<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
APAC TELESERVICES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
LOGO
APAC TELESERVICES, INC.
ONE PARKWAY NORTH CENTER
SUITE 510
DEERFIELD, ILLINOIS 60015
NOTICE OF ANNUAL MEETING OF SHARE OWNERS
MAY 20, 1997
To the Share Owners of
APAC TeleServices, Inc.:
The Annual Meeting of Share Owners of APAC TeleServices, Inc. will be held
at The Northern Trust Company, 50 South LaSalle Street, Chicago, Illinois on
May 20, 1997, at 10:00 A.M. Central Daylight Time for the following purposes:
1. To elect six directors.
2. To consider and transact such other business as may properly come
before the Annual Meeting or any adjournment thereof.
Share owners of record at the close of business on March 24, 1997, are
entitled to notice of, and to vote at, the Annual Meeting.
Whether or not you plan to attend the meeting, please date, sign and mail
the enclosed proxy in the envelope provided which requires no postage for
mailing in the United States. A prompt response is helpful, and your
cooperation will be appreciated.
By Order of the Board of Directors
Marc S. Simon
Chief Financial Officer and
Secretary
April 10, 1997
<PAGE>
LOGO
APAC TELESERVICES, INC.
ONE PARKWAY NORTH CENTER
SUITE 510
DEERFIELD, ILLINOIS 60015
----------------
PROXY STATEMENT
ANNUAL MEETING OF SHARE OWNERS TO BE HELD MAY 20, 1997
----------------
This Proxy Statement is being mailed to share owners of APAC TeleServices,
Inc. (the "Company") on or about April 10, 1997, and is furnished in
connection with the solicitation of proxies by the Board of Directors for the
Annual Meeting of Share Owners to be held on May 20, 1997, for the purpose of
considering and acting upon the matters specified in the Notice of Annual
Meeting of Share Owners accompanying this Proxy Statement.
Each share owner is entitled to one vote for each Common Share held as of
the record date. A majority of the outstanding shares entitled to vote at this
meeting and represented in person or by proxy will constitute a quorum. As of
the close of business on March 24, 1997, the record date for determining share
owners entitled to vote at the Annual Meeting, 46,774,786 Common Shares were
outstanding.
If the form of Proxy which accompanies this Proxy Statement is executed and
returned, it will be voted in accordance with your directions. A Proxy may be
revoked at any time prior to the voting thereof by written notice to the
Secretary of the Company. The affirmative vote of the holders of a majority of
the Common Shares entitled to vote and represented in person or by proxy at
the Annual Meeting is required in the election of directors and any other
proposal submitted to a vote. Shares represented by proxies which are marked
"abstain" or to deny discretionary authority on any matter will be treated as
shares present and entitled to vote, which will have the same effect as a vote
against any such matters. Broker "non-votes" will be treated as not
represented at the meeting as to matters for which a non-vote is indicated on
the broker's proxy. Broker "non-votes" and the shares as to which share owners
abstain are included for purposes of determining whether a quorum of shares is
present at a meeting. A broker "non-vote" occurs when a nominee holding shares
for a beneficial owner does not vote a particular proposal because the nominee
does not have discretionary voting power with respect to that item and has not
received instructions from the beneficial owner. Broker non-votes will have no
effect on the election of directors.
Expenses incurred in the solicitation of proxies will be borne by the
Company. Certain officers of the Company may make solicitations in person or
by telephone.
<PAGE>
SECURITIES BENEFICIALLY OWNED BY
PRINCIPAL SHARE OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 24, 1997,
regarding the beneficial ownership of Common Shares by (i) each person known
by the Company to own beneficially more than 5% of its outstanding Common
Shares, (ii) each director and nominee, (iii) each Named Executive Officer (as
defined below), and (iv) all executive officers, directors and nominees as a
group. Except as otherwise indicated, the Company believes that the beneficial
owners of the Common Shares listed below, based on information provided by
such owners, have sole investment voting power with respect to such shares,
subject to community property laws where applicable. Unless otherwise
indicated, the address of each of the share owners named below is the
Company's principal executive office.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED
---------------------
NAME NUMBER PERCENT(1)
- ---- ---------- ----------
<S> <C> <C>
Theodore G. Schwartz,.................................... 19,710,000 42.1%
Chairman, Chief Executive
Officer and Director
Trust Seven Hundred Thirty U/A/D 4/2/94(2)............... 2,615,000 5.6
Trust Four Hundred Thirty U/A/D 4/2/94(3)................ 2,615,000 5.6
M. Christine Schwartz (2)(3)(4).......................... 5,832,680 12.5
FMR Corp., et al (5)..................................... 3,591,200 7.7
Marc S. Simon (6)(7)..................................... 242,614 *
Donald B. Berryman (7)................................... 19,078 *
Kenneth G. Culver (7).................................... 31,699 *
Thomas M. Collins (7).................................... 8,000 *
Morris R. Shechtman (7).................................. 32,770 *
George D. Dalton......................................... 2,000 *
Paul G. Yovovich......................................... 5,000 *
Gregory K. Jones......................................... 1,000 *
All directors and executive officers as a group (14 20,060,022 42.6
persons) (7)............................................
</TABLE>
- --------
*less than 1%
(1) Percentage of beneficial ownership is based on 46,774,786 Common Shares
outstanding as of March 24, 1997.
(2) M. Christine Schwartz, Robert W. Wicklein, John J. Abens and Heidi
Schoeffer serve as trustees of Trust Seven Hundred Thirty. All decisions
regarding the voting and disposition of shares held by Trust Seven Hundred
Thirty must be made by a majority of all trustees. The address of this
share owner is c/o TCS Group, 1200 Shermer Road, Suite 212, Northbrook, IL
60062.
(3) M. Christine Schwartz, Robert W. Wicklein, John J. Abens and Heidi
Schoeffer serve as trustees of Trust Four Hundred Thirty. All decisions
regarding the voting and disposition of shares held by Trust Seven Hundred
Thirty must be made by a majority of all trustees. The address of this
share owner is c/o TCS Group, 1200 Shermer Road, Suite 212, Northbrook, IL
60062.
(4) Includes 600,000 Common Shares held by the Schwartz 1996 Charitable
Remainder Unitrust for which M. Christine Schwartz is trustee and has
voting and investment control. The address of this share owner is c/o TCS
Group, 1200 Shermer Road, Suite 212, Northbrook, IL 60062.
(5) Based upon information provided in Schedule 13G dated February 14, 1997.
FMR Corp.'s address is 82 Devonshire Street, Boston, MA 02109.
2
<PAGE>
(6) Includes 3,000 Common Shares held in trust for the benefit of Mr. Simon's
children for which Mr. Simon is Co-Trustee and shares voting and
investment control.
(7) Includes Common Shares which may be acquired pursuant to options which are
exercisable within 60 days as follows: Mr. Simon (236,014 shares); Mr.
Berryman (18,994 shares); Mr. Culver (26,494 shares); Mr. Collins (5,000
shares); Mr. Shechtman (5,000 shares); and all directors and executive
officers as a group (297,502 shares).
ELECTION OF DIRECTORS
At the Annual Meeting of Share Owners, six directors, constituting the
entire Board of Directors of the Company, are to be elected to serve until the
next annual meeting of share owners. It is intended that the proxies (except
proxies marked to the contrary) will be voted for the nominees listed below,
which nominees are members of the present Board of Directors. It is expected
that the nominees will serve, but if any nominee or nominees declines or is
unable to serve for any unforeseen cause, the proxies will be voted to fill
any vacancy so arising in accordance with the discretionary authority of the
persons named in the proxies.
The Board of Directors recommends a vote FOR the election of each of the
following nominees.
NOMINEES FOR ELECTION
The following table sets forth certain information with respect to the
nominees:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Theodore G. Schwartz........... 43 Theodore G. Schwartz has served as the
Company's Chairman and Chief Executive
Officer since its formation in May 1973.
Marc S. Simon.................. 48 Marc S. Simon joined the Company as Chief
Financial Officer in June 1995 and was
elected as a Director of the Company in
August 1995. Prior to joining the Company,
Mr. Simon was a partner practicing
corporate and business law at Neal, Gerber
& Eisenberg, a law firm in Chicago,
Illinois for more than 7 years. Mr. Simon
is a certified public accountant.
Thomas M. Collins.............. 69 Thomas M. Collins became a director of the
Company in August 1995. He has been
Chairman of Shuttleworth & Ingersoll, P.C.,
a law firm in Cedar Rapids, Iowa, for more
than five years and has practiced with the
firm for more than 40 years. Mr. Collins
was Chairman of the Board of Life
Investors, Inc., a financial services
holding company, from 1980 to 1988. Mr.
Collins serves on the board of directors of
McLeod, Inc., a telecommunications company.
George D. Dalton............... 69 George D. Dalton became a director of the
Company in July 1996. Mr. Dalton has been
Chairman of the Board and Chief Executive
Officer of Fiserv, Inc., a provider of
account processing and integrated
information management systems for
financial institutions, since its founding
in 1984. Mr. Dalton also serves on the
board of directors of ARI, Inc.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Morris R. Shechtman............ 54 Morris R. Shechtman became a director of
the Company in September 1995. In November
1996, the Company purchased from Mr.
Shechtman and his wife all of the
outstanding interests of The Shechtman
Group, a management consulting firm of
which Mr. Shechtman had been the Chief
Executive Officer and Managing Director
from January 1996 through November 1996. In
connection with such transaction, in
November 1996, Mr. Shechtman became the
Chairman of The Shechtman Institute/APAC
University. See "Certain Transactions"
below. From December 1993 through December
1995, Mr. Shechtman was the Managing
Director of the Insite Institute, a
management consulting firm, and prior to
joining the Insite Institute, he was an
independent management consultant through
his company, Morris R. Shechtman &
Associates Ltd.
Paul G. Yovovich............... 43 Paul G. Yovovich became a director of the
Company in July 1996. From July 1996
through January 1997, Mr. Yovovich served
as an employee of the Company, assisting
management in the Company's strategic
efforts. From June 1993 to May 1996, Mr.
Yovovich was President of Advance Ross
Corporation, which merged with CUC
International, Inc. in January 1996. Prior
to joining Advance Ross Corporation, Mr.
Yovovich was employed by Centel Corporation
and was President of Centel Corporation's
Central Telephone Company from January 1990
to December 1992. Mr. Yovovich serves on
the boards of U.S. Robotics Corporation,
Illinois Superconductor Corporation and
Comarco, Inc. Mr. Yovovich is a certified
public accountant.
</TABLE>
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors met four times during 1996. All directors attended
all such meetings and all meetings of Board committees on which they served in
1996.
BOARD COMMITTEES
The Board of Directors has established two standing committees: the Audit
Committee and the Compensation Committee.
The Audit Committee, which currently consists of Messrs. Collins, Dalton and
Simon, recommends the appointment of auditors and oversees the accounting and
audit functions of the Company. Mr. Shechtman had served on the Audit
Committee until October 1996. The Audit Committee met twice in 1996.
The Compensation Committee, which currently consists of Messrs. Collins,
Dalton and Yovovich, determines executive officers' salaries and bonuses and
administers the Incentive Stock Plan and the Employee Stock Purchase Plan. Mr.
Shechtman had served on the Compensation Committee until August 1996. Mr.
Dalton served as the Chairman of the Compensation Committee until February
1997 when he was succeeded by Mr. Yovovich. The Compensation Committee met
twice in 1996 and periodically took actions by unanimous written consent.
4
<PAGE>
DIRECTOR COMPENSATION
Directors who are not employees or officers of the Company receive an annual
retainer of $12,000 and an option to purchase 5,000 Common Shares upon initial
election and annually upon each re-election as a director at the Company's
annual meeting of share owners. These options have an exercise price equal to
the fair market value of a Common Share on the date of grant. Directors may
also be reimbursed for certain expenses in connection with attendance at Board
and committee meetings. Other than with respect to reimbursement of expenses,
directors who are employees or officers of the Company will not receive
additional compensation for service as a director. For information concerning
a transaction with Morris Shechtman, a director of the Company, see "Certain
Transactions" below.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to all compensation
paid or earned for services rendered to the Company by the Company's chief
executive officer and four of the Company's other executive officers
(together, the "Named Executive Officers") during each of the last three
fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------ ------------
NAME AND SECURITIES ALL OTHER
PRINCIPAL OTHER ANNUAL UNDERLYING COMPENSATION
POSITION YEAR SALARY BONUS COMPENSATION OPTIONS (#) ($)
--------- ---- ------ ----- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Theodore G. 1996 $312,000 $ 0 $ 0 0 $1,484(1)
Schwartz 1995 312,000 0 0 0 2,170(1)
Chairman and 1994 312,000 0 0 0 1,269
Chief
Executive Offi-
cer
Marc S. Simon(2) 1996 250,000 250,000 0 50,000 696(3)
Chief Financial 1995 139,423 140,000 0 565,034 174(3)
Officer 1994 0 0 0 0 0
Kenneth G. Cul- 1996 175,000 35,109 0 1,005 432(3)
ver 1995 126,923 25,000 0 182,470 108(3)
Senior Vice 1994 120,385 37,500 0 0 0
President--
Facilities
Donald B. 1996 175,000 0 100,447(4) 656 1,115(5)
Berryman 1995 169,231 38,875 0 182,470 647(5)
Senior Vice 1994 119,231 50,000 0 0 0
President--
General Manag-
er/
Operations
Gregory K. 1996 185,097 0 0 0 198(3)
Jones(6) 1995 23,077 0 0 182,470 14(3)
Senior Vice 1994 0 0 0 0 0
President--
Business Devel-
opment
</TABLE>
- --------
(1) Represents $534 and $1,246 with respect to group life insurance premiums
paid and $950 and $924 contributed by the Company on behalf of Mr.
Schwartz to the Company's 401(k) plan, in each of fiscal 1996 and fiscal
1995, respectively.
(2) Mr. Simon joined the Company in May 1995.
(3) Represents group life insurance premiums paid.
(4) Represents $88,804 in moving expenses and $11,643 in automobile expenses
paid by the Company on Mr. Berryman's behalf.
(5) Represents $165 and $41 with respect to group life insurance premiums paid
and $950 and $606 contributed by the Company on behalf of Mr. Berryman to
the Company's 401(k) plan, in each of fiscal 1996 and fiscal 1995,
respectively.
(6) Mr. Jones joined the Company in October 1995.
5
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the number of incentive stock options granted
to the Named Executive Officers during 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (5)
------------------------------------------------- ---------------------
NUMBER OF
SECURITIES % OF TOTAL EXERCISE
UNDERLYING OPTIONS GRANTED OR BASE
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR (3) ($/SH)(4) DATE 5% ($) 10%($)
---- ---------- --------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Theodore G. Schwartz.... -- -- -- -- -- --
Marc S. Simon........... 50,000(1) 4.3 $22.4375 3/1/06 $1,827,416 $2,909,855
Donald B. Berryman...... 656(2) * $36.00 6/28/06 38,468 61,254
Kenneth G. Culver....... 729(2) * $36.00 6/28/06 42,749 68,070
276(2) * $42.875 11/04/06 19,276 30,693
Gregory K. Jones........ -- -- -- -- -- --
</TABLE>
- --------
*Less than 1%.
(1) Options are not exercisable during the first twelve months from the date
the options are granted. Thereafter, the options become exercisable at the
rate of 20% of the total shares subject to the option on and after the
first day of each anniversary of the date on which option was awarded. The
term of the option is ten years.
(2) These options were granted pursuant to the CPR Plan (see pages 7-8 below).
They vest immediately but are not exercisable during the first two years
from the date they are granted. The term of the option is ten years.
(3) Based on 1,170,711 total options granted to employees, including the Named
Executive Officers, in 1996.
(4) The exercise price was equal to the estimated fair market value of the
Common Shares on the date of grant.
(5) The potential realizable value is calculated based on the term of the
option at its time of grant (ten years). It is calculated by assuming the
stock price on the date of grant appreciates at the indicated annual rate
compounded annually for the entire term of the option and that the option
is exercised and sold on the last day of its term for the appreciated
stock price.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information regarding stock option exercises in
fiscal 1996 and exercisable and unexercisable incentive stock options held by
the Named Executive Officers as of December 29, 1996.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
VALUE OPTIONS AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)(2)
SHARES ACQUIRED REALIZED ---------------------------------- -------------------------
NAME ON EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- --------- --------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Theodore G. Schwartz.... 0 0 0 0 0 0
Donald E. Berryman...... 8,500 $ 256,577 27,994 146,632 $ 864,245 $4,507,423
Kenneth G. Culver....... 10,000 301,855 26,494 146,981 817,936 4,507,510
Marc S. Simon........... 0 0 113,007 502,027 3,849,527 16,135,574
Gregory K. Jones........ 36,494 1,431,079 0 145,976 0 4,260,675
</TABLE>
- --------
(1) Value is calculated by subtracting the exercise price per share from the
fair market value at the time of exercise and multiplying by the number of
shares exercised pursuant to the stock option.
(2) Value is calculated by subtracting the exercise price per share from the
fair market value at December 27, 1996, the last trading day in fiscal
1996, of $37.1875 per share, and multiplying by the number of shares
subject to the stock option.
6
<PAGE>
EMPLOYMENT AGREEMENTS
In May 1995, the Company entered into an employment agreement with Mr. Simon
providing for payment of an annual base salary of $250,000. Mr. Simon will be
eligible to receive bonuses from the Company through the Company's
Compensation, Performance, Responsibility Incentive Plan ("CPR Plan"). In
addition, Mr. Simon will receive an additional payment for each calendar year
during the term of the agreement equal to the excess, if any, of $500,000 over
Mr. Simon's salary plus bonus. If Mr. Simon's salary plus bonus in any given
year exceeds $500,000, the additional payment for the following year shall be
reduced by the amount of such excess. The Company granted Mr. Simon an option
to purchase 282,517 Common Shares. This option has a term of 10 years and an
exercise price of $1,764,705. The option vests 20% on May 31 of each year
through 2000. If Mr. Simon is terminated for cause or resigns without
substantial reason, the unvested portion of the option is forfeited. The
option fully vests upon Mr. Simon's death or disability or if his employment
agreement is terminated without cause or Mr. Simon terminates such agreement
for substantial reason. In the event of a sale of substantially all of the
Company's assets or stock, Mr. Simon has the right to sell this option back to
the Company for an amount determined with reference to the amount received in
such sale. The agreement terminates at the earlier of May 31, 2000 or any of
the following events: (1) death or disability of Mr. Simon; (2) mutual
agreement, (3) the Company's election to terminate for cause; (4) Mr. Simon's
election to terminate for substantial reason with 30 days notice; or (5) Mr.
Simon's election to terminate without substantial reason. If the agreement
terminates due to death, disability or mutual agreement, the Company has
agreed to pay Mr. Simon his salary as accrued through the termination date and
any amounts accrued and vested with respect to the CPR Plan. If Mr. Simon's
employment is terminated for cause or Mr. Simon elects to terminate without
substantial reason, he will receive only his salary up to the date of
termination. If Mr. Simon terminates the agreement with substantial reason or
the Company terminates without cause, Mr. Simon shall receive his salary,
bonuses and execution payments up to the termination date and any amounts
accrued and vested, but not covered by the bonus under the CPR Plan. These
amounts will be paid in equal monthly installments, without interest, through
the scheduled termination date of the agreement. During such period, Mr. Simon
has agreed to assist the Company in transitioning his former responsibilities
to other employees and shall serve as advisor and consultant to the Company
for approximately 10 hours per week. The agreement also contains non-
competition and confidentiality commitments.
In March 1994, the Company entered into an employment agreement with Mr.
Berryman providing for payment of a minimum annual base salary of $125,000.
Mr. Berryman will be eligible to receive bonuses from the Company through the
CPR Plan. The employment agreement terminates at the earlier of December 31,
1998 or any of the following events: (1) death or disability of Mr. Berryman;
(2) mutual agreement, (3) the Company's election to terminate for cause; or
(4) 60 days' prior written notice by either party. If the agreement terminates
due to death, disability, mutual agreement or 60 days written notice by Mr.
Berryman, the Company has agreed to pay Mr. Berryman his salary as accrued
through the termination date and any amounts accrued and vested with respect
to the CPR Plan. If Mr. Berryman's employment is terminated with or without
cause, he will receive only his salary up to the date of termination. The
agreement also contains non-competition and confidentiality commitments.
In October 1995, the Company entered into an employment agreement with Mr.
Jones which, as amended, provides for payment of a minimum annual base salary
of $175,000. Mr. Jones will be eligible to receive bonuses from the Company
through the CPR Plan. If the Company terminates Mr. Jones' employment other
than "for cause" (as defined in the Company's 1995 Incentive Stock Plan) or in
the event that Mr. Jones' resigns for "substantial reason" and either such
event occurs prior to October 1, 2000, Mr. Jones will be entitled to nine
months' base salary. Under the terms of the agreement, "substantial reason"
includes (i) the assignment by the Company to Mr. Jones of duties that are
substantially inconsistent with his position as a member of senior level
management or (ii) failure by the Company to materially comply with the
provisions of the agreement. No resignation by Mr. Jones will be considered
for "substantial reason" unless he provides written resignation notice to the
Company at least thirty days in advance, describing the reasons for his
resignation and affording the Company the opportunity to cure during such
notice period. Mr. Jones also executed a non-competition and confidentiality
agreement with the Company.
7
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW OF EXECUTIVE COMPENSATION POLICIES
The Compensation Committee administers the Company's executive officer
compensation program. The Compensation Committee has established the following
general principles in setting the compensation levels of the Company's
executive officers and in administering the APAC TeleServices, Inc. 1995
Incentive Stock Plan (the "Incentive Stock Plan"):
. Provide compensation levels and equity ownership opportunities through
the Incentive Stock Plan to attract and retain highly qualified
individuals.
. Set competitive base compensation levels and utilize performance based
incentive compensation to achieve total compensation targets.
. Establish performance goals which are aggressive and are aligned with
the Company's objectives regarding increasing growth in operating
results and share owner value.
. Use a compensation performance responsibility incentive compensation
system to recognize outstanding individual contributions and overall
Company performance which exceed annual goals.
. Grant stock options broadly across the organization so that all
executive officers and key employees are firmly aligned with the
Company's share owners' economic value.
The overall compensation of executive officers is made up of the
compensation components set forth below.
Base Salaries. Base salaries of executive officers are targeted to be
competitive relative to companies in the direct marketing, high technology and
high growth industries and other comparable companies. In determining
salaries, the Committee also takes into account individual experience and
performance.
Compensation, Performance, Responsibility Incentive Plan. In 1996 the
Company utilized a compensation, performance and responsibility (CPR) bonus
plan. Under the CPR Plan, the Committee established goals based on significant
individual and team contributions to the short- and long-term objectives of
the Company. CPR incentive payments may be in the form of either cash or stock
options. Funding to establish the pool of dollars used for CPR payments is
based upon pre-tax profit levels from the overall company, business and
divisions. Performance is assessed on both the individual and team levels,
primarily on the basis of business objectives achieved.
Option Grants. Executive officers and other key employees of the Company are
eligible to participate in the Incentive Stock Plan. The purpose of the plan
is to attract highly qualified individuals and to provide them with incentive
to maximize share owner value by providing them with opportunities to acquire
Common Shares of the Company. Options are granted to executive officers and
key employees who the Compensation Committee, in its sole discretion,
determines to be responsible for the future growth and profitability of the
Company. The Compensation Committee establishes the number of shares covered
by each grant and the exercise price and vesting period for each grant. The
Committee typically grants stock options with five year vesting periods for
each grant, creating strong incentives for recipients of stock option grants
to remain with the Company. The stock options granted by the Compensation
Committee generally have an exercise price equal to the fair market value of
the Company's Common Shares on the date of grant, thus rewarding the recipient
only if the Company's Common Share price appreciates above the price on the
date of grant.
Including the stock options granted to executive officers identified in the
table above, in 1996 the Compensation Committee granted a total of 1,170,711
options to 665 employees, some of whom are officers of the Company. Option
grants ranged from 250 options to 50,000 options for executive officers and
employees.
Section 162(m) of the Internal Revenue Code limits the deductibility, for
federal income tax purposes, of compensation paid to certain of the Company's
executive officers in excess of $1 million, unless certain conditions are met.
The Compensation Committee does not believe that Section 162(m) will affect
the deductibility of compensation expected to be paid by the Company in the
foreseeable future.
8
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION
The base salary of Mr. Schwartz, the Company's Chief Executive Officer,
remained at $312,000 for the years 1994, 1995 and 1996. The Compensation
Committee believes that Mr. Schwartz's total cash compensation was
significantly below that of his peers at comparable companies. Because Mr.
Schwartz has a substantial equity position attributable to his role as founder
of the Company, he did not participate in the Company's CPR Plan in 1996 and
elected not to receive an award of stock options in 1996 in favor of
increasing the options awarded to other managers and key employees. Mr.
Schwartz is expected to receive a salary adjustment and will appropriately be
considered for participation in the CPR Plan and to receive an award of stock
options in 1997.
COMPENSATION COMMITTEE
Thomas M. Collins
George D. Dalton
Paul G. Yovovich
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Collins, a member of the Compensation Committee in 1996, is the Chairman
of Shuttleworth & Ingersoll, P.C., a law firm in Cedar Rapids which provided
certain legal services to the Company in 1996. Mr. Shechtman was the Chairman
of the Compensation Committee until August 1996. In November 1996, the Company
purchased from Mr. Shechtman and his wife all of the outstanding interests of
The Shechtman Group, a management consulting firm. In connection with such
transaction, in November 1996, Mr. Shechtman became the Chairman of The
Shechtman Institute/APAC University. See "Certain Transactions" below. Mr.
Yovovich was an employee of the Company from July 1996 through January 1997.
During 1996, no executive officer of the company served on the board of
directors or compensation committee of any other corporation with respect to
which any member of the Compensation Committee was engaged as an executive
officer. No member of the Compensation Committee was formerly an officer of
the Corporation.
CERTAIN TRANSACTIONS
Pursuant to an agreement dated November 22, 1996 (the "Purchase Agreement"),
the Company purchased all of the issued and outstanding interests in The
Shechtman Group, L.L.C., a Nevada limited liability company ("The Shechtman
Group") from Morris Shechtman, a director of the Company, and his wife, Arleah
Shechtman, in exchange for an aggregate of 54,440 Common Shares. The Purchase
Agreement also granted to the Shechtmans certain registration rights with
respect to such Common Shares (pursuant to which the Company filed a
registration statement in March 1997). The Company believes that the foregoing
transaction was conducted on terms at least as favorable to the Company as
those that could have been obtained from an unrelated third party. In
connection with the purchase of The Shechtman Group by the Company, Morris and
Arleah Shechtman each became employees of the Company. Prior to the purchase
of The Shechtman Group by the Company, during the fiscal year ended December
29, 1996, The Shechtman Group provided leadership training programs to the
Company's managers and the Company paid to The Shechtman Group an aggregate of
$870,952 therefor.
Pursuant to an agreement among Mr. Schwartz, the Chairman and Chief
Executive Officer of the Company, the trustees of certain trusts and the
Company, Mr. Schwartz and the trusts are entitled to certain rights with
respect to the registration of their Common Shares under the Securities Act of
1933, as amended (the "Securities Act"). If the Company proposes to register
any of its securities under the Securities Act, Mr. Schwartz and the trusts
are entitled to notice of such registration and are entitled to include at the
Company's expense all or a portion of their shares therein, subject to certain
conditions. Such share owners also may, subject to certain conditions, require
the Company at the Company's expense, to file a registration statement on Form
S-1 under the Securities Act with respect to such Common Shares, on not more
than two occasions, and the Company is required to use its best efforts to
effect the registration. In addition, such share owners also may, subject to
certain
9
<PAGE>
conditions, require the Company at the Company's expense, to register their
shares on Form S-2 or S-3, as applicable, on not more than two occasions in
any fiscal year. In February 1996, at the request of Mr. Schwartz and the
trusts, the Company, at the Company's expense, filed a registration statement
on Form S-1 to register the sale of Common Shares by Mr. Schwartz and the
trusts. In November 1996, at the request of Mr. Schwartz and the trusts, the
Company filed a registration statement on Form S-3 to register the sale of
Common Shares by Mr. Schwartz and the trusts. Mr. Schwartz paid the expenses
of the November 1996 offering.
Mr. Collins, a director of the Company, is the Chairman of Shuttleworth &
Ingersoll, P.C., a law firm in Cedar Rapids which provided certain legal
services to the Company in fiscal 1996.
10
<PAGE>
PERFORMANCE GRAPH
The following graph sets forth a comparison of the cumulative total share
owner return on the Company's Common Shares for the period beginning October
11, 1995, the date the Company's Common Shares began trading on the Nasdaq
National Market, and ending December 31, 1996, as compared with the cumulative
total return of the S&P 500 Index and two Peer Group Indexes. The first Peer
Group consists of the same publicly-traded companies used in last year's
performance graph, namely: Automatic Data Processing, Inc., ATC
Communications, Fiserv Inc., National TechTeam, Inc., Paychex Inc. and Sitel
Corporation. The second Peer Group, which the Company intends to use for
future performance graphs because these companies are more closely aligned
with the Company's services, consists of: ATC Communications Group, Inc., ICT
Group, Inc., National Techteam, Inc., Precision Response Corp., RMH
Teleservices Inc., Sitel Corp., Snyder Communications, Sykes Enterprises,
Inc., Teletech Holdings, Inc., Telespectrum Worldwide, Inc. and West
Teleservices Corp. The total share owner return for each company in the Peer
Groups has been weighted according to the company's stock market
capitalization. This graph assumes an investment of $100 on October 11, 1995
in each of the Company's Common Shares, the S&P 500 Index, and the Peer Group
Indexes, and assumes reinvestment of dividends, if any. The stock price
performance shown on the graph below is not necessarily indicative of future
stock price performance.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
10/11/95 12/29/95 12/31/96
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
APAC Teleservices, Inc............................ $100.00 $167.925 $386.164
S&P 500........................................... $100.00 $106.734 $131.595
Peer Group (Old).................................. $100.00 $108.476 $136.556
Peer Group (New).................................. $100.00 $138.024 $392.461
</TABLE>
11
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that certain of the Company's
officers, its directors, and persons who own more than ten percent of the
Company's outstanding stock, file reports of ownership and changes in
ownership with the Securities and Exchange Commission. During 1996, to the
knowledge of the Company, all Section 16(a) filing requirements applicable to
its officers, directors, and greater than ten percent beneficial owners were
complied with.
ANNUAL REPORT; FORM 10-K
A copy of the Company's Annual Report to Share Owners for the fiscal year
ended December 29, 1996 accompanies this proxy statement. Additional copies of
the Annual Report to Share Owners or copies of the Company's Annual Report on
Form 10-K filed with the SEC may be obtained by writing to APAC TeleServices,
Inc., One Parkway North Center, Suite 510, Deerfield, Illinois 60015,
Attention: Corporate Secretary.
ACCOUNTANTS
The firm of Arthur Andersen LLP was the Company's independent accountants
for fiscal 1996 and has been selected as independent accountants to audit the
books, records and accounts of the Company for 1997. Representatives of Arthur
Andersen LLP will be present at the Annual Meeting and will be available to
respond to appropriate questions and to make a statement if they desire to do
so.
PROPOSALS OF SECURITY HOLDERS
A share owner proposal to be presented at the 1998 Annual Meeting must be
received at the Company's executive offices, One Parkway North Center, Suite
510, Deerfield, Illinois 60015, by no later than December 11, 1997, for
evaluation as to inclusion in the Proxy Statement in connection with such
Meeting.
In order for a share owner to nominate a candidate for director, under the
Company's Bylaws, timely notice of the nomination must be given in writing to
the Secretary of the Company. To be timely, such notice must be delivered or
mailed by first class United States mail, postage prepaid, to the Secretary at
the principal executive offices of the Company not less than sixty (60) days
nor more than ninety (90) days prior to the date of the annual meeting of
share owners or if the Company mails its notice and proxy to the share owners
less than sixty (60) days prior to the annual meeting, within ten (10) days
after the notice and proxy is mailed. Such notice must describe certain
information regarding the nominee and the share owner giving the notice,
including such information as name, address, occupation and shares held.
In order for a share owner to bring other business before a share owners
meeting, timely notice must be given to the Secretary of the Company within
the time limits described above. Such notice must include certain information
regarding the share owner giving the notice and a description of the proposed
business. These requirements are separate from and in addition to the
requirements a share owner must meet to have a proposal included in the
Company's proxy statement. Any share owner desiring a copy of the Company's
Bylaws will be furnished one upon written request to the Secretary.
12
<PAGE>
OTHER MATTERS TO COME BEFORE THE MEETING
The Board of Directors of the Company knows of no other business which may
come before the Annual Meeting. However, if any other matters are properly
presented to the Meeting, the persons named in the proxies will vote upon them
in accordance with their best judgment.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN THE PROXY AND
RETURN IT IN THE ENCLOSED STAMPED ENVELOPE.
By Order of the Board of Directors
MARC S. SIMON
Chief Financial Officer, Secretary
Date: April 10, 1997
13
<PAGE>
APAC TELESERVICES, INC.
Proxy is Solicited on Behalf of the Board of Directors
For the Annual Meeting of Share Owners -- May 20, 1997
The undersigned appoints Theodore G. Schwartz and Marc S. Simon, and each
of them, as proxies, each with full power of substitution and revocation, to
represent and to vote, as designated on the reverse side hereof, all of the
Common Shares of APAC TeleServices, Inc. which the undersigned has power to
vote, with all powers which the undersigned would possess if personally present,
at the annual meeting of share owners of APAC TeleServices, Inc. to be held on
May 20, 1997, at The Northern Trust Company, 50 South LaSalle Street, Chicago,
IL 60675, or at any adjournment thereof.
Unless otherwise marked, this proxy will be voted FOR the election of the
nominees named.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
Reverse Side:
APAC TeleServices, Inc.
Please Mark Vote in Oval in the Following Manner Using Dark Ink Only
1. Election of Directors -
Nominees: Theodore G. Schwartz, Marc S. Simon,
Thomas M. Collins, George D. Dalton,
Morris R. Shechtman and Paul G. Yovovich
For Withhold For all
all all (Except Nominee(s) written below)
[_] [_] [_]
----------------------------
Dated:
----------------------------------------------------
Signature(s)
--------------------------------------------------------
--------------------------------------------------------------------
Please sign exactly as your name(s) appears hereon. Joint owners
should each sign personally. If signing in fiduciary or
representative capacity, give full title as such. If a corporation,
please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by
authorized person.
YOUR VOTE IS IMPORTANT!
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
