to the contrary, at
any time to terminate such employment or to increase or decrease the
compensation of the participant from the rate in existence at the time of the
grant of an Award.
17. DURATION, AMENDMENT AND TERMINATION. No Award shall be granted
after July 1, 2005; provided, however, that the terms and conditions applicable
to any Award granted prior to such date may thereafter be amended or modified by
mutual agreement between the Company and the participant or such other persons
as may then have an interest therein. Also, by mutual agreement between the
Company and a participant hereunder, under this Plan or under any other present
or future plan of the Company, Awards may be granted to such participant in
substitution and exchange for, and in cancellation of, any Awards previously
granted such participant under this Plan, or any other present or future plan of
the Company. The Board of Directors may amend the Plan from time to time or
terminate the Plan at any time. However, no action authorized by this Section 17
shall reduce the amount of any existing Award or change the terms and conditions
thereof without the participant's consent. No amendment of the Plan shall be
made without approval of the shareholders of the Company if such approval is
required by law or regulatory authority.
18. GOVERNING LAW. This Plan and actions taken in connection herewith
shall be governed and construed in accordance with the laws of the State of
Illinois (regardless of the law that might otherwise govern under applicable
Illinois principles of conflict of laws).
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS THE SUMMARY FINANCIAL INFORMATION EXTRACTED FROM APAC
CUSTOMER SERVICES, INC. AND SUBSIDIARIES FORM 10-Q FOR THE THIRTEEN WEEKS ENDED
APRIL 2, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q FILING.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-2000 JAN-02-2000
<PERIOD-END> APR-02-2000 APR-04-1999
<CASH> 27,630 3,790
<SECURITIES> 0 0
<RECEIVABLES> 71,368 80,157
<ALLOWANCES> 1,894 1,173
<INVENTORY> 0 0
<CURRENT-ASSETS> 113,029 113,336
<PP&E> 135,920 152,329
<DEPRECIATION> 75,176 62,660
<TOTAL-ASSETS> 232,160 269,723
<CURRENT-LIABILITIES> 65,083 93,263
<BONDS> 100,873 128,338
0 0
0 0
<COMMON> 501 490
<OTHER-SE> 57,373 41,334
<TOTAL-LIABILITY-AND-EQUITY> 232,160 269,723
<SALES> 118,364 107,420
<TOTAL-REVENUES> 118,364 107,420
<CGS> 91,022 90,448
<TOTAL-COSTS> 109,702 104,355
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,736 3,407
<INCOME-PRETAX> 5,926 (342)
<INCOME-TAX> 2,370 (140)
<INCOME-CONTINUING> 3,556 (202)
<DISCONTINUED> 115 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,671 (202)
<EPS-BASIC> .07 (0.00)
<EPS-DILUTED> .07 (0.00)
</TABLE>
