Document:

Exhibit 10.2

 

APAC CUSTOMER SERVICES, INC.

 

2005 INCENTIVE STOCK PLAN

 

 

EFFECTIVE JUNE 3, 2005

 

 

APAC CUSTOMER SERVICES, INC.

 

2005 INCENTIVE STOCK PLAN

 

1.             Purpose.  The purpose of the APAC CUSTOMER SERVICES,
INC. 2005 Incentive Stock Plan (the “Plan”) is to provide incentives to
attract and retain highly competent persons as officers and key employees of
APAC Customer Services, Inc. (the “Company”) and its Subsidiaries 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 shares of Common Stock and to receive monetary payments based on the
value of such shares pursuant to the Awards described herein.  The Plan is the successor to the Predecessor
Plan.

 

2.             Definitions.

 

(a)           “Award”
means, Stock Options (including Incentive Stock Options), Stock Appreciation
Rights, Restricted Stock or Restricted Stock Unit awards, Performance Share or
Performance Unit awards, Dividend or Dividend Equivalent Rights, Stock Awards,
MIP Awards, Director Options, or other awards (“Other Incentive Awards”),
that are valued in whole or in part by reference to, or are otherwise based on,
Common Stock or other factors, all on a stand-alone, combination or tandem basis,
as described in or granted under the Plan.

 

(b)           “Award
Agreement” means a writing provided by the Company to each Participant
setting forth the terms and conditions of each Award made under the Plan.

 

(c)           “Board”
means the Board of Directors of the Company.

 

(d)           “Change
of Control” shall be deemed to have occurred upon the happening of any of
the following events:

 

(i)            A tender
offer shall be made and consummated for the ownership of more than 50% of the
outstanding voting securities of the Company;

 

(ii)           The Company
shall be merged or consolidated with another corporation and as a result of
such merger or consolidation less than 50% of the outstanding voting securities
of the surviving or resulting corporation shall be owned in the aggregate by
the former shareholders of the Company, as the same shall have existed
immediately prior to such merger or consolidation;

 

(iii)          The Company
shall sell all or substantially all of its assets to another corporation which
is not a wholly-owned subsidiary or affiliate;

 

(iv)          As the
result of, or in connection with, any contested election for the Board of
Directors of the Company, or any tender or exchange offer, merger or business
combination or sale of assets, or any combination of the 

 

 

foregoing (a “Transaction”), the persons
who were Directors of the Company before the Transaction shall cease to
constitute a majority of the Board of Directors of the Company, or any
successor thereto; or

 

(v)           A person,
within the meaning of Section 3(a)(9) or of Section 13(d)(3) (as in effect on
the date hereof) of the Securities Exchange Act of 1934 (“Exchange Act”),
other than any employee benefit plan then maintained by the Company, shall
acquire more than 50% of the outstanding voting securities of the Company
(whether, directly, indirectly, beneficially or of record). For purposes
hereof, ownership of voting securities shall take into account and shall
include ownership as determined by applying the provisions of Rule
13d-3(d)(1)(i) (as in effect on the date hereof) pursuant to the Exchange Act.

 

Notwithstanding the
foregoing, (A) 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
(B) if the Schwartz Entities control, directly or indirectly, less than
twenty-seven (27%) percent of the Company’s voting securities while it is a
public company, then “33 1/3%” shall be substituted for “50%” in clauses
(i) and (v) of this Section 1(d), and “66 2/3%” shall be substituted for “50%”
in clause (ii) of this Section 1(d).

 

(e)           “Code”
means the Internal Revenue Code of 1986, as amended from time to time.

 

(f)            “Committee”
means the Compensation Committee of the Board or such other committee of the
Board as may be designated by the Board from time to time to administer the
Plan.  Unless the Board otherwise
determines, and such determination is reduced to writing articulating the
reasons for such determination, the Committee shall at all times be comprised
of not less than two members, each of whom shall qualify as (i) a “Non-Employee
Director” within the meaning of Rule 16b-3(b)(3) (or any successor rule) under
the Exchange Act, (ii) an “outside director” within the meaning of Section
162(m) of the Code and the regulations thereunder (or any successor law or
regulation), and (iii) an “independent director” as such term is defined or
used by the rules of the exchange or system on which Common Stock is listed.

 

(g)           “Common
Stock” means the Common Stock, $0.01 par value, of the Company.

 

(h)           “Company”
means APAC Customer Services, Inc., a Delaware corporation, and any successor
thereto.

 

(i)            “Director”
means a member of the Board.

 

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(j)            “Director
Plan” means the former APAC Teleservices, Inc. Amended and Restated 1995
Non-Employee Director Stock Option Plan, which plan previously was merged into
the Predecessor Plan.

 

(k)           “Director
Option” has the meaning specified in Section 6(i).

 

(l)            “Dividend
or Dividend Equivalent Rights” has the meaning specified in Section 6(f).

 

(m)          “Effective
Date” has the meaning specified in Section 18.

 

(n)           “Employee”
means an employee of the Company or a Subsidiary.

 

(o)           “Fair
Market Value” means the average of the highest and the lowest quoted
selling prices on the NASDAQ Stock Market on the relevant valuation date or, if
there were no sales on the valuation date, on the next preceding date on which
such selling prices were recorded; provided, if Common Stock is not at any time
readily tradable 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 Stock of the Company.

 

(p)           “Incentive
Stock Option” has the meaning specified in Section 6(b).

 

(q)           “Independent
Contractor” means an independent contractor providing consulting or
advisory services to the Company at any time or from time to time.

 

(r)            “Other
Incentive Award” has the meaning specified in Section 2(a).

 

(s)           “MIP
Award” has the meaning specified in Section 6(h).

 

(t)            “Non-Employee
Director” means a member of the Board who is not an Employee of the Company
or any Subsidiary.

 

(u)           “Participant”
means an Employee, Non-Employee Director or Independent Contractor who has been
granted an Award under the Plan, including the Predecessor Plan.

 

(v)           “Performance-Based
Award” has the meaning specified in Section 7.

 

(w)          “Performance
Criteria” has the meaning specified in Section 7.

 

(x)            “Performance
Share” has the meaning specified in Section 6(d).

 

(y)           “Performance
Unit” has the meaning specified in Section 6(e).

 

(z)            “Plan”
means this APAC Customer Services, Inc. Incentive Stock Plan, which includes
the Predecessor Plan.

 

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(aa)         “Plan
Year” means a twelve-month period beginning with January 1 of each
year.

 

(bb)         “Predecessor
Plan” means the Company’s Second Amended and Restated 1995 Incentive Stock
Plan.

 

(cc)         “Previously-Acquired
Shares” means shares of Common Stock acquired by the Participant or any
beneficiary of Participant other than pursuant to an Award under the Plan, the
Predecessor Plan or any similar plan maintained by the Company, or if so
acquired under the Plan, the Predecessor Plan or such other plan, and such
shares of Common Stock have been held for a period of not less than six months
or such shorter period as the Committee may permit (or such longer period as
may be required to avoid a charge to earnings for financial reporting
purposes).

 

(dd)         “Restriction
Period” means a period of time beginning as of the date upon which an Award
subject to restrictions or forfeiture provisions is made pursuant to the Plan
and ending as of the date upon which the Common Stock subject to such Award is
no longer restricted or subject to forfeiture provisions.

 

(ee)         “Restricted
Share” has the meaning specified in Section 6(d).

 

(ff)           “Restricted
Unit” has the meaning specified in Section 6(e).

 

(gg)         “Stock
Appreciation Right” has the meaning specified in Section 6(c).

 

(hh)         “Stock
Award” has the meaning specified in Section 6(g).

 

(ii)           “Stock
Option” has the meaning specified in Section 6(a).

 

(jj)           “Subsidiary”
means any corporation or other entity, whether domestic or foreign, in which
the Company has or obtains, directly or indirectly, a proprietary interest of
at least 50% by reason of stock ownership or otherwise.

 

3.             Eligibility.  Any Employee, Non-Employee Director or
Independent Contractor selected by the Committee is eligible to receive an
Award.  Designation of a Participant in
any year shall not require the Committee to 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.

 

4.             Plan
Administration.

 

(a)           Authority.  Except as otherwise determined by the Board,
the Plan shall be administered by the Committee.  The Committee shall make determinations with
respect to the participation of Employees, Non-Employee Directors and
Independent Contractors in the Plan and, except as otherwise required by law or
the Plan, the type and amount of Awards, the terms of Awards, including vesting
schedules, price, length of relevant performance, Restriction Period, option
period, dividend rights, 

 

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post-retirement and
termination rights, payment alternatives such as cash, stock, contingent awards
or other means of payment consistent with the purposes of the Plan, and such
other terms and conditions as the Committee deems appropriate.  For such purposes, the Committee may reprice
or otherwise decrease the exercise price applicable to any outstanding Stock
Option, cancel a Stock Option or Stock Appreciation Right when its exercise
price exceeds the Fair Market Value of the underlying Common Stock in exchange
for another Stock Option or Stock Appreciation Right, or other action that is treated
as a repricing under generally accepted accounting principles, whether or not
in connection with an adjustment contemplated by Section 11.

 

(b)           Determinations.

 

(i)            The
Committee shall have authority to supply any omission, correct any defect, or
reconcile any inconsistency in the Plan in such manner and to such extent as it
shall deem appropriate in its sole discretion to carry the same into effect; to
issue administrative guidelines as an aid to administer the Plan and make
changes in such guidelines as it from time to time deems proper; to establish
such rules and regulations as it deems necessary for the proper administration
of the Plan, to interpret and construe the provisions of the Plan and the Award
Agreements; to decide all questions of fact arising in its application; to the
extent permitted under the Plan, grant waivers of Plan terms, conditions,
restrictions, and limitations; to accelerate the exercisability of any Stock
Option, Incentive Stock Option or Stock Appreciation Right and the elimination
of any restrictions on any Restricted Stock, Restricted Stock Unit, Performance
Share or Performance Unit Award, when such action or actions would be in the
best interest of the Company; and to make all other determinations pursuant to
any Plan provision or Award Agreement which shall be final and binding on all
persons.

 

(ii)           The
Committee may act only by a majority of its members. Any determination of the
Committee may be made, without a meeting, by a writing or writings signed by
all of the members of the Committee. In addition, the Committee may authorize
any one or more of its members to execute and deliver documents on behalf of
the Committee.

 

(iii)          To the
extent deemed necessary or advisable for purposes of Section 16 of the Exchange
Act or Section 162(m) of the Code, a member or members of the Committee may
recuse himself or themselves from any action, in which case action taken by the
majority of the remaining members shall constitute action by the Committee.

 

(c)           Delegation.  To the extent permitted by applicable law,
the Committee may, by a resolution adopted by the Committee, authorize one or
more officers of the Company to do one or more of the following:  (i) designate officers and other Employees,
Non-Employee Directors, and Independent Contractors of the Company to be
Participants to receive an Award under the Plan, (ii) determine the
amount, terms, conditions, and form of any such Awards and (iii) take such
other 

 

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actions which the Committee
is authorized to take under the Plan; provided, however, that the resolution so
authorizing such Participant shall specify the total number of shares of Common
Stock or the amount of cash payable under such Awards which such Participant
may be so awarded; provided, further, that the Committee may not delegate to
any person the authority to grant Awards to, or take other action with respect
to, Participants who at the time of such Awards or action are subject to
Section 16 of the Exchange Act or are “covered employees” as defined in
Section 162(m) of the Code. 
Further, the Committee may not authorize an officer to designate himself
or herself as a recipient of any such Awards. 
To the extent deemed necessary or advisable for purposes of Section 16
of the Exchange Act or otherwise, the Board may act as the Committee hereunder.

 

(d)           Liability;
Indemnification. 
No member of the Board, no member of the Committee and no Employee shall
be liable for any act or failure to act hereunder, except in circumstances
involving his bad faith, gross negligence or fraud, or 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 the Plan have been delegated.  The Company shall indemnify members of the
Committee and any agent of the Committee who is an Employee, against any and
all liabilities or expenses to which they may be subjected by reason of any act
or failure to act with respect to their duties on behalf of the Plan, except in
circumstances involving such person’s bad faith, gross negligence or willful
misconduct.

 

5.             Stock
Subject to the Plan.

 

(a)           Available
Shares.  The stock subject
to the provisions of the Plan may be shares of authorized but unissued Common
Stock, treasury shares held by the Company or any Subsidiary, or shares
acquired by the Company through open market purchases or otherwise.  Subject to adjustment in accordance with the
provisions of Section 11, the total number of shares of Common Stock which may
be issued under the Plan shall not exceed the number of shares under the
Predecessor Plan heretofore authorized for issuance and not previously issued
and not issued after the Effective Date (or which, after the Effective Date,
become available as provided herein).  To
the extent that shares of Common Stock subject to an outstanding Award or an
award under the Predecessor Plan are not issued by reason of the forfeiture,
termination, surrender, cancellation or expiration while unexercised of such
award, by reason of the tendering or withholding of shares (by either actual
delivery or by attestation) to pay all or a portion of the purchase price or to
satisfy all or a portion of the tax withholding obligations relating to such an
Award under the Plan or award under the Predecessor Plan, by reason of being
settled in cash in lieu of Common Stock or settled in a manner such that some
or all of the shares covered by the Award are not issued to a Participant, or
being exchanged for an Award under the Plan that does not involve Common Stock,
then such shares shall immediately again be available for issuance under the
Plan.  The foregoing provisions of this
Section 5(a) to the contrary notwithstanding, no shares attributable to the Director
Plan may be subject to Incentive Stock Option Awards under the Plan.  The Committee may from time to time adopt and
observe such procedures concerning the counting of shares against the Plan
maximum 

 

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as it may deem
appropriate.  Shares of Common Stock
issued in connection with awards that are assumed, converted or substituted
pursuant to a merger, acquisition or similar transaction entered into by the
Company or any of its Subsidiaries shall not reduce the number of shares of
Common Stock available under the Plan.

 

(b)           Limitations.  Subject to Section 11, the maximum number of
shares of Common Stock that may be covered by Awards granted under the Plan to
any single Participant during any one Plan Year shall be 1,000,000 shares;
provided, any Awards or portion of Awards that are cancelled or repriced shall
continue to be counted in determining such maximum aggregate number of shares
of Common Stock that may be granted to any single Participant.  If an Award is granted in tandem with a Stock
Appreciation Right, such that the exercise of the Award right or Stock
Appreciation Right with respect to a share of Common Stock cancels the tandem
Stock Appreciation Right or Award right, respectively, with respect to such
share, the tandem Award right and Stock Appreciation Right with respect to each
share of Common Stock shall be counted as covering but one share of Common
Stock for purposes of applying the limitations of this paragraph (b).

 

6.             Awards under
the Plan.  As the Committee
may determine, the following types of Awards may be granted under the Plan on a
stand alone, combination or tandem basis:

 

(a)           Stock Option. 
A right to buy a specified number of shares of Common Stock at a fixed
exercise price during a specified time, all as the Committee may determine;
provided that the exercise price of any Stock Option shall not be less than
100% of the Fair Market Value of a share of Common Stock on the date of grant
of such Award; and, provided, further, that in no event shall the term of any
Stock Option extend to a date which is more than ten years after the date of
grant of such Award.

 

(b)           Incentive Stock Option. 
A right to buy a specified number of shares of Common Stock at a fixed
exercise price during a specified time, all as the Committee may determine;
provided that Incentive Stock Options shall be awarded only to Participants who
are Employees of the Company or one of its subsidiaries (under Section 424(f)
of the Code), have an exercise price that is not less than 100% Fair Market
Value of a share of Common Stock on the date of grant of such Award and a term
that extends to a date that is not more than ten years after the date of grant
of such Award.  An Award in the form of
an Incentive Stock Option shall otherwise comply with all requirements of
Section 422 of the Code or any successor Section of the Code as it may be
amended from time to time.  Options
granted as Incentive Stock Options that at any time fail to satisfy the
requirements of Section 422 of the Code shall thereafter constitute Stock
Options other than Incentive Stock Options without action by the Committee.

 

(c)           Stock Appreciation Right. 
A right to receive the excess of the Fair Market Value of a share of
Common Stock on the date the Stock Appreciation Right is exercised over the
Fair Market Value of a share of Common Stock on the date the 

 

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Stock Appreciation Right
was granted, payable in shares of Common Stock, in cash or a combination of
Common Stock and cash, in accordance with the terms of the Award.

 

(d)           Restricted Shares and Performance Shares.  A transfer of Common Stock to a Participant,
subject to such restrictions on transfer or other incidents of ownership, or in
the case of Performance Shares subject to performance standards established
pursuant to Section 7 below, for such periods of time as the Committee may
determine. The terms of a Performance Share Award also may provide for payment
in cash or a combination of Common Stock and cash.

 

(e)           Restricted Units and Performance Units.  A fixed or variable share or dollar
denominated unit subject to such conditions of vesting, and time of payment, or
in the case of Performance Share Units, performance standards established
pursuant to Section 7 below, as the Committee may determine, which are valued
at the Committee’s discretion in whole or in part by reference to, or otherwise
based on, the Fair Market Value of a share of Common Stock and which may be
paid in Common Stock, cash or in a combination of Common Stock and cash.

 

(f)            Dividend or Dividend Equivalent Right.  A right to receive dividends or their
equivalent in value, equal to the amount of the dividend actually paid with
respect to one share of Common Stock, which shall be payable in Common Stock,
cash or in a combination of Common Stock and cash with respect to any new or
previously existing Award, as the Committee shall determine.

 

(g)           Stock Award. 
An unrestricted transfer of ownership of Common Stock.

 

(h)           MIP Awards. 
A Stock Award, Restricted Stock Award or a Restricted Stock Unit Award,
together with or without an Award of Dividend or Dividend Equivalent Rights, or
a Stock Option Award, as payment for an award granted and earned under the
Company’s Management Incentive Plan, as amended and restated February 8, 2005  and as may be amended thereafter from time to
time (subject to shareholder approval as provided thereunder and at Section 14
hereunder).

 

(i)            Director Options. 
As a component of a Non-Employee Director’s compensation for services as
a member of the Board, a Stock Option Award (other than an Incentive Stock
Option), to purchase shares of Common Stock of the Company at an exercise price
equal to the Fair Market Value of Common Stock on the date of the Award, and
providing such terms and conditions as determined by the Committee.  Anything in this Section 6 to the contrary
notwithstanding, with respect to Director Option Awards:

 

(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:

 

8

 

(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 Director Option granted under the Plan shall become
fully exercisable upon the death of the Non-Employee Director while serving on
the Board or upon the retirement of the Non-Employee Director.  For these purposes, “retirement” means
a Non-Employee Director’s termination of service as a member of the Board on or
after the date on which the Non-Employee Director’s age plus service as a
member of the Board equals or exceeds 62, provided that the Non-Employee
Director has attained age 50 and has served as a member of the Board for not
less than six years, or at any time with the consent of the Board.

 

(iii)          Any Director
Option may not be exercised after the earliest to occur of the following
events: (A) after the fifth anniversary of the termination of the Non-Employee
Director’s service as a member of the Board for any reason (and, subject to
Section 15(d), then only to the extent that the Non-Employee Director could
have exercised such option on the date of termination); or (B) more than ten
(10) years after the date the option is granted.

 

(j)            Other Incentive Awards. 
Other Incentive Awards which are related to or serve a similar function
to those Awards set forth in this Section 6, including, but not limited to,
Other Incentive Awards related to the establishment or acquisition by the
Company or any Subsidiary of a new or start-up business or facility.

 

7.             Performance-Based
Awards.  The Committee may
from time to time, establish Performance Criteria with respect to an Award (a “Performance-Based
Award”).  The Performance Criteria or
standards for an Award shall be determined by the Committee in writing, shall
be measured for achievement or satisfaction during the period in which the
Committee permitted such Participant to satisfy or achieve such Performance
Criteria and may be absolute in their terms or measured against or in
relationship to other companies comparably, similarly or otherwise situated or
other external or internal measure and may be based on or adjusted for any
other objective goals, events, or occurrences established by the Committee,
provided that such criteria or standards relate to one or more of the
following:  (a) earnings before interest,
taxes, depreciation and amortization, (b) revenue, (c) sales, (d) earnings per
share, (e) funds from operations, (f) pretax income before allocation of
corporate overhead and bonus, (g) budget, (h) cash flow, (i) net income, (j)
division, group or corporate financial goals, 

 

9

 

(k) appreciation in or
maintenance of the price of the Stock or any other publicly traded securities
of the Company, (l) dividends, (m) total shareholder return, (n) return on
shareholders’ equity, (o) return on assets, (p) return on investment, (q)
internal rate of return, (r) attainment of strategic and operational
initiatives, (s) market share, (t) operating margin, (u) profit margin,
(v) gross profits, (w) earnings before interest and taxes, (x) economic
value-added models, (y) comparisons with various stock market indices, (z)
increase in number of customers, and (aa) reductions in costs, as determined by
the Committee.  Such Performance Criteria
may be particular to a line of business, Subsidiary or other unit or the
Company generally, and may, but need not be, based upon a change or an increase
or positive result.  In interpreting Plan
provisions applicable to Performance Criteria and to Performance-Based Awards
to Participants who are “covered employees” under Section 162(m) of the Code,
it is the intent of the Plan to conform with the standards of Section 162(m) of
the Code and the regulations thereunder. 
The Committee in establishing Performance Criteria applicable to such
Performance-Based Awards, and in interpreting the Plan, shall be guided by such
standards, including, but not limited to providing that the Performance-Based
Award shall be paid, vested or otherwise delivered solely as a function of
attainment of objective Performance Criteria based on one or more of the
specific factors set forth in this Section 7 established by the Committee not
later than 90 days after the period of service applicable to the Award has
commenced (or, if such period of service is less than one year, not later than
the date on which 25% of such period has elapsed).  Pursuant to such standards, the Committee may
reduce, but not increase, the amount so vested, paid or delivered.

 

8.             Award
Agreements. 
Each Award under the Plan shall be evidenced by an Award Agreement.  Delivery of an Award Agreement to each
Participant shall constitute an agreement, subject to Section 9 hereof, between
the Company and the Participant as to the terms and conditions of the Award; provided,
that, in the event of any conflict between a provision of the Plan and any
provision of an Award Agreement, the provision of the Plan shall prevail.

 

9.             Other Terms
and Conditions.

 

(a)           No Assignment; Limited Transferability of Stock Options.  Except as provided below, no Award granted under
the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, otherwise than by will or by the laws of descent and
distribution.  Notwithstanding the
foregoing, the Committee may, in its discretion, authorize all or a portion of
the Stock Options (other than Incentive Stock Options) granted to a Participant
to be on terms which permit transfer by such Participant to:

 

(i)            the spouse,
children or grandchildren of the Participant (“Immediate Family Members”);

 

(ii)           a trust or
trusts for the exclusive benefit of such Immediate Family Members; or

 

10

 

(iii)          a
partnership in which such Immediate Family Members are the only partners,

 

provided that:

 

(A)          there may be
no consideration for any such transfer;

 

(B)           the Award
Agreement pursuant to which such Stock Options are granted expressly provides
for transferability in a manner consistent with this Section 9(a); and

 

(C)           subsequent
transfers of transferred Stock Options shall be prohibited except those in
accordance with this Section 9(a).

 

Following transfer, any such Stock Options shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of this Section 9(a)
hereof the term “Participant” shall be deemed to refer to the transferee.  The provisions of the Stock Option relating
to the period of exercisability and expiration of the Stock Option shall
continue to be applied with respect to the original Participant, and the Stock
Options shall be exercisable or received by the transferee only to the extent,
and for the periods, set forth in said Stock Option.

 

(b)           Beneficiary Designation. 
Each Participant under the Plan may name, from time to time, any beneficiary
or beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his death before he receives
any or all of such benefit.  Each
designation will revoke all prior designations by the same Participant, shall
be in a form prescribed by the Committee, and will be effective only when filed
by the Participant in writing with the Committee during his lifetime.  In the absence of any such designation,
benefits remaining unpaid at the Participant’s death shall be paid to his
estate.

 

(c)           Termination of Employment. 
The disposition of the grant of each Award in the event of the
retirement, disability, death or other termination of a Participant’s
employment or service to the Company as an Independent Contractor shall be as
determined by the Committee and set forth in the Award Agreement.

 

(d)           Predecessor Plan Awards. 
Unless expressly provided otherwise by the Committee, references to the “Plan”
set forth in any agreement representing an award granted under the Predecessor
Plan prior to the Effective Date shall refer to the terms of the Predecessor
Plan.

 

(e)           Rights as a Shareholder. 
A Participant shall have no rights as a stockholder with respect to
shares covered by an Award until the date the Participant or his nominee,
guardian or legal representative is the holder of record; provided, however,
that Participants holding Restricted Shares may exercise full voting rights
with respect to those shares during the Restriction Period.  Nothing contained in the Plan, and no action
taken pursuant to its provisions, shall create or be construed to create a
trust of 

 

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any kind, or a fiduciary
relationship between the Company and any Participant, beneficiary, legal
representative or any other person. To the extent that any person acquires a
right to receive payments from the Company under the Plan, such right shall be
no greater than the right of an unsecured general creditor of the Company.  All payments to be made hereunder shall be
paid from the general funds of the Company and no special or separate fund
shall be established and no segregation of assets shall be made to assure
payment of such amounts except as expressly set forth in the Plan. The Plan is
not intended to be subject to the Employee Retirement Income Security Act of
1974, as amended.

 

(f)            Dividends and Dividend Equivalents.  Dividend and Dividend Equivalent Rights may
be extended to and made a part of any Award, subject to such terms, conditions
and restrictions as the Committee may establish.  The Committee may also establish rules and
procedures for the crediting of Dividend Equivalents for Awards.

 

(g)           Payments by Participants. 
The Committee may determine that Awards for which a payment is due from
a Participant may be payable:  (i) via
personal check, bank draft, money order, certified check, or cashier’s check
payable to the order of the Company or by money transfers or direct account
debits; (ii)     through the delivery or deemed delivery
based on attestation to the ownership of Previously Acquired Shares of Common
Stock with a Fair Market Value equal to the total payment due from the
Participant, or delivery by the Participant of a written attestation of the
same; or (iii) a copy of irrevocable instructions to a broker to promptly
deliver to the Company the amount of proceeds from a sale of Shares equal to
the exercise price.  To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures
with one or more brokerage firms; provided, such payment pursuant to clause
(iii) shall be subject to compliance with Federal Reserve Board Regulation T,
federal and state securities laws and trading policies established by the
Company and applicable to the Participant.

 

(h)           Withholding. 
Except as otherwise provided by the Committee in the Award Agreement or
otherwise (i) the deduction of withholding and any other taxes required by law
shall be made from all amounts paid in cash, and (ii) in the case of the
exercise of Stock Options or payments of Awards in shares of Common Stock, the
Participant shall be required to pay the amount of any taxes required to be
withheld in cash prior to receipt of such stock, or alternatively, to elect to
have a number of shares the Fair Market Value of which equals the amount
required to be withheld deducted from the shares to be received upon such
exercise or payment or deliver such number of Previously-Acquired Shares of
Common Stock.  In no event shall such withholding
amount exceed the minimum amount required by law to be withheld.

 

(i)            Other Restrictions. 
The Committee shall impose such other restrictions on any Awards granted
pursuant to the Plan as it may deem advisable, including, without limitation,
restrictions under applicable Federal or state securities laws, post-vesting or
exercise holding periods, or requirements to comply with restrictive covenants,
and may legend the certificates issued in connection with an Award to give
appropriate notice of any such restrictions.

 

12

 

10.           Amendments,
Modification and Termination.

 

(a)           The Plan.  The Board may at any time and from time to
time, alter, amend, suspend or terminate the Plan in whole or in part, subject
to any requirement of shareholder approval imposed by applicable law, rule or
regulation.  No termination, amendment,
or modification of the Plan shall adversely affect in any material way any
Award previously granted under the Plan, without the written consent of the
Participant holding such Award.

 

(b)           Award
Agreements. 
The Committee may amend or modify any Award Agreement at any time,
provided that if the amendment or modification adversely affects the
Participant, such amendment or modification shall be by mutual agreement between
the Committee and the Participant or such other persons as may then have an
interest therein. In addition, and subject to shareholder approval in
accordance with Section 14(c), by mutual agreement between the Committee and a
Participant or such other persons as may then have an interest therein, Awards
may be granted to a Participant in substitution and exchange for, and in
cancellation of, any Awards previously granted to such Participant under the
Plan, or any award previously granted to such Participant under any other
present or future plan of the Company or any present or future plan of an
entity which (i) is purchased by the Company, (ii) purchases the Company, or
(iii) merges into or with the Company.

 

11.           Adjustment.  The aggregate number of shares of Common
Stock as to which Awards may be granted to Participants, the number of shares
of Common Stock set forth in the limitations in Section 5(b), the number of
shares of Common Stock covered by each outstanding Award, and the price per
share of Common Stock in each such Award, shall all be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a subdivision, consolidation or split of shares or other capital
adjustment, or the payment of a stock dividend or other increase or decrease in
such shares, effected without receipt of consideration by the Company, or other
change in corporate or capital structure; provided, however, that:

 

(a)           any
fractional shares resulting from any such adjustment shall be eliminated;

 

(b)           that with
respect to Awards that may be subject to Section 162(m) of the Code, such
modifications and/or changes do not disqualify compensation attributable to
such Awards as “performance-based compensation” under Section 162(m) of the
Code; and

 

(c)           any
adjustment with respect to an Incentive Stock Option due to a change or
distribution described in this Section 11 shall comply with the rules of
Section 424(a) of the Code, and in no event shall any adjustment be made which
would render any Incentive Stock Option granted hereunder other than an
incentive stock option for purposes of Section 422 of the Code.  The Committee may also make the foregoing
changes and any other changes, including changes in the classes of securities
available, to the extent it is deemed necessary or desirable to preserve the
intended 

 

13

 

benefits of the Plan for
the Company and the Participants in the event of any other reorganization,
recapitalization, merger, consolidation, spinoff, extraordinary dividend or
other distribution or similar transaction.

 

12.           Rights as
Employees, Directors or Independent Contractors.  No person shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as giving a
Participant the right to be retained in the employ of, as a Director of, or as
an Independent Contractor of the Company or a Subsidiary.  Further, the Company and each Subsidiary
expressly reserve the right at any time to dismiss a Participant free from any
liability, or any claim under the Plan, except as provided herein or in any
Award Agreement issued hereunder.

 

13.           Listing of
Shares and Related Matters. 
If at any time the Committee shall determine that the listing,
registration or qualification of the shares of Common Stock subject to any
Award on any securities exchange or under any applicable law, or the consent or
approval of any governmental regulatory authority, is necessary or desirable as
a condition of, or in connection with, the granting of an Award or the issuance
of shares of Common Stock thereunder, such Award may not be exercised,
distributed or paid out, as the case may be, in whole or in part, unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Committee.

 

14.           Shareholder
Approval.

 

(a)           Initial
Approval.  The Plan shall be
approved by the shareholders of the Company at the first annual meeting
following the date adopted by the Board. 
Approval of the Plan by the shareholders of the Company shall be a
condition to the right of each Participant to receive or retain Awards
hereunder.

 

(b)           Reapproval.  If required by Treasury Regulation Section
1.162-27(e)(4)(vi) or any successor regulation or rule, the material terms of
Performance Criteria as described in Section 7 shall be disclosed to and
reapproved by the shareholders of the Company no later than the first
shareholder meeting that occurs in the 5th year following the year in which the
Company’s shareholders previously approved such performance goals.

 

(c)           Repricing.  Any amendment, revision, replacement,
cancellation and regrant, or other change to an outstanding Award, not
otherwise provided herein, that is determined to be a “repricing” (or word(s)
of similar effect) under the rules of the exchange or system on which Common
Stock is listed shall be approved by the shareholders of the Company before
such “repriced” Award shall be effective.

 

15.           Change of
Control.  Notwithstanding
anything contained in the Plan or any Award Agreement to the contrary, in the
event of a Change of Control, the following shall occur with respect to any and
all Awards outstanding as of such Change of Control:

 

14

 

(a)           To the
extent any Stock Option, Incentive Stock Option or Stock Appreciation Right
(including any Stock Option, Incentive Stock Option or Stock Appreciation Right
granted under the Predecessor Plan) is not exercisable, it shall become exercisable
as to one-half of the shares subject to the unexercisable portion of the Stock
Option and one-half of the shares subject to the unexercisable portion of the
Stock Appreciation Right;

 

(b)           Any
restrictions imposed on Restricted Shares and Restricted Units shall lapse as
to one-half of the Restricted Shares and one-half of the Restricted Units
subject to such restrictions;

 

(c)           Unless
otherwise specified in a Participant’s Award Agreement at time of grant, the
maximum payout opportunities attainable under all outstanding Awards of
Performance Units, Performance Shares and Other Incentive Awards shall be
deemed to have been fully earned for the entire performance period(s) as of the
effective date of the Change of Control. 
The vesting of all such Awards shall be accelerated as of the effective
date of the Change of Control, and in full settlement of such Awards, there
shall be paid out in cash, or in the sole discretion of the Committee, shares
of Common Stock with a Fair Market Value equal to the amount of such cash, to
Participants within thirty (30) days following the effective date of the Change
of Control the maximum of payout opportunities associated with such outstanding
Awards; and

 

(d)           To the
extent that any Director Option (including a Director Option granted under the
Predecessor Plan) is not exercisable, it shall become exercisable as to all of
the shares subject to the unexercisable portion of the Director Option.

 

16.           Governing
Law.  To the extent that
federal laws do not otherwise control, the Plan and all Award Agreements
hereunder shall be construed in accordance with and governed by the law of the
State of Illinois (without regard for its conflict of laws principles).

 

17.           Construction.  The descriptive headings in the Plan are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of the Plan.  The use of the word “including” in the Plan
shall be by way of example rather than by limitation. Except where otherwise
indicated by the context, any masculine term used herein also shall include the
feminine, the plural shall include the singular, and the singular shall include
the plural.

 

18.           Effective
Date and Term. 
The effective date of the Plan shall be June 3, 2005 (the “Effective
Date”), subject to approval by the shareholders of the Company.  No Award shall be granted after June 3, 2015;
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 the
Plan or under any other present or future plan of the Company, and subject to
the limitations under Section 5(b)(ii), Awards may be granted to such
Participant in substitution and 

 

15

 

exchange for, and in
cancellation of, any Awards previously granted such participant under the Plan,
or any other present or future plan of the Company.

 

16Exhibit 10.3

 

TERM SHEET

 

This
letter sets forth the terms of employment as an “at will” employee that APAC
Customer Services, Inc. is prepared to offer Joseph Doolan (“Candidate”).

 

	
  TITLE:

  	
   

  	
  Vice President - Controller

  
	
   

  	
   

  	
   

  
	
  LOCATION:

  	
   

  	
  Deerfield, Illinois

  
	
   

  	
   

  	
   

  
	
  REPORTS TO:

  	
   

  	
  George Hepburn - Senior Vice President and Chief
  Financial Officer

  
	
   

  	
   

  	
   

  
	
  BASE SALARY:

  	
   

  	
  $195,000.00 annually ($7,500.00 bi-weekly). This is
  stated for convenience and is not intended as an annual contract of
  employment

  
	
   

  	
   

  	
   

  
	
  SIGN-ON BONUS:

  	
   

  	
  $60,000.00 bonus to be paid at Candidate’s six-month
  anniversary. In the event candidate voluntarily resigns his/her employment
  within one year of the date employment begins, candidate shall repay the sign
  on bonus in its entirety.

  
	
   

  	
   

  	
   

  
	
  BONUS:

  	
   

  	
  Candidate is eligible to participate in APAC’s
  annual Management Incentive Plan (“MIP”) as it exists from year to year. We
  envision an opportunity of 7.5% - 30% - 60% of Base Salary for
  threshold-target-maximum performance, respectively. The payout of MIP will
  depend on APAC meeting its budgeted financial performance and Candidate
  meeting individual and team performance goals that will be established each
  year between Candidate and his/her manager.

  
	
   

  	
   

  	
   

  
	
  STOCK OPTIONS:

  	
   

  	
  Subject to approval by the
  Compensation Committee of the Board of Directors, Candidate shall be
  granted options to purchase 85,000 shares of APAC common stock priced on the
  date of such approval. These options will vest at the rate of 20% per year
  during the next five years of employment.

  
	
   

  	
   

  	
   

  
	
  EFFECTIVE: 

  	
   

  	
  January 30, 2006. 

  
	
   

  	
   

  	
   

  
	
  BENEFITS:

  	
   

  	
  Employee shall be eligible to participate in benefit
  plans available to APAC employees as summarized on the Corporate Benefit Plan
  Summary dated January 1, 2006 which includes; medical, dental vision, life
  insurance/accidental death and dismemberment, short term and long term
  disability, flexible spending accounts, 401(k), as well as holidays,
  vacation, sick days and educational assistance.

  
	
   

  	
   

  	
   

  
	
  AGREEMENT

  	
   

  	
  As a condition of employment Candidate shall sign an
  appropriate 

  

 

1

 

	
  PROTECTING THE COMPANY’S INTERESTS:

  	
   

  	
  Agreement Protecting Company Interests, a copy of
  which is enclosed.

  
	
   

  	
   

  	
   

  
	
  OTHER:

  	
   

  	
  Offer contingent upon satisfactory Background check.

  
	
   

  	
   

  	
   

  
	
  OTHER:

  	
   

  	
  Candidate hereby
  represents and warrants to and with APAC Customer Services, Inc. that
  Candidate is not subject to any covenants, agreements or restrictions,
  including, without limitation, any covenants, agreements or restrictions
  arising out of Candidate’s prior employment or independent contractor
  relationships, which would be breached or violated by Candidate’s acceptance
  of this offer of employment or by Candidate’s performance of her/his duties
  at APAC Customer Services, Inc. Candidate acknowledges that it is APAC Customer
  Services, Inc.’s express policy and procedure to abstain from the use or
  disclosure of the trade secrets and proprietary information of third parties,
  and Candidate hereby expressly covenants that s/he will not, in the
  performance of her/his duties at APAC Customer Services, Inc., use or
  disclose the trade secrets or proprietary information of third parties.

  

 

 

AGREED TO:

 

 

	
  /s/ Karen Tulloch

  	
  1/11/06

  	
   

  	
  /s/Joseph Doolan

  	
   

  
	
  Karen Tulloch

  	
  (Date)

  	
   

  	
  Joseph Doolan

  	
   

  
	
  Senior Vice President, Human Resources

  	
   

  	
  Candidate

  	
   

  

 

2

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