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
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sections 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)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
[ ] 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:*
4) Proposed maximum aggregate value of transaction:
* Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
APAC TELESERVICES, INC.
ONE PARKWAY NORTH CENTER
SUITE 510
DEERFIELD, ILLINOIS 60015
(847) 374-4980
NOTICE OF ANNUAL MEETING OF SHARE OWNERS
MAY 18, 1999
TO THE SHARE OWNERS OF
APAC TELESERVICES, INC.:
The Annual Meeting of Share Owners of APAC TeleServices, Inc. (the
"Company") will be held at Harris Trust & Savings Bank, 111 West Monroe Street,
Chicago, Illinois on Tuesday, May 18, 1999, at 10:00 a.m. Central Daylight Time
for the following purposes:
1. To elect five directors.
2. To consider and act upon a proposal of the Board of
Directors to approve an amendment to the Company's Amended and Restated
Articles of Incorporation to change the Company's name from APAC
TeleServices, Inc. to APAC Customer Services, Inc.
3. To consider and act upon a proposal of the Board of
Directors to approve the reservation of an additional 150,000 Common
Shares to be available for issuance pursuant to the APAC TeleServices,
Inc. 1995 Nonemployee Director Stock Option Plan.
4. 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 22, 1999, 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
President
April 28, 1999
<PAGE>
APAC TELESERVICES, INC.
ONE PARKWAY NORTH CENTER
SUITE 510
DEERFIELD, ILLINOIS 60015
(847) 374-4980
-------------------
PROXY STATEMENT
ANNUAL MEETING OF SHARE OWNERS TO BE HELD MAY 18, 1999
-------------------
This Proxy Statement is being mailed to share owners of APAC
TeleServices, Inc. (the "Company") on or about April 28, 1999, 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 18, 1999, 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 22, 1999, the record date for determining
share owners entitled to vote at the Annual Meeting, 47,485,085 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 two-thirds of the outstanding
Common Shares entitled to vote on March 22, 1999 is required for approval of the
proposal to amend the Company's Amended and Restated Articles of Incorporation
to change the Company's name.
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, for the approval of the proposal to
reserve an additional 150,000 Common Shares to be available for issuance
pursuant to the APAC TeleServices, Inc. 1995 Nonemployee Director Stock Option
Plan, and for 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 on 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 or the proposal to reserve an additional 150,000
Common Shares to be available for issuance pursuant to the APAC TeleServices,
Inc. 1995 Nonemployee Director Stock Option Plan. Broker non-votes will have the
same effect as a vote against the proposal to amend the Company's Amended and
Restated Articles of Incorporation to change the Company's name.
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 22,
1999, 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 and 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>
Shares
Beneficially Owned
-----------------------------------------------------------------------------
Name Number Percent(1)
<S> <C> <C>
Theodore G. Schwartz (2)(8)
Chairman, President, Chief
Executive Officer and Director 19,758,000 41.6%
Trust Seven Hundred Thirty U/A/D 4/2/94(3) 2,615,000 5.5
Trust Four Hundred Thirty U/A/D 4/2/94 (4) 2,615,000 5.5
M. Christine Schwartz (3)(4) 5,232,680 11.0
Merrill Lynch & Co., Inc.(5) 2,817,200 5.9
Capital Research and Management Company 2,408,200 5.1
and SmallCap World Fund (6)
Marc S. Simon (7)(8) 488,628 1.0
Donald B. Berryman (8) 98,142 *
L. Clark Sisson (8) 30,000 *
Thomas M. Collins (8) 28,001 *
George D. Dalton (8) 15,335 *
Paul G. Yovovich (8) 46,001 *
John Abernethy (9) 65,000 *
John Dontje (10) 37,418 *
James Nikrant (11) 34,769 *
All directors and executive officers as 20,472,808 42.5
a group (9 persons) (8)
- - ------------------
*less than 1%
<PAGE>
(1) Percentage of beneficial ownership is based on 47,485,085 Common Shares
outstanding as of March 22, 1999.
(2) Includes 8,000 Common Shares held in trust for the benefit of certain
members of Mr. Schwartz's family for which Mr. Schwartz is trustee and
has voting and investment control.
(3) Robert W. Wicklein, John J. Abens and Thomas A. Datillo serve as
general 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 general trustees. In addition, M.
Christine Schwartz serves as a special trustee of the Trust, having no
responsibilities or powers regarding the vote or disposition of the
shares owned by the Trust. The address of this share owner is c/o TCS
Group, 1200 Shermer Road, Suite 212, Northbrook, IL 60062.
(4) Robert W. Wicklein, John J. Abens and Thomas A. Datillo serve as
general 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 general trustees. In addition, M.
Christine Schwartz serves as a special trustee of the Trust, having no
responsibilities or powers regarding the vote or disposition of the
shares owned by the Trust. 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 2, 1999.
This share owner's address is World Financial Center, North Tower, 250
Vesey Street, New York, NY 10381.
(6) Based upon information provided in Schedule 13G dated February 8, 1999.
This share owner's address is 333 South Hope Street, Los Angeles,
California 90071.
(7) 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.
(8) Includes Common Shares which may be acquired pursuant to options which
are exercisable within 60 days as follows: Mr. Schwartz (40,000 shares)
Mr. Simon (482,028 shares); Mr. Berryman (97,982 shares); Mr. Collins
(25,001 shares); Mr. Dalton (13,335 shares); Mr. Yovovich (31,001
shares); and Mr. Sisson (10,000); and all directors and executive
officers as a group (706,048 shares).
(9) Mr. Abernethy served as the Company's Chief Financial Officer until
October 1998. Includes 65,000 Common Shares which may be acquired
pursuant to options which are exercisable within 60 days. The address
of this share owner is 641 Courtland Circle, Western Springs, Illinois
60558.
(10) Mr. Dontje served as a Senior Vice President until March 1999. Includes
37,418 Common Shares which may be acquired pursuant to options which are
exercisable within 60 days. The address of this share owner is 3900
Cedar Bluff Court, N.E., Cedar Rapids, Iowa 52411.
(11) Mr. Nikrant served as a Senior Vice President until December 1998.
Includes 34,769 Common Shares which may be acquired pursuant to options
which are exercisable within 60 days. The address of this share owner is
307 Crescent Avenue, S.E., Cedar Rapids, Iowa 52403.
</TABLE>
ELECTION OF DIRECTORS
At the Annual Meeting of Share Owners, five 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
<PAGE>
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>
Name Age Position
<S> <C> <C>
Theodore G. Schwartz 45 Theodore G. Schwartz has served as the Company's Chairman and Chief Executive
Officer since its formation in May 1973.
Marc S. Simon 50 Marc S. Simon became President of the Company in March 1998. Mr. 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 the law firm of Neal, Gerber & Eisenberg
in Chicago, Illinois for more than 7 years. Mr. Simon is a certified public
accountant.
Thomas M. Collins 71 Thomas M. Collins became a director of the Company in August 1995. He is Of
Counsel at Shuttleworth & Ingersoll, P.C., a law firm in Cedar Rapids, Iowa, for
which Mr. Collins served as Chairman for more than five years and where he has
practiced 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 71 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., Clark/Bardes and Fiserv, Inc.
Paul G. Yovovich 45 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 3Com Corporation, Comarco, Inc. and Focal
Communications.
</TABLE>
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors met twelve times during 1998. All directors
attended at least 75% of such meetings and meetings of Board committees on which
they served in 1998.
<PAGE>
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. The Audit Committee met three
times in 1998.
The Compensation Committee, which currently consists of Messrs. Dalton
and Yovovich, determines executive officers' salaries and bonuses and
administers the Incentive Stock Plan and the Employee Stock Purchase Plan. The
Compensation Committee met three times in 1998 and periodically took actions by
unanimous written consent.
DIRECTOR COMPENSATION
In 1998, directors who were not employees or officers of the Company
received an annual retainer of $12,000 and an option to purchase 10,000 Common
Shares upon the adjournment of 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 were also reimbursed for certain expenses
in connection with attendance at Board and committee meetings. Other than with
respect to reimbursement of expenses, directors who were employees or officers
of the Company did not receive additional compensation for service as a
director.
In 1999, directors who are not employees or officers of the Company
will receive (i) options to purchase 20,000 Common Shares upon adjournment of
the annual meeting of share owners, (ii) options to purchase 1,000 Common Shares
for each regular or special board meeting attended in person (or 500 Common
Shares if such director participates in the meeting via telephone) and (iii) an
annual retainer of $12,000. Further, the Company may issue options to each
non-employee director who serves on the Executive Committee of the Board of
Directors. All options granted will have an exercise price equal to the fair
market value of a Common Share on the date of grant. Directors will also be
reimbursed for certain expenses in connection with attendance at Board and
Committee meetings. Other than with respect to reimbursement of expenses,
directors who are employees or officers of the Company will not receive
additional compensation for service as a director.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information with respect to all
compensation paid or earned for services rendered to the Company by the
Company's chief executive officer, four of the Company's other executive
officers who were serving as executive officers at the end of fiscal 1998, and
two additional individuals who served as executive officers during fiscal 1998
but were not serving in such capacity at fiscal year end (together, the "Named
Executive Officers") during each of the last three fiscal years.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG TERM
COMPENSATION
Annual Compensation AWARDS
-------------------- -------
NAME AND PRINCIPAL YEAR SALARY BONUS OTHER ANNUAL SECURITIES ALL OTHER
POSITION ---- ------ ----- COMPENSATION UNDERLYING COMPENSATION
- - ------------------ ------------ OPTIONS (#) ($)
----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Theodore G. Schwartz 1998 $324,000 0 0 200,000 $4,322(1)
Chairman and Chief 1997 312,000 0 0 0 3,054(1)
Executive Officer 1996 312,000 0 0 0 1,484(1)
Marc S. Simon 1998 509,615 0 0 0 1,179(2)
President 1997 500,000 0 0 0 696(2)
1996 250,000 250,000 0 50,000 696(2)
Donald B. Berryman 1998 238,846 0 0 35,082(4) 3,002(7)
Senior Vice President- 1997 194,600 50,000 0 35,082(5) 2,974(7)
Sales & Marketing 1996 175,000 0 100,447(3) 656(6) 2,540(7)
L. Clark Sisson(8)
Senior Vice President- 1998 100,899 175,459(9) 0 100,000 0
Operations 1997 0 0 0 0 0
1996 0 0 0 0 0
John Dontje(10) 1998 199,635 0 0 158,483(12) 2,878(15)
1997 164,423 0 0 40,483(13) 2,039(15)
1996 90,721 5,147 16,852(11) 30,118(14) 288(2)
John Abernethy(16) 1998 249,039 62,500 0 175,000(17) 381(2)
1997 15,385 0 0 150,000(18) 0
1996 0 0 0 0 0
James Nikrant(19) 1998 242,923 0 0 114,835(21) 4,623(24)
1997 220,000 0 0 66,835(22) 2,983(24)
1996 136,231 24,145 38,822(20) 40,914(23) 288(2)
(1) Represents (i) $932 with respect to group life insurance premiums paid
and $3,390 contributed by the Company on behalf of Mr. Schwartz to the
Company's 401(k) plan in fiscal 1998, (ii) $534 with respect to group
life insurance premiums paid and $2,520 contributed by the Company on
behalf of Mr. Schwartz to the Company's 401(k) plan in fiscal 1997, and
(iii) $534 with respect to group life insurance premiums paid and $950
contributed by the Company on behalf of Mr. Schwartz to the Company's
401(k) plan in fiscal 1996.
(2) Represents group life insurance premiums paid.
(3) Represents $88,804 in moving expenses and $11,643 in automobile
expenses paid by the Company on Mr. Berryman's behalf.
<PAGE>
(4) Includes only shares for which options were granted, or deemed granted
due to repricing, in 1997 which were repriced in 1998.
(5) Includes 656 shares for which options granted in 1996 were repriced in
1997. All shares shown were subsequently repriced in 1998 and are
reflected as grants in that year.
(6) All shares shown were subsequently repriced in 1997 and are reflected
as grants in that year.
(7) Represents (i) $348 with respect to group life insurance premiums paid
and $2,654 contributed by the Company on behalf of Mr. Berryman to the
Company's 401(k) plan in fiscal 1998, (ii) $171 with respect to group
life insurance premiums paid and $2,803 contributed by the Company on
behalf of Mr. Berryman to the Company's 401(k) plan in fiscal 1997, and
(iii) $165 with respect to group life insurance premiums paid and
$2,375 contributed by the Company on behalf of Mr. Berryman to the
Company's 401(k) plan in fiscal 1996.
(8) Mr. Sisson joined the Company in May 1998.
(9) Includes $159,000 in bonuses paid to Mr. Sisson upon the Company's
acquisition of ITI Holdings, Inc. in 1998.
(10) Mr. Dontje joined the Company in May 1996 and served as a Senior Vice
President from November 1997 to February 1999.
(11) Represents moving expenses paid by the Company on Mr. Dontje's behalf.
(12) Includes 40,483 shares for which options were granted, or deemed
granted due to repricing, in 1997 which were repriced in 1998.
(13) Includes 30,118 shares for which options granted in 1996 were repriced
in 1997. All shares shown were subsequently repriced in 1998 and are
reflected in the table as grants in that year.
(14) All shares shown were subsequently repriced in 1997 and are reflected
in the table as grants in that year.
(15) Represents (i) $852 with respect to group life insurance premiums paid
and $2,026 contributed by the Company on behalf of Mr. Dontje to the
Company's 401(k) plan in fiscal 1998 and (ii) $726 with respect to
group life insurance premiums paid and $1,313 contributed by the
Company on behalf of Mr. Dontje to the Company's 401(k) plan in fiscal
1997.
(16) Mr. Abernethy joined the Company in December 1997 and served as the
Company's Chief Financial Officer from January 1998 to October 1998.
Mr. Abernethy's employment with the Company ceased in January 1999.
(17) Includes 150,000 shares for which options granted in 1997 were repriced
in 1998.
(18) All shares shown were subsequently repriced in 1998 and are reflected
in the table as grants in that year.
(19) Mr. Nikrant served as a Senior Vice President from May 1996 to December
1998.
(20) Includes $33,543 in moving expenses paid by the Company on Mr.
Nikrant's behalf.
(21) Includes 66,835 shares for which options were granted, or deemed
granted due to repricing, in 1997 which were repriced in 1998.
(22) Includes 40,914 shares for which options granted in 1996 were repriced
in 1997. All shares shown were subsequently repriced in 1998 and are
reflected in the table as grants in that year.
<PAGE>
(23) All shares shown were subsequently repriced in 1997 and are reflected
in the table as grants in that year.
(24) Represents (i) $1,711 with respect to group life insurance premiums
paid and $2,912 contributed by the Company on behalf of Mr. Nikrant to
the Company's 401(k) plan in fiscal 1998 and (ii) $1,539 with respect
to group life insurance premiums paid and $1,444 contributed by the
Company on behalf of Mr. Nikrant to the Company's 401(k) plan in fiscal
1997.
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the number of incentive stock options
granted to the Named Executive Officers during 1998.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION
TERM (1)
------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR (2) ($/SH) DATE 5% ($) 10 %($)
---- ---------- --------------- ------- --- ----- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Theodore G. Schwartz 200,000(3) 5.1% $25.00 3/23/08 $(357,600) $2,392,166
Marc S. Simon - - - - - -
Donald Berryman 656(4)(5) * $8.50 6/28/06 2,662 6,377
4,426(4)(5) * $8.50 1/15/07 19,352 47,055
30,000(4)(3) * $8.50 10/28/07 160,368 346,277
L. Clark Sisson 50,000(3) 1.3% $6.50 4/30/08 259,039 1,328,724
50,000(3) 1.3% $3.44 9/2/08 108,170 274,124
John Dontje 118(4)(6) * $8.50 11/4/06 425 996
365(4)(6) * $8.50 1/5/07 1,315 3,081
10,000(4)(6) * $8.50 5/20/07 45,293 233,859
20,000(4)(6) * $8.50 5/20/07 90,586 467,718
10,000(4)(6) * $8.50 5/20/07 42,293 233,859
68,000(6) 1.7% $8.50 4/30/08 352,293 1,807,069
50,000(6) 1.3% $3.44 9/2/08 108,170 294,124
John Abernethy 150,000(4)(7) 3.8% $8.50 11/21/07 2,267,846 4,366,390
25,000(7) * $8.50 4/30/08 129,519 664,362
James Nikrant 594(4)(8) * $8.50 6/28/06 2,411 5,774
320(4)(8) * $8.50 11/4/96 1,153 2,701
921(4)(8) * $8.50 1/15/07 4,027 9,792
25,000(4)(8) * $8.50 5/20/07 113,233 584,647
20,000(4)(8) * $8.50 5/20/07 90,586 467,718
20,000(4)(8) * $8.50 5/20/07 90,586 467,718
48,000(8) 1.2% $8.50 4/30/08 248,677 1,275,575
* Less than 1%.
(1) 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
<PAGE>
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.
(2) Based on 3,898,510 total options granted to employees, including the
Named Executive Officers, in 1998. This amount includes 2,879,614
options which were granted in 1998 and 1,018,896 options which were
issued in earlier years but repriced in 1998.
(3) 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.
(4) Options granted in prior years but repriced in 1998.
(5) Options are not exercisable during the first three years from the date
they are granted. The term of the option is ten years.
(6) All unvested options (representing 121,065 shares) held by Mr. Dontje
were forfeited upon the termination of his employment with the Company
in February 1999. In addition, all vested options which Mr. Dontje
continues to hold (representing 37,418 shares) must be exercised by
August 31, 2001. Upon the termination of his employment with the
Company, the vesting of certain of Mr. Dontje's options was accelerated
pursuant to the terms of the option grant.
(7) All unvested options (representing 110,000 shares) held by Mr.
Abernethy were forfeited upon the termination of his employment with
the Company in January 1999. In addition, all vested options which Mr.
Abernethy continues to hold (representing 65,000 shares) must be
exercised by June 30, 2000. Upon the termination of his employment with
the Company, the Company agreed to accelerate the vesting of certain of
Mr. Abernethy's options. See "Severance Agreements."
(8) All unvested options (representing 80,066 shares) held by Mr. Nikrant
were forfeited upon the termination of his employment with the Company
in December 1998. In addition, all vested options which Mr. Nikrant
continues to hold (representing 34,769 shares) must be exercised by
December 27, 1999. Upon the termination of his employment with the
Company, the vesting of certain of Mr. Nikrant's options was
accelerated pursuant to the terms of the option grant.
</TABLE>
AGGREGATE FISCAL YEAR-END OPTION VALUES
The following table provides information regarding the exercisable and
unexercisable incentive stock options held by the Named Executive Officers as of
January 3, 1999, the last day of fiscal 1998. No Named Executive Officer
exercised any options in fiscal 1998.
<PAGE>
<TABLE>
AGGREGATE FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)
------------------------------ ----------------------
NAME
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C>
Theodore G. Schwartz 0 200,000 - -
Marc S. Simon 359,020 256,014 $233,007 $148,672
Donald Berryman 97,982 102,070 - -
L. Clark Sisson 0 100,000 - $17,500
John Dontje(2) 0 158,483 - $17,050
John Abernethy(3) 30,000 145,000 - -
James Nikrant(4) 34,769 0 - -
(1) Value is calculated by subtracting the exercise price per share from
the fair market value at December 31, 1998, the last trading day in
fiscal 1998, of $3.781 per share, and multiplying by the number of
shares subject to the stock option.
(2) All unvested options (representing 121,065 shares) held by Mr. Dontje
were forfeited upon the termination of his employment with the Company
in February 1999. In addition, all vested options which Mr. Dontje
continues to hold (representing 37,418 shares) must be exercised by
August 31, 2001. Upon the termination of his employment with the
Company, the vesting of certain of Mr. Dontje's options was accelerated
pursuant to the terms of the option grant.
(3) All unvested options (representing 110,000 shares) held by Mr.
Abernethy were forfeited upon the termination of his employment with
the Company. In addition, all vested options which Mr. Abernethy
continues to hold (representing 65,000 shares) must be exercised by
June 30, 2000. Upon the termination of his employment with the Company,
the Company agreed to accelerate the vesting of certain of Mr.
Abernethy's options. See "Severance Agreements."
(4) All unvested options (representing 80,066 shares) held by Mr. Nikrant
were forfeited upon the termination of his employment with the Company
in December 1998. In addition, all vested options which Mr. Nikrant
continues to hold (representing 34,769 shares) must be exercised by
December 27, 1999. Upon the termination of his employment with the
Company, the vesting of certain of Mr. Nikrant's options was
accelerated pursuant to the terms of the option grant.
</TABLE>
REPORT ON REPRICING OF OPTIONS
On August 5, 1998, pursuant to the recommendation of the Compensation
Committee, and in order to preserve an economic incentive for continued
commitment to the Company's success, the Board of Directors authorized the
repricing of certain of its outstanding options having an exercise price in
excess of the then current market value. The Board of Directors made the
decision to reprice such options based on its belief that such repricing was
necessary and in the best interest of the Company and its share owners to retain
key personnel. The Board of Directors authorized the repricing of all options
(other than options held by Messrs. Schwartz and Simon and any director) having
an exercise price in excess of the then current market value. Such options were
amended (i) with respect to the Company's Chief Financial Officer and Senior
Vice Presidents, to provide a new exercise price of $8.50 per share (when the
fair market value was $5 5/8) and (ii) with respect to all other option holders,
to provide a new exercise price of $6.50 per share (when the fair market value
was $5 5/8), which was not less than the fair market value of the Company's
Common Shares on such date. Other than such change in the exercise price, all
other terms of the existing options remained the same.
The following table contains information about adjustments to the
exercise prices of the outstanding options held by executive officers (including
Named Executive Officers) since the Company's initial public offering of its
Common Shares on October 10, 1995. As described above, the adjustments made on
August 5, 1998 were made by amending the existing options to provide them with
the new exercise price.
<PAGE>
<TABLE>
TEN-YEAR OPTION REPRICINGS
<CAPTION>
Number of Length of
Common Shares Market Price Original Option
Underlying of Common Exercise Term Remaining
Options Shares at Time Price at Time New Exercise at Date of
Name Date Repriced of Repricing of Repricing Price Repricing
- - ---- ---- -------- --------- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
John Abernethy 8/5/98 150,000 $5.63 $14.50 $8.50 9 1/4 years(1)
8/5/98 25,000 $5.63 $9.50 $8.50 9 3/4 years(1)
656 $32.25 $36.00 $32.25 9 1/2 years
Donald B. 1/15/97 656 $16.75 $32.25 $16.75 9 years
Berryman 5/20/97 4,426 $16.75 $32.25 $16.75 9 1/2 years
5/20/97 656 $5.63 $16.75 $8.50 7 3/4 years
8/5/98 4,426 $5.63 $16.75 $8.50 8 1/4 years
8/5/98 30,000 $5.63 $12.66 $8.50 9 1/4 years
8/5/98
John C. Dontje 1/15/97 10,000 $32.25 $34.12 $32.25 9 1/4 years(2)
1/15/97 20,000 $32.25 $42.88 $32.25 9 3/4 years(2)
1/15/97 118 $32.25 $42.88 $32.25 9 3/4 years(2)
5/20/97 10,000 $16.75 $32.25 $16.75 9 years(2)
5/20/97 20,000 $16.75 $32.25 $16.75 9 1/4 years(2)
5/20/97 118 $16.75 $32.25 $16.75 9 1/4 years(2)
5/20/97 365 $16.75 $32.25 $16.75 9 1/2 years(2)
8/5/98 118 $5.63 $16.75 $8.50 8 years(2)
8/5/98 365 $5.63 $16.75 $8.50 8 1/4 years(2)
8/5/98 10,000 $5.63 $16.75 $8.50 7 3/4 years(2)
8/5/98 20,000 $5.63 $16.75 $8.50 8 years(2)
8/5/98 10,000 $5.63 $16.75 $8.50 8 3/4 years(2)
8/5/98 68,000 $5.63 $9.50 $8.50 9 3/4 years(2)
William S. 1/15/97 319 $32.25 $34.81 $32.25 9 1/2 years(3)
Lipsman 1/15/97 113 $32.25 $42.88 $32.25 9 3/4 years(3)
1/15/97 1,000 $32.25 $42.88 $32.25 9 3/4 years(3)
5/20/97 319 $16.75 $32.25 $16.75 9 years(3)
5/20/97 113 $16.75 $32.25 $16.75 9 1/4 years(3)
5/20/97 372 $16.75 $32.25 $16.75 9 1/2 years(3)
5/20/97 5,000 $16.75 $25.00 $16.75 9 3/4 years(3)
5/20/97 1,000 $16.75 $32.25 $16.75 9 1/2years(3)
5/20/97 7,500 $16.75 $29.94 $16.75 9 3/4 years(3)
8/5/98 319 $5.63 $16.75 $6.50 7 3/4 years(3)
8/5/98 113 $5.63 $16.75 $6.50 8 years(3)
8/5/98 372 $5.63 $16.75 $6.50 8 1/4 years(3)
8/5/98 2,500 $5.63 $16.75 $6.50 8 3/4 years(3)
8/5/98 5,000 $5.63 $16.75 $6.50 8 1/2 years(3)
8/5/98 1,000 $5.63 $16.75 $6.50 8 1/4 years(3)
8/5/98 7,500 $5.63 $16.75 $6.50 8 1/2 years(3)
8/5/98 17,200 $5.63 $9.50 $6.50 9 3/4 years(3)
James M. Nikrant 1/15/97 20,000 $32.25 $38.38 $32.25 9 1/2 years(4)
1/15/97 594 $32.25 $36.00 $32.25 9 1/2 years(4)
1/15/97 320 $32.25 $42.88 $32.25 9 3/4 years(4)
1/15/97 20,000 $32.25 $42.88 $32.25 9 3/4 years(4)
5/20/97 20,000 $16.75 $32.25 $16.75 9 years(4)
5/20/97 594 $16.75 $32.25 $16.75 9 years(4)
5/20/97 320 $16.75 $32.25 $16.75 9 1/4 years(4)
5/20/97 20,000 $16.75 $32.25 $16.75 9 1/4 years(4)
5/20/97 921 $16.75 $32.25 $16.75 9 1/2 years(4)
8/5/98 594 $5.63 $16.75 $8.50 7 3/4 years(4)
8/5/98 320 $5.63 $16.75 $8.50 8 years(4)
8/5/98 921 $5.63 $16.75 $8.50 8 1/4 years(4)
8/5/98 25,000 $5.63 $16.75 $8.50 8 3/4 years(4)
8/5/98 20,000 $5.63 $16.75 $8.50 7 3/4 years(4)
8/5/98 20,000 $5.63 $16.75 $8.50 8 years(4)
8/5/98 48,000 $5.63 $9.50 $8.50 9 3/4 years(4)
<PAGE>
Number of Length of
Common Shares Market Price Original Option
Underlying of Common Exercise Term Remaining
Options Shares at Time Price at Time New Exercise at Date of
Name Date Repriced of Repricing of Repricing Price Repricing
- - ---- ---- -------- --------- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
L. Clark Sisson 8/5/98 50,000 $5.63 $9.50 $6.50 9 3/4 years
Philip B. Wade 1/15/97 1,000 $32.25 $42.88 $32.25 9 3/4 years
1/15/97 231 $32.25 $34.81 $32.25 9 1/2years
1/15/97 94 $32.25 $42.88 $32.25 9 3/4 years
5/20/97 1,000 $16.75 $32.25 $16.75 9 1/4 years
5/20/97 4,400 $16.75 $32.25 $16.75 9 1/2years
5/20/97 231 $16.75 $32.25 $16.75 9 years
5/20/97 94 $16.75 $32.25 $16.75 9 1/4 years
5/20/97 359 $16.75 $32.25 $16.75 9 1/2years
8/5/98 231 $5.63 $16.75 $6.50 7 3/4 years
8/5/98 94 $5.63 $16.75 $6.50 8 years
8/5/98 359 $5.63 $16.75 $6.50 8 1/4 years
8/5/98 5,000 $5.63 $16.75 $6.50 8 3/4 years
8/5/98 1,000 $5.63 $16.75 $6.50 8 years
8/5/98 4,440 $5.63 $16.75 $6.50 8 1/4 years
8/5/98 9,824 $5.63 $9.50 $6.50 9 3/4 years
(1) All unvested options (representing 110,000 shares) held by Mr.
Abernethy were forfeited upon the termination of his employment with
the Company in January 1999. In addition, all vested options which Mr.
Abernethy continues to hold (representing 65,000 shares) must be
exercised by June 30, 2000. Upon the termination of his employment with
the Company, the Company agreed to accelerate the vesting of certain of
Mr. Abernethy's options. See "Severance Agreements."
(2) All unvested options (representing 121,065 shares) held by Mr. Dontje
were forfeited upon the termination of his employment with the Company
in February 1999. In addition, all vested options which Mr. Dontje
continues to hold (representing 37,418 shares) must be exercised by
August 31, 2001. Upon the termination of his employment with the
Company, the vesting of certain of Mr. Dontje's options was accelerated
pursuant to the terms of the option grant.
(3) All unvested options (representing 33,504 shares) held by Mr. Lipsman
were forfeited upon the termination of his employment with the Company
in February 1999. In addition, all vested options which Mr. Lipsman
continues to hold (representing 500 shares) must be exercised by May
20, 1999.
(4) All unvested options (representing 80,066 shares) held by Mr. Nikrant
were forfeited upon the termination of his employment with the Company
in December 1998. In addition, all vested options which Mr. Nikrant
continues to hold (representing 34,769 shares) must be exercised by
December 27, 1999. Upon the termination of his employment with the
Company, the vesting of certain of Mr. Nikrant's options was
accelerated pursuant to the terms of the option grant.
</TABLE>
COMPENSATION COMMITTEE
George D. Dalton
Paul G. Yovovich
<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 565,034 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 from
1996 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. After May 31, 2000, the agreement is terminable by either
party on 30-days notice. Until May 31, 2000, the agreement will terminate for
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 an 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 upon the occurrence 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 April 1999, the Company entered into an employment agreement with
Mr. Sisson. This employment agreement, which provides for payment of a minimum
annual base salary of $225,000, replaced an earlier agreement between Mr. Sisson
and the Company. Under the agreement, Mr. Sisson will also be eligible to
receive bonuses from the Company through the CPR Plan, with a maximum payout of
50% of his base salary, if the Company and Mr. Sisson each meet certain budgeted
performance goals. In addition, the Company agreed to pay certain relocation
costs to Mr. Sisson and granted to Mr. Sisson options to purchase an additional
150,000 Common Shares. In the even that Mr. Sisson's employment is terminated by
the Company other than for gross negligence or cause, Mr. Sisson will be
entitled to severance payments equal to 12 months base salary. Pursuant to the
agreement, Mr. Sisson also executed the Company's standard non-competition and
confidentiality agreement.
SEVERANCE AGREEMENTS
In January 1999, the Company entered into a severance agreement with
John Abernethy, who served as the Company's Chief Financial Officer from January
1998 to October 1998. Pursuant to the terms of the severance agreement, the
Company agreed to pay to Mr. Abernethy his base salary (at the rate of $250,000
<PAGE>
per year) for a period of nine months beginning on his termination date (January
8, 1999). The Company and Mr. Abernethy also agreed that Mr. Abernethy would
receive a bonus of $62,500 for his 1998 service to the Company and that the
vesting of certain options granted to Mr. Abernethy would be accelerated, so
that he currently holds an aggregate of 65,000 vested options. Further, the
Company agreed to allow Mr. Abernethy to exercise such vested options at any
time until June 30, 2000. Under the severance agreement, Mr. Abernethy may
continue to participate in the Company's employee benefit plans until June 30,
2000 and will have access to certain out placement services at the Company's
expense (up to $2,500). Concurrent with his execution of the severance
agreement, Mr. Abernethy delivered to the Company a general release of claims.
In April 1999, the Company entered into a severance agreement with John
Dontje, who served as the Company's Senior Vice President until February 1999.
Pursuant to the terms of the severance agreement, the Company agreed to pay to
Mr. Dontje $250,000 over a period of thirty months beginning March 1, 1999.
Further, the Company agreed to allow Mr. Dontje to exercise his vested options
at any time until March 1, 2000. Under the severance agreement, Mr. Abernethy
may continue to participate in the Company's employee benefit plans until
February 29, 2000 and the Company agreed to sell to Mr. Dontje the automobile
the Company had provided for his use, for consideration of $8,000. Concurrent
with his execution of the severance agreement, Mr. Dontje delivered to the
Company a general release of claims.
In January 1999, the Company entered into a severance agreement with
James Nikrant, who served as the Company's Senior Vice President until December
27, 1998. Pursuant to the terms of the severance agreement, the Company agreed
to pay to Mr. Nikrant $300,000 over a period of sixty-five weeks from the date
of his termination of employment. Further, the Company agreed to allow Mr.
Dontje to exercise his vested options at any time until December 27, 1999.
Concurrent with his execution of the severance agreement, Mr. Dontje delivered
to the Company a general release of claims.
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"):
o Provide compensation levels and equity ownership opportunities
through the Incentive Stock Plan to attract and retain highly
qualified individuals.
o Set competitive base compensation levels and utilize
performance based incentive compensation to achieve total
compensation targets.
o Establish performance goals which are aggressive and are
aligned with the Company's objectives regarding increasing
growth in operating results and share owner value.
o Use a compensation performance responsibility incentive
compensation system to recognize outstanding individual
contributions and overall Company performance which exceed
annual goals.
o 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.
<PAGE>
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 1998 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.
In 1998 the Compensation Committee granted a total of 2,879,614 options
to 858 employees, some of whom are officers of the Company. In addition, in 1998
the Company repriced 2,639,709 options (including 1,620,813 options which had
been granted in 1998 prior to the repricing). See "Report on Repricing of
Options." Option grants ranged from one option to 400,000 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
effect the deductibility of compensation expected to be paid by the Company in
the foreseeable future.
CHIEF EXECUTIVE OFFICER COMPENSATION
The base salary of Mr. Schwartz, the Company's Chief Executive Officer,
remained at $312,000 for the years 1996 and 1997 and was $324,000 in 1998. The
Compensation Committee believes that Mr. Schwartz's total cash compensation was
significantly below that of his peers at comparable companies. In 1998, Mr.
Schwartz received an option exercisable into 200,000 Common Shares. Such option
has an exercise price equal to $25.00 per share, expires after ten years and
vests at a rate of 20% per year, beginning on the first anniversary of the grant
date. The market price of the Common Shares on the date Mr. Schwartz received
his grant was $14.25. Prior to 1998, the Company did not issue any options to
Mr. Schwartz due to his significant ownership interest in the Company. However,
in 1998, the Compensation Committee approved the grant of options to Mr.
Schwartz described above to begin to bring his compensation package in line with
those of his peers at comparable companies. Even so, however, the Compensation
Committee set the exercise price for such grant significantly above the market
price on the date of grant in order to provide a clear incentive to Mr. Schwartz
to work toward a significant increase in the market price of the Company's
Common Shares.
COMPENSATION COMMITTEE
George D. Dalton
Paul G. Yovovich
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, 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 an employee of the Company
in 1998 and none was formerly an officer of the Company.
CERTAIN TRANSACTIONS
Mr. Collins, a director of the Company, is of counsel at Shuttleworth &
Ingersoll, P.C., a law firm in Cedar Rapids which provided certain legal
services to the Company in fiscal 1998. In addition, the Company owns $250,000
in shares of 2001 Development Corporation, a community-oriented economic
development company in Cedar Rapids, Iowa, of which Mr. Collins is the
President. Share ownership in 2001 Development Corporation is limited to
corporations doing business in Cedar Rapids and, as a result, Mr. Collins owns
no interest in 2001 Development Corporation.
An entity controlled by the spouse of Morris R. Shechtman, who served
as a director of the Company until December 1998, was a consultant of the
Company in 1998 and received an aggregate of $106,702 as compensation for
services rendered.
<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, 1998, the last trading day in
fiscal 1998, as compared with the cumulative total return of the S&P 500 Index
and a Peer Group Index. The Peer Group 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 Group 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 Index, and assumes
reinvestment of dividends, if any. The stock price performance shown on the
graph below is not necessarily indicative of future stock price performance.
[graph omitted]
<TABLE>
- - ------------------------------- ---------------- ------------ -------------- ---------------- --------------
10/11/95 12/29/95 12/27/96 12/26/97 12/31/98
- - ------------------------------- ---------------- ------------ -------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
APAC Teleservices, Inc. $100.00 $167.9 $364.8 $134.6 $38.1
S&P 500 $100.00 $106.7 $134.4 $169.5 $226.6
Peer Group $100.00 $138.0 $388.0 $241.8 $226.0
- - ------------------------------- ---------------- ------------ -------------- ---------------- --------------
</TABLE>
<PAGE>
PROPOSAL TO APPROVE THE AMENDMENT TO
THE COMPANY'S AMENDED AND RESTATED ARTICLES OF INCORPORATION
TO CHANGE THE COMPANY'S NAME
The Company's Board of Directors has adopted a resolution to amend the
Company's Amended and Restated Articles of Incorporation to change the Company's
name from APAC TeleServices, Inc. to APAC Customer Services, Inc.
In the judgment of the Board of Directors, the change of the corporate
name is desirable given that the nature of the Company's business is far more
expansive than the "TeleServices" name implies and that the Company's primary
focus is on "Customer Service."
Approval of the Charter Amendment requires the affirmative vote of
two-thirds of the outstanding Common Shares entitled to vote as of March 22,
1999, the record date.
The Board of Directors recommends a vote FOR approval of the amendment
of the Company's Amended and Restated Articles of Incorporation to change the
Company's name from APAC TeleServices, Inc. to APAC Customer Services, Inc.
PROPOSAL TO APPROVE THE RESERVATION OF AN
ADDITIONAL 150,000 COMMON SHARES
FOR ISSUANCE UNDER THE 1995 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
The 1995 Nonemployee Director Stock Option Plan (the "Plan") was
adopted by the Board of Directors in 1995 and approved by the share owners in
the same year. The purpose of the Plan is to attract and retain highly qualified
persons as directors of the Company. The total number of Common Shares presently
available for grant under the Plan is 150,000. As of March 22, 1999, options to
purchase an aggregate of 100,000 Common Shares had been granted under the Plan.
The Board of Directors has now amended the Plan, subject to share owner
approval, to increase the number of shares available for grants under the Plan
to 300,000.
The increase in the number of Common Shares available for grants under
the Plan will allow the Company to remain competitive with those companies that
offer stock incentives to attract and keep directors.
SUMMARY OF PLAN
The purpose of Plan is to enable the Company to provide those directors
of the Company who are not salaried officers or employees of the Company or any
of its direct or indirect subsidiaries with stock options, thereby attracting,
retaining and rewarding such persons and strengthening the mutuality of interest
between such persons and the Company's share owners.
Only non-employee directors of the Company are eligible to participate
in the Incentive Stock Plan. There are currently 3 such directors eligible to
participate in the Plan, Messrs. Collins, Dalton and Yovovich. Under the Plan,
as recently amended by the Board of Directors, each non-employee director may be
awarded nonqualified stock options as determined by the Compensation Committee
and ratified by the full Board of Directors (prior to the recent amendment, the
Plan provided that each non-employee director was automatically awarded
nonqualified stock options exercisable into 10,000 Common Shares on the date of
each annual meeting of the Company's share owners). Options issued under the
<PAGE>
Plan must have an exercise price equal to the fair market value on the date of
grant, expire after 10 years and vest in equal installments on the first, second
and third anniversary of the date of grant. For a description of the options to
be awarded to the non-employee directors in 1999, see "Director Compensation."
The Plan provides that the options granted may not be transferred
otherwise than by law or by will or the laws of descent and distribution or to
members of the director's immediate family or trusts or family partnerships for
the benefit of such family members.
The Board of Directors reserves the right to amend, suspend or
terminate the Plan at any time, subject to the rights of participants with
respect to any outstanding awards. Notwithstanding the foregoing, the Plan may
not be amended more frequently than once every six months and no amendment to
the Plan may be made without approval of share owners of the Company if such
approval is required by law or regulatory authority.
FEDERAL TAX TREATMENT
Under current United States' tax law, a director who is granted a
nonqualified stock option will not have taxable income at the time of grant, but
will have taxable income at the time of exercise equal to the difference between
the exercise price of the shares and the market value of the shares on the date
of exercise.
The Company is entitled to a tax deduction for the same amount.
GENERAL PLAN INFORMATION
No options have been granted by the Company under the Plan since the
end of fiscal 1998. To date, Messrs. Collins, Dalton and Yovovich, the Company's
current nonemployee directors, have received options exercisable into an
aggregate of 35,000, 25,000 and 20,000, respectively, under the Plan. On April
23, 1999 the last reported sales price of the Common Shares on the Nasdaq
National Market was $3.125 per share.
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 to approve the proposal to reserve an additional 150,000 Common Shares
to be available for issuance pursuant to the Plan.
The Board of Directors recommends a vote FOR approval of the
reservation of an additional 150,000 Common Shares for issuance under the APAC
TeleServices, Inc. 1995 Nonemployee Director Stock Option Plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
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 1998, 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, except that, due to an error at the
Company, Mr.Berryman did not timely report the repricing of his options in 1998.
ANNUAL REPORT; FORM 10-K
A copy of the Company's Annual Report on Form 10-K filed with the SEC
accompanies this proxy statement. Additional copies of the Annual Report on Form
10-K may be obtained by writing to APAC TeleServices, Inc., One Parkway North
Center, Suite 510, Deerfield, Illinois 60015, Attention: Secretary.
<PAGE>
ACCOUNTANTS
The firm of Arthur Andersen LLP was the Company's independent
accountants for fiscal 1998 and has been selected as independent accountants to
audit the books, records and accounts of the Company for 1999. 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 2000 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 31, 1999, 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.
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
President
Date: April 28, 1999
<PAGE>
APAC TELESERVICES, INC.
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHARE OWNERS -- MAY 18, 1999
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 18, 1999, at Harris Trust & Savings Bank, 111 West Monroe Street,
Auditorium, Eighth Floor, Chicago, Illinois , or at any adjournment thereof.
UNLESS OTHERWISE MARKED, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES NAMED AND FOR APPROVAL OF AN
AMENDMENT TO THE COMPANY'S AMENDED AND
RESTATED ARTICLES OF INCORPORATION TO CHANGE THE COMPANY'S NAME FROM
APAC TELESERVICES, INC. TO APAC CUSTOMER SERVICES, INC. AND
FOR APPROVAL OF THE RESERVATION OF AN ADDITIONAL 150,000 COMMON SHARES
FOR ISSUANCE UNDER THE APAC TELESERVICES, INC.
1995 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN.
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,
and Paul G. Yovovich
For Withhold For all
all all Except
/ /1 / /2 / /3
_____________________________________
(Except Nominee(s) written above)
2. APPROVAL OF A PROPOSAL OF THE BOARD OF
DIRECTORS TO AMEND THE COMPANY'S
AMENDED AND RESTATED ARTICLES OF
INCORPORATION TO CHANGE THE COMPANY'S
NAME FROM APAC TELESERVICES, INC. TO
APAC CUSTOMER SERVICES, INC.
For Against Abstain
/ /4 / /5 / /6
3. APPROVAL OF A PROPOSAL OF THE BOARD OF
DIRECTORS FOR THE RESERVATION OF AN
ADDITIONAL 150,000 COMMON SHARES TO BE
AVAILABLE FOR ISSUANCE PURSUANT TO THE
APAC TELESERVICES, INC. 1995 NONEMPLOYEE
DIRECTOR STOCK OPTION PLAN.
For Against Abstain
/ /7 / /8 / /9
Dated:_______________________, 1999
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.
Appendix
--------
Explanatory Note: APAC TeleServices, Inc.'s Amended and Restated 1995
Nonemployee Dirctor Stock Option Plan is filed herewith pursuant to Item 10 of
Schedule 14A and is not part of the proxy statement.
APAC TELESERVICES, INC.
AMENDED AND RESTATED
1995 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE. APAC TELESERVICES, INC., an Illinois corporation
(the "Company"), hereby adopts the Amended and Restated 1995 Nonemployee
Director Stock Option Plan (the "Plan"). The purpose of the Plan is to attract
and retain outstanding individuals to serve as members of the Board of Directors
of the Company by providing such persons opportunities to acquire Common Shares
of the Company ("Common Shares"), thereby strengthening the mutuality of
interest between such persons and the Company's shareholders.
2. SHARES RESERVED UNDER THE PLAN. There is hereby reserved
for issuance under the Plan an aggregate of _________*/ Common Shares (after
giving effect to the stock split consummated on September 8, 1995), which may be
authorized but unissued shares. If there is a lapse, expiration, termination or
cancellation of any option granted under this Plan, all unissued shares subject
to or reserved for such option may again be used for new options granted under
this Plan.
3. PARTICIPATION. Participation in this Plan is limited to
members of the Board of Directors who are not salaried officers or employees of
the Company or any of its direct or indirect subsidiaries (a "Nonemployee
Director" or "Participant").
4. OPTIONS TO BE GRANTED UNDER THE PLAN. The Compensation
Committee of the Board of Directors shall have authority to grant options on
such terms and conditions as it deems appropriate, subject to Sections 5 and 6
below and ratification of grants by the Board of Directors.
5. OPTION EXERCISE PRICE. Each option granted under this Plan
shall be exercisable at an option price equal to 100% of the Fair Market Value
(defined below) of the Common Shares on the date of the grant.
6. LIMITATIONS ON EXERCISE. Any option granted under this Plan
may be exercised (in accordance with Section 7 hereof) in whole or in part, from
time to time after the date granted, subject to the following limitations:
(a) No option granted hereunder may be exercised during the
first year following the date such option was granted. Thereafter, each option
may be exercised:
(i) 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;
- - --------
*/Subject to shareholder approval.
<PAGE>
(ii) 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
(iii) 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.
(b) Notwithstanding the limitations of Section 6(a) above, any
option granted under this Plan shall become fully exercisable upon the death of
the Nonemployee Director while serving on the Board or upon the retirement of
the Nonemployee Director if such death or Retirement occurs on or after the
first anniversary of the date such option was issued. For these purposes,
"Retirement" means a Nonemployee Director's termination of service as a member
of the Board after age 70 or at any time with the consent of the Board.
(c) Unless the Committee determines otherwise at the time of
grant or thereafter, any option granted under this Plan may not be exercised
after the earliest to occur of any of the following events:
(i) more than ninety (90) days after termination of any
Nonemployee Director's service as a member of the Board for any reason
other than death or Retirement (and then only to the extent that the
Nonemployee Director could have exercised such option on the date of
termination);
(ii) more than one hundred eighty (180) days after a
Nonemployee Director's Retirement from the Board (and then only to the
extent that the Nonemployee Director could have exercised such option
on the date of Retirement);
(iii) more than twelve months after death of a Nonemployee
Director (and then only to the extent that the Nonemployee Director
could have exercised such option on the date of death); or
(iv) more than ten (10) years from the date the option is
granted.
<PAGE>
7. METHOD AND TIME OF EXERCISE; DELIVERY OF CERTIFICATES. Any
option granted under this Plan shall be deemed exercised on the date written
notice of exercise is received by the Secretary of the Company at the Company's
corporate headquarters. Such notice shall be accompanied by: (i) a check payable
to the Company for the purchase price of the shares to be purchased; or (ii)
delivery (or certification of ownership) of Common Shares owned by the
Participant for at least six months whose Fair Market Value on the date of
exercise equals the purchase price of the shares to be purchased; or (iii) any
combination of the foregoing. A Participant may also use cashless exercise as
permitted under Federal Reserve Board's Regulation T.
8. NONTRANSFERABILITY. Any option granted under this Plan
shall not be transferable other than by will or the laws of descent and
distribution, and shall be exercisable, during the Participant's lifetime, only
by the Participant or the Participant's guardian or legal representative. If a
Nonemployee Director dies during the option period, any option granted to such
Participant may be exercised by his estate or the person to whom the option
passes by will or the laws of descent and distribution, but only in accordance
with Section 6 above. Notwithstanding the foregoing, an option will
automatically become transferable to the Participant's immediate family or
trusts or family partnerships for the benefit of such persons.
9. OTHER PROVISIONS; SECURITIES REGISTRATION. The grant of any
option under the Plan may also be subject to other provisions as counsel to the
Company deems appropriate, including, without limitation, such provisions as may
be appropriate to comply with federal or state securities laws and stock listing
requirements.
10. DEFINITION OF FAIR MARKET VALUE. The term "Fair Market
Value" shall mean, as of any date, the mean between the highest and lowest sale
prices of the Common Shares as reported on the NASDAQ National Market System (or
such other consolidated transaction reporting system on which such Common Shares
are primarily traded) for such day, or if such Common Shares were not traded on
such day, then the next preceding day on which the shares were traded, all as
reported by such source as the Board of Directors may select.
11. ADJUSTMENT PROVISIONS. If the Company shall at any time
change the number of issued Common Shares without new consideration to the
Company (such as by stock dividend or stock split), the total number of shares
reserved for issuance under this Plan and the number of shares covered by each
outstanding option and the exercise price thereunder shall be automatically
<PAGE>
adjusted so that the aggregate consideration payable to the Company and the
value of each option shall not be changed. If, during the term of any option
granted under this Plan, the Common Shares shall be changed into another kind of
stock, securities, cash or other property whether as a result of reorganization,
sale, merger, consolidation, or other similar transaction, the Board of
Directors shall cause adequate provision to be made whereby the Participants
shall thereafter be entitled to receive, upon the due exercise of any
outstanding options, the stock, securities, cash or other property the
Participants would have been entitled to receive immediately prior to the
effective date of any such transaction for Common Shares which could have been
acquired through the exercise of such options.
12. AMENDMENT OR DISCONTINUATION OF PLAN. The Board of
Directors may amend the Plan at any time or suspend or discontinue the Plan at
any time, but no such action shall adversely affect any outstanding option;
provided that this Plan may not be amended more frequently than once every six
months and no amendment shall be adopted which would result in any Nonemployee
Director losing his or her status as a "disinterested" administrator under Rule
16b-3 with respect to any employee benefit plan of the Company or result in the
Plan losing its status as a protected plan under Rule 16b-3.
13. GOVERNING LAW. This Plan and the options granted hereunder
shall be governed and construed in accordance with the laws of the State of
Illinois (regardless of the law that might otherwise govern under applicable
Illinois principles of conflicts of laws).
