UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 333-4128
BOSTON COMMUNICATIONS GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
MASSACHUSETTS 04-3026859
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
100 Sylvan Road, Suite 100, Woburn, Massachusetts 01801
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (617)692-7000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
Indicate by check mark whether registrant (1) has filed all reports required
to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES (X) NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The approximate aggregate value of the voting stock held by non-affiliates
of the registrant, computed by reference to the closing sales price of such
stock quoted on the Nasdaq National Market on February 29, 2000 was $84,458,903.
The number of shares outstanding of the Registrant's common stock, $.01 par
value per share, as of February 29, 2000 was 16,628,154.
DOCUMENTS INCORPORATED BY REFERENCE
The following document is incorporated by reference in the following part of
this Form 10-K: information required by Part III (Items 10, 11, 12 and 13) of
this Annual Report on Form 10-K is incorporated from the Proxy statement
relating to the 2000 Annual Meeting of Stockholders of the Company.
<PAGE>
Item 1. BUSINESS
Background
General
Boston Communications Group, Inc. (BCGI) is the leading provider of prepaid
services to wireless carriers in North America currently serving the
top five wireless carriers based on number of subscribers in the US. Taken
together with the Company's innovative roaming services and teleservices, this
suite of offerings has made BCGI a leading provider of enhanced services to the
wireless telecommunications industry. The Company's Prepaid Wireless Services
Division provides U.S and Canadian carriers with prepaid wireless services
through its C2C Prepaid Services network. This network enables carrier's
subscribers to use their wireless phone as if they were a traditional post-pay
subscriber, thereby expanding carriers' service offerings to new and existing
subscribers without the added billing costs and collection risk. The Systems
Division markets a voice processing platform with enhanced features for
providing prepaid wireless, voice messaging, calling card and toll limitation
services to domestic and international wireless and wireline carriers. The
Systems Division also manufactures prepaid system components that are used to
support the Company's C2C network. The Company's Teleservices Division
provides customer support teleservices to wireless carriers that allows them
to outsource all or a portion of their customer service activities, and are
designed to help wireless carriers retain subscribers, reduce costs and manage
growth. The Company's ROAMERplus Division provides carriers with the ability
to cost-effectively generate revenues from subscribers who are not covered
under traditional roaming agreements by arranging payment for roaming calls
and paying carriers for the airtime used. Each of the divisions complement
each other by providing the Company with a strong suite of products and
services to meet the needs of wireless carriers. The Company's customers
include eight of the ten largest domestic wireless carriers by subscriber,
five of whom use three or more of the Company's products.
The Company is currently exploring opportunities to utilize its extensive
prepaid network and real-time rating engine for mobile and other electronic
commerce applications. Because of the scale of its network and access to the
largest wireless carriers in North America, the Company anticipates that it can
provide wireless internet and other companies the ability to bill users for
products and services on a real-time prepaid basis. The Company's expertise in
processing micro payment transactions could be sold to service and content
providers to allow them to bill for small dollar internet transactions. The
Company also believes that the market for prepaid internet billing will be very
attractive to the youth market. The Company intends to leverage the financial
investment in its existing technological infrastructure to facilitate mobile
commerce solutions for wireless carriers, other telecommunications companies
and online merchants.
Wireless telephone service has been one of the fastest growing areas of the
telecommunications industry over the last thirteen years. Currently, prepaid
wireless is the fastest growing market segment of wireless industry. According
to the Yankee Group, the number of Prepaid Wireless users in the U.S. will grow
from 4.9 million at the end of 1999 to 34 million by the end of 2003. The
Yankee Group also estimates that over 64% of total net subscriber additions and
more than 22% of all wireless subscribers will be prepaid in 2003. Estimates
from the Yankee Group indicate that Prepaid Wireless in North America was a $1.5
billion industry in 1999.
The Company was organized as a Massachusetts corporation in 1988 and introduced
its ROAMERplus roaming service in 1991. The Company introduced teleservices in
1993 and its prepaid wireless service in 1996. Also in 1996, the Company
acquired Voice Systems Technology Inc, which is now the Systems Division. The
Company's principal office is located at 100 Sylvan Road, Suite 100, Woburn,
Massachusetts 01801 and its telephone number is (617) 692-7000.
<PAGE>
Description of Business
Prepaid Wireless Services Division
The Company introduced its C2C network-based prepaid wireless service offering
in early 1996 and as of December 31, 1999 was offering the service in over 150
U.S. Metropolitan Service Areas (MSA's) which cover more than 80% of the U.S.
population and all major markets in Canada as of December 31, 1999.
The Company has become the leading prepaid wireless service provider for
wireless carriers in the United States and Canada and has grown its subscriber
base more than 113% from 890,000 at December 31, 1998 to 1.9 million at December
31, 1999. The Yankee Group estimates that the Company holds about 40% of the
U.S. Prepaid Wireless market at the end of 1999. The average monthly minutes of
use per subscriber was approximately 45 minutes during the fourth quarter of
1999. The Company added 411,000 new net subscribers to its C2C platform during
that time.
The Company is uniquely positioned to continue as the market leader and benefit
from the anticipated explosive growth in prepaid wireless use. Since the
introduction of the Company's prepaid wireless service, BCGI has invested over
$60 million to create the only national network of prepaid service voice nodes,
which provide local points of presence for wireless carriers to tie into the
BCGI network. A key advantage over other prepaid wireless service providers is
BCGI's ability to utilize the 63 voice nodes to process prepaid wireless
roaming calls locally, without having to route these calls back to a central
location via an 800 number. BCGI has the ability to identify where in North
America a prepaid wireless user is when they make or receive a call, so the
network can determine the "least cost route" for that roaming call, thus giving
the carrier the most cost-effective call handling, and giving the end user as
seamless a roaming experience as possible. BCGI's platform is a real time
rating engine that debits the user's account as the calls are made, as compared
to other platforms that are typically not real-time and therefore are more
exposed to fraud and revenue leakage. The C2C network provides economies of
scale by combining many carrier's subscribers onto one comprehensive network
and database. In addition, the Company's extensive experience in prepaid has
allowed the Company to offer not only rich and robust features and
functionality but also to provide knowledgeable guidance to carriers to
facilitate profitable prepaid programs.
The C2C network permits a wireless carrier to automatically switch a prepaid
subscriber's call to the C2C network where information regarding the status of
that subscriber's prepaid account is maintained. A subscriber establishes an
account with the wireless carrier by prepaying a specific dollar amount that is
credited toward future service. Subsequently, each call that is initiated or
received by the subscriber is routed to the C2C network and rated in real time
based on the telephone number called, carrier usage charges, taxes and
applicable surcharges. The subscriber is able to replenish the account by
purchasing additional prepaid service from the carrier by credit card through
C2C's automated replenishment feature or by purchasing additional prepaid
service at any of the carrier's affiliated retail outlets. The C2C network
can complete a call and debit the account automatically without requiring the
subscriber to enter a debit card number or other information. As a result, a
prepaid subscriber receives service similar to a subscriber using traditional
post-pay billing arrangements, including the ability to make outgoing and
receive incoming calls, as well as roam into other markets. Prepaid roaming
can be done automatically through the C2C platform, via the Company's C2C
service agreements, C2C call screening feature and through the Company's
ROAMERplus service. In addition, the Company is currently developing an
enhanced roaming solution that will allow our prepaid subscribers to make or
receive calls anywhere in the United States and Canada.
The C2C network consists of a central computer database complex linked by a high
speed, fully redundant wide area frame relay network to geographically
distributed proprietary call processing subsystems, called voice nodes. Each
voice node site is capable of serving more than one carrier and consists of a
computer controlled telecommunications switch and an interactive voice response
unit that provides high quality personalized voice prompts. These voice nodes
are linked to the carriers' mobile switching centers via dedicated telephone
facilities. The distributed node architecture is designed to be modular and
scaleable, while remaining efficient and cost-effective. The C2C network also
utilizes the SS7 signaling protocol from carrier's mobile switching centers for
faster and more reliable call set-up as well as to facilitate enhanced digital
services including Caller ID and voice mail. The centralized database enables
prepaid users to make calls while roaming in other service areas where the C2C
network is in place.
The Company provides international dialing capabilities to permit prepaid
subscribers to make calls from within the United States and Canada to countries
around the world. The Passport feature allows subscribers to use prepaid
services from any prepaid or traditional postpaid mobile phone on a per-call
basis. Additional features include outbound roaming, automated replenishment
options and credit card address verification.
<PAGE>
BCGI continues to expand the features of its prepaid wireless services to offer
additional functionality to its carriers and their prepaid subscribers. During
1999, the Company added its Converged Prepaid feature that allows subscribers
to make prepaid calls from a wireless or landline phone. The Company also
added a call-screening feature to provide seamless outbound roaming. Other
features were added to provide a more user-friendly experience to the prepaid
subscriber. The Company works closely with the carriers on an ongoing basis
to develop additional features and functionality to expand the capabilities
and value of prepaid wireless services.
The Company created its Distribution Technology Partner program in 1999 to
offer expanded prepaid distribution to its C2C carrier customers. This
program enables subscribers to replenish their prepaid service at many more
retail locations beyond the carrier's retail outlets. Western Union, Radio
Shack, Datascape, UPP and PreNet all signed up for the program, providing
over 75,000 potential points of distribution to BCGI customers. The Company
is aggressively pursuing additional partners and arrangements for distribution
including online activation and replenishment opportunities.
The Company signed an agreement with AG Communication Systems (AGCS, a wholly
owned subsidiary of Lucent Technologies) to jointly develop a Wireless
Intelligent Network (WIN) based solution for prepaid wireless service, including
prepaid roaming. This WIN system will take advantage of the call processing
efficiency and enhanced feature capabilities of WIN, Phase II standards, while
building on BCGI's existing strengths in all areas of prepaid service delivery
and back office operation. While WIN call processing will be the standard used
by many prepaid providers, BCGI customers will benefit greatly by continuing
to receive industry leading services in the areas of rating, reporting,
distribution support, customer care and replenishment. This will enable BCGI
to provide a state-of-the-art, full-featured platform to new customers while
allowing a smooth migration for current customers, including roaming capability
between WIN and non-WIN systems. Carriers will also have the opportunity to
upgrade to WIN in certain markets and remain on the current C2C platform in
other markets. The WIN service logic that BCGI and AGCS are developing is
intended to operate on many Service Control Point (SCP) platforms, providing
carriers the flexibility to run WIN service logic on their own SCP platform if
they choose.
Carriers compensate BCGI for network usage by contracting at a per minute rate
for prepaid subscriber usage based on the connection time between the carrier's
mobile switching center and the C2C network voice node. As minutes of usage
increase and carriers achieve higher volume tiers, the per minute rates paid
by the carriers decrease yielding lower average rates per minute of usage.
The terms of the Company's existing contracts to provide prepaid wireless
services through the C2C network are generally one or two years.
The Company currently provides C2C to several U.S. carriers, including Airtouch,
Southwestern Bell Mobile Systems (SBC), Bell Atlantic Mobile, Bell South
Cellular Corp., AT&T Wireless (AWS), Bay Area Cellular, Aliant Cellular, Dobson
Cellular Systems, Inc., and Cincinnati Bell Wireless in addition to more than 20
wireless resellers. The Company also provides prepaid wireless services in
Canada to Rogers AT&T Wireless. As of February 29, 2000 the Company was
supporting over two million prepaid subscribers on behalf of carriers who have
deployed a BCGI C2C prepaid system in the United States and Canada.
Teleservices Division
The Company began providing teleservices in 1993 in response to the industry's
need for 24-hour, 365 day customer service. The Company's teleservices
program allows a wireless carrier's subscriber to obtain information on rate
plans, phone operations and service center locations, as well as instructions on
roaming features and promotions. Subscribers also may make billing inquiries,
initiate address and rate plan changes, and obtain other customer assistance.
Most carriers using BCGI's teleservices use these services for special projects,
off-hours and overflow subscriber support. The Company currently provides
teleservices to thirty-one wireless customers. Certain wireless carriers that
have contracted for the Company's prepaid wireless services have also engaged
the Company to provide teleservices for their prepaid subscribers.
The Company provides its teleservices from four telecommunications call centers
located in the United States and Canada. The Company's largest
telecommunications call center is located in Deland, Florida and employs over
400 personnel as of December 31, 1999. In collaboration with the University of
Massachusetts - Lowell, the Company operates a service center in Lowell,
Massachusetts. This service center is located on the campus of the university
and provides students the opportunity to learn about call center operations
while earning money and scholarships to pay for their education. More than 50%
of the current teleservices representatives at this service center are student
employees of the university. The Company also provides services in a call
center in New Brunswick, Canada and Lakeland, Florida. The Company contracts
with ICT Group, Inc. who owns and manages the operational functions of the New
Brunswick and Lakeland call centers, in accordance with company specifications.
BCGI is responsible for call routing, initial training and ongoing quality
assurance and mentoring to ensure compliance with the Company's standards.
<PAGE>
Each of the Company's facilities is designed to provide highly efficient, rapid
customer response through the deployment of state-of-the-art switching
technologies with client/server architecture and open, automatic call delivery
platforms. Each customer service representative utilizes database interfaces
customized for each carrier, to facilitate subscriber inquiry response,
technical problem resolution, program/feature clarification, on-line follow-up
and performance reporting. These customized interfaces can be programmed to
give the Company complete access to a particular carrier's subscriber databases.
Administration of call center floor personnel is facilitated by the use of
forecasting, scheduling and monitoring systems that allow floor supervisors to
observe numerous aspects of the call center's performance in a graphical format,
including information on call duration, compliance with contract standards and
operator performance.
BCGI has identified additional specific teleservices needs in the wireless
industry and has developed services to meet those needs. These services allow
the carriers to better manage the demands of hiring, training, managing and
retaining a large number of customer service representatives for specialized
service projects that often place significant increased demands on the capacity
of customer service centers. For example, BCGI provides teleservices support to
carriers who have prepaid subscribers on the C2C network using BCGI's
proprietary CCST software. BCGI's wireless-trained representatives are
available to effectively answer subscriber questions that are not handled by
C2C's automated customer service application. BCGI also provides special
support services to carriers including dealer support, phone number and NPA-NXX
area code changes and third party verification services. In 1999, the Company
made its CCST software available for license to carriers who wish to perform
customer care on their own, creating another competitive advantage of the C2C
platform.
The Company offers extensive in-house classroom and on-the-job training programs
for its teleservices personnel, including instruction on a full breadth of
customer service skills, call handling techniques and service quality. In
addition, carrier-specific training allows the teleservices staff to
disseminate information on a particular carrier's services, as well as to update
and edit information in the carrier's databases.
Roaming Services Division
BCGI's ROAMERplus roaming service enables wireless carriers to cost-effectively
generate revenues from subscribers roaming in a carrier's service area who are
not covered under traditional roaming agreements. These unregistered roamers
attempting to place calls in the serving carrier's territory are automatically
switched to BCGI, which arranges payment for the calls, completes the calls and
pays the serving carrier based on the length of the call. When an unregistered
roamer places a call in the carrier's service area, the carrier's mobile
switching center forwards the call, at the Company's expense, to the Company's
proprietary digital call processing system. The roamer may complete the call by
charging the call to a telephone calling card, a commercial credit card, a
prepaid account or as a collect call. All incoming traffic is initially handled
by an automated call processing system, which prompts the caller for billing and
calling information. The Company's specially trained service representatives
handle all calls that require additional operator assistance. The Company's
roaming service is being used by approximately 87 wireless carriers that
collectively hold licenses for over 1,000 markets in the United States, Canada
and Mexico. BCGI services 8 of the 10 largest wireless carriers, by number of
subscribers, in the United States.
In order to implement the Company's ROAMERplus service, a carrier need only make
a minor software change in its switches. BCGI pays for transport of the calls
to its facilities and for completion of the calls. Under its agreements with
carriers, which typically have a term of one year, BCGI pays the serving carrier
for the airtime that the roamer uses and charges the roamer for the call. The
charge for the call appears directly on a telephone or credit card bill, with
BCGI (typically, under the trade name "Wireless Roaming") as the vendor.
ROAMERplus eliminates collection and fraud risk for the carrier because BCGI
takes responsibility for collection from the customer. The Company manages this
collection and fraud risk by utilizing its own proprietary and external fraud
control systems as well as validating the caller's credit before completing the
call. Over the past few years there has been a decrease in the suspension of
inter-carrier roaming agreements due to improved fraud controls implemented by
the carriers. This change, coupled with some reduction of unregistered
roaming due to prepaid wireless growth (caused by former unregistered roamers
becoming prepaid wireless users) and the increase in one-rate registered roaming
plans offered by some national carriers has caused a decline in roaming service
revenues.
Since the Company expects the unregistered roaming business segment to continue
to decline, the Company has focused its efforts on cost management and finding
new sources of revenue for this platform. In order to maintain margins and
realize contributing profits from ROAMERplus, the Company has improved its call
routing and streamlined operations to reduce telecommunications rates as well as
bad debt and labor costs.
<PAGE>
Systems Division
The Systems Division delivers prepaid wireless solutions to carriers which, when
coupled with the Prepaid Wireless Services Division's carrier customers, makes
BCGI the leading provider of prepaid wireless services to carriers in North
America. The Systems Division sells systems that enable prepaid wireless
calling on a turnkey basis primarily to international customers. In 1999, the
Systems Division introduced its latest product, BCGI Prepaid Connection, a new
architecture for delivering prepaid service that gives wireless carriers in
small- and medium-sized U.S. markets many of the benefits of BCGI's national C2C
prepaid wireless network at a lower cost. Prepaid Connection carriers can offer
subscribers automatic inbound and outbound roaming virtually anywhere in North
America and competitive pricing on a per-minute-of-use basis. In return, these
carriers will be able to increase their revenues when other BCGI prepaid callers
roam into their service area. The callers who can roam into their service area
include subscribers of the largest wireless carriers which BCGI serves today.
BCGI's server complex in Tulsa, Oklahoma manages the call rating, customer
account information, Web-based customer care server and the connection to the
national roaming server complex. The Division also markets and sells systems
for voice messaging, toll limitation and other enhanced service applications to
Original Equipment Manufacturers (OEM's) and wireless and wireline carriers
throughout North America.
Prepaid systems have been sold to several customers whose efforts are focused on
international prepaid wireless, including Cable & Wireless, Bell South Wireless
International and Cellstar, Ltd. In 1999, the Company entered into an agreement
with Centigram Communications under which BCGI's prepaid system solution is
offered through Centigram's worldwide distribution channels. These customers
have operations throughout the world and have enabled the Company to make
prepaid system sales in Mexico, Brazil, Venezuela and several other South
American countries. The Company expects to continue to market and sell its
systems through these and other channels to expand prepaid wireless services
beyond North and South America.
Engineering, Research and Development
BCGI believes that its future success will depend in large part on its ability
to enhance existing services and develop new services in response to changing
market, customer and technological requirements of the wireless telephone
industry. An important factor in the future success of the Company's prepaid
wireless service will be the Company's ability to provide, at competitive
prices, more functionality and features than those typically available in other
competitive offerings. The Company has developed proprietary software to enable
its call processing platform to handle custom signaling interfaces to various
types of wireless switches, specialized call rating requirements of prepaid
wireless services, and interfaces to wireless administration and management
information systems. The Company is developing a number of enhanced services
that it intends to make available to prepaid and traditional subscribers through
the C2C network. In addition, BCGI's agreement with AGCS to jointly develop the
WIN system is expected to improve call processing efficiency and provide BCGI
the ability to enhance the features available to carriers. These enhanced
services are intended to be designed to enable carriers to market prepaid more
effectively, to generate additional sources of revenue from subscribers, to
provide carriers with more extensive internal reporting capabilities and help to
reduce carriers' telecommunications costs.
The Company spent approximately $5.4 million, $5.5 million and $6.0 million on
engineering, research and development in 1997, 1998, and 1999, respectively.
The Company expects to continue to devote significant resources to its
engineering, research and development activities in future years.
<PAGE>
Sales, Marketing and Distribution
The Company's sales strategy is to establish and maintain long-term
relationships with its customers. The Company utilizes a consultative sales
process to understand and define customer needs and determine how those needs
can be addressed by the Company's services. BCGI seeks to build upon its
existing customer relationships by integrating and cross-selling its different
service offerings. The Company's sales cycle varies for different services and
can be up to 12 months for the Company's Teleservices, Prepaid Wireless Services
and Systems Divisions.
The Company's sales force consists of business development representatives who
generally have significant experience in the wireless industry, either as former
employees of wireless carriers or in selling products and services to wireless
carriers. The Company typically assigns each sales representative to a single
group of wireless telephone carriers in order to support the development and
maintenance of long-term strategic customer relationships. These
representatives are supported by product specific account and service managers
who also typically have experience in the wireless industry and manage the
accounts on a daily basis after the completion of the initial sale. Most
business development representatives are strategically located in the carriers
major geographic regions, however, the Company's marketing and product
management activities are supported from its Woburn, Massachusetts facility and
from its Tulsa, Oklahoma Systems Division location.
The Company's direct sales strategy is complemented by a marketing program that
includes participation in industry trade shows, advertising and public
relations. Because the Company's customers are a group of large-scale wireless
carriers, the Company seeks to gain wide exposure through carefully selected
events and activities specific to the wireless telephone industry.
Product and account management groups have been established for the Prepaid
Wireless Services, Teleservices and Systems Divisions. Each group focuses on
supporting carriers' operational issues, understanding the prepaid market and
providing carriers with valuable information regarding prepaid marketing and
subscriber trends, distribution techniques and marketing success factors. The
Company works closely with the carriers and the industry to disseminate and
integrate this information into their prepaid programs to help generate and
retain prepaid subscribers. In addition, the product and account management
groups focus on identification of new features and functionality that drive
incremental prepaid business by working closely with all BCGI customers.
Distribution of prepaid wireless is an integral piece of the service because it
provides consumers with numerous channels to purchase or replenish prepaid
service. The Company continues to improve distribution options for prepaid
cards on behalf of wireless carriers through its Distribution Technology
Program, under which the Company seeks arrangements with national distributors,
retailers, resellers and alternative channels to increase market penetration and
exposure. Currently Western Union, Radio Shack, Datascape, UPP and PreNet are
all part of BCGI's Distribution Technology Program, providing over 75,000
potential points of distribution to BCGI customers. The Company is aggressively
pursuing additional partners and arrangements for distribution including online
activation and replenishment opportunities. The Company has focused much effort
on its marketing program in 1999 and 2000 to expand awareness of its prepaid
product offering, specifically to provide more assistance to its carrier
customers in strategically marketing and promoting prepaid services through
their sales and distribution channels.
Customers
The Company provides its services to wireless carriers and resellers of varying
size, expertise and capabilities. The Company currently provides one or more
of its services to approximately 87 wireless carriers in the United States,
Canada and Mexico, including 8 of the 10 largest wireless carriers in the United
States. Historically, a significant portion of the Company's revenues in any
particular period has been attributed to a limited number of customers. Net
revenues attributable to the Company's ten largest customers accounted for
approximately 75%, 79% and 86% of the Company's total revenues in 1997, 1998,
and 1999, respectively. AT&T Wireless, Ameritech Cellular Services, Bell
Atlantic Mobile, Southwestern Bell Mobile Systems, Bell South Cellular and
Airtouch Communications accounted for approximately 5%, 15%, 11%, 10%, 13% and
13%, respectively, of total revenues in 1998 and for 10%, 9%, 17%, 11%, 11% and
15%, respectively, of total revenues in 1999.
<PAGE>
Competition
The market for services to wireless carriers is highly competitive and subject
to rapid change. A number of companies currently offer one or more of the
services provided by the Company. In addition, many wireless carriers are
providing or can provide, in-house, the services that the Company offers.
Trends in the wireless telephone industry, including greater consolidation and
technological or other developments that make it simpler or more cost-effective
for wireless carriers to provide certain services themselves, could affect
demand for the Company's services and could make it more difficult for the
Company to offer a cost-effective alternative to a wireless carrier's in-house
capabilities. In addition, the Company anticipates continued growth in the
wireless carrier services industry, and consequently, the entrance of new
competitors in the future. BCGI's principal competitor in the unregistered
roaming market is National Telemanagement Corporation and in its C2C prepaid
network market, Intervoice Brite, Inc., National Telemanagement Corporation,
GTE Telecommunications Services, Inc., Lucent Technologies, Inc. and Ericcson.
In the teleservices market, BCGI competes with a variety of companies that have
inbound and outbound service centers. The Systems Division's principal
competitors in the turnkey prepaid and voice processing systems markets include
Corsair Communications Inc., Comverse Technology, Inc. and Intervoice Brite,
Inc.
The Company believes that the principal competitive factors in the wireless
carrier services industry include the ability to identify and respond to
customer needs, quality and breadth of service offerings, the size and scale of
its C2C platform, nationwide roaming, price and technical expertise. The
Company's ability to compete also depends in part on a number of competitive
factors outside its control, including the ability to hire and retain employees,
the development by others of products and services that are competitive with the
Company's products and services, the price at which others offer comparable
products and services and the extent of its competitors' responsiveness to
customer needs. There can be no assurance that the Company will be able to
continue to compete successfully with its existing competitors or with new
competitors.
Government Regulation
The Federal Communications Commission ("FCC"), under the terms of the
Communications Act of 1934, as amended, including the Telecommunications Act of
1996, regulates interstate communications and use of radio spectrum, including
entry, exit, rates and terms of operation. BCGI presently neither operates any
facilities utilizing radio spectrum nor has any facilities-based services
involving interstate communications. Consequently, it is not required to and
does not hold any licenses or other authorizations issued by the FCC for
interstate operations. Two subsidiaries of the Company, Cellular Express, Inc.
and BCGI Communications Corp. have been granted licenses by the FCC to provide
international telecommunications services. BCGI Communications Corp. has also
filed applications to provide intrastate telecommunication services in all 50
states, and if approved, will be subject to state regulatory requirements.
The wireless carriers that constitute the Company's customers are regulated at
both the federal and state levels. Such regulation may decrease the growth of
the wireless telephone industry, affect the development of the PCS market,
limit the number of potential customers for the Company's services or impede the
Company's ability to offer competitive services to the wireless market or
otherwise have a material adverse effect on the Company's business and results
of operations. At the same time, the Telecommunications Act of 1996, a
deregulatory measure, may cause changes in the industry, including entrance of
new competitors and industry consolidation, which could in turn affect the
Company's cost of doing business or otherwise have a material effect on the
Company's business, financial condition and results of operations.
Employees
As of December 31, 1999, the Company had a total of 936 full-time and part-time
employees. Of these employees, 619 serve in teleservices and roaming call
center and related functions, 182 serve in technical operations and software
development, 49 serve in sales, marketing, product and account management and 86
serve in administration and management. In addition, 107 students of the
University of Massachusetts - Lowell serve as representatives for the
Teleservices Division. None of the Company's employees are represented by a
labor union. The Company believes that its employee relations are good.
<PAGE>
Backlog
As of December 31, 1999, there was $28,000 in backlog of firm orders of the
Systems Division. The Company includes in backlog only those orders for which
it has received completed purchase orders and for which delivery has been
specified within 12 months. Most orders are subject to cancellation by the
customer. Because of the possibility of customer changes in delivery schedules,
cancellation of orders and potential delays in product shipments, the Company's
backlog as of any particular date may not be representative of actual sales for
any succeeding period.
Item 2. PROPERTIES
The Company leases space or facilities at five of its six principal locations:
Woburn and Lowell, Massachusetts, Deland and Lakeland, Florida and Riverview,
New Brunswick, Canada. In March 1999, the Company purchased the property at its
Tulsa, Oklahoma location which was previously under lease. The Woburn location
serves as the operations center for ROAMERplus and has separate facilities that
house the Company's network operations center as well as the Company's executive
headquarters, training facility, engineering, sales, human resources and finance
personnel. The Deland, Lakeland and Riverview facilites serve as call centers
for teleservices. The Deland facility is leased and run by the Company. The
Lakeland and Riverview facilities are leased and managed by a third party. The
Tulsa facility is used for the manufacturing and assembly of systems and houses
other Systems Division support functions such as engineering, product
management, sales support and finance. The Company has 32 other leased
facilities throughout the United States that are used to house the Company's
voice nodes and certain equipment for the C2C network.
The following is a listing of the Company's significant leased facilities:
Square
Location Footage Expiration Date
------------------------------------------------
Woburn, MA 81,834 February 2001-June 2004
Deland, FL 30,000 May 2003
Lowell, MA 9,000 February 2002
Item 3. LEGAL PROCEEDINGS
In December 1999, the Company was named as a defendant in a suit filed in United
States District Court for the Northern District of Iowa by a former supplier
(the "Supplier") of materials to a subsidiary of the Company. A purchase
contract for an unspecified number of components was signed in 1997 and the
Supplier became the sole supplier for a certain system component in 1997 and
early 1998. The suit alleges that the Company breached the confidentiality
clause of the contract, misappropriated the Suppliers' trade secrets and
interfered with actual and prospective contracts with other customers. The
Supplier has requested injunctive relief and seeks actual and punitive damages
for lost profits and damage to the supplier's reputation in excess of $1
million. The Company believes that the claim is without merit.
In December 1999, the Company was named as a defendant in a suit filed in United
States District Court for the District of New Jersey by another supplier
("Supplier II") of materials to a subsidiary of the Company. A purchase
contract was signed for up to 1,000 units of a certain system component with a
stipulation giving the Company most favored nation pricing. In February 1999,
the Company stopped shipments from Supplier II. Supplier II then invoiced the
Company for $437,000 to compensate for components not shipped. Subsequently,
the Company discovered that Supplier II had not extended most favored nation
pricing over the entire contract period. The Company maintains that Supplier II
has been paid in full. The suit against the Company alleges breach of contract,
lost profits of $350,000 and fraudulent and unfair conduct. The Company
believes that it has meritorious defenses and counterclaims to this action.
On November 20, 1997, AWS sent a letter to the Company stating that it believed
that it was entitled to indemnification from the Company in respect to a certain
claim presently pending in a case brought by Ronald A. Katz Technology
Licensing, L.P. and MCI Telecommunications Corporation against AT&T Corp. in the
United States District Court for the Eastern District of Pennsylvania. The
amount in question is undetermined. The Company believes that the claim is
without merit. No legal action has been brought against the Company.
<PAGE>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company, through
solicitation of proxies or otherwise, during the last quarter of the year ended
December 31, 1999.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company and their ages and positions are as
follows:
Name Age Position
---- --- --------
E.Y. Snowden 45 President & Chief Executive
Officer, Director
Frederick E. von 47 Vice President, Corporate
Mering Development, Director
Karen A. Walker 35 Treasurer, Vice President,
Financial Administration and
Chief Financial Officer
Mr. Snowden has served as a Director of the Company and as its President
and Chief Executive Officer since February 1998. Prior to joining the Company,
Mr. Snowden served as President and Chief Operating Officer of American Personal
Communications, L.P. d/b/a Sprint Spectrum, a telecommunications company, from
February 1994 to December 1997. From June 1990 until February 1994, Mr. Snowden
was an Area Vice President at Pacific Bell, Inc., a telecommunications company.
Mr. Snowden was the Chief Executive Officer at Universal Optical Company, Inc.
from March 1986 to March 1988. Mr. Snowden received his B.S. from Stanford
University and his M.B.A. from Harvard Graduate School of Business
Administration.
Mr. von Mering has served as a Director of the Company since 1989 and as
the Company's Vice President of Corporate Development since April 1999. From
1989 until April 1999 Mr. von Mering was the Company's Vice President, Finance
and Administration. Prior to joining the Company, Mr. von Mering served as
Regional Vice President and General Manager for the paging division of
Metromedia, Inc., a communications company, from 1980 to 1986. From 1975 to
1979, Mr. von Mering was employed at Coopers & Lybrand LLP. Mr. von Mering
earned his B.A. in accounting from Boston College and his M.B.A. from Babson
College.
Ms. Walker has served as Treasurer, Vice President Financial Administration
and Chief Financial Officer of the Company since April 1999 and as Vice
President of Financial Administration from August 1998 until April 1999. She
served as the Company's Corporate Controller from December 1993 until August
1998. Prior to her employment at BCGI, Ms. Walker spent more than six years at
Ernst & Young LLP, where she earned her CPA and was a manager in their
Entrepreneurial Services Group. Ms. Walker earned a B.S. in Accounting from
Boston College.
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
Market Information for Common Stock
Boston Communications Group, Inc.'s Common Stock is traded on the Nasdaq
National Market, under the symbol BCGI. The following table reflects the range
of high and low selling prices of the Company's common stock for the periods
indicated.
1998 1999
High Low High Low
First Quarter $11 11/16 $6 1/8 $13 1/4 $8 1/16
Second Quarter 11 1/4 6 1/2 14 11/16 7 3/8
Third Quarter 9 1/8 3 7/8 17 1/4 4 9/16
Fourth Quarter 13 6 3/4 7 7/16 3 1/2
Holders
At February 29, 2000, there were approximately 5,000 holders of Common Stock.
Dividends
The Company has never paid a cash dividend on its Common Stock. The Company
currently intends to retain all of its earnings to finance future growth and,
accordingly, does not anticipate paying any cash dividends in the foreseeable
future.
Item 6. SELECTED FINANCIAL DATA
The following tables should be read in conjunction with the Consolidated
Financial Statements of the Company and the notes thereto and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing elsewhere in this report.
Year ended December 31,
1995 1996 1997 1998 1999
Consolidated Statements of Operations (in thousands, except per share data)
Data:
Total revenues(1) $34,220 $50,651 $68,099 $86,482 $105,051
Operating income (loss) 2,129 610 (2,389) (3,149) (1,287)
Income (loss) from continuing
operations(2) 3,008 599 (1,116) (1,800) (786)
Loss from discontinued operations (165) -- -- -- --
Net income (loss) 2,843 599 (1,116) (1,800) (786)
Net income (loss) available to common
shareholders 1,893 148 (1,116) (1,800) (786)
Basic net income (loss) per common
share: 0.57 0.02 (0.08) (0.11) (0.05)
Diluted net income (loss) per common
share: 0.22 0.01 (0.08) (0.11) (0.05)
Consolidated Balance Sheet Data:
Cash and short-term investments 253 21,421 33,704 25,609 30,236
Working capital 2,082 26,433 38,210 37,397 34,880
Property and equipment, net 4,884 12,906 38,087 38,055 44,995
Total assets 13,614 51,959 93,385 91,760 102,081
Redeemable preferred stock 15,896 -- -- -- --
Shareholders' equity (deficit) $(8,698) $42,893 $80,104 $78,658 $79,369
Dividends per common share -- -- -- -- --
(1) In February 1996, the Company acquired VST for Common Stock and cash with
an aggregate value of approximately $2.5 million.
(2) In 1995, the Company reversed the deferred tax asset valuation allowance,
resulting in a tax benefit of $1.8 million. In addition, in 1995, the
Company realized benefits from a net operating loss carryforward of
$840,000.
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Consolidated Results of Operations
The Company's total revenues increased 21% from $86.5 million in 1998 to $105.1
million in 1999. The growth was primarily attributable to a 98% increase in the
Company's principal business, Prepaid Wireless Services, and to a 57% increase
in Teleservices revenues, primarily arising from increased customer service for
carriers' C2C customers. A 21% decline in Roaming Service revenues and 63%
decline in Systems revenues offset the growth in Prepaid Wireless Services and
Teleservices. In 1998, total revenues increased 27% compared to 1997 primarily
due to increases in Prepaid Wireless Services and Teleservices revenues.
The Company incurred operating losses for the years ended December 31, 1999,
1998, and 1997 totaling $1.3 million, $3.1 million, and $2.4 million
respectively. Excluding the effect of the one-time charge for the
reorganization of the Systems Division, the Company generated operating income
of $537,000 in 1999. The significant increase in Prepaid revenues principally
contributed to the improvement in operating income. Excluding the effects of
the loss on impairment of long-lived assets, the operating losses for the years
ended December 31, 1998 and 1997 were $2.5 million and $1.8 million,
respectively. The increased loss in 1998 reflects the increased depreciation,
telecommunication and personnel costs associated with the deployment and
operation of the C2C network. The specifics of each division's revenues and net
operating income (loss) are discussed in greater detail below.
The Company's reportable operating segments consist of Prepaid Wireless
Services, Teleservices, Roaming Services and Systems Divisions. The accounting
policies of the operating segments are the same as those described in the
summary of significant accounting policies in Note 2 of the Company's
Consolidated Financial Statements, except that the financial results for the
Company's operating segments have been prepared using a management approach.
This approach is consistent with the basis and manner in which the Company's
management internally analyzes financial information for the purposes of
assisting in making internal operating decisions. The Company evaluates
performance based on stand-alone divisions operating income (loss) before
interest and taxes and allocates corporate level operating expenses to the
operating divisions. Segment disclosure information is included in Note 5 of
the Company's Consolidated Financial Statements.
The Company's chief operating decision-maker is its President and Chief
Executive Officer. The Company's Divisions, or operating segments, are managed
separately because each represents a strategic business unit that offers
different products and serves unique markets within the wireless industry.
However, the divisions do complement each other in order to provide the Company
with a strong suite of products and services to meet the needs of wireless
carriers. The Company's customers include eight of the ten largest domestic
wireless carriers by subscriber, five of whom use three or more of the Company's
products.
<PAGE>
Divisional Data
(in thousands except for percentages)
Prepaid
Wireless Roaming
Services Teleservices Services Systems Total
- - --------------------------------------------------------------------------
1999
Revenues $36,920 $40,870 $22,249 $5,012 $105,051
Gross margin 23,040 7,291 4,019 (246) 34,104
Gross margin percentage 62% 18% 18% (5%) 32%
Operating income(loss) 3,467 316 1,116 (6,186) (1,287)
Percentage of revenues 9% 1% 5% (123%) (1%)
1998
Revenues $18,624 $26,001 $28,235 $13,622 $86,482
Gross margin 8,659 5,918 6,364 5,174 26,115
Gross margin percentage 46% 23% 23% 38% 30%
Operating income(loss) (7,236) 393 2,962 732 (3,149)
Percentage of revenues (39%) 2% 10% 5% (4%)
1997
Revenues $7,539 $17,009 $32,461 $11,090 $68,099
Gross margin 1,260 4,815 6,754 4,889 17,718
Gross margin percentage 17% 28% 21% 44% 26%
Operating income(loss) (7,976) 562 4,547 478 (2,389)
Percentage of revenues (106%) 3% 14% 4% (4%)
Prepaid Wireless Services Division
Prepaid Wireless Services Division revenues increased from $7.5 million in 1997
to $18.6 million in 1998 and increased 98% to $36.9 million in 1999. The
increase in 1999 was the result of existing carrier customers adding new markets
and new subscribers as well as increased minutes of use. At the end of 1999
there were approximately 1.9 million paid subscribers on the C2C network, as
compared to 890,000 subscribers at the end of 1998, an increase of over 113%.
The subscribers increased more than 200% in 1998 from 290,000 at the end of
1997. The increase in 1998 was the result of new carrier contracts secured in
1998, as well as existing carrier customers adding new markets to the C2C
network.
Gross margins for the Prepaid Wireless Services Division improved from 17% of
prepaid wireless service revenues in 1997 to 46% of revenues in 1998 and to 62%
of revenues in 1999. The improvement in both years resulted from the
significant increase in prepaid wireless services revenues in 1998 and 1999 that
leveraged the predominantly fixed cost infrastructure. This increase in gross
margins was partially offset by increased personnel and related costs incurred
to support the growth of the C2C network.
Operating income (loss) for the Prepaid Wireless Services Division decreased 10%
from an $8.0 million operating loss in 1997 to a $7.2 million operating loss in
1998, compared to operating income of $3.5 million in 1999. Although
depreciation and other operating costs increased in 1999 to support the expanded
system, the increases in revenues and gross margin in 1999 more than offset
these costs, which are more fixed than variable, resulting in an operating
profit. The operating losses incurred in 1997 and 1998 were due to costs
associated with developing and launching the C2C network, including costs for
personnel, network development and telecommunications equipment and software to
launch and subsequently expand the C2C system.
<PAGE>
Teleservices Division
Teleservices Division revenues increased 53% from $17.0 million in 1997 to
$26.0 million in 1998 and increased 57% to $40.9 million in 1999. The increases
in Teleservices revenues were primarily due to new and additional services
provided to existing customers and the addition of new carrier customers in 1997
and 1998. A significant component of these increases was the increase in
Teleservices revenues from billing inquiry services provided to the Prepaid
Division's carriers. Teleservices revenues from those services increased 331%
from $1.9 million in 1997 to $8.2 million in 1998 and increased 110% to $17.2
million in 1999. The Company does not expect that these trends will continue
for several reasons: First, during the fourth quarter of 1999, one of the
Company's carrier customers made the decision to transfer a portion of its
customer care to an in-house facility with existing capacity. Second, in order
to maintain its competitive advantage for its prepaid system, the Company has
decided to offer its carrier customers the option to license the prepaid
customer service software (CCST), which will potentially have a negative impact
on Teleservices Division revenues in 2000, while providing additional licensing
and maintenance revenue to prepaid wireless services. The Company's C2C prepaid
platform is attractive to carrier customers because billing inquiry can either
be outsourced to BCGI or provided in-house by the carrier.
Gross margins for the Teleservices Division decreased from 28% of teleservices
revenues in 1997 to 23% of revenues in 1998, and declined to 18% of revenues in
1999. The decreases in gross margins in 1999 and 1998 were primarily due to
incremental costs in connection with opening one additional call center in 1999
and three centers in 1998, including training, travel and other start up costs.
Another reason for the gross margin decline was the leasing of call center
facilities, equipment and personnel from third parties that began in August
1998, that resulted in these costs being classified entirely in cost of services
in 1998 and 1999. Prior to 1998, these costs were classified in depreciation or
general and administrative expenses. In October 1999, the Company cancelled the
management services contract and acquired the underlying leases for the Deland
call center facility to achieve additional cost savings. This buyout is
expected to have a positive effect on 2000 gross margins given that a portion of
the related expenses will again be classified as depreciation or general and
administrative expenses. In addition, the closing of the Woburn, Massachusetts
call center is expected to reduce labor costs in 2000.
Operating income for the Teleservices Division decreased from $562,000 in 1997
to $393,000 in 1998 and $316,000 in 1999. Operating income for the Teleservices
Division represented 3% of Teleservices revenues in 1997, 2% in 1998 and 1% in
1999. The decrease in 1999 operating income was due to costs associated with
the closing of the Woburn call center, including severance and asset writeoffs.
The decrease in 1998 was primarily due to the Company's significant investment
in call center technology designed to enhance service offerings as well as
improve operational efficiency.
Roaming Services Division
Roaming services revenues decreased 13% from $32.5 million in 1997 to $28.2
million in 1998 and decreased 21% to $22.2 million in 1999. The decrease in
roaming services revenues was primarily attributable to fewer suspensions of
inter-carrier automatic roaming agreements and some reduction of unregistered
roaming use because of the growth of prepaid wireless services. In addition, a
consumer's decision to use the Company's premium priced roaming service has been
adversely affected by an increase in one-rate registered roaming plans offered
by some national carriers. The Company anticipates that these trends will
continue and, therefore, roaming services revenues will continue to decrease
over time.
Gross margins for the Roaming Services Division increased from 21% of roaming
services revenues in 1997 to 23% in 1998 and declined to 18% in 1999. The gross
margin declined in 1999 due to lower revenues and therefore lower absorption of
fixed costs, higher revenue sharing rates paid to the Company's carrier
customers and with increased roaming calls attempted that were not completed
resulting in higher telecommunications costs. The improvement in 1998 resulted
primarily from enhancement and expansion of automated features of the service
that reduced labor costs.
Operating income for the Roaming Services Division decreased from $4.5 million
in 1997 to $3.0 million in 1998 and decreased 62% to $1.1 million in 1999. The
decreases were primarily a result of lower absorption of fixed costs as roaming
services revenues declined. The decrease was partially offset by reduced labor
costs and other cost reduction measures. The Company anticipates that operating
income for the Roaming Services Division will continue to decline due to the
anticipated decrease in roaming services revenues.
<PAGE>
Systems Division
Systems revenues increased 23% from $11.1 million in 1997 to $13.6 million in
1998 and decreased 63% to $5.0 million in 1999. The decrease in 1999 was due to
a significant decline in orders for the Division's international prepaid
systems. The increase in 1998 was due to system sales to new and existing
customers in South America, including a sale to one customer for approximately
$7.0 million.
Gross margins for the Systems Division decreased from 44% of systems revenues in
1997 to 38% in 1998 and decreased to 31% of systems revenues in 1999 (excluding
the effects of the one-time charge). The decrease in 1999 was primarily due to
the reduced sales levels for 1999 that absorbed fewer fixed costs. In addition,
the gross margin was further reduced by the one-time charge of $1.8 million
recorded in the third quarter of 1999 for the reorganization of the Systems
Division. The charge principally relates to expenses associated with inventory
write-downs to bring the level of inventory in line with the future sales
strategy, as well as severance costs. The Company believes that the
reorganization will help position the Division to expand its presence in the
international market, while ensuring that corporate exposure to the under-
performance of the Division is minimized. However, should the reorganization
not be successful, the Systems Division may incur additional operating losses,
asset impairment charges or other write-offs that could materially and adversely
affect the Company's business, operating results and financial condition. The
decrease in 1998 was primarily a result of increased competition in the market
for prepaid systems that resulted in reduced prices for the systems, as well as
higher costs associated with installing systems abroad. The trend of selling
more prepaid systems in proportion to total systems sales also continued and,
therefore, was an additional factor in the decrease in gross margin.
Operating income for the Systems Division increased 53% from $478,000 in 1997 to
$732,000 in 1998 and decreased to a $6.2 million operating loss in 1999.
Operating income for the Systems Division represented 4% of systems revenues in
1997, 5% of systems revenues in 1998 and the operating loss represented (123%)
of systems revenues in 1999. The decrease in 1999 was primarily a result of the
one-time charge along with the low sales volume that caused lower gross margins
and less absorption of fixed operating, depreciation, and amortization costs.
Operating income remained consistent as a percentage of systems revenues in 1998
and 1997, notwithstanding the decrease in gross margin, because sales and
marketing expenses of the Systems Division were reduced with the consolidation
of one of the division's satellite sales offices into its Tulsa headquarters.
The Company currently prices and sells all of its systems to international
customers in U.S. dollars. In addition, many Systems Division customers are
multinational corporations that are publicly traded in the U.S. All payments
are received in U.S. dollars which helps to protect the Company from the need to
hedge against foreign currency risk.
Operating Data
($ in thousands)
1999 1998 1997
%of %of %of
Total Revenue Total Revenue Total Revenue
- - --------------------------------------------------------------------------------
Total revenues $105,051 100% $86,482 100% $68,099 100%
Engineering, research and
development 6,045 6% 5,523 6% 5,433 8%
Sales and marketing 6,507 6% 5,590 6% 5,089 7%
General and administrative 7,269 7% 6,208 7% 3,470 5%
Depreciation and
amortization 15,570 15% 11,245 13% 5,546 8%
Impairment of long-lived
assets 0 0% 698 1% 569 1%
<PAGE>
Engineering, research and development expenses
Engineering, research and development expenses primarily include the salaries
and benefits for software development and engineering personnel associated with
the development, implementation and maintenance of existing and new services.
Engineering, research and development expenses remained consistent at 6% for the
years ended December 31, 1998 and 1999, respectively, but increased from $5.5
million to $6.0 million due to additional personnel hired to develop new
features and functionality for the Company's C2C network.
Engineering, research and development expenses decreased as a percentage of
total revenues from 8% to 6% for the years ended December 31, 1997 and 1998.
This decrease primarily resulted from engineers devoting less time to developing
and building out the C2C network infrastructure than they had in the prior year
and, to a lesser extent, to the changes associated with organizing the Company
into its four operating divisions. As a result of the divisional structure,
certain senior management personnel changed their functional responsibilities
from engineering to general management and oversight of the divisions. The
Company intends to continue to increase its engineering, research and
development expenditures to support future development and enhancements of its
prepaid and other wireless services and systems. In addition, the Company
intends to invest additional resources to expand the capabilities of its current
network to be positioned to take advantage of new wireless opportunities.
Sales and marketing expenses
Sales and marketing expenses include direct sales and product management
salaries, commissions, travel and entertainment expenses, in addition to the
cost of trade shows, advertising and other promotional expenses. Sales and
marketing expenses remained consistent at 6% for the years ended December 31,
1998 and 1999, respectively, but increased in absolute dollars from $5.6 million
in 1998 to $6.5 million in 1999. The increase in absolute dollars for 1999
primarily related to new marketing and business development efforts for the
Company.
As a percentage of total revenues, sales and marketing expenses decreased from
7% in 1997 to 6% in 1998. This decrease resulted primarily from revenues
absorbing fixed sales and marketing costs that did not increase as rapidly as
revenue growth. In addition, the decrease resulted from the consolidation of
the Systems Division satellite sales offices to the Tulsa headquarters in 1997
and, to a lesser extent, to the changes associated with organizing the Company
into its four operating divisions. As a result of the divisional structure,
certain senior management personnel changed their functional responsibilities
from sales and marketing to general management and oversight of the divisions.
General and administrative expenses
General and administrative expenses include salaries and benefits of employees
and other expenses that provide administrative support to the Company. Total
general and administrative expenses were consistent as a percentage of total
revenues for 1998 and 1999 at 7%, respectively, but increased in absolute
dollars from $6.2 million in 1998 to $7.3 million in 1999, due to increased
personnel and other related costs to support the Company's growth.
General and administrative expenses increased as a percentage of total revenues
from 5% in 1997 to 7% in 1998. The increase resulted principally from the
addition of staff to support the Company's growth and changes associated with
organizing the Company into its four operating divisions. As a result of the
divisional structure, certain senior management personnel changed their
functional responsibilities from marketing and engineering to general management
and oversight of the divisions.
<PAGE>
Depreciation and amortization expense
Depreciation and amortization expense includes depreciation of
telecommunications systems, furniture and equipment and leasehold improvements.
The Company provides for depreciation using the straight-line method over the
estimated useful lives of the assets, which range from three to twenty years.
Goodwill related to acquisitions is amortized over eight years. Depreciation
and amortization expense increased from 13% to 15% of total revenues for 1998
and 1999, respectively, primarily due to the depreciation of additional
technical equipment and software to support the rapid expansion and enhancement
of the Company's prepaid wireless network. This increase was partially offset
by a decrease in depreciation as a percentage of Teleservices revenues since
most of the Division's growth was facilitated through outsourced call center
facilities. In 1999, the Company primarily supported the growth in Teleservices
by leasing call center facilities, equipment and personnel from third parties
and classified amounts entirely in cost of services.
Depreciation and amortization expense increased more than 100% in 1998 compared
to 1997. The increase in 1998 was due primarily to the depreciation of
additional technical equipment and software to support the rapid expansion and
enhancement of the Company's prepaid wireless network. Depreciation and
amortization expense are expected to increase in 2000 due to increased capital
expenditures for telecommunications systems, primarily related to new features
and functionality and the continued expansion of the C2C network. In addition,
the Deland call center equipment leases assumed in October 1999 are expected to
increase depreciation since these expenses will no longer be classified as cost
of services but instead will be classified as depreciation expense.
Impairment of long-lived assets
The Company recognized a pre-tax charge of $569,000 and $698,000 in the years
ended December 31, 1997 and 1998, respectively, for a write-down of assets that
are no longer being used to support the Company's operations.
Interest income
Interest income increased from $1.1 million in the year ended December 31, 1997
to $1.3 million in 1998 and decreased to $896,000 in 1999. Interest income was
earned from investments of the proceeds of the Company's public offerings and
was offset slightly by interest expense from the Company's capital leases.
Provision (benefit) for income taxes
The income tax provision of $395,000 recorded for the year ended December 31,
1999 principally represents the Company's assessment of the additional valuation
allowance necessary on the Company's net operating losses. The income tax
benefit of $188,000 for the year ended December 31, 1997 yielded a 14% income
tax benefit. The lack of an income tax benefit in 1998 and the income tax
benefit of $188,000 recorded in 1997, resulted primarily from the non-
deductibility of goodwill from the Company's acquisitions. In addition, the
Company did not provide any additional benefit for net operating losses
generated in 1998. The Company's effective income tax rate may be greater than
40% in future years due to the continued impact of non-deductible goodwill.
The Company has recorded a net deferred tax asset for net operating loss
carryforwards and other temporary differences based on management's assessment
that it is more likely than not that future results of operations will be
sufficient to realize this asset.
<PAGE>
Selected Quarterly Operating Results
The following table sets forth certain unaudited quarterly results of
operations of the Company for the eight quarters in the two year period ended
December 31, 1999, including such amounts expressed as a percentage of revenues.
This quarterly information is unaudited, has been prepared on the same basis as
the audited Consolidated Financial Statements and, in the opinion of the
Company's management, reflects all necessary adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the
information for the periods presented. The quarterly operating results are not
necessarily indicative of future results of operations when read in conjunction
with the audited Consolidated Financial Statements and Notes thereto included
elsewhere in this Annual Report on Form 10-K.
Three months ended
-------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
1999 1999 1999 1999
- - --------------------------------------------------------------------------------
Revenues:
Prepaid wireless services $7,872 $9,731 $9,115 $10,202
Teleservices 9,843 10,707 10,088 10,232
Roaming services 5,435 5,733 5,956 5,125
System sales 1,014 1,250 955 1,793
- - --------------------------------------------------------------------------------
Total revenues 24,164 27,421 26,114 27,352
Expenses:
Cost of service revenues 15,471 17,067 17,651 15,500
Cost of system revenues 735 863 728 1,108
Cost of system revenues-one-time charge -- -- 1,824 --
Engineering, research and development 1,263 1,551 1,632 1,599
Sales and marketing 1,606 1,664 1,498 1,739
General and administration 1,640 1,794 1,985 1,850
Depreciation and amortization 3,372 3,544 3,921 4,733
Impairment of long-lived assets -- -- -- --
- - --------------------------------------------------------------------------------
Total expenses 24,087 26,483 29,239 26,529
- - --------------------------------------------------------------------------------
Operating income(loss) 77 938 (3,125) 823
Interest income 274 247 227 148
- - --------------------------------------------------------------------------------
Income (loss) before income taxes 351 1,185 (2,898) 971
Provision (benefit) for income taxes 161 523 (684) 395
- - --------------------------------------------------------------------------------
Net income (loss) 190 662 (2,214) 576
- - --------------------------------------------------------------------------------
Basic and diluted earnings per share $0.01 $0.04 $(0.13) $0.03
- - --------------------------------------------------------------------------------
Three months ended
-------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998
- - --------------------------------------------------------------------------------
Revenues:
Prepaid wireless services $2,934 $4,043 $5,010 $6,637
Teleservices 4,589 6,226 7,514 7,672
Roaming services 7,796 7,059 7,097 6,283
System sales 5,064 3,932 1,547 3,079
- - --------------------------------------------------------------------------------
Total revenues 20,383 21,260 21,168 23,671
Expenses:
Cost of service revenues 12,041 12,899 13,684 13,295
Cost of system revenues 2,673 2,180 1,363 2,232
Cost of system revenues-one-time charge -- -- -- --
Engineering, research and development 1,403 1,176 1,426 1,518
Sales and marketing 1,333 1,308 1,387 1,562
General and administration 1,414 1,469 1,572 1,753
Depreciation and amortization 2,452 2,695 2,908 3,190
Impairment of long-lived assets -- 698 -- --
- - --------------------------------------------------------------------------------
Total expenses 21,316 22,425 22,340 23,550
- - --------------------------------------------------------------------------------
Operating income(loss) (933) (1,165) (1,172) 121
Interest income 386 326 331 306
- - --------------------------------------------------------------------------------
Income (loss) before income taxes (547) (839) (841) 427
Provision (benefit) for income taxes (208) -- 208 --
- - --------------------------------------------------------------------------------
Net income (loss) (339) (839) (1,049) 427
- - --------------------------------------------------------------------------------
Basic and diluted earnings per share $(0.02) $(0.05) $(0.06) $0.03
- - --------------------------------------------------------------------------------
<PAGE>
As a Percentage of Total Revenues
-------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
1999 1999 1999 1999
- - -------------------------------------------------------------------------------
Revenues:
Prepaid wireless services 33% 35% 35% 37%
Teleservices 41 39 38 37
Roaming services 22 21 23 19
System sales 4 5 4 7
- - ------------------------------------------------------------------------------
Total revenues 100 100 100 100
Expenses:
Cost of service revenues 64 62 67 57
Cost of system revenues 3 3 3 4
Cost of system revenues-one-time charge -- -- 7 --
Engineering, research and development 5 6 6 6
Sales and marketing 7 6 6 6
General and administration 7 7 8 7
Depreciation and amortization 14 13 15 17
Impairment of long-lived assets -- -- -- --
- - ------------------------------------------------------------------------------
Total expenses 100 97 112 97
Operating income(loss) 0 3 (12) 3
Interest income 1 1 1 0
- - ------------------------------------------------------------------------------
Income (loss) before income taxes 1 4 (11) 3
Provision (benefit) for income taxes -- 2 (3) 1
- - ------------------------------------------------------------------------------
Net income (loss) 1% 2% (8)% 2%
- - ------------------------------------------------------------------------------
As a Percentage of Total Revenues
-------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998
- - -------------------------------------------------------------------------------
Revenues:
Prepaid wireless services 14% 19% 24% 28%
Teleservices 23 29 36 32
Roaming services 38 33 33 27
System sales 25 19 7 13
- - ------------------------------------------------------------------------------
Total revenues 100 100 100 100
Expenses:
Cost of service revenues 59 61 64 56
Cost of system revenues 13 10 6 9
Cost of system revenues-one-time charge -- -- -- --
Engineering, research and development 7 6 7 6
Sales and marketing 7 6 7 7
General and administration 7 7 7 7
Depreciation and amortization 12 13 14 14
Impairment of long-lived assets -- 3 -- --
- - -------------------------------------------------------------------------------
Total expenses 105 106 105 99
Operating income(loss) (5) (6) (5) 1
Interest income 2 2 1 1
- - -------------------------------------------------------------------------------
Income (loss) before income taxes (3) (4) (4) 2
Provision (benefit) for income taxes (1) -- 1 --
- - -------------------------------------------------------------------------------
Net income (loss) (2)% (4)% (5)% 2%
- - -------------------------------------------------------------------------------
The Company has experienced fluctuations in its quarterly operating results and
anticipates that such fluctuations will continue and could intensify. The
Company's quarterly operating results may vary significantly depending on a
number of factors, including the timing of the introduction or acceptance of new
services offered by the Company or its competitors, seasonality, changes in the
mix of services provided by the Company, changes in regulations affecting the
wireless industry, changes in the Company's operating expenses, personnel
changes, and general economic conditions. In particular, Prepaid Wireless
Services revenues are affected by seasonal trends as the fourth quarter
typically generates the highest number of net additions as compared to the other
three quarters. The timing of carrier contract renewals can also impact Prepaid
Wireless Service revenues. Teleservices revenues may be influenced by the
requirements of one of more of the Company's significant Teleservices customers,
including engagement of the Company to implement or assist in implementing
special projects of limited duration. The Company's Roaming Services revenues
are affected by the frequency and volume of use of the Company's services, which
may be influenced by seasonal trends, as well as changes in demand during
particular periods due to a higher or lower incidence of temporary suspension of
inter-carrier roaming agreements in certain markets. The timing of orders and
the number of large prepaid systems shipped during a particular quarter may
fluctuate based upon the needs of systems customers and can have a significant
impact on the level of Systems Division revenues.
Because a significant portion of the Company's operating expenses are committed
in advance, the Company may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. Accordingly, unexpected
revenue shortfalls could cause significant variations in operating results from
quarter to quarter and could have a material adverse effect on the Company's
results of operations. As a result, the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as an indication of likely future performance.
<PAGE>
Liquidity and Capital Resources
Cash, cash equivalents and short-term investments increased from $25.6 million
in 1998 to $30.2 million in 1999. The increase was due to improved cash
collections and cash management along with the use of capital leases to finance
certain equipment purchases. Net cash provided by operations of $20.9 million
in 1999 was primarily generated from $15.6 million in depreciation and
amortization expense, which resulted from the significant investment in
telecommunications systems and equipment in 1999 and increased accounts payable
and accrued expenses of $4.9 million which primarily related to accrued call
center management fees and cellular airtime.
The Company's investing activities utilized $18.1 million of net cash in 1999.
The Company expended $16.1 million in 1999, including almost $11.1 million for
telecommunications systems equipment and software for expansion of the Company's
C2C network. The Company also purchased $2.0 million in net short-term
investments. The Company anticipates that over the next 12 months it will
continue to make significant capital investments for additional equipment and
enhanced feature capabilities to strengthen Prepaid Wireless Services. The
Company's financing activities utilized $238,000 in 1999, mainly due to payments
of capital lease obligations, partially offset by proceeds from the exercise of
stock options.
The Company believes that its short-term investments and the funds anticipated
to be generated from operations would be sufficient to finance the Company's
operations for at least the next 12 months.
Impact of Year 2000
Many computer systems and software products installed in the industry were coded
to accept only two digit entries in the date code field. In order to
distinguish 21st century dates from 20th century dates, the date code field must
be modified to distinguish between 21st and 20th century dates. As a result,
many companies upgraded or replaced their software and computer systems in order
to comply with these Year 2000 requirements. The use of software and computer
systems that are not Year 2000 compliant could result in a system failures or
miscalculations resulting in disruptions of operations, including among other
things a temporary in ability to process transactions, send invoices or engage
in normal business activities.
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In late 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. In total, the
Company expensed approximately $883,000 in connection with remediating its
systems. The Company is not aware of any material problems resulting from Year
2000 issues, either with its products, its internal systems, or the products and
services of third parties. The Company will continue to monitor its mission
critical computer applications and those of its suppliers and vendors throughout
the year 2000 to ensure that any latent Year 2000 matters that may arise are
addressed promptly.
<PAGE>
Certain Factors That May Affect Future Results
This Annual Report contains forward-looking statements that involve risks and
uncertainties, including without limitation, statements regarding Teleservices
revenue and gross margin, trend of decreased suspensions of inter-carrier
automatic roaming agreements, prepaid cannibalization of unregistered roaming
and carrier marketing of one-rate registered roaming plans to reduce roaming
service revenues, Roaming Division profitability declining due to decreasing
revenue, increased expenditures for engineering, research and development,
greater costs of depreciation and amortization and an effective income tax rate
greater than 40%. The Company's actual results may differ significantly from
the results discussed in the forward-looking statements. A number of important
factors exist that could affect the Company's future operating results,
including, without limitation, technological changes in the Company's industry,
the ability of the Company to continue to successfully support its C2C network,
the ability of the Company's carrier customers to successfully continue to
market and sell C2C prepaid wireless services, the Company's ability to retain
existing customers and attract new customers, increased competition and general
economic factors.
Historically, a significant portion of the Company's revenues in any particular
period have been attributable to a limited number of customers. This
concentration of customers can cause the Company's revenues and earnings to
fluctuate from quarter to quarter, based on the volume of call traffic generated
through these customers, the services being performed for the teleservices
programs and the level of system sales. A significant decrease in business from
any of the Company's major customers, including a decrease in business due to
factors outside of the Company's control, would have a material adverse effect
on the Company's business, financial condition and results of operations.
The Company has recently developed a distributed architecture that will enable
carriers to use our proprietary software to deliver prepaid billing inquiry
in-house. However, any revenues generated from this application will reduce the
need for the Teleservices Division to provide customer care services and
therefore may reduce teleservices revenues in future quarters.
A number of the Company's Prepaid, Teleservices and Systems Division contracts
have been extended beyond their expiration dates or will expire in 2000 and
beyond. There can be no assurances that the Company will be successful in
renewing any of these contracts. If these contracts are not renewed the
Company's business, financial condition and results of operations could be
materially adversely affected. Also, when and if the contracts are renewed,
many of the carrier customers have reached higher tiers of subscription levels
and therefore contractual rates per minute will be lower than in previous years.
If subscriber levels begin to drop off, revenue could be adversely affected due
to these lower rates.
The Company has experienced fluctuations in its quarterly operating results and
anticipates that such fluctuations will continue and could intensify. The
Company experienced an operating loss in 1997 and the first three quarters of
1998, primarily due to expenses associated with the development and expansion of
its C2C network. During the quarter ended September 30, 1999, an operating loss
was also incurred due to the Systems Division one-time charge, system outages in
Prepaid and a software problem in Teleservices. In addition, the Company's
Systems Division has experienced operating losses during each of the last six
quarters due to fewer sales of international prepaid systems. The Company's
quarterly operating results may vary significantly depending on a number of
factors including, the timing of the introduction or acceptance of new services
offered by the Company or its competitors, changes in the mix of services
provided by the Company, variations in the level of system sales, changes in
regulations affecting the wireless industry, changes in the Company's operating
expenses, the ability to identify, hire and retain qualified personnel and
general economic conditions. Due to all of the foregoing factors, it is
possible that in some future quarter the Company's results of operations will be
below prior results or the expectations of public market analysts and investors.
In such event, the price of the Company's Common Stock would likely be
materially and adversely affected.
The Company has recently taken steps in an attempt to improve the results of the
Systems Division, which has generated losses during each of the last six
quarters. A reorganization plan was implemented in September 1999 in an effort
realign the division and improve operating results. However, should these
reorganization efforts not be successful, the Systems Division may incur
additional operating losses, asset impairment charges or other write-offs that
could materially and adversely affect the Company's overall business, operating
results and financial condition.
<PAGE>
The Company historically has provided its services almost exclusively to
wireless carriers. Although the wireless telecommunications market has
experienced significant growth in recent years, there can be no assurance that
such growth will continue at similar rates, or at all, or that wireless carriers
will continue to use the Company's services. The Company expects that demand
for its roaming services will continue to decline as fewer inter-carrier roaming
agreements are suspended, prepaid cannibalization of unregistered roaming use
increases and carriers offer more one-rate roaming plans. In addition, prepaid
wireless services are relatively new services in new markets, and if these
markets do not grow as expected or if the carriers in these markets do not use
the Company's services, the Company's business, financial condition and results
of operations would be materially and adversely affected.
The Company's future success depends, in large part, on the continued use of its
existing services and systems, the acceptance of new services in the wireless
industry and the Company's ability to develop new services and systems or adapt
existing services or systems to keep pace with changes in the wireless telephone
industry. Further, a rapid shift away from the use of wireless in favor of
other services, could affect demand for the Company's service offerings and
could require the Company to develop modified or alternative service offerings
to address the particular needs of the providers of such new services. There
can be no assurance that the Company will be successful in developing or
marketing its existing or future service offerings or systems in a timely
manner, or at all.
The Company is currently devoting significant resources toward the support and
enhancement of its prepaid wireless services and systems to maintain system
reliability and expand the C2C network. Several of the Company's carrier
customer contracts contain penalty clauses that provide for reductions in
revenue for certain network outages. There can be no assurance that the Company
will successfully support and enhance the C2C network effectively to avoid
system outages and any associated loss in revenue, that the market for the
Company's prepaid service will continue to develop, or that the Company's C2C
network will successfully support current and future growth. Furthermore, the
Company has expended significant amounts of capital to support the C2C
agreements it has secured with its carrier customers. Because C2C revenues are
principally generated by prepaid subscriber minutes of use, the Company's C2C
revenues can be impacted by the carrier's ability to successfully market and
sell prepaid services. Revenues from the Company's C2C network are dependent on
the ability to retain subscribers on the network and there can be no assurance
that the Company's churn rate (percentage of total subscribers that terminate
service on the network) will not increase, which may result in reductions in
related revenues. Teleservices revenues associated with billing inquiry support
for C2C carrier customers are becoming a more significant portion of
teleservices revenues and therefore these revenues are dependent upon the size
and growth of the C2C subscriber base. In addition, the Company has enabled
carrier customers to license software that enables C2C customers to perform
their billing inquiry in-house if they choose. This may reduce the Company's
Teleservices revenues significantly and reduce profits accordingly.
The Company has experienced outages on the C2C network which have resulted in
performance penalties and unbilled revenue. Despite efforts to avoid outages,
there can be no assurance that future outages will not occur. Such outages can
result in additional penalties and lost revenue for the Company. In addition,
outages could damage the Company's reputation. The occurrence of one or more
outages could have a material adverse effect on the Company's business,
operating results and financial condition.
The Company has expanded its operations rapidly, creating significant demands on
the Company's administrative, operational, development and financial personnel
and other resources. In addition, the growth of the Company's Teleservices
Division is dependent on recruiting, training and retaining employees to perform
customer services responsibilities. Teleservices has also recently outsourced a
small portion of its call center operations to a third party vendor who is
responsible for certain operational functions, including hiring, training and
retaining employees. There can be no assurance that the vendor will continue to
be able to meet the Company's existing and future needs effectively.
Additional expansion by the Company may further strain the Company's management,
financial and other resources. There can be no assurance that the Company's
systems, procedures, controls and existing space will be adequate to support
expansion of the Company's operations. If the Company's management is unable to
manage growth effectively, the quality of the Company's services, its ability to
retain key personnel and its business, financial condition and results of
operations could be materially and adversely affected.
The Company's operations are supported by many hardware components and software
applications from third party vendors. There can be no assurances that these
hardware components and software applications will function in accordance with
specifications agreed upon by the Company and its vendors. If the hardware and
software do not function as specified, the Company's business, financial
condition and results of operations could be materially and adversely affected.
<PAGE>
The Company currently prices and sells all of its systems to international
customers in U.S. dollars. In addition, many Systems Division customers are
multinational corporations that are publicly traded in the U.S. All payments
are received in U.S. dollars which helps to protect the Company from the need to
hedge against foreign currency risk. While these provisions serve to protect
the Company from accounts receivable losses, there can be no assurances that
systems sales to foreign countries will not result in losses due to devaluation
of foreign currencies or other international business conditions outside of the
Company's control.
The market for services to wireless carriers is highly competitive and subject
to rapid change. A number of companies currently offer one or more of the
services offered by the Company. In addition, many wireless carriers are
providing or can provide, in-house, the services that the Company offers. In
addition, the Company anticipates continued growth and competition in the
wireless carrier services industry and consequently, the entrance of new
competitors in the future. An increase in competition could result in price
reductions and loss of market share and could have a material adverse effect on
the Company's business, financial condition or results of operations.
The Company is exploring opportunities to utilize its prepaid network and real-
time rating engine for mobile and electronic commerce applications. There can
be no assurances that there will be a market for the Company's network in the
mobile and electronic commerce arena. In addition, this market could be so
highly competitive that the Company will not be able to enter it.
The Company's success and ability to compete is dependent in part upon its
proprietary technology. If unauthorized copying or misuse of the Company's
technology were to occur to any substantial degree, the Company's business,
financial condition and results of operations could be materially adversely
affected. In addition, some of the software used to support the Company's
services is licensed by the Company from single vendors, which are small
corporations. There can be no assurance that these suppliers will continue to
license this software to the Company or, if any supplier terminates its
agreement with the Company, that the Company will be able to develop or
otherwise procure software from another supplier on a timely basis and at
commercially acceptable prices.
The Company's operations are dependent on its ability to maintain its computer,
switching and other telecommunications equipment and systems in effective
working order and to protect its systems against damage from fire, natural
disaster, power loss, telecommunications failure or similar events. Any damage,
failure or delay that causes interruptions in the Company's operations could
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company has recorded a net deferred tax asset for net operating loss carry
forwards and other temporary differences based on management's assessment that
it is more likely than not that future results of operations will be sufficient
to realize this asset. However, there can be no assurances that future results
of operations will be sufficient to fully realize this asset.
<PAGE>
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company currently prices and sells all of its systems to international
customers in U.S. dollars. In addition, many Systems Division customers are
multinational corporations that are publicly traded in the U.S. All payments
are received in U.S. dollars which helps to protect the Company from the need to
hedge against foreign currency risk. While these provisions serve to protect
the Company from accounts receivable losses, there can be no assurances that
systems sales to foreign countries will not result in losses due to devaluation
of foreign currencies or other international business conditions outside of the
Company's control.
The Company does not believe that there is any material market risk exposure
with respect to derivative or other financial instruments that would require
disclosure under this item.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Consolidated Financial Statements and supplementary data are
included as part of this Annual Report on Form 10-K:
Consolidated Balance Sheets
at December 31, 1999 and 1998..............................................25
Consolidated Statements of Operations
for the years ended December 31, 1999, 1998 and 1997.......................26
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 1999, 1998 and 1997.......................27
Consolidated Statements of Cash Flows
for the years ended December 31, 1999, 1998 and 1997.......................28
Notes to Consolidated Financial Statements..................................29
Report of Ernst & Young LLP, Independent Auditors...........................39
<PAGE>
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
December 31,
--------------------
1999 1998
- - --------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $21,145 $18,523
Short-term investments 9,091 7,086
Accounts receivable, net of allowance
for billing adjustments and doubtful
accounts of $2,025 in 1999 and $1,508
in 1998 18,546 18,432
Inventory 2,007 3,525
Deferred income taxes 1,169 1,564
Prepaid expenses 1,758 823
- - --------------------------------------------------------------------------------
Total current assets 53,716 49,953
Property and equipment:
Telecommunications systems & software 63,692 47,801
Furniture and fixtures 3,477 2,264
Leasehold improvements 2,803 2,127
Systems in development 5,560 4,305
- - --------------------------------------------------------------------------------
75,532 56,497
Less allowance for depreciation and amortization 30,537 18,442
- - --------------------------------------------------------------------------------
44,995 38,055
Goodwill, net 2,854 3,460
Other assets 516 292
- - --------------------------------------------------------------------------------
Total assets $102,081 $91,760
- - --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $941 $884
Accrued expenses 15,012 10,124
Income taxes payable 505 496
Current maturities of capital lease obligations 2,378 1,052
- - --------------------------------------------------------------------------------
Total current liabilities 18,836 12,556
Capital lease obligations, net of current maturities 3,876 546
Commitments and contingencies
Shareholders' equity:
Preferred Stock, $.01 par value, 2,000,000 shares
authorized, none issued and outstanding -- --
Common Stock, voting, par value $.01 per share,
35,000,000 shares authorized; 16,699,874 shares
in 1999 and 16,436,028 shares in 1998 issued 167 164
Additional paid-in capital 93,177 91,683
Treasury Stock (101,420 shares), at cost (673) (673)
Accumulated deficit (13,302) (12,516)
- - --------------------------------------------------------------------------------
Total shareholders' equity 79,369 78,658
- - --------------------------------------------------------------------------------
Total liabilities and shareholders' equity $102,081 $91,760
- - --------------------------------------------------------------------------------
See accompanying notes.
<PAGE>
Consolidated Statements of Operations
(In thousands, except share and per share amounts)
Year Ended December 31,
------------------------------
1999 1998 1997
- - --------------------------------------------------------------------------------
REVENUES:
Prepaid wireless services $36,920 $18,624 $7,539
Teleservices 40,870 26,001 17,009
Roaming services 22,249 28,235 32,461
System sales 5,012 13,622 11,090
- - --------------------------------------------------------------------------------
105,051 86,482 68,099
EXPENSES:
Cost of services revenues 65,689 51,919 44,180
Cost of system revenues 3,434 8,448 6,201
Cost of system revenues - one-time charge 1,824 -- --
Engineering, research and development 6,045 5,523 5,433
Sales and marketing 6,507 5,590 5,089
General and administrative 7,269 6,208 3,470
Depreciation and amortization 15,570 11,245 5,546
Impairment of long-lived assets -- 698 569
- - --------------------------------------------------------------------------------
106,338 89,631 70,488
- - --------------------------------------------------------------------------------
Operating loss (1,287) (3,149) (2,389)
Interest income 896 1,349 1,085
- - --------------------------------------------------------------------------------
Loss before income taxes (391) (1,800) (1,304)
Provision (benefit) for income taxes 395 -- (188)
- - --------------------------------------------------------------------------------
Net loss $(786) $(1,800) $(1,116)
- - --------------------------------------------------------------------------------
Basic and diluted net loss per share $(0.05) $(0.11) $(0.08)
- - --------------------------------------------------------------------------------
Shares used in computing basic and diluted net
loss per share 16,529 16,274 14,007
- - --------------------------------------------------------------------------------
See accompanying notes.
<PAGE>
Consolidated Statements of Shareholders' Equity
(In thousands, except share amounts)
Treasury Stock Common Stock Additional
--------------------------------- Paid In
Shares Dollars Shares Dollars Capital
- - -------------------------------------------------------------------------------
Balance at December 31, 1996 46,420 $(372) 12,725,749 $127 $52,738
Issuance of Common Stock -- -- 3,000,000 30 35,769
Exercise of Stock Options -- -- 538,630 6 2,482
Issuance of Common Stock Under
Employee Stock Purchase Plan -- -- 9,568 -- 40
Net loss -- -- -- -- --
- - -------------------------------------------------------------------------------
Balance at
December 31, 1997 46,420 (372) 16,273,947 163 91,029
- - -------------------------------------------------------------------------------
Exercise of Stock Options -- -- 143,488 1 572
Issuance of Common Stock Under
Employee Stock Purchase Plan -- -- 18,593 -- 82
Treasury Stock Purchase 55,000 (301) -- -- --
Net loss -- -- -- -- --
- - -------------------------------------------------------------------------------
Balance at
December 31,1998 101,420 (673) 16,436,028 $164 91,683
- - -------------------------------------------------------------------------------
Exercise of Stock Options -- -- 208,980 2 1,209
Issuance of Common Stock Under
Employee Stock Purchase Plan -- -- 54,866 1 285
Net loss -- -- -- -- --
- - -------------------------------------------------------------------------------
Balance at
December 31,1999 101,420 $(673) 16,699,874 $167 $93,177
- - -------------------------------------------------------------------------------
Total
Accumulated Shareholders'
Deficit Equity
- - --------------------------------------------------------
Balance at December 31, 1996 $(9,600) $42,893
Issuance of Common Stock -- 35,799
Exercise of Stock Options -- 2,488
Issuance of Common Stock Under
Employee Stock Purchase Plan -- 40
Net loss (1,116) (1,116)
- - --------------------------------------------------------
Balance at
December 31, 1997 (10,716) 80,104
- - --------------------------------------------------------
Exercise of Stock Options -- 573
Issuance of Common Stock Under
Employee Stock Purchase Plan -- 82
Treasury Stock Purchase -- (301)
Net loss (1,800) (1,800)
- - --------------------------------------------------------
Balance at
December 31,1998 (12,516) 78,658
- - --------------------------------------------------------
Exercise of Stock Options -- 1,211
Issuance of Common Stock Under
Employee Stock Purchase Plan -- 286
Net loss (786) (786)
- - --------------------------------------------------------
Balance at
December 31,1999 $(13,302) $79,369
- - --------------------------------------------------------
See accompanying notes
<PAGE>
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
-----------------------------
1999 1998 1997
- - --------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net loss $(786) $(1,800) $(1,116)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 15,570 11,245 5,546
Deferred income taxes 395 -- (230)
Impairment of long-lived assets -- 698 569
One-time charge 1,824 -- --
Changes in operating assets and liabilities,
excluding effects of business acquisitions:
Accounts receivable (114) (5,987) (1,385)
Inventory 41 (1,975) (361)
Prepaid expenses and other assets (1,159) 65 (151)
Accounts payable and accrued expenses 4,598 918 1,514
Income taxes payable 9 30 (24)
- - --------------------------------------------------------------------------------
Net cash provided by operating activities 20,378 3,194 4,362
INVESTING ACTIVITIES
Acquisition of businesses, net of cash acquired -- -- (1,398)
Purchase of short-term investments (18,777) (14,095) (12,976)
Sale of short-term investments 16,772 17,112 23,371
Purchase of property and equipment (15,513) (10,516) (28,552)
- - --------------------------------------------------------------------------------
Net cash used in investing activities (17,518) (7,499) (19,555)
FINANCING ACTIVITIES
Proceeds from exercise of stock options 1,211 573 2,488
Proceeds from issuance of stock 286 82 35,839
Purchase of treasury stock -- (301) --
Repayment of capital lease obligations (1,735) (1,127) (456)
- - --------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (238) (773) 37,871
- - --------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 2,622 (5,078) 22,678
Cash and cash equivalents at beginning of year 18,523 23,601 923
- - --------------------------------------------------------------------------------
Cash and cash equivalents at end of year $21,145 $18,523 $23,601
- - --------------------------------------------------------------------------------
Supplemental disclosure of non-cash transactions:
- - --------------------------------------------------------------------------------
Capital lease obligations $6,391 -- $3,200
- - --------------------------------------------------------------------------------
See accompanying notes.
<PAGE>
Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION
The Company
Boston Communications Group, Inc. (the Company) develops, markets and provides
specialized prepaid wireless services, teleservices, and roaming services to
the wireless telephone industry. The Company also manufactures prepaid and
voice systems equipment.
2. SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company earns revenues by processing prepaid wireless calls, by providing
teleservices customer care support and processing wireless calls for
unregistered wireless subscribers who have roamed outside of their service area.
Revenue is recognized when the service is provided and is recorded net of
estimated billing adjustments. The Company recognizes revenue from the sale of
systems at the time the systems are shipped.
Principles of Consolidation
The financial statements include 100% of the accounts and operations of the
Company and all of its majority-owned subsidiaries. All intercompany accounts
and transactions have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less at the date of purchase to be cash equivalents.
Short-term Investments
The Company accounts for its marketable securities under the Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Instruments in
Debt and Equity Securities." The Company has classified all of its securities
as available-for-sale, and are thus reported at fair market value.
Investments that mature between three and twelve months are considered short-
term investments. The Company's short-term investments are invested in
corporate notes.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Concentrations of Credit Risk
The Company's prepaid wireless services allows carriers, throughout the United
States and Canada, to access the Company's prepaid C2C platform, enabling the
carriers to offer prepaid wireless calling to their subscribers. Accounts are
not activated until payment is received by the carrier. Teleservices are
provided to wireless carriers located throughout the United States and Canada.
The Company's roaming customers are individuals who place wireless calls from
service areas, which are not covered by traditional roaming agreements. These
calls are forwarded by wireless carriers to the Company for processing. Each
transactionis small in size and the Company minimizes credit risk by validating
appropriate billing information. The Company sells its voice systems in North
America and its prepaid systems in North and South America.
The Company has roaming, teleservice and prepaid wireless service agreements
with, and sells its systems to numerous carriers. During the years ended
December 31, 1999, 1998, and 1997, the Company's top 10 customers accounted for
86%, 79% and 75% of the Company's total revenues, respectively. The following
table summarizes sales in excess of 10% of total revenues only, as a percentage
of total revenues, to major customers:
December 31,
----------------------------
1999 1998 1997
- - -----------------------------------------------------------------------
Bell Atlantic Mobile (P,T,R) 17% 11% 12%
AirTouch (P,T,R) 15 13 --
BellSouth Cellular Corp. (P,T,R,S) 11 13 --
Southwestern Bell Mobile Systems (P,T,R) 11 -- 11
AT&T (P,T,R) 10 -- --
Ameritech Cellular (T,R) -- 15 12
- - -----------------------------------------------------------------------
Revenue from these customers was generated from the following divisions:
P - Prepaid wireless services
T - Teleservices
R - Roaming services
S - Systems
Inventory
Inventory, which consists of computer hardware and electronic components, is
recorded at the lower of cost (first-in, first-out method) or market. Inventory
is categorized as follows (in thousands):
December 31,
-----------------------
1999 1998
- - ---------------------------------------------
Raw materials $1,356 $2,690
Work in process 651 835
- - ---------------------------------------------
$2,007 $3,525
- - ---------------------------------------------
Property and Equipment
Property and equipment are recorded at cost and depreciated on a straight-line
basis over the estimated useful lives of the assets, which range from 3 to 20
years. Systems in development represent the cost of purchased hardware and
software to be used in switching equipment not yet placed into service and will
be depreciated between 3 and 5 years.
Impairment of Long Lived Assets
In accordance with Financial Accounting Standards Board Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," the Company reviews its long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. If it is determined that the carrying amount
of an asset cannot be fully recovered, an impairment loss is recognized. During
1998 and 1997, the Company recorded impairment losses of $698,000 and $569,000,
respectively, for the writedown of equipment which could no longer be used in
its business to its fair market value. These assets were sold during 1998 at
their impaired carrying value of $265,000.
<PAGE>
Goodwill
Goodwill represents the excess of cost of acquired businesses over the fair
market value of all net assets acquired. Goodwill is being amortized on a
straight-line basis over an eight-year period. Accumulated amortization totaled
approximately $2.0 million and $1.4 million as of December 31, 1999 and 1998,
respectively.
Engineering, Research and Development
Costs associated with engineering, research and development are expensed as
incurred.
Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) in accounting for its stock-
based compensation plans, rather than the alternative fair value accounting
method provided for under Financial Accounting Standards Board Statement (SFAS)
No. 123, "Accounting for Stock-Based Compensation," as this alternative requires
the use of option valuation models that were not developed for use in valuing
employee stock options. Under APB 25, since the exercise price of options
granted under these plans equals the market price of the underlying stock on the
date of grant, no compensation expense is required.
Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
establishes standards for the recognition, measurement, and reporting of
derivatives and hedging activities and is effective, as amended, for all
quarters in fiscal years beginning after December 31, 2001. The Company
anticipates that the adoption of this new accounting standard will not have a
material impact on the Company's consolidated financial statements.
Basic and Diluted Net Loss Per Share
Basic and diluted net loss per share represents net loss divided by weighted
average shares outstanding. Diluted and basic net loss per share are the same
because the Company generated net losses in 1999, 1998 and 1997.
3. ONE-TIME CHARGE
In September 1999, the Company recorded a one-time charge of $1.8 million as a
result of the reorganization of the Systems Division. The charge primarily
relates to inventory write-downs associated with the reorganization.
.
4. ACCRUED EXPENSES
Accrued expenses consist of the following:
December 31,
------------------
(In thousands) 1999 1998
- - ---------------------------------------------------------
Billing adjustments $1,171 $1,177
Cellular airtime 1,898 1,178
Payroll 2,333 2,052
Telecommunication costs 1,122 1,596
Deferred revenue 1,383 700
Call center management fees 1,830 259
Other 5,275 3,162
- - ---------------------------------------------------------
$15,012 $10,124
- - ---------------------------------------------------------
<PAGE>
5. SEGMENT REPORTING
The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" in 1998. SFAS No. 131 established standards for
reporting information about operating segments in annual financial statements
and requires selected information about operating segments in interim financial
reports issued to stockholders. It also established standards for related
disclosures about products and services, and geographic areas. Operating
segments are defined as components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker, or decision making group, in deciding how to allocate
resources and in assessing performance. The Company's chief operating decision-
maker is the President and Chief Executive Officer. The operating segments are
managed separately because each operating segment represents a strategic
business unit that offers different products and serves different niches in the
wireless industry.
The Company's reportable operating segments consist of the Prepaid Wireless
Services, Teleservices, Roaming Services and Systems Divisions. The Company's
Prepaid Wireless Services Division offers prepaid wireless service that allows
carriers to access the Company's prepaid C2C platform, enabling the carriers to
offer prepaid wireless calling to their subscribers. The Company's Teleservices
Division provides customer support teleservices to wireless carrier's customers,
which allows carriers to outsource all or a portion of their customer service
activities. The Company's Roaming Services Division provides carriers with
ROAMERplus call processing services which provides carriers the ability to
generate revenues from subscribers who are not covered under traditional roaming
agreements by arranging payment for roaming calls. The Company's Systems
Division manufactures and markets voice processing platforms to wireless and
wireline carriers throughout North and South America with enhanced features
including prepaid wireless, voice messaging and toll limitation services. The
Systems Division also sells prepaid systems to international carriers and
manufactures the voice nodes used to support the Company's C2C network. The
other segment assets include cash equivalents and short-term investments and
other assets not allocated to the reportable operating segments.
The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies except that the
financial results for the Company's operating segments have been prepared using
a management approach. This is consistent with the basis and manner in which
the Company's management internally analyzes financial information for the
purposes of assisting in making internal operating decisions. The Company
evaluates performance based on stand-alone operating segment income(loss) before
interest and taxes and allocates corporate level operating expenses to the
operating segments. All revenues are generated from external customers and
there are no intersegment revenues. Revenues are attributed to geographic areas
based on the location of the customers to whom the services were provided or the
location where the systems were shipped. Capital expenditures include equipment
purchased directly from vendors or acquired through a capital lease. The
summary of operating segment information is as follows at December 31, (in
thousands):
Prepaid
Wireless Roaming
Services Teleservices Services Systems
-----------------------------------------------------------------------------
1999
Net revenues $36,920 $40,870 $22,249 $5,012
Depreciation and amortization 9,745 3,287 945 1,593
Operating income(loss) 3,467 316 1,116 (6,186)
Assets 37,620 15,662 4,083 8,566
Capital expenditures 11,116 1,260 233 1,624
------------------------------------------------------------------------------
1998
------------------------------------------------------------------------------
Net revenues $18,624 $26,001 $28,235 $13,622
Depreciation and amortization 6,782 2,473 808 1,182
Operating income(loss) (7,236) 393 2,962 732
Assets 31,501 10,493 5,518 12,855
Capital expenditures 6,603 1,311 199 1,184
------------------------------------------------------------------------------
1997
------------------------------------------------------------------------------
Net revenues 7,539 17,009 32,461 11,090
Depreciation and amortization 2,359 1,745 600 842
Operating income(loss) (7,976) 562 4,547 478
Assets 29,314 8,126 7,110 9,701
Capital expenditures 24,742 4,154 798 1,006
Other Total
-------------------------------------------------
1999
Net revenues $-- $105,051
Depreciation and amortization -- 15,570
Operating income(loss) -- (1,287)
Assets 36,150 102,081
Capital expenditures 1,843 16,076
-------------------------------------------------
1998
-------------------------------------------------
Net revenues $-- $86,482
Depreciation and amortization -- 11,245
Operating income(loss) -- (3,140)
Assets 31,393 91,760
Capital expenditures 1,219 10,516
-------------------------------------------------
1997
-------------------------------------------------
Net revenues -- 68,099
Depreciation and amortization -- 5,546
Operating income(loss) -- (2,389)
Assets 39,134 93,385
Capital expenditures 1,034 31,734
<PAGE>
Information concerning principal geographic areas is as follows (in thousands):
Year ended December 31,
----------------------------
Net Revenues 1999 1998 1997
- - -------------------------------------------------------------
North America
- - -------------------------------------------------------------
United States $93,332 $78,044 $59,760
Canada 8,494 2,334 427
Other 1,908 1,231 4,869
- - -------------------------------------------------------------
Total North America 103,734 81,609 65,056
- - -------------------------------------------------------------
South America 1,317 4,873 3,043
- - -------------------------------------------------------------
Total $105,051 $86,482 $68,099
- - -------------------------------------------------------------
6. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities are as follows:
December 31,
----------------
(In thousands) 1999 1998
- - -----------------------------------------------------------------------------
Deferred tax assets:
Net operating loss carryforwards $3,503 $2,577
Allowance for doubtful accounts
and billing adjustments 719 521
Inventory valuation adjustments 815 245
Minimum tax credit carryforwards 101 111
Accrued expenses and other 692 977
Asset impairment -- 478
- - -----------------------------------------------------------------------------
5,830 4,909
Valuation allowance (1,063) (853)
- - -----------------------------------------------------------------------------
Total deferred tax assets 4,767 4,056
Deferred tax liabilities:
Tax over book depreciation and amortization expense (3,598) (2,492)
- - -----------------------------------------------------------------------------
Total deferred tax liabilities (3,598) (2,492)
- - -----------------------------------------------------------------------------
Net deferred tax assets $1,169 $1,564
- - -----------------------------------------------------------------------------
The provision (benefit) for income taxes consists of the following (in
thousands):
Year Ended December 31,
--------------------------------
(In thousands) 1999 1998 1997
- - -------------------------------------------------------------------------------
Current:
Federal $-- $-- $--
State 30 -- 42
- - -------------------------------------------------------------------------------
30 -- 42
Deferred:
Federal 314 -- (209)
State 51 -- (21)
- - --------------------------------------------------------------------------------
365 -- (230)
- - --------------------------------------------------------------------------------
Income tax provision (benefit) $395 $-- $(188)
- - --------------------------------------------------------------------------------
At December 31, 1999, the Company has approximately $9.1 million of net
operating loss carryforwards for federal income tax return purposes available
for use in future years that expire beginning in 2006. The valuation allowance
increased from $853,000 at December 31, 1998 to $1.1 million at December 31,
1999 due to net operating losses for which no benefit was recognized in 1999
and an additional reserve recorded against the Company's net deferred tax
assets.
A reconciliation of the income tax provision (benefit) at the statutory rate to
the income tax provision (benefit) as reported is as follows:
Year Ended
December 31,
1999 1998 1997
- - ---------------------------------------------------------------------------
Federal benefit at statutory rate $(133) $(612) $(443)
State income benefit, net of federal (16) (71) (52)
Permanent differences 334 288 307
Valuation allowances 210 395 --
- - ---------------------------------------------------------------------------
$395 -- $(188)
- - ---------------------------------------------------------------------------
Income taxes paid were $41,000 in 1999, $61,000 in 1998, and $83,000 in 1997.
7. CAPITAL STOCK
Preferred Stock
The Board of Directors are authorized, subject to certain limitations prescribed
by law, without further shareholder approval, to issue from time to time up to
an aggregate of 2,000,000 shares of Preferred Stock in one or more series and to
fix or alter the designations, preferences, rights and any qualifications,
limitations or restrictions of the shares of each such series thereof, including
the dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption (including sinking fund provisions), redemption price or prices,
liquidation preferences and the number of shares constituting any series or
designations of such series. The issuance of Preferred Stock may have the
effect of delaying, deferring or preventing a change of control of the Company.
The Company has no present plans to issue any shares of Preferred Stock.
Stock Option Plans
The Company's 1996 and 1998 Stock Option Plans (the Plans) were adopted by the
Board of Directors and approved by the stockholders of the Company in 1996 and
1998, respectively. The Plans provide for the grant of stock options to
employees, officers and directors, consultants and advisors to, the Company and
its subsidiaries. Under the Plans, the Company may grant options that are
intended to qualify as incentive stock options within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code") ("incentive stock
options"), or options not intended to qualify as incentive stock options ("non-
statutory options"). Incentive stock options may only be granted to employees
of the Company. A total of 1,264,792 and 600,000 shares of Common Stock may be
issued upon the exercise of options granted under the 1996 and 1998 Stock Option
Plans, respectively. The maximum number of shares with respect to which options
may be granted to any employee under the 1996 and 1998 Stock Option Plans shall
not exceed 200,000 and 60,000 shares of Common Stock, respectively, during any
calendar year. All options granted have 10 year terms and generally vest and
become exercisable over one to five years.
In 1998, the Company granted 400,000 non-qualified options to purchase shares of
common stock at an exercise price of $7.06. In 1999, the Company granted
175,000, 25,000, and 10,000 non-qualified options to purchase shares of common
stock at $8.63, $13.13, and $8.44 respectively. The exercise prices of all non-
qualified options were equal to the fair market value as determined by the
Company on the date of grant.
Pro forma information regarding net income and earnings per share is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted average assumptions for 1999,
1998, and 1997: risk-free interest rates of 5.5%, 5.4%, and 6.4%, respectively,
no dividend yield, the volatility factor of the expected market price of the
Company's common stock of 0.5 and a weighted-average expected life of the option
of 3 to 5 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows (in thousands, except for per share information):
December 31,
------------------------------
1999 1998 1997
- - -------------------------------------------------------------------
Pro forma net loss $(2,569) $(4,034) $(2,859)
- - -------------------------------------------------------------------
Pro forma basic and diluted net
loss per share $ (0.16) $ (0.25) $ (0.20)
- - --------------------------------------------------------------------
Stock option information is as follows:
1999 1998
- - ---------------------------------------------------------------------------
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price
- - ---------------------------------------------------------------------------
Outstanding-begining of year 1,935,976 $6.90 1,417,654 $6.74
Granted 684,000 7.98 966,500 7.33
Exercised (208,580) 5.80 (143,888) 4.00
Canceled (306,850) 7.48 (304,290) 9.00
- - ---------------------------------------------------------------------------
Outstanding - end of year 2,104,546 $7.27 1,935,976 $6.90
- - ---------------------------------------------------------------------------
1997
- - -------------------------------------------------------
Weighted
Average
Exercise
Options Price
- - -------------------------------------------------------
Outstanding-begining of year 1,666,359 $8.86
Granted 1,124,342 5.87
Exercised (538,630) 4.62
Canceled (834,417) 11.18
- - -------------------------------------------------------
Outstanding - end of year 1,417,654 $6.74
- - -------------------------------------------------------
The following table summarizes the stock options outstanding and
exercisable as of December 31, 1999:
Options Options Exercise
Exercisable Outstanding Price
- - ----------------------------------------------
236,266 606,950 $3.69-4.88
314,104 649,604 5.00-7.06
77,300 563,100 7.37-8.62
152,142 284,892 8.66-14.00
- - ---------------------------------------------
779,812 2,104,546 $7.27
- - ---------------------------------------------
There were 322,599 options available for grant at December 31, 1999. There were
628,437 options exercisable at December 31, 1998 at a weighted-average exercise
price of $6.91. The weighted-average fair value of options granted during 1999
and 1998 was $3.98 and $3.24, respectively. The weighted-average contractual
life of options outstanding at December 31, 1999 and 1998 was 8.0 and 8.6 years,
respectively.
Employee Stock Purchase Plan
The Company's 1996 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors and approved by the shareholders of the
Company in April 1996. The Purchase Plan authorizes the issuance of up to a
total of 225,000 shares of Common Stock to participating employees. In May
1999, the Plan was amended by the Board of Directors to shorten the initial
eligibility period and increase the discount to the employees.
<PAGE>
All full-time employees of the Company who have been employed by the Company for
a minimum of three months, including directors of the Company who are employees,
are eligible to participate in the Purchase Plan. On the first day of a
designated payroll deduction period (the "Offering Period"), the Company will
grant to each eligible employee who has elected to participate in the Purchase
Plan an option to purchase shares of Common Stock as follows: the employee may
authorize an amount (up to a maximum of 10% of such employee's regular pay) to
be deducted by the Company from such pay during the Offering Period. On the
last day of the Offering Period, the employee is deemed to have exercised the
option, at the option exercise price, to the extent of accumulated payroll
deductions. Under the terms of the Purchase Plan, the option price is an amount
equal to 85% of the fair market value per share of the Common Stock on either
the first day or the last day of the Offering Period, whichever is lower. In no
event may an employee purchase in any one Offering Period a number of shares
which has an aggregate market value (determined on the last day of the offering
Period) in excess of $25,000. The Compensation Committee may, in its
discretion, choose an Offering Period of 12 months or less for each of the
Offerings and choose a different Offering Period for each Offering.
8. COMMITMENTS
Leases
The Company entered into capital leases for $3.6 million and $3.2 million in
1999 and 1997, respectively. The accumulated amortization of the assets under
capital leases was $2.4 million and $886,000 at December 31, 1999 and 1998,
respectively. In addition, in 1999 the Company cancelled a management contract
and acquired the underlying leases, resulting in capital lease additions of
approximately $2.7 million. In addition, the Company has $1.2 million in
payments outstanding to be paid through September 30, 2000 to prepay the
remaining 48 months on the facility lease. The Company also has non-cancelable
operating lease commitments for office space, call center facilities, equipment
and personnel. Rent and call center facility and equipment expense approximated
$11.9 million in 1999, $2.2 million in 1998, and $1.2 million in 1997. Future
minimum payments under non-cancelable capital leases and operating leases are
as follows (in thousands):
<TABLE>
Capital Operating
Year ending December 31, Leases Leases
- - ------------------------------------------------------------
<S> <C> <C>
2000 $2,766 $3,868
2001 2,105 1,347
2002 1,562 1,115
2003 534 1,016
2004 -- 276
- - ------------------------------------------------------------
Total minimum lease payments 6,967 $7,622
Amounts representing interest 713 ------
- - ---------------------------------------------
Present value of net minimum payments 6,254
Less: current portion 2,378
- - ---------------------------------------------
$3,876
- - ---------------------------------------------
</TABLE>
Significant Contracts
The Company has an agreement with a vendor to jointly develop two products for
the Company. The Company will pay this vendor $1.7 million for the development
effort and the exclusive license to use the first product and $8.0 million for
the development effort and exclusive license to use the second product during
the next two years.
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
Board of Directors and Shareholders
Boston Communications Group, Inc.
We have audited the accompanying consolidated balance sheets of Boston
Communications Group, Inc. and subsidiaries as of December 31, 1999 and 1998 and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1999.
Our audits also included the financial statements schedule listed in the Index
at Item 14(a). These financial statements and schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Boston
Communications Group, Inc. and subsidiaries at December 31, 1999 and 1998, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
/s/ Ernst & Young LLP
Boston, Massachusetts
January 28, 2000
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The sections entitled "Election of Directors" and Reports Under Section 16(a)
of the Exchange Act appearing in the Company's proxy statement for the annual
meeting of stockholders to be held on May 25, 2000 set forth certain information
with respect to the directors of the Company and reports filed by certain
persons under Section 16(a) of the Exchange Act and are incorporated herein by
reference. Certain information with respect to persons who are or may be deemed
to be executive officers of the Company is set forth under the caption
"Executive Officers of the Company" in Part I of this report.
Item 11. EXECUTIVE COMPENSATION
The sections entitled "Executive Compensation", "Employment Agreements with
Named Executive Officers" and "Report of the Compensation Committee" appearing
in the Company's proxy statement for the annual meeting of stockholders to be
held on May 25, 2000 set forth certain information with respect to the
compensation of management of the Company and are incorporated herein by
reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section entitled "Security Ownership of Certain Beneficial Owners and
Management" appearing in the Company's proxy statement for the annual meeting of
stockholders to be held on May 25, 2000, sets forth certain information with
respect to the ownership of the Company's Common Stock and is incorporated
herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The sections entitled "Executive Compensation", "Employment Agreements with
Named Executive Officers," and "Certain Transactions" appearing in the Company's
proxy statement for the annual meeting of stockholders to be held on May 25,
2000, set forth certain information with respect to certain business
relationships and transactions between the Company and its directors and
officers and are incorporated herein by reference.
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES & REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following consolidated financial statements of Boston Communications Group,
Inc. are included as Item 8:
Consolidated Balance Sheets at December 31, 1999 and 1998...................25
Consolidated Statements of Operations
- Years ended December 31, 1999, 1998 and 1997.............................26
Consolidated Statements of Shareholders' Equity
- Years ended December 31, 1999, 1998 and 1997.............................27
Consolidated Statements of Cash Flows
- Years ended December 31, 1999, 1998 and 1997.............................28
Notes to Consolidated Financial Statements..................................29
(2) Financial Statement Schedules
Index to Consolidated Financial Statement Schedules
For the years ended December 31, 1999, 1998 and 1997:
Schedule II - Valuation and Qualifying Accounts
All other Schedules have been omitted because the required information is shown
in the consolidated financial statements or notes thereto or they are not
applicable.
(3) The Exhibits listed in the Exhibit Index immediately preceding the
Exhibits are filed as part of this Annual Report on Form 10-K.
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 27th day of
March 2000.
BOSTON COMMUNICATIONS GROUP, INC.
By: /s/ E.Y. Snowden
------------------
E.Y. Snowden
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ E.Y. Snowden President, Chief March 27, 2000
------------------- Executive Officer
E.Y. Snowden and Director
/s/ Karen A. Walker Vice President, March 27, 2000
--------------------- Finance and
Karen A. Walker Administration,
Director (Principal
Financial and
Accounting Officer)
/s/ Paul J. Tobin Chairman of the March 27, 2000
------------------- Board of Directors
Paul J. Tobin
<PAGE>
Signature Title Date
--------- ----- ----
/s/ Brian E. Boyle Vice Chairman of the March 27, 2000
-------------------- Board of Directors
Brian E. Boyle
/s/ Craig L. Burr Director March 27, 2000
-------------------
Craig L. Burr
/s/ Paul R. Gudonis Director March 27, 2000
---------------------
Paul R. Gudonis
/s/ Gerald Segel Director March 27, 2000
------------------
Gerald Segel
/s/ Mark J. Kington Director March 27, 2000
---------------------
Mark J. Kington
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- - ------- -----------
3.1 Restated Articles of Organization of the Company, as amended. 1
3.3 Amended and Restated By-Laws of the Company. 1
10.2 +1996 Stock Option Plan. 1
10.3 +1996 Employee Stock Purchase Plan. 1
10.3.1 +Amendment Number 1, dated August 30, 1996, to 1996 Employee Stock
Purchase Plan 2
10.15 Commercial Lease dated January 24, 1996 between the Company and
Cummings Properties Management, Inc. 1
10.15.1 Commercial Lease dated February 26, 1996 between the Company and
Cummings Property Management, Inc. (Amendment No. 1). 2
10.15.2 Amendment No. 2, dated August 8, 1996, to the commercial lease between
the Company and Cummings Property Management, Inc. 2
10.15.3 Amendment No. 3, dated February 5, 1997, to the commercial lease
between the Company and Cummings Property Management, Inc. 2
10.27 Software License and Services Agreement dated October 30, 1996 between
the Company and Oracle Corporation. 2
10.28 Software License and Services Agreement dated September 24, 1996
between the Company and Oracle Corporation. 2
10.33 Commercial Lease dated April 1, 1997 between the Company and Cummings
Properties Management, Inc 3
10.34 Master Equipment Lease Agreement between Boston Communications Group,
Inc. and Fleet Capital Corp. dated August 20, 1997 4
10.41 Agreement dated February 9, 1998 between the Company and the
University of Massachusetts at Lowell. 5
10.42 Employment Letter Agreement dated February 10, 1998 between the
Company and E.Y. Snowden. 5
10.45 +1998 Stock Incentive Plan
10.47^ Agreement between the Company and AG Communication Systems dated Nov.
16, 1998. 6
10.49 Amendment No. 4, dated December 4, 1998, to the commercial lease
between the Company and Cummings Property Management, Inc. 6
10.50 Master Equipment Lease between Boston Communications Group and Fleet
Capital Corp. dated May 17, 1999. 7
<PAGE>
10.51^ Letter of Agreement between Centigram Communications Corporation and
Boston Communications Group dated August 12, 1999. 8
10.52^ Amendment #1 to the Agreement between A.G. Communications Systems
Corporation and Boston Communications Group dated August 26,1999. 8
10.53 Lease between Cummings Properties and Boston Communications Group
dated June 3, 1999. 8
10.54^ Riverview, New Brunswick, Canada Management Services Agreement between
ICT Group, Inc. and Boston Communications Group, Inc. dated August 4,
1999. 8
10.55^ Lakeland, FL Management Services Agreement between ICT Group, Inc. and
Boston Communications Group, Inc. dated August 4, 1999. 8
10.56 Termination of Services Agreement and related Assignment and
Assumption Agreements between ICT Group, Inc. and Boston
Communications Group, Inc., dated September 30, 1999.
10.57 +Amendment No. 3 to the Boston Communications Group, Inc. 1996
Employee Stock Purchase Plan dated August 12, 1999.
11 Statement RE: Computation of Per Share Earnings
21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP, Independent Auditors.
27 Financial Data Schedules.
1 Incorporated by reference to the Company's Registration Statement on Form S-1
filed June 17, 1996 (File No. 333-4128)
2 Incorporated by reference to the Company's Form 10-K for the year ended
December 31, 1996.
3 Incorporated by reference to the Company's Form 10-Q for the quarter ended
June 30, 1997.
4 Incorporated by reference to the Company's Form 10-Q for the quarter ended
September 30, 1997.
5 Incorporated by reference to the Company's Form 10-Q for the quarter ended
March 31, 1998.
6 Incorporated by reference to the Company's Form 10-K for the year ended
December 31, 1998.
7 Incorporated by reference to the Company's Form 10-Q for the quarter ended
June 30, 1999.
8 Incorporated by reference to the Company's Form 10-Q for the quarter ended
September 30, 1999.
+ Management contract or compensatory plan or arrangement filed as an exhibit
pursuant to Item 14(c) of this Report.
^ Confidential treatment granted as to certain positions, which positions have
been deleted and filed separately with the Securities and Exchange Commission.
<PAGE>
<TABLE>
SCHEDULE II
BOSTON COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
COL. A COL. B COL. C
- - ------------------------------------ ------------ -------------------------
ADDITIONS
-----------------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER
BEGINNING OF COSTS AND ACCOUNTS
DESCRIPTION PERIOD EXPENSES DESCRIBE (1)
----------- -------------- -------------
<S> <C> <C> <C>
Year ended December 31, 1999:
Reserves and allowances deducted
from asset accounts:
Allowance for billing adjustments
and uncollectible accounts $1,508 $ -- $1,688
Year ended December 31, 1998:
Reserves and allowances deducted
from asset accounts:
Allowance for billing adjustments
and uncollectible accounts $1,304 $ -- $1,557
Year ended December 31, 1997:
Reserves and allowances deducted
from asset accounts:
Allowance for billing adjustments
and uncollectible accounts $1,242 $ -- $636
COL. A COL. D COL. E
- - ------------------------------------ ---------- -------------
DEDUCTIONS BALANCE AT
DESCRIPTION DESCRIBE (2) END OF PERIOD
----------- --------------
<S> <C> <C>
Year ended December 31, 1999:
Reserves and allowances deducted
from asset accounts:
Allowance for billing adjustments
and uncollectible accounts $1,171 $2,025
Year ended December 31, 1998:
Reserves and allowances deducted
from asset accounts:
Allowance for billing adjustments
and uncollectible accounts $1,353 $1,508
Year ended December 31, 1997:
Reserves and allowances deducted
from asset accounts:
Allowance for billing adjustments
and uncollectible accounts $574 $1,304
(1) Billing adjustments recorded as a reduction of revenue.
(2) Settlement of billing adjustments.
</TABLE>
Exhibit 10.56
TERMINATION AGREEMENT
This Agreement is entered into as of September 30, 1999 by and between ICT
Group, Inc. ("ICT") 800 Town Center Drive, Langhorne, PA 19047 and Cellular
Express, Inc., d/b/a Boston Communications Group ("Client"), 100 Sylvan Road,
Suite 100, Woburn, MA 01801.
WHEREAS, ICT and Client have entered into that certain Management Services
Agreement dated May 15, 1998 (the "Services Agreement") relating to the facility
located at Woodland Plaza Shopping Center, Deland Florida (the "Deland
Facility"); and
WHEREAS, pursuant to Section 14 of the Services Agreement, Client may terminate
the Agreement provided Client has made the payments to ICT and assumed the
equipment and real estate lease obligations as described therein; and
WHEREAS, Client and ICT wish to terminate the Agreement in accordance with the
provisions of Section 14.
NOW, THEREFORE, in consideration of the covenants and promises contained herein,
and intending to be legally bound hereby, ICT and Client hereby agree as
follows:
1.Termination of Services Agreement: Client and ICT hereby agree that the
Services Agreement is terminated as of September 30, 1999 (the "Effective Date")
pursuant to the provisions of Section 14.2 of the Services Agreement. Except as
set forth in this Agreement, and except for the payment of any amounts owed by
Client to ICT due under the Services Agreement, Client and ICT hereby release
and forever discharge the other from any and all claims, damages or losses
arising from the acts, omissions or performance of either party under the
Agreement prior to the Effective Date.
ICT is liable for and agrees to pay all expenses incurred under the Services
Agreement through September 30, 1999, including, but not limited to rent,
additional rent, equipment lease payments, maintenance costs, facility costs,
and utilities.
2. Assumption of Real Estate Lease: Client hereby agrees as of the Effective
Date to assume all of ICT's obligations arising on or after the Effective Date
under the real estate lease (the "Real Estate Lease") dated June 1, 1998 as
amended by that certain First Amendment to Lease Agreement dated June 1, 1998,
and as further amended by that certain Second Amendment to Lease Agreement dated
November 23, 1998 by and between ICT, as tenant, and BDC Deland, Inc.
("Landlord") for the rental of the Deland Facility as more fully described in
the Real Estate Lease. In furtherance thereof, Client and ICT agree to execute
simultaneously with this Agreement a real estate assignment and assumption
agreement (the "Real Estate Assumption and Assignment") with regard to the
Deland Facility in the form of Exhibit A attached hereto and made part hereof.
In addition to the warranties contained in the real estate assignment and
assumption agreement, with respect to the Real Estate Lease, ICT further
warrants and represents:
a. That the Lease is in full force and effect and is a valid legally
binding obligations of the parties thereto.
b. That ICT is not in breach of any of the terms and conditions of
said Lease and is current in the payment of all rent, additional
rent, utilities and other payments due under the terms of said
Lease.
c. That ICT has not assigned any of its rights under the Lease to
any third party.
d. That ICT has full corporate power and authority to enter into the
Real Estate Assumption and Assignment and to carry out its
obligations thereunder, that the execution and delivery thereof
have been duly authorized by the Board of Directors of ICT and no
other corporate proceedings on the part of ICT are necessary to
authorize the Real Estate Assumption and Assignment, and that the
Real Estate Assumption and Assignment constitutes the valid and
binding obligations of ICT.
e. That the execution, delivery and performance of the Real Estate
Assumption and Assignment by ICT do not require the consent,
waiver, approval, or authorization of any person or authority
(other than the lessor of the Lease) and will not violate, result
in a breach of or the acceleration of any obligation under or
constitute a default under, any provision of any charter, by-law,
indenture, mortgage, lien, lease, agreement, contract,
instrument, order, judgment, decree, ordinance, or regulations or
any restriction to which any property of ICT is subject or by
which ICT is bound or affected.
3. Assumption of Equipment Leases: Client hereby agrees as of the Effective Date
to assume all of ICT's obligations arising on or after the Effective Date under
the equipment leases identified in Schedule 1 hereto (the "Equipment Leases")
for the equipment identified in Schedule 1 hereto (the "Equipment"). In
furtherance thereof, Client and ICT agree to execute simultaneously with this
Agreement an equipment assignment and assumption agreement for each of the
equipment leases identified in Schedule 1 in the form of Exhibit B attached
hereto and made part hereof. In addition to the warranties contained in the
Equipment assignment and assumption agreement, with respect to the Equipment
Leases, ICT further warrants and represents:
a. That Lessee is not in breach of any of the terms and conditions
of said Lease and is current in the payment of all rent,
additional rent, utilities and other payments due under the
terms of said Lease.
b. That Lessee has not assigned any of its rights under the Lease
to any third party.
c. That Lessee has full corporate power and authority to enter into
this Assignment and to carry out its obligations hereunder, that
the execution and delivery hereof have been duly authorized by
the Board of Directors of Lessee and no other corporate
proceedings on the part of Lessee are necessary to authorize
this Assignment, and that the Assignment constitutes the valid
and binding obligations of Lessee.
d. That the execution, delivery and performance of this Agreement
by Lessee do not require the consent, waiver, approval, or
authorization of any person or authority (other than the lessor
of the Lease) and will not violate, result in a breach of or the
acceleration of any obligation under or constitute a default
under, any provision of any charter, by-law, indenture,
mortgage, lien, lease, agreement, contract, instrument, order,
judgment, decree, ordinance, or regulations or any restriction
to which any property of Lessee is subject or by which Lessee is
bound or affected.
e. That all equipment assigned hereunder is in good working order
and that all documentation relating to such equipment will be
provided to Assignee upon execution of this Agreement.
f. That it has inquired of all providers of Equipment and software
operating on such Equipment, and has obtained assurances from
such providers that the Equipment and software are year 2000
compliant.
4. Assignment of Maintenance Agreements: ICT will assign any maintenance
agreements which ICT has for the Equipment (the "Maintenance Agreements") to
Client immediately following the Effective Date. As of the Effective Date of
such assignment and subject to satisfactory terms and conditions of such
Maintenance Agreements, Client agrees to assume all of ICT's obligations under
such agreements. Until such time that Client assumes the Maintenance
Agreements, ICT will remain liable for all obligations of such agreements.
5. Transfer of Software Licenses: ICT warrant that, to the extent it has
software licenses for the Equipment (the "Software Licenses"), such Software
Licenses are transferable. ICT will transfer such Software Licenses to Client
as soon as practicable. If ICT is unable to transfer the existing licenses ICT
will pay Client the costs incurred by Client in obtaining new Software Licenses.
6. Payments to ICT: Client hereby agrees to pay ICT the following amounts by
wire transfer of immediately available federal funds to an account designated by
ICT or by check:
a) The amount of $ $802,752.00 on September 30, 1999; and
b) Eleven (11) equal monthly payments of $138,584.00 per month
payable on the last business day of each calendar month with the
first of such payments due October 29, 1999.
Any amount not paid when due shall bear interest at the rate of one and one-half
percent (1.5%) per month compounded daily. In the event Client fails to make any
payment when due, the entire unpaid balance of all payments due hereunder, plus
interest thereon, shall become immediately due and payable.
7. Deposits: ICT has paid deposits (the "Deposit Amounts") to the Lessors of the
Equipment Leases and the Real Estate Lease. In conjunction with the Assumption
and Assignment Agreements with respect to such leases, Client has paid to ICT
the Deposit Amounts. Should the Lessors mistakenly refund those Deposit Amounts
to ICT, ICT agrees that it will immediately forward such Deposit Amounts to
Client.
8. Indemnification: Each party hereby agrees to indemnify and hold harmless the
other from any claims, losses or damages, including attorney fees, suffered by
the other arising from a party's breach of this Agreement or any of the
Assignment and Assumption Agreements executed pursuant to Section 2 and 3 of
this Agreement or other failure to perform its obligations hereunder. A party
seeking indemnification shall provide the other party with prompt written notice
of any claim, suit, demand or other action for which such party seeks to be
indemnified and shall grant control of the defense and settlement thereof to the
other party. The party seeking indemnification shall cooperate with the other
party in the defense of any such claim, suit, demand or other action and shall
have the right, but not the obligation, to participate therein by using
attorneys of its choice at its expense. Any settlement of such claim, suit,
demand or other action shall require the consent of both Client and ICT, which
consent shall not be unreasonably withheld.
ICT agrees to indemnify and hold harmless Client from any claims, suits,
actions, causes of action, liabilities, losses or damages of a third party
incurred prior to the termination of the Services Agreement arising from the
occupancy of the space or the possession or operation of the equipment.
9. Third Party Consents: Client and ICT hereby agree to obtain prior to the
Effective Date all consents of third parties, including without limitation the
Landlord and the lessors under the Equipment Leases, necessary to complete the
assignment and assumption of the Real Estate Lease and the Equipment Leases as
set forth on Sections 2 and 3 hereof.
10. Default by Client: In the event Client defaults under the Equipment
Leases, the Real Estate Lease, the Maintenance Agreements or the Software
Licenses at any time after Client's assumption thereof hereunder and as a result
of such default ICT incurs any liability, and Client fails to cure such default
or pay ICT the amount of such liability within 30 days after written notice from
ICT, then Client shall be in default under this Agreement (a "Default"). In the
event of a Default, in addition to any other remedies, which may be available to
ICT, ICT shall have the right, but not the obligation, to retake possession of
the Deland Facility and the Equipment for ICT's sole use. If ICT wishes to
exercise such rights of possession, it shall provide Client with written notice
of such election and within ten (10) days after receipt thereof Client shall
deliver possession of the Deland Facility and the Equipment to ICT. At the time
Client so delivers possession to ICT, Client shall execute any assignment
agreements reasonably requested by ICT to effect such delivery.
11. Miscellaneous: This Agreement represents the entire agreement between the
parties with respect to the subject matter hereof and supercedes and replaces
any prior agreements, oral or written, with respect thereto. The laws of the
Commonwealth of Pennsylvania, except for its conflict of laws provisions shall
govern this Agreement. Any notices under this Agreement shall be sent by
certified or registered mail, return receipt requested, to the addresses of the
parties first above written, or as may be changed by notice given in accordance
with this Section 11, to the attention of the Chief Financial Officer with a
copy to the General Counsel
In WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
ICT Group, Inc. Cellular Express, Inc. d/b/a/ Boston
Communications Group
By: /s/ VA Paccapaniccia By: /s/ Karen A. Walker
Name: VA Paccapaniccia Name: Karen A. Walker
Title: Sr. VP Finance and CFO Title: CFO
TRANSFER & ASSUMPTION AGREEMENT
Assumption Agreement made by and between ICT Group, Inc., ("Lessee"),
Boston Communications Group, Inc. ("Transferee"), The ELEX Group, Inc.,
("Lessor"), and EUROPEAN AMERICAN BANK ("EAB"), a corporation organized under
the Banking Laws of the State of New York ("Assignee").
WHEREAS, Lessee is presently indebted to Lessor under an Agreement for
Leasing dated September 24, 1998, and Lease #980715 (collectively the "Lease")
between Lessee and ELEX, and duly assigned to EAB, copies of which Lease,
delivery and acceptance receipt, sale and Collateral Assignment by ELEX to EAB,
notice of assignment and financing statements filed with the Secretary of State
of Pennsylvania and Florida, with regard to the following equipment, are annexed
hereto as Exhibit A.
SEE ATTACHED SCHEDULE "A"
and,
WHEREAS, Lessee has agreed to sell, transfer and assign its interest in
such equipment and Lease to Transferee, and Transferee has agreed to assume all
of Lessee's obligations to Lessor:
NOW, THEREFORE, IT IS AGREED:
1. Rent Balance All of the parties acknowledge that the balance due to Lessor as
of the date hereof is payable in the manner set forth in the Lease, or other
evidences of indebtedness and any other documents, waivers or agreements in
connection therewith heretofore executed by Lessee (herein collectively referred
to as the "Obligations").
2. Rent Payments Lessee and Transferee hereby agree jointly and severally to pay
and discharge the lease payments and all other amounts payable under the
Obligations to Lessor or its successors and assigns, in accordance with the
terms of the Obligations and upon execution of this Agreement, to pay to EAB the
monthly installments of $35,590.00 for the next 47 remaining months including
the installment beginning with 11/1/99.
3. Assumption Transferee hereby assumes and agrees to perform all the covenants
of Lessee set forth in the Obligations.
4. Lessee's Liability Lessee shall continue to remain liable on the Obligations
and remain firmly bound as though this Agreement had never been entered into.
5. Lease Terms All terms, conditions, and covenants of the Obligations shall
remain unchanged and shall continue to remain in full force and effect.
6. Estoppel Lessee and Transferee hereby warrant, represent, and covenant that
the Obligations are not subject to any disputes, offsets, or counterclaims of
any kind or nature whatsoever.
7. Security Transferee acknowledges that Lessor has a valid first security
interest in the equipment and in confirmation thereof agrees to execute all
financing statements and other documents which Lessor may, in its sole
discretion, deem necessary to protect such security interest.
8. No release Lessee agrees that its obligations hereunder shall not be impaired
by any modification, release, or other alteration of any Obligations of Lessee
or of any security therefore, to all of which Lessee hereby consents and that
the liability of Lessee hereunder is direct and unconditional and may be
enforced without requiring Lessor or its assignees first to resort to any other
right, remedy, or security.
9. Consent Lessor hereby consents to the aforesaid transfer by Lessee to
Transferee.
Transferee: Lessee:
Boston Communications Group Inc. ICT Group, Inc.
By: /s/ Karen A Walker By: /s/ V A Paccapaniccia
Title: Chief Financial Officer Title: Sr. VP Finance & CFO
CONSENTED TO: CONSENTED TO:
Assignee: Lessor:
EUROPEAN AMERICAN BANK The ELEX Group, Inc.
By: Frederick W. Frinkelmare By: JoDee B. Pettine
Title: A V P Title: President
AGREEMENT FOR LEASING
THIS AGREEMENT by and between THE ELEX GROUP, INC., a New Jersey corporation,
whose address is P.O. Box 14, Medford, New Jersey 08055 ("ELEX"), and ICT GROUP,
INC., a Pennsylvania corporation whose address is 800 Town Center Drive,
Langhorne,PA 19047 ("Lessee").
WITNESSETH
WHEREAS, Lessee desires to lease items of equipment from ELEX or certain lessors
represented by ELEX, and ELEX is willing to arrange such leases; and
WHEREAS, the parties wish to set forth in full certain terms to be incorporated
in all leases to be executed pursuant to this Agreement For Leasing:
NOW THEREFORE, in consideration of the mutual covenants herein contained and
intending to be legally bound hereby, it is agreed as follows:
1. Leasing. Lessee hereby authorizes ELEX, and ELEX agrees to use its best
efforts to arrange leases of equipment wherein Lessee shall be the lessee and
ELEX or the other party or parties represented by ELEX shall be the lessor.
Such leases shall cover such equipment and shall contain such provisions
respecting payments, terms, covenants, conditions and provisions ("Provisions")
as the respective parties thereto may agree. Lessee will execute such leases
when ELEX or a lessor secured by ELEX is ready to enter into such leases. ELEX
shall make all arrangements between Lessee, and all lessor(s) represented by
ELEX.
2. Lease Provisions. Each such lease, ("Lease") shall, in addition to its
Provisions, incorporate by reference all of the following terms and conditions,
covenants and provisions (the term "ELEX" as used hereafter, being deemed to
refer to the lessor under each such Lease; the term "Unit" being deemed to refer
to each item of equipment described in and covered by a Lease; the term
"Equipment" being deemed to refer to all items of equipment described in and
covered by a Lease; and the term "Date of Acceptance" being deemed to refer to
the date a Unit is available to be placed in service for its intended purpose):
(a) Term. The Lease of the Equipment shall commence as of the date thereof
and shall continue in full force and effect until terminated by either
party as of any succeeding rental payment date, upon not less than one
hundred eighty days prior written notice to the other party; provided,
however, that the term of the Lease shall in no event be less than the
period specified as the "Initial Term" in the Lease covering such
Equipment.
If any term shall be extended or any renewal options shall be exercised, the
word "term" as used herein shall be deemed to refer to the Initial Term and all
extended or renewal terms of any Lease hereto, and all provisions of this
Agreement For Leasing shall apply during extended or renewal terms.
(b) Rent. As used herein, "rent" for the Equipment shall be the "total
rent" specified in the Lease, payable in successive installments at
the times set forth in the Lease. It is understood and agreed by the
Lessee that such "total rent" shall be of the essence of the Lease and
that ELEX shall be entitled to the payment of the full amount thereof
in consideration of the letting of the Equipment, including payment of
the then outstanding balance of such total rent (plus all other sums
due under the I-ease) in the event of the happening of any default
specified in Paragraph 20) below, subject to reduction only as
provided in Paragraph 20)(2)(b). Rent shall be paid to ELEX at its
address specified in the Lease, or as otherwise directed by ELEX free
from all claims, demands, or setoffs against ELEX, the manufacturer of
the Equipment or any assignee of ELEX If ELEX is subjected to any
liability because of any non-compliance with the Lease or any
regulatory law applicable to any of the Equipment on the part of the
Lessee, then upon notice to the Lessee of the nature and/or amount
thereof, the Lessee shall forthwith discharge the same, and if ELEX
shall incur any expense by reason thereof, the amount of such expense
shall be added to the installment of rent next falling due as
additional rent.
If any installment of rent is not paid within ten (10) days following the due
date thereof, a late charge equal to five percent (5%) of such installment shall
be due and payable as additional rent, and thereafter an additional late charge
of five percent (5%) of the then unpaid installment and late charges shall be
due and payable as of the eleventh day of each succeeding month thereafter until
such installment is paid.
(c) Use, Care and Operation. Lessee shall, at its expense:
(1) Receipt and Acceptance. Receive each Unit of Equipment at, and pay all
delivery charges for each Unit to, the location of original use
specified therefore; unload, and, if required, assemble and install
the same.
Lessee will signify the Date of Acceptance of each Unit of the
Equipment by the prompt execution and delivery to ELEX of a
Certificate of Acceptance in the form attached hereto as Exhibit I
("Certificate of Acceptance"). The Lessee's execution and delivery to
ELEX of the Certificate of Acceptance, signed by an officer of Lessee,
shall conclusively establish as between ELEX and the Lessee that each
Unit is in good operating order, repair, condition, appearance, is
suitable for the purpose of Lessee and the Lease, conforms to the
specifications applicable thereto and that such unit has not been used
or operated prior to the Date of Acceptance indicated therein. Such
acceptance shall not affect Lessee's claims against the manufacturer
or manufacturer's warranties.
(2) Fees and Taxes. Pay, and file any necessary returns with respect to,
all license fees, assessments or other governmental charges, and
sales, use, gross receipts, personal property, and other tax or taxes,
now or hereafter imposed by any state, federal or local government or
agency upon any Unit or upon the leasing, use or operation thereof, or
upon the receipt of rentals therefore or earnings arising therefrom
(excluding taxes imposed on ELEX's net income, except any such taxes
which are in substitution for, or relieve the Lessee from, the payment
of taxes which it would otherwise be obligated to pay or reimburse as
herein provided) before the same shall become in default or subject to
the payment of any penalty or interest and supply ELEX with receipts
or other evidence of payment satisfactory to ELEX; Lessee shall
promptly reimburse ELEX for all property taxes, or levies assessed
upon any Unit, paid by ELEX; however, there shall be no obligation of
ELEX to make payment of any property taxes assessed upon any Unit.
(3) Maintenance. At all times keep and maintain each Unit in good working
order, repair, and appearance; install, keep, and maintain on such
insignia and identification as ELEX may designate, and certify that
such has been done; make any and all necessary repairs and thereto in
order that each Unit, its components and accessories, shall continue
to fulfill their intended function or use; and keep and the same as
specified in the Lease therefore; except that Lessee shall not,
without ELEX's prior written consent, affix or install any accessory,
equipment, device, advertising matter or insignia to any Unit. ELEX
passes through to Lessee all warranties of the manufacturer of the
Equipment and Lessee shall have the right to, and will, directly avail
itself of all warranties and representations made by the manufacturer
with respect to the Equipment and ELEX agrees to execute such
documents as may be required to enable Lessee to obtain customary
warranty service for each Unit of Equipment from the manufacturer.
The Lessee agrees to execute at its own expense a maintenance contract
with the manufacturer of the Equipment and to keep said contract force
until the Equipment is surrendered to ELEX. Said maintenance contract
shall provide for at least the same services by the manufacturer as
those furnished under the manufacturer's standard maintenance contract
for nine-hour per day use of the Equipment, and shall provide for the
incorporation of such engineering changes and improvements in the
Equipment which are available without additional charge as part of such
services. A maintenance contract for the Equipment may not be entered
into with other than the manufacturer of the Equipment without the
approval of ELEX, which approval will not be unreasonably withheld.
All replacements, repairs, parts, and supplies shall be obtained at
Lessee's expense and shall be performed and supplied only by such
persons as shall be approved by ELEX. All replacements, repairs,
parts, supplies, accessories, equipment, devices, or other items
furnished or affixed to any Unit shall thereupon become ELEX's property
and Lessee shall arrange that there be delivered promptly to ELEX all
instruments or documents as may be necessary to evidence ELEX's
original and free, clear and unencumbered title thereto and ownership
thereof.
(4) Provisioning. Provide all labor, materials, services, utilities,
electric power, parts, and other supplies or items consumed by, or
required for, or in connection with the recommended use of, each Unit.
(5) Compliance with Law. Observe and comply with, and perform and execute,
all laws, rules, regulations, or orders of all state, federal, and
local governments or agencies which in any way affect or relate to, or
are applicable to, any Unit, or the use, operation, maintenance, or
storage thereof, and Lessee shall, and does hereby, indemnify ELEX and
agrees to hold ELEX harmless from any and all liability that may arise
from any infringement or violation of any such law, rule, regulation,
or order by Lessee, or Lessee's employees, or any other person.
(6) Use and Operation. Not use, operate, maintain, or store any Unit
improperly, carelessly, or in violation of the Lease or any
instructions furnished therefore by the manufacturer or by ELEX; nor
install or operate the same other than as specified in the Lease; nor
permit anyone other than its authorized agents, persons, and employees,
all of whom must be competent operators to operate the same, and for
whom Lessee agrees to be responsible.
(7) Non-Transferability. Not, without ELEX's prior written consent, which
shall not be unreasonably withheld, let or sublet any Unit; nor lend or
part with the possession of any Unit, or any part thereof-, nor assign
the Lease or any interest therein.
(8) Risk Bear and assume all risk and liability for (and Lessee does hereby
agree to indemnify and hold ELEX harmless from any and all claims,
liens, demands, or liability arising out of) the loss of or damage to
each Unit, the use, operation, maintenance, and storage thereof, and
the loads thereon, and the injury or death of persons and/or damage to
property howsoever arising therefrom or the use therefore, or the
condition of such Unit, during the continuance of the Lease and until
the return of such Unit. The indemnities and assumptions of liability
herein provided shall continue in full force and effect notwithstanding
the termination of the Lease, whether by expiration of time, by
operation of law, or otherwise
(9) Inspection. Upon ELEX's demand, permit ELEX, its agents or
representatives and persons designated by ELEX to enter upon the
premises where each Unit is located and to inspect each Unit, and its
manner of use, at any reasonable time and from time to time.
(10) Notice of Location. Not, without ELEX's written consent, remove any
Unit from the location of original use-, and at all time keep ELEX
advised of the location of any Unit should Lessee remove it from the
location of original use.
(d) Representations. Lessee does hereby agree that each Unit is of a size,
design, capacity, and material selected by Lessee, and that Lessee is
satisfied that each such Unit is suitable for Lessee's purposes, and
sufficiently durable under the conditions of usage thereof by Lessee,
and that ELEX has made no representations or warranties with respect to
the suitability or durability of any Unit for the purposes or uses of
Lessee, or with respect to the permissible load thereof, or any other
representation or warranty, express or implied, with respect thereto.
Lessee understands and acknowledges that no broker or supplier, nor any
salesman, broker or agent of any broker or supplier is an agent of
ELEX. Lessee represents to ELEX that the Equipment will be used
exclusively for business or commercial purposes and will not be used at
any time during the term of the Lease for personal, family or household
purposes.
NO REPRESENTATIONS
ELEX DOES NOT WARRANT THE EQUIPMENT IN ANY RESPECT, EITHER EXPRESSLY OR BY
IMPLICATION AND WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ELEX EXPRESSLY
DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS OR ADEQUACY FOR ANY
PURPOSE OR USE, QUALITY, PRODUCTIVENESS OR CAPACITY.
(e) Non-Liability of ELEX. ELEX shall not be liable to Lessee for any
loss, incidental or consequential damage, expense of any kind or nature
caused, directly, indirectly, by any Unit or the Equipment or the use,
maintenance, operation, handling, or storage thereof, or loads thereon,
or the repairs, servicing, or adjustments thereto, or because the same
is, or has become, unsuitable, or unserviceable, or by any interruption
of service or loss of use thereof, or strict liability with respect
thereto, or for any loss of business or damage whatsoever or howsoever
caused. ELEX shall not be liable to Lessee for delay in delivering, or
failure to deliver any Unit.
(f) Insurance. Lessee will procure and maintain at its sole cost and
expense, bodily injury and third party property damage insurance, with
insurers satisfactory to ELEX, for the Equipment, with liability limits
of not less than those specified in the Lease. Lessee will further,
without cost to ELEX maintain or cause to be maintained in effect
throughout the term of the Lease for the Equipment, with insurers
satisfactory to ELEX, insurance policies insuring against all-risk
physical loss or damage to such Equipment for an amount equal to the
Casualty Value (hereinafter defined) of such Equipment as of the last
monthly rent payment date set forth in Schedule of Casualty Values
attached to the Lease. All policies shall name as additional insured
ELEX, and assignees of ELEX and Lessee as their interest may appear and
provide that they cannot be amended or canceled with respect to ELEX,
and its assignees except on at least thirty (30) days prior written
notice to ELEX and its assignees. All policies or certificates thereof
and endorsements thereto shall be delivered to ELEX effective and
enforce at the time of execution of the Lease. All renewals thereof
shall be delivered to ELEX, least ten (10) days prior to the expiration
of the current policy. Lessee hereby appoints ELEX as its attorney-in-
fact, coupled with an interest, with full power of substitution, for
purposes of executing any proof of loss or related document, endorsing
any check, draft or other means of payment in connection with any loss,
compensable under such policies. This power is irrevocable for so long
as the Lessee remains indebted to FLEX or its assignee hereunder or
under any other agreement or instrument.
(g) Damage. Should any Unit:
(1) be damaged by reason of any cause, and be capable of repair without
impairment of value, Lessee shall repair the same at Lessee's sole
expense, as quickly as circumstances permit, without any abatement of
rent. In such event, should ELEX be indemnified under any insurance
Policy Or policies pursuant to the provisions of the Lease covering
such Unit, ELEX shall pay to Lessee the proceeds received by ELEX from
such insurance but only to the extent necessary to reimburse Lessee for
all amounts paid by it pursuant to this paragraph and properly
documented. In any event ELEX shall not be liable for any amount in
excess of said insurance proceeds; or
(2) be lost, stolen, destroyed, taken for a public use, or damaged beyond
repair by any cause whatsoever, ("Casualty") Lessee shall pay ELEX
within fifteen (15) days thereafter an amount equal to ELEX's original
cost of said Unit, as shown in Schedule A of the Lease of said Unit,
multiplied by the casualty loss percentage applicable to the date of
Casualty, as shown in Schedule B of the Lease of said Unit, ("Casualty
Value"). Upon such payment, and if the Lessee shall then not be in
default under the Lease, the balance of the rent due under the Lease
shall abate in an amount determined by the same percentage as the
original cost of the Unit(s) suffering the Casualty bears to the cost
of the Equipment. Until such payment Lessee shall continue the prompt
payment of all rent under the Lease and any such rent due for the
period before payment shall not abate. Following payment of the
Casualty Value Lessee shall be entitled to the proceeds of any
insurance covering the Unit(s) suffering a Casualty, but in no event
shall the amount of such reimbursement exceed the Casualty Value
previously paid by Lessee, and any excess shall be the property of
ELEX.
(h) Return of Equipment. Within ten (10) days after the expiration or
sooner termination of the term of the Lease (or of any extension
thereof), Lessee will, at Lessee's expense, return each Unit which has
not been lost, stolen, destroyed, or damaged beyond repair, to ELEX, or
ELEX's designee or designees, loaded on such appropriate conveyance and
properly packed and at such destination or destinations as ELEX may
designate, free of all advertising or insignia placed thereon pursuant
to Section 2(c) (3) by Lessee (other than identification tags of ELEX),
and in the same operating condition, order, repair, and appearance as
when received [reasonable wear and tear {except as provided in
Paragraph 2 (c) (3) above) and damage by any cause for which ELEX has
recovered under insurance, excepted]. If any such Unit is not so
returned within the time specified herein, Lessee shall continue to pay
the rent specified in the Lease until the Equipment is so returned in
the aforesaid condition.
(i) Time of Essence. Tune is of the essence of this Agreement. No express
or implied waiver by ELEX of any default hereunder shall in any way be,
or be construed to be, a waiver of any future or other default of
Lessee, or a waiver of any rights of ELEX, or a modification of any of
the I-ease terms, or an extension or enlargement of Lessee's rights
under the Lease.
(j) Default by Lessee.
(1) If (a) Lessee shall fail to pay the rent when due; or (b) Lessee shall
fail to perform any other term or condition of the Lease and such
failure shall continue for a period of thirty (30) days; or (c)
proceedings under the Federal Bankruptcy Code shall be instituted
against Lessee, or a receiver shall be appointed for Lessee or any of
its property, or any of the Equipment shall be attached or levied upon,
and such proceedings shall not be vacated, or fully stayed within ninety
(90) days-in the case of proceedings under the Federal Bankruptcy Code,
otherwise within twenty (20) days thereof; or (d) Lessee shall make an
assignment for the benefit of creditors, or institute proceedings for
debtor relief under the Federal Bankruptcy Code, or admit in writing its
inability to pay its debts generally as they become due; or (e) if any
representations or warranty made by Lessee hereunder or in connection
herewith shall be false, misleading or untrue in any material respect,
(2) then ELEX at its option, may declare the balance of the rent due under
the Lease, as well as any amounts specified herein or in the Lease as
items of additional rent and not then accrued and owing, immediately due
and payable, and upon any such declaration the same, plus the aggregate
amounts of any installment of rent(including any late charge thereon)
and any other sums then accrued and unpaid, shall be due and payable
forthwith, and ELEX shall have the right to take all steps appropriate
to collect the same and
(a) to take immediate possession of the Equipment, and
(b) to lease or sell, or both, the Equipment or any Unit upon such terms as
ELEX may elect, and apply the net proceeds on account of Lessee's
obligations hereunder, and
(c) in accordance with the terms of the Lease to confess a judgment against
the Lessee for the full amount of the rent and other sums due and owing
under the Lease.
The foregoing remedies and any other remedy available at law or equity are
cumulative and available to ELEX but ELEX shall be under no obligation to
exercise any such remedy. The exercise by ELEX of any such remedies shall not
release Lessee from its obligations hereunder or bar ELEX from proceeding
otherwise. Lessee shall additionally pay ELEX a reasonable sum as and for
attorneys' fees and an amount equal to such unreimbursed expenses as shall have
been paid or incurred by ELEX in the seizure of the Equipment or any Unit, or in
the enforcement of any of ELEX's rights or privileges hereunder.
(k) Assignment by ELEX. ELEX shall have the right to assign all or any part
of its rights under the Lease. In such event, the assignee shall be
entitled to enforce the rights so assigned but shall be under no
liability to the Lessee to perform any of the obligation of ELEX, unless
assignee assumes such liability in writing, in which case ELEX shall, to
the extent assignee assumes such liability, be released from all
of its obligations to Lessee. Lessee agrees that it will pay the rent
and all other sums due by Lessee hereunder directly to such assignee
after receipt of notice of such Assignment. Any assignee of ELEX's
rights may reassign such rights with the same force and effect as an
original assignment.
(1) Security. As security for the faithful performance by Lessee of the
terms and conditions of the Lease, Lessee shall deposit with ELEX the
amount indicated in the Lease as security deposit and/or advance
rentals. Provided Lessee has at all times fully performed all its
covenants and conditions agreed upon to be performed, ELEX will return
to Lessee the security deposit at the expiration of the Lease. ELEX
may, but shall not be required to, apply such security deposit and/or
advance rentals to discharge any overdue obligation of the Lease.
(m) Notices. All notices, consents, waivers or other communications required
under the Lease shall be in writing by certified mail, and any such
notice, consent, waiver or communications shall be irrevocable and
become effective when deposited in the United States mail, with proper
postage prepaid, addressed to the party intended to be served at its
address appearing in this Agreement or in the Lease, or at such other
address as such party may, from time to time, designate in writing.
(n) General. This is a contract of lease only, and nothing herein shall be
construed as conveying to Lessee any right, title, or interest in or to
the Equipment, except its rights as a Lessee only. Title to the
Equipment shall at all times remain in ELEX, and Lessee shall at all
times, at Lessee's expense, protect and defend ELEX's title thereto
against all claims, liens, and legal processes of Lessee's creditors, or
persons claiming through Lessee, and keep the Equipment free and clear
from all such liens, claims, and processes. ELEX covenants, subject to
performance by Lessee of all of its obligations under the Lease, that
Lessee will have quiet enjoyment of the Equipment during the term of the
Lease. Each Unit is, and shall remain, personal property irrespective
of its use or manner of attachment to real property, and Lessee shall
obtain for ELEX a real property waiver from owner or mortgagee of the
premises where any Unit is kept. Said waiver shall provide that the
Equipment shall remain personal property removable by ELEX or its
assignee at any time without notice; ELEX or its assigns shall have
access to the premises as may be required for the purpose of inspection,
sale, and removal the real property owner waives any right, title, lien,
or interest, which he may otherwise have in the Equipment. The parties
agree that this Agreement for Leasing and each I-ease are intended to
qualify as a "finance lease" under Article 2A of the Uniform Commercial
Code. Lessee acknowledges that (a) Lessee has received a copy of the
contract by which ELEX acquired the Equipment (the" Supply Contract") or
(b) Lessee has reviewed and approved the Supply Contract or (c) ELEX has
informed Lessee in writing that Lessee may have rights under the Supply
Contract and that Lessee should contact the supplier of the description
of any such rights.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, LESSEE HEREBY WAIVES ANY RIGHTS TO
(i) CANCEL ANY LEASE, (ii) REPUDIATE ANY LEASE, (iii) REVOKE ACCEPTANCE OF THE
EQUIPMENT, (iv) RECOVER DAMAGES FROM ELEX FOR ANY BREACHES OF WARRANTY OR FOR
ANY OTHER REASON, (v) A SECURITY INTEREST IN THE EQUIPMENT IN LESSEE'S
POSSESSION OR CONTROL FOR ANY REASON, (vi) DEDUCT ALL OR ANY PART OF ANY CLAIMED
DAMAGES RESULTING FROM ELEX'S DEFAULT, IF ANY, UNDER ANY LEASE, (vii) "COVER" BY
MAKING ANY PURCHASE OR LEASE OF, OR CONTRACT TO PURCHASE OR LEASE, EQUIPMENT IN
SUBSTITUTION FOR THAT DUE FROM ELEX, (viii) RECOVER ANY GENERAL, SPECIAL
INCIDENTAL OR CONSEQUENTIAL DAMAGES FOR ANY REASON WHATSOEVER, AND (ix)
SPECIFIC PERFORMANCE, REPLEVIN, DETINUE, SEQUESTRATION, CLAIM OR DELIVERY OR THE
LIKE FOR ANY EQUIPMENT IDENTIFIED TO ANY LEASE.
Each individual Lease executed pursuant to the Agreement for Leasing shall
constitute a separate and independent lease.
ELEX's obligations shall be suspended to the extent that ELEX is hindered or
prevented from complying therewith because of strikes, lockouts, war, acts of
God, fires, storms, accidents, governmental regulations or interference or other
acts beyond ELEX's control. No obligation of ELEX, except as otherwise
specified herein, shall survive the term of the Lease, or sooner termination
thereof, and should ELEX permit use by Lessee of any Unit beyond the term
specified therefore, the Lease obligations of Lessee shall continue and such
permissive use shall not be construed as a renewal of the term thereof, or as a
waiver of any right or continuation of any obligation of ELEX thereunder, and
ELEX may take possession of any such Unit at any time upon demand after 10 days
written notice. The cancellation or other termination, whether by operation of
law or otherwise, of the Lease shall not release Lessee from any of its
obligations hereunder or thereunder save [except as provided in Paragraph 2(c)
(8) above] upon payment in full by Lessee to ELEX of the Termination Value set
forth in the Lease. In the event ELEX shall be entitled, pursuant to any
provision hereof, to repossess any Unit, ELEX shall not be liable to the Lessee
in respect of any damage arising out of any such repossession except for ELEX's
negligent or wrongful act. This Agreement contains the entire understanding
between ELEX and Lessee, and any change or modification must be in writing and
signed by both parties. This Agreement is entered into under and shall be
construed in accordance with the laws of the State of New Jersey insofar as
applicable to the rights of ELEX, Lessee and any third party as to the
Equipment.
No term of provision of this Agreement for Leasing or any Lease may be amended,
altered, waived, discharged, or terminated except by a written instrument signed
by the parties hereto, and in compliance with Section 2-208(2)of the Uniform
Commercial Code requiring separate signature of this provision, Lessee has
signed in the space provided below.
___VP___________
(Lessee's initials)
(o) Lessee shall furnish to ELEX (i) within ninety (90) days after the close
of each fiscal year of Lessee, a copy of its financial statements,
including a Balance Sheet and Profit and Loss Statement of Lessee as of
the end of such year, in each case certified by public accountants of
recognize standing acceptable to ELEX and (ii) other such financial
information respecting the Financial condition and operation of Lessee
as ELEX may from time to time reasonable request.
3. Special Provisions.
4. Resolutions and Recording Costs.
(a) Lessee agrees that it will provide ELEX or its assignee with appropriate
opinions of counsel and certified copies of all necessary authorizing
resolutions, as may be reasonably requested by ELEX or any assignee or
counsel therefore.
(b) Lessee agrees that it will pay any and all recording costs necessarily
incurred to establish and record any lien in favor of any assignee of
ELEX
5. Miscellaneous.
(a) It is understood and agreed between the parties hereto that, subject to
Lessee's rights to the Equipment so long as Lessee is not in default
under the Lease, the several instruments and documents incidental or
related to this Agreement, to the assignment of any Lease, and/or to the
mortgaging of any of the Equipment by ELEX may contain such provisions
-as may be required by reason of the laws of the place where any of the
Equipment is located in order that ELEX or its assignees or a mortgagee
or holder of a security interest may obtain the full benefits of this
Agreement in accordance with its original intendments and purposes, or
as may be reasonably required by any such assignee for the full
protection of any security interest which such assignee may have in the
Equipment or any Lease, and the provisions of this Agreement are subject
to all such requirements.
(b) The headings and sub-headings contained in this Agreement are solely for
convenience and are not intended to be complete or accurate summations
or indices of the contents of their respective paragraphs.
(c) Any provision of this Agreement found to be prohibited by law shall be
ineffective to the extent of such prohibition without invalidating the
rest of this Agreement.
(d) Lessee agrees that at any time and from time to time, upon the written
request of ELEX or its Assignees, Lessee will promptly and duly execute
and deliver any and all such further instruments and documents as ELEX
or its Assignees may deem desirable in obtaining the full benefits of
this Agreement and any Lease herewith and of the rights and powers
granted thereunder. Lessee hereby grants ELEX the authority to sign and
file on Lessee's behalf any document or financing statement ELEX deems
necessary to perfect or protect ELEX's interest in the Equipment or
pursuant to the Uniform Commercial Code.
(e) This Agreement contains the whole understanding of the parties; shall be
cons trued and enforced in accordance with the laws of the State of New
Jersey and shall inure to the benefit of, and be binding upon, the
respective legal representatives and heirs of the individual parties;
and the successors and assigns of the corporate parties.
IN WITNESS WHEREOF, the parties hereto have executed these presents, the
corporate parties by their officers thereunto duly authorized this 24th day of
September 1998.
ICT GROUP, INC. THE ELEX GROUP, INC.
(Lessee) (ELEX)
BY /s/ VA Paccapaniccia BY /s/ JoDee B. Pettine
TITLE Senior VP Finance and CFO TITLE President
Signed in my presence in the Signed in my presence in the State of
Commonwealth of Pennsylvania New Jersey
/s/ Diane Haeselin, Notary /s/ Sharon McCarty, Notary
Notarial Seal SHARON MCCARTY
Diane Haeselin, Notary Public NOTARY PUBLIC OF NEW JERSEY
Middletown Twp., Bucks County MY COMMISSION EXPIRES MARCH 27, 1999
My Commission Expires May 12, 2001
Member, Pennsylvania Association of Notaries'
LEASE #980715
THE ELEX GROUP, INC., a New Jersey corporation, whose address is P.O. Box 14,
Medford, New Jersey 08055 ("ELEX"), hereby leases to ICT GROUP, INC., a
Pennsylvania corporation whose address is 800 Town Center Drive, Langhorne, PA
19047
('Lessee"), and Lessee hereby hires and takes from ELEX, the equipment described
in Schedule A attached hereto and made a part hereof ('Equipment"), at the rent
and upon the terms and conditions herein set forth:
1. Location of Original Use: 1398 South Woodland Blvd., DeLand FL 32720
2. Initial Term: Commencing on the first day of the month following the Date of
Acceptance of the Equipment under Lease and expiring Sixty (60) months
thereafter.
3. Rental: Monthly Rent: $ 35,590.00 Security Deposit: $ 71,180.00 Advanced
Rentals: $ None
Total Rent: $ Payable in Sixty (60) successive equal monthly installments of
Thirty Five Thousand Five Hundred Ninety Dollars and No Cents ($35,590.00)
each plus the Additional Rent specified in the Special Provision For Terminal
Rental Adjustment.
Each installment shall be due upon the first day of each and every month after
the Date of Acceptance of the Equipment, except for the first monthly
installment thereof and any Security which is due upon the execution of this
Lease. Additionally the Lessee shall pay to ELEX an interim rent for the period
from the Date of Acceptance of the Equipment to the first day of the month
following such date ('Interim Rent Period"). Said interim rent shall be that
proportion of a monthly rent installment which bears the same ratio as the
number of days of the Interim Rent Period bears to thirty (30) days, and shall
be payable on the first day of the month following the Interim Rent Period.
4. Reports and Payment of Rental: Lessee shall make all payment and send all
notices to ELEX at the address of ELEX set forth above, or at such other address
as ELEX may, from time to time, designate in writing.
5. Liability Insurance: Lessee shall provide and maintain the following
liability insurance:
A. Public Liability Bodily Injury, not less than $500,000 per one person,
$1,000,000 per one accident.
B. Property Damage, not less than $500,000.
6. Confession of Judgment: In the event of any default by Lessee under this
Lease as provided in Paragraph 20) of the Agreement For Leasing, Lessee hereby
empowers any Prothonotary, Clerk of Court or attorney of any Court of Record to
appear for Lessee and, with or without complaint filed, confess judgment, or a
series of judgments, against Lessee in favor of ELEX or any assignees of ELEX,
as of any term, present or future, for all or any part of the rent specified in
this Lease and then unpaid including at ELEX's option the rent for the entire
unexpired balance of the term of this Lease and all other charges, payments,
costs and expenses reserved as rent or additional rent, together with interest
thereon, costs of suit and an attorney's commission for collection of five (5%)
percent of the total of the foregoing sums; but in any event said attorney's
commission shall be not less than One Thousand Dollars ($1,000.00); and for so
doing, this Lease or a copy hereof, verified by affidavit, shall be a sufficient
warrant; and the said judgment from and after entry thereof, shall bear interest
at the highest rate of interest a judgment may bear under the laws of the State
of New Jersey.
Lessee hereby waves the benefit of any laws which might now or hereafter
authorize the stay of any execution to be issued on any judgment recovered on
this Lease or the exemption of any property from levy or sale thereunder.
Lessee also waives and releases ELEX or any assignee of ELEX and said attorney,
from all errors, defects and imperfections whatsoever of a procedural nature in
the entering of any judgment or any process or proceedings relating thereto.
7. WARRANTIES AND REPRESENTATIONS: LESSEE DOES HEREBY AGREE THAT EACH UNIT IS OF
A SIZE, DESIGN, CAPACITY AND MATERIAL SELECTED BY LESSEE, AND THAT LESSEE IS
SATISFIED THAT EACH SUCH UNIT IS SUITABLE FOR LESSEE'S PURPOSES, AND
SUFFICIENTLY DURABLE UNDER THE CONDITIONS OF USAGE THEREOF BY LESSEE, AND THAT
ELEX MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE SUITABILITY,
DURABILITY, MERCHANTABILITY OR FITNESS FOR ANY PURPOSE OF ANY UNIT OR ANY OTHER
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT THERETO.
8. Special Provisions: The following special provisions shall be incorporated
herein by reference:
Special Provision For Option To Purchase
Special Provision For Option To Renew
Special Provision For Option To Early Terminate
Special Provision For Terminal Rental Adjustment
"This is Counter-part No. 2 of 3 signed counterparts. A security interest in
this Lease may be created only by possession of Counter-part No. 1."
I
9. By the execution hereof, there are incorporated and made a part hereof for
all purposes, as though set forth herein at length, each and all of the terms,
conditions and provisions of Paragraphs 2 through 5 of the Agreement For Leasing
dated September 1998 between Lessee and THE ELEX GROUP, INC. a copy of which is
attached hereto. Unless specifically defined in this Lease the defined terms
used herein shall have the same meaning as set forth in the Agreement For
Leasing.
10. UPON ACCEPTANCE OF THE EQUIPMENT, THIS LEASE SHALL CONSTITUTE A
NONCANCELABLE NET LEASE COVERING THE EQUIPMENT. LESSEE'S OBLIGATIONS TO PAY ALL
RENT AND OTHER AMOUNTS WHEN DUE AND TO PERFORM AS REQUIRED UNDER THIS LEASE ARE
UNCONDITIONAL AND IRREVOCABLE- SUCH OBLIGATIONS ARE NOT SUBJECT TO CANCELLATION,
MODIFICATION, REPUDIATION, REVOCATION OR EXCUSE. LESSEE SHALL NOT BE ENTITLED TO
ANY ABATEMENT, REDUCTION, OFFSET OR COUNTERCLAIM WITH RESPECT TO THESE
OBLIGATIONS FOR ANY REASON WHATSOEVER, WHETHER ARISING OUT OF CLAIMS AGAINST
ELEX, THE MANUFACTURER OR SUPPLIES' DEFECT IN, LACK OF FITNESS FOR USE OF, LOSS
OF POSSESSION OR USE OF OR DAMAGE OR DESTRUCTION OF THE EQUIPMENT, ANY
PROHIBITION AGAINST USE OR OTHERWISE.
11. Lessee warrants and agrees that it has not and will not use or operate any
Unit(s) of Equipment prior to the Date of Acceptance of the Unit(s) under Lease.
In order to assure ELEX of the tax benefits available to an owner of Equipment
with whom the first use begins the parties incorporate herein the provisions of
"Schedule C" attached hereto.
This Lease shall inure to the benefit of and shall be binding upon ELEX and
Lessee, their assigns and successors.
12. IN WITNESS WHEREOF, the parties hereto have hereunto caused this Lease to be
duly executed as of the 24th day of September 1998.
ICT GROUP, INC. (Lessee) THE ELEX GROUP, INC.
BY /s/ VA Paccapaniccia BY /s/ JoDee B. Pettine
TITLE Senior VP Finance and CFO TITLE President
ATTEST: /s/ Robert Hawling, VP Facilities
Signed in my presence in Signed in my presence in the State of
the Commonwealth of Pennsylvania New Jersey
/s/ Diane Haeselin, Notary /s/ Sharon McCarty, Notary
Notarial Seal SHARON MCCARTY
Diane Haeselin, Notary Public NOTARY PUBLIC OF NEW JERSEY
Middletown Twp., Bucks County
MY COMMISSION EXPIRES MARCH 27, 1999
My Commission Expires May 12, 2001
Member, Pennsylvania Association of Notaries'
SCHEDULE A
Page 1 of 1 Pages
DESCRIPTION OF EQUIPMENT
Manufacturer: Aspect, Commercial Business Interiors, Interior Concepts,
Centercore, IKON Office Solutions, AFO Consulting, Marshall B. Bone, Inc.,
Kronos, DeLand Heating & Air Conditioning Co., Florida Electric Works
Location: 1398 South Woodland, Deland FL 32720
QTY. MODEL# DESCRIPTION SERIAL NUMBER
VARIOUS FURNITURE AND FIXTURES AND TELECOMMUNICATIONS EQUIPMENT
SCHEDULE B
CASUALTY LOSS AND TERMINATION VALUE SCHEDULE
Casualty Loss Occurring or Notification of Termination Given After Casualty
Termination
Rental Payment Number Loss Values* Values*
0 115
12 98
24 81 72.90
36 59 55.50
48 38 35.90
60 10 10.00
*Values are given as a percentage of original cost.
LB16T60 Lease Number 980715
SCHEDULE C
Indemnity for Loss of Depreciation
If ELEX shall not be entitled to a deduction with respect to ELEX's full cost of
any Unit of Equipment list in Schedule A of this Lease based upon The
Accelerated Cost Recovery System provided by Section 168 of the Internal Revenue
Code of 1986, as amended, in the amounts specified in Section 168 (b) (1)
thereof for Recovery Property defined therein as having a class life of 5-Year
Property (Deduction") then Lessee shall pay to ELEX within 30 days of ELEX's
demand, as additional rent hereunder, an amount which, after deduction of all
taxes required to be paid by ELEX in respect of the receipt thereof, shall be
equal to the sum of (x) an amount equal to the additional taxes paid or payable
by ELF-X in consequence of the failure to obtain the benefit of such Deduction
and (z) any interest or penalty which may be assessed against ELEX in connection
with such inability to obtain the benefit of such Deduction, all of which
amounts shall be payable on written demand made at any time after payment of
the additional income tax. Notwithstanding the indemnity given by Lessee hereby,
it is understood and agreed that ELEX shall have full control over the filing of
its tax returns and any and all negotiations with tax authorities with respect
thereto; and shall be the sole judge of the terms upon which it is appropriate
to settle any controversy with the taxing authorities with respect thereto.
Without limiting the generality of the preceding sentence, in the event of any
such controversy, ELEX shall, to the extent practicable, notify Lessee of, and
consult with Lessee in connection with, any negotiations with tax authorities
relative to such controversy. The term, "tax return" as used herein shall
include any tax return filed separately by ELEX or any consolidated return in
the filing of which ELEX may join with an affiliated corporation.
L-C1951 Lease Number
980715
Special Provision For Option To Purchase
In the event that the Lease has not been earlier terminated and that no default
has occurred Lessee may, by written notice delivered to ELEX at least one
hundred eighty (180) days prior to the expiration date of the term or any
previously extended term (the "Expiration Date"), elect to purchase the
Equipment then subject to the Lease for a purchase price equal to the "Fair
Market Value" thereof as of the end of such term, such purchase to be on an
as-is, where-is basis, without representation or warranty, expressed or implied,
of any kind whatsoever by ELEX. As used in this Section, "Fair Market Value"
shall be determined by ELEX and Lessee on the basis of what would be obtained in
an arm's length transaction between an informed and willing buyer (other than a
buyer currently in possession or a used equipment dealer) and an informed seller
under no compulsion to sell, and in determining such amount (i) the cost of
removal from the location of current use shall not be a deduction from such
amount and (6) it shall be assumed that each Unit is in the condition required
by the Lease. If on or before sixty (60) days prior to the Expiration Date ELEX
and Lessee are unable to agree upon "Fair Market Value", such Fair Market
Value shall be determined by an independent appraiser mutually agreed upon by
ELEX and Lessee within (10) days after selection, or failing such agreement, by
a panel of three independent, qualified appraisers one of whom shall be selected
by ELEX, the second by Lessee and third appointed by the first two selected all
within the ten (10) days. The appraiser or panel of appraisers, as the case may
be, shall make its determination within a period of thirty (30) days following
appointment. The determination so made shall be conclusively binding upon both
ELEX and Lessee. The expenses and fees of all appraisers shall be borne by
Lessee.
SP-OTI'95 Lease Number
980715
Special Provision For Option To Renew
(1) Renewal Option. In the event that the Lease has not been earlier terminated
and that no default has occurred and is continuing, Lessee shall have the option
to extend the term of Us Lease or prior extensions thereof with respect to the
Equipment for a period specified by Lessee but in any event each extension shall
be for not less than six (6) months in duration ('Additional Term"), commencing
on the expiration date of the term or any previously extended term (the
"Expiration Date") if notice of the exercise of such option is given by Lessee
in Writing to ELEX at least one hundred eighty (180) days prior to the
Expiration Date of its intention to extend the term of this Lease for the
Additional Term.
(2) Rentals During Additional Term. The rental to be paid during all such
extensions shall be an amount equal to "Fair Market Rental" as of the
commencement of the Additional Term, payable in advance in equal and
consecutive monthly installments on each monthly anniversary of the Expiration
Date commencing with the Expiration Date. As used in this section, the term
"Fair Market Rental" shall mean an amount equal to the aggregate net rental
which would be obtained in an arm's length transaction between an informed and
willing lessee (other than a lessee in possession or a used equipment dealer)
and an informed and willing lessor under no compulsion to lease, and in
determining such amount (i) the cost of removal from the location of current
use shall not be a deduction from such amount and (~) it shall be assumed that
at the time of the commencement of such Additional Term, each Unit is in the
condition required by the Lease. If on or before sixty (60) days prior to the
Expiration Date, ELEX and Lessee are unable to agree upon a determination of
Fair Market Rental, such Fair Market Rental shall be determined by an
independent appraiser mutually agreed upon by ELEX and Lessee within ten (10)
days after selection, or failing such agreement, by a panel of three independent
qualified appraisers, one of whom shall be selected by ELEX, the second by
Lessee and the third appointed by the first two selected all within the ten (10)
days. The appraiser or panel of appraisers, as the case may be, shall make its
determination within a period of thirty (30) days following appointment. The
determination so made shall be conclusively binding upon both ELEX and Lessee.
The expenses and fees of all appraisers shall be borne by Lessee.
SP-OTR95 Lease Number
980715
Special Provision For Early Termination
(1) If during the Initial Term all or part of the Equipment becomes obsolete or
surplus to Lessee's requirements, and provided no default has occurred, Lessee
may at any time after the thirty sixth (36th) month, upon not less than ninety
(90) days prior written notice to ELEX, terminate,the Lease with respect to such
Equipment, or any Unit(s) thereof, ("Terminated Unit(s)"j, as of any succeeding
rental payment date specified in said notice (Termination Date").
(2)On the Termination Date the Lessee shall return the Terminated Unit(s) to
ELEX pursuant to the provisions of sub-paragraph 2(h) of the Agreement For
Leasing.
(3) Following the giving of written notice to terminate the Lease as to any Unit
s), ELEX and Lessee shall endeavor to obtain bids for the purchase or lease of
the Terminated Unit(s) on an as-is, where-is basis and without representations
or warranties, expressed or implied, of any kind whatsoever.
(4) Upon the Termination Date, Lessee shall pay ELEX the regular monthly
installment of rent, without any abatement as described in paragraph ten (10)
hereof, plus the net Termination Value, which shall be deemed to be the amount,
if any, by which the Termination Value, defined in paragraph seven (7) hereof,
exceeds the net amount received by ELEX for the Terminated Unit (s).
(5) If by the Termination Date a satisfactory bidder(s) has not been obtained
for the sale or lease of all of the Terminated Unit(s), ELEX shall within ninety
(90) days after the return of the remaining Unit(s) to ELEX sell or lease the
Unit(s) for the highest offer then available.
(6) Lessee shall be refunded an amount equal to the proceeds of the sale or the
present value of the lease, as defined in paragraph eight (8) hereof, less the
actual expenses incurred by ELEX in making the sale(s) or lease(s), including,
without limitation, storage, insurance, advertising, sales taxes and attorneys'
fees for the Terminated Unit(s) and, but in no event shall the refund be in
excess of the net Termination Value previously paid by Lessee to ELEX
(7) The Termination Value shall be computed by multiplying ELEX 's original cost
for the Terminated Unit(s) as shown on Schedule A of the Lease, by the
applicable termination percentage shown on Schedule B of the Lease (Termination
Value').
(8) The present value of a lease shall be deemed to be equal to the aggregate
net rentals of such lease discounted at a rate equal to three percent (3%) over
the average then current prime interest rate or equivalent thereof charged by
the three largest New York commercial banks on the Termination Date.
(9)In the event that no bidder has been obtained for the sale or lease of all of
the Terminated Unit(s) -, within ninety (90) days after the Termination Date,
ELEX shall transfer ownership of the Unit(s) to Lessee.
(10) In the event of termination of the Lease as to any Unit(s), the amount of
each remaining installment of rent as provided in the Lease shall be reduced
and abated by the same percentage as ELEX's original cost of such Terminated
Unit(s) bears to the total original cost of all Unit(s) as shown in Schedule A
of the Lease.
SP-PPM5 Lease Number
980715 -
SPECIAL PROVISION FOR TERMINAL RENTAL ADJUSTMENT
(1) Since the rental payments due under the Lease are based upon the anticipated
residual value of the Equipment being equal to or greater than 10% of the
original cost, as shown on Schedule A of the Lease, ("Residual Value"), it is
agreed that notwithstanding anything to the contrary contained herein Lessee
shall pay to ELEX prior to the termination of the Term of the Lease
("Termination Date") as "Additional Rent" the amount, if any, by which the
Termination Value, as specified on Schedule B of the Lease, exceeds the net
proceeds received as of the date thereof from the sale of the Equipment.
(2) Following the giving of written notice to terminate the Lease, ELEX and
Lessee shall endeavor to obtain bids for the purchase of the Units of Equipment
on an as-is, where-is basis and without representations or warranties, express
or implied, of any kind whatsoever. Within ninety (90) days after the
Termination Date, ELEX shall sell said Unit(s) for the highest offer then
available. Upon such sale, Lessee shall be refunded an amount equal to the
proceeds of the sale less the actual expense incurred by ELEX in making the
sale, including, without limitation, storage, insurance, advertising, sales
taxes and attorneys' fees, but in no event shall the refund be in excess of the
Additional Rent previously paid.
(3) In the event that no bidder has been obtained for the sale of all of the
Units of Equipment within ninety (90) days after the Termination Date, ELEX may
at its option transfer title to Lessee for those Units of Equipment which have
not been sold.
SPFTRA1981 Lease # 980715
AGREEMENT FOR THE PURCHASE OF EQUIPMENT UNDER LEASE
By and between The ELEX Group, Inc., a New Jersey corporation whose address is
P.O. Box 14, Medford, New Jersey 08055 ("ELEX"), and ICT GROUP, INC., a
Pennsylvania corporation whose address is 800 Town Center Drive, Langhorne, PA
19047 ("Lessee").
WITNESSETH:
WHEREAS, ELEX and Lessee have entered into a lease covering the equipment set
forth on Schedule A attached hereto and made a part hereof ("Equipment") dated
September 1998 -#980715 ("Lease"); and
WHEREAS, the parties now wish to modify some of the terms and conditions of the
Lease;
NOW, THEREFORE, in consideration of the mutual promises set forth hereinafter
and in the Lease and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is hereby agreed as follows:
1) In the event that the Lease has not been earlier terminated and that no
continuing default is then occurring, either party may, by giving written notice
to the other party at least one hundred eighty (180) days prior to the
expiration date of the term of the Lease ("Expiration Date"), elect to have the
equipment then subject to the Lease purchased by the Lessee on the Expiration
date for a purchase price equal to ten percent (10%) of the original cost of the
Equipment, such purchase to be on an as-is, where-is basis, without
representation or warranty, expressed or implied, of any kind whatsoever by ELEX
2) In the event of a conflict between the provisions of the aforesaid Lease and
this Agreement, the provisions of this Agreement shall govern.
In witness whereof, the parties hereto have caused this Agreement For The
Purchase Of Equipment
Under Lease to be duly executed this 24th day of September 1998.
ICT GROUP, INC. THE ELEX GROUP, INC.
(Lessee) (ELEX)
By: /s/ VA Paccapaniccia By: /s/ JoDee B. Pettine
Title: Sr VP Finance and CFO Title: President
LESSEE'S CONSENT AND AGREEMENT
The undersigned ("Lessee") acknowledges receipt of notice that ELEX will execute
the attached Collateral Assignment(s), relating to the Lease of even date
herewith ("Lease"), and for good and valuable consideration, receipt whereof is
hereby acknowledged, Lessee hereby consents to the execution and delivery of
said Collateral Assignment(s) and to all the terms and provisions thereof and
agrees that upon notice to the Lessee of such Collateral Assignment(s):
(a) The Lessee will pay directly to the last Assignee or to whomsoever such
Assignee shall direct (i) all rent and other moneys due and to become due from
the Lessee as set forth in the Lease, (ii) all amounts payable by reason of
acceleration of the liability of the Lessee for such rent or other moneys and
(iii) all other amounts at any time owing under the Lease by the Lessee.
(b) The Lessee will not assert against such last Assignee, or against whomsoever
such Assignee shall have directed payment to be made, any defense, setoff or
counterclaim (including recoupment against, or other diminution of, amounts
payable by the Lessee to such Assignee) which it may have against ELEX or
anyone, whether arising under the Lease, hereunder or otherwise. Lessee
acknowledges that any assignment or transfer by ELEX shall not materially change
Lessee's duties or obligations under the Lease.
(c) The Lessee will not modify or consent to any modification of the terms of
the Lease without the written consent of ELEX and such last Assignee.
(d)All obligations and warranties of ELEX contained in the Lease shall be and
remain enforceable by the Lessee against and only against ELEX and its
successors and assigns and not against the Collateral Assignee.
(e)Any assignment executed and delivered pursuant to the right reserved to ELEX
and its assignees in Paragraph 2(k) of the Agreement for Leasing shall be deemed
to be included within this Consent and Agreement.
Dated: September 24, 1998 ICT GROUP, INC.
(Lessee)
BY /s/ VA Paccapaniccia
Title Sr. VP Finance and CFO
SEAL
Attest Robert Hawling VP Facilitie
EXHIBIT I
CERTIFICATE OF ACCEPTANCE
TO: THE ELEX GROUP, INC. ("ELEX")
I, a duly appointed inspector and authorized representative of ICT GROUP, INC.,
a Pennsylvania corporation whose address is 800 Town Center Drive, Langhorne, PA
19047
("Lessee"), do hereby certify in accordance with the Lease dated September 1998
between Lessee and ELEX that (i) I do accept the Unit(s) of Equipment listed in
the Schedule A attached hereto and made a part hereof which has (have) a
purchase price of $ 1,987,056 (ii) the Date of Acceptance is as set forth below
and (iii) the Unit(s) has (have) been delivered and installed at:
1398 South Woodland Blvd., DeLand FL 32720
The execution of this Certificate of Acceptance will in no way relieve or
decrease the responsibility of any manufacturer of any Unit(s) of Equipment for
any warranties it has made with respect to any Unit(s) of Equipment.
ICT GROUP-INC.(Lessee)
BY /s/ VA Paccapaniccia
(Person authorized to sign)
TITLE Sr VP Finance and CFO
DATE 9/24/98
Signed in my presence in Signed in my presence in the
the Commonwealth of Pennsylvania State of New Jersey
/s/ Diane Haeselin, Notary /s/ Sharon McCarty, Notary
Notarial Seal SHARON MCCARTY
Diane Haeselin, Notary Public NOTARY PUBLIC OF NEW JERSEY
Middletown Twp., Bucks County MY COMMISSION EXPIRES MARCH 27, 1999
My Commission Expires May 12, 2001
Member, Pennsylvania Association of Notaries'
THE ELEX GROUP, INC
(ELEX)
BY JoDee B. Pettine
TITLE President
TRANSFER & ASSUMPTION AGREEMENT
Assumption Agreement made by and between ICT Group, Inc., ("Lessee"),
Boston Communications Group, Inc. ("Transferee"), The ELEX Group, Inc.,
("Lessor"), and JEFFERSON BANK ("Jefferson"), a corporation organized under the
Banking Laws of the State of Pennsylvania ("Assignee").
WHEREAS, Lessee is presently indebted to Lessor under an Agreement for
Leasing dated March 29, 1999 and Lease #990727 (collectively the "Lease")
between Lessee and ELEX, and duly assigned to Jefferson, copies of which Lease,
delivery and acceptance receipt, sale and Collateral Assignment by ELEX to
Jefferson, notice of assignment and financing statements filed with the
Secretary of State of Pennsylvania and Florida, with regard to the following
equipment, are annexed hereto as Exhibit A.
SEE ATTACHED SCHEDULE "A"
and,
WHEREAS, Lessee has agreed to sell, transfer and assign its interest in
such equipment and Lease to Transferee, and Transferee has agreed to assume all
of Lessee's obligations to Lessor:
NOW, THEREFORE, IT IS AGREED:
1. Lessee hereby assigns and sets over to Transferee all of
Lessee's rights, title and interest in, under and to the Lease.
2. Rent Balance All of the parties acknowledge that the balance
due to Lessor as of the date hereof is payable in the manner set forth in the
Lease, or other evidences of indebtedness and any other documents, waivers or
agreements in connection therewith heretofore executed by Lessee (herein
collectively referred to as the "Obligations").
3. Rent Payments Lessee and Transferee hereby agree jointly and
severally to pay and discharge the lease payments and all other amounts payable
under the Obligations to Lessor or its successors and assigns, in accordance
with the terms of the Obligations and upon execution of this Agreement, to pay
to Jefferson Bank the monthly installments of $18,395.00 for the next 47
remaining months including the installment beginning with 11/1/99.
4. Assumption Transferee hereby assumes and agrees to perform all
the covenants of Lessee set forth in the Obligations.
5. Lease Terms All terms, conditions, and covenants of the
Obligations shall remain unchanged and shall continue to remain in full force
and effect.
6. Estoppel Lessee and Transferee hereby warrant, represent, and
covenant that the Obligations are not subject to any disputes, offsets, or
counterclaims of any kind or nature whatsoever.
7. Security Transferee acknowledges that Lessor has a valid first
security interest in the equipment and in confirmation thereof agrees to execute
all financing statements and other documents which Lessor may, in its sole
discretion, deem necessary to protect such security interest.
8. Consent and Release Lessor and Assignee hereby consent to the
aforesaid transfer by Lessee to Transferee, and hereby agrees that Lessee is
hereby released and forever discharged from any and all Obligations arising
from the Lease which is the subject hereof.
9. Lessee hereby warrants and represents:
a. That Lessee is not in breach of any of the terms and
conditions of said Lease and is current in the payment of all
rent, additional rent, utilities and other payments due under
the terms of said Lease.
b. That Lessee has not assigned any of its rights under the
Lease to any third party.
c. That Lessee has full corporate power and authority to enter
into this Transfer & Assumption Agreement ("Agreement") and
to carry out its obligations hereunder, that the execution
and delivery hereof have been duly authorized by the Board of
Directors of Lessee and no other corporate proceedings on the
part of Lessee are necessary to authorize this Assignment and
that the Agreement constitutes the valid and binding
obligations of Lessee.
d. That the execution, delivery and performance of this
Agreement by Lessee do not require the consent, waiver,
approval, or authorization of any person or authority (other
than the Lessor of the Lease) and will not violate, result in
a breach of or the acceleration of any obligation under or
constitute a default under, any provision of any charter, by-
law, indenture, mortgage, lien, lease, agreement, contract,
instrument, order, judgment, decree, ordinance, or
regulations or any restriction to which any property of
Lessee is subject or by which Lessee is bound or affected.
10. Lessee hereby warrants and represents:
a. That all equipment assigned hereunder is in good working
order and that all documentation relating to such equipment
will be provided to Transferee upon execution of this
agreement.
b. That it has inquired of all providers of equipment assigned
hereunder and software operating on such equipment and has
obtained assurances from such providers that the equipment
and software are year 2000 compliant.
11. Transferee hereby represents and warrants:
a. That Transferee has a copy of the Lease, including the
Lessees Consent and Agreement, The Certificate of Acceptance
and all relating documents of the Lease and that Transferee
agrees to all the terms and conditions of all documents
relating to the Lease.
12. This Agreement shall be binding upon the successors and assigns
of the parties. The parties shall execute and deliver such
further or additional documents as may be necessary to evidence
or carry out the provisions of this Agreement.
13. This Transfer and Assumption Agreement shall become effective
upon the consummation of the Transaction, the signing hereof by
both Lessee and Transferee and the execution by the Lessor of the
consent hereto in the form set forth below.
Transferee: Lessee:
Boston Communications Group Inc. ICT Group, Inc.
By: /s/ Karen A. Walker By: /s/ V A Paccapaniccia
Title: Chief Financial Officer Title Sr. VP Finance & CFO
CONSENTED TO: CONSENTED TO:
Assignee: Lessor:
JEFFERSON BANK The ELEX Group, Inc.
By: /s/ B W Galley By: JoDee B. Pettine
Title: Vice President Title: President
TRANSFER & ASSUMPTION AGREEMENT
Assumption Agreement made by and between ICT Group, Inc., ("Lessee"),
Boston Communications Group, Inc. ("Transferee"), The ELEX Group, Inc.,
("Lessor"), and JEFFERSON BANK ("Jefferson"), a corporation organized under the
Banking Laws of the State of Pennsylvania ("Assignee").
WHEREAS, Lessee is presently indebted to Lessor under an Agreement for
Leasing dated March 29, 1999 and Lease #990727 (collectively the "Lease")
between Lessee and ELEX, and duly assigned to Jefferson, copies of which Lease,
delivery and acceptance receipt, sale and Collateral Assignment by ELEX to
Jefferson, notice of assignment and financing statements filed with the
Secretary of State of Pennsylvania and Florida, with regard to the following
equipment, are annexed hereto as Exhibit A.
SEE ATTACHED SCHEDULE "A"
and,
WHEREAS, Lessee has agreed to sell, transfer and assign its interest in
such equipment and Lease to Transferee, and Transferee has agreed to assume all
of Lessee's obligations to Lessor:
NOW, THEREFORE, IT IS AGREED:
1. Lessee hereby assigns and sets over to Transferee all of
Lessee's rights, title and interest in, under and to the Lease.
2. Rent Balance All of the parties acknowledge that the balance
due to Lessor as of the date hereof is payable in the manner set forth in the
Lease, or other evidences of indebtedness and any other documents, waivers or
agreements in connection therewith heretofore executed by Lessee (herein
collectively referred to as the "Obligations").
3. Rent Payments Lessee and Transferee hereby agree jointly and
severally to pay and discharge the lease payments and all other amounts payable
under the Obligations to Lessor or its successors and assigns, in accordance
with the terms of the Obligations and upon execution of this Agreement, to pay
to Jefferson Bank the monthly installments of $18,395.00 for the next 47
remaining months including the installment beginning with 11/1/99.
4. Assumption Transferee hereby assumes and agrees to perform all
the covenants of Lessee set forth in the Obligations.
5. Lease Terms All terms, conditions, and covenants of the
Obligations shall remain unchanged and shall continue to remain in full force
and effect.
6. Estoppel Lessee and Transferee hereby warrant, represent, and
covenant that the Obligations are not subject to any disputes, offsets, or
counterclaims of any kind or nature whatsoever.
7. Security Transferee acknowledges that Lessor has a valid first
security interest in the equipment and in confirmation thereof agrees to
execute all financing statements and other documents which Lessor may, in its
sole discretion, deem necessary to protect such security interest.
8. Consent and Release Lessor and Assignee hereby consent to the
aforesaid transfer by Lessee to Transferee, and hereby agrees that Lessee is
hereby released and forever discharged from any and all Obligations arising from
the Lease which is the subject hereof.
14. Lessee hereby warrants and represents:
e. That Lessee is not in breach of any of the terms and
conditions of said Lease and is current in the payment of all
rent, additional rent, utilities and other payments due under
the terms of said Lease.
f. That Lessee has not assigned any of its rights under the
Lease to any third party.
g. That Lessee has full corporate power and authority to enter
into this Transfer & Assumption Agreement ("Agreement") and
to carry out its obligations hereunder, that the execution
and delivery hereof have been duly authorized by the Board of
Directors of Lessee and no other corporate proceedings on the
part of Lessee are necessary to authorize this Assignment and
that the Agreement constitutes the valid and binding
obligations of Lessee.
h. That the execution, delivery and performance of this
Agreement by Lessee do not require the consent, waiver,
approval, or authorization of any person or authority (other
than the Lessor of the Lease) and will not violate, result in
a breach of or the acceleration of any obligation under or
constitute a default under, any provision of any charter, by-
law, indenture, mortgage, lien, lease, agreement, contract,
instrument, order, judgment, decree, ordinance, or
regulations or any restriction to which any property of
Lessee is subject or by which Lessee is bound or affected.
15. Lessee hereby warrants and represents:
c. That all equipment assigned hereunder is in good working
order and that all documentation relating to such equipment
will be provided to Transferee upon execution of this
agreement.
d. That it has inquired of all providers of equipment assigned
hereunder and software operating on such equipment and has
obtained assurances from such providers that the equipment
and software are year 2000 compliant.
16. Transferee hereby represents and warrants:
b. That Transferee has a copy of the Lease, including the
Lessees Consent and Agreement, The Certificate of Acceptance
and all relating documents of the Lease and that Transferee
agrees to all the terms and conditions of all documents
relating to the Lease.
17. This Agreement shall be binding upon the successors and assigns
of the parties. The parties shall execute and deliver such further or
additional documents as may be necessary to evidence or carry out the provisions
of this Agreement.
18. This Transfer and Assumption Agreement shall become effective
upon the consummation of the Transaction, the signing hereof by both Lessee and
Transferee and the execution by the Lessor of the consent hereto in the form set
forth below.
Transferee: Lessee:
Boston Communications Group Inc. ICT Group, Inc.
By: /s/ Karen A. Walker By: /s/ V A Paccapaniccia
Title: Chief Financial Officer Title Sr. VP Finance & CFO
CONSENTED TO: CONSENTED TO:
Assignee: Lessor:
JEFFERSON BANK The ELEX Group, Inc.
By: /s/ B W Galley By: JoDee B. Pettine
Title: Vice President Title: President
AGREEMENT FOR LEASING
THIS AGREEMENT by and between THE ELEX GROUP, INC, a New Jersey corporation,
whose address is P.O. Box 14, Medford, New Jersey 08055 ("ELEX"), and ICT GROUP,
INC., a Pennsylvania corporation whose address is 800 Town Center Drive,
Langhorne, PA 19047
("Lessee").
WITNESSETH
WHEREAS, Lessee desires to lease items of equipment from ELEX or certain
lessors represented by ELEX, and ELEX is willing to arrange such leases; and
WHEREAS, the parties wish to set forth in full certain terms to be
incorporated in all leases to be executed pursuant to this Agreement For
Leasing:
NOW THEREFORE, in consideration of the mutual covenants herein contained and
intending to be legally bound hereby,it is agreed as follows:
1. Leasing. Lessee hereby authorizes ELEX, and ELEX agrees to use its best
efforts to arrange leases of equipment wherein Lessee shall be the lessee and
ELEX or the other party or parties represented by ELEX shall be the lessor.
Such leases shall cover such equipment and shall contain such provisions
respecting payments, terms, covenants, conditions and provisions ("Provisions')
as the respective parties thereto may agree. Lessee will execute such leases
when ELEX or a lessor secured by ELEX is ready to enter into such leases. ELEX
shall make all arrangements between Lessee, and all lessor(s) represented by
ELEX.
2. Lease Provisions. Each such lease, ("Lease") shall, in addition to its
Provisions, incorporate by reference all of the following terms and conditions,
covenants and provisions (the term "ELEX" as used hereafter, being deemed to
refer to the lessor under each such Lease; the term "Unit" being deemed to refer
to each item of equipment described in and covered by a Lease; the term
"Equipment" being deemed to refer to all items of equipment described in and
covered by a Lease; and the term "Date of Acceptance" being deemed to refer to
the date a Unit is available to be placed in service for its intended purpose):
(a) Term. The Lease of the Equipment shall commence as of the date thereof
and shall continue in full force and effect until terminated by either party as
of any succeeding rental payment date, upon not less than one hundred eighty
days prior written notice to the other party; provided, however, that the term
of the Lease shall in no event be less than the period specified as the
"Initial Term' in the Lease covering such Equipment.
If any term shall be extended or any renewal options shall be exercised, the
word "term" as used herein shall be deemed to refer to the Initial Term and all
extended or renewal terms of any Lease hereto, and all provisions of this
Agreement For Leasing shall apply during extended or renewal terms.
(b) Rent. As used herein, "rent" for the Equipment shall be the "total rent"
specified in the Lease, payable in successive installments at the times set
forth in the Lease. It is understood and agreed by the Lessee that such 'total
rent" shall be of the essence of the Lease and that ELEX shall be entitled to
the payment of the full amount thereof in consideration of the letting of the
Equipment, including payment of the then outstanding balance of such total rent
(plus all other sums due under the Lease) in the event of the happening of any
default specified in Paragraph 20) below, subject to reduction only as provided
in Paragraph 20)(2)(b). Rent shall be paid to ELEX at its address specified in
the Lease, or as otherwise directed by ELEX free from all claims, demands, or
setoffs against ELEX the manufacturer of the Equipment or any assignee of ELEX.
If ELEX is subjected to any liability because of any non-compliance with the
Lease or any regulatory law applicable to any of the Equipment on the part of
the Lessee, then upon notice to the Lessee of the nature and/or amount thereof,
the Lessee shall forthwith discharge the same, and if ELEX shall incur any
expense by reason thereof, the amount of such expense shall be added to the
installment of rent next falling due as additional rent.
If any installment of rent is not paid within ten (10) days following the due
date thereof, a late charge equal to five percent (5%) of such installment shall
be due and payable as additional rent, and there-after an additional late charge
of five percent (5%) of the then unpaid installment and late charges shall be
due and payable as of the eleventh day of each succeeding month thereafter until
uch installment is paid.
(c) Use, Care and Operation. Lessee shall, at its expense:
(1) Receipt and Acceptance. Receive each Unit of Equipment at, and pay all
delivery charges for each Unit to, the location of original use specified
therefore; unload, and, if required, assemble and install the same.
Lessee will signify the Date of Acceptance of each Unit of the Equipment by the
prompt execution and delivery to ELEX of a Certificate of Acceptance in the form
attached hereto as Exhibit I ("Certificate of Acceptance"). The Lessee's
execution and delivery to ELEX of the Certificate of Acceptance, signed by an
officer of Lessee, shall conclusively establish as between ELEX and the Lessee
that each Unit is in good operating order, repair, condition, appearance, is
suitable for the purpose of Lessee and the Lease, conforms to the specifications
applicable thereto and that such unit has not been used or operated prior to the
Date of Acceptance indicated therein. Such acceptance shall not affect Lessee's
claims against the manufacturer or manufacturer's warranties.
(2) Fees and Taxes. Pay, and file any necessary returns with respect to, all
license fees, assessments or other governmental charges, and sales, use, gross
receipts, personal property, and other tax or taxes, now or hereafter imposed by
any state, federal or local government or agency upon any Unit or upon the
leasing, use or operation thereof, or upon the receipt of rentals therefore or
earnings arising therefrom (excluding taxes imposed on ELEX's net income,
except any such taxes which are in substitution for, or relieve the Lessee from,
the payment of taxes which it would otherwise be obligated to pay or reimburse
as herein provided) before the same shall become in default or subject to the
(3) payment of any penalty or interest and supply ELEX with receipts or other
evidence of payment satisfactory to ELEX; Lessee shall promptly reimburse ELEX
for all property taxes, or levies assessed upon any Unit, paid by ELEX however,
there shall be no obligation of ELEX to make payment of any property taxes
assessed upon any Unit.
(3) Maintenance. At all times keep and maintain each Unit in good working
order, repair, and appearance; install, keep, and maintain C., each Unit such
insignia and identification as ELEX may designate, and certify that such has
been done; make any and all necessary repairs and replacements. thereto in order
that each Unit, its components and accessories, shall continue to fulfill their
intended function or use; and keep and operate the same as specified in the
Lease therefore; except that Lessee shall not, without ELEX's prior written
consent, affix or install any accessory, equipment, device, advertising matter
or insignia to any Unit. ELEX passes through to Lessee all warranties of the
manufacturer of the Equipment and Lessee shall have the right to, and will,
directly avail itself of all warranties and representations made by the
manufacturer with respect to the Equipment and ELJEX agrees to execute such
documents as may be required to enable Lessee to obtain customary warranty
service for each Unit of Equipment from the manufacturer.
The Lessee agrees to execute at its own expense a maintenance contract with the
manufacturer of the Equipment and to keep said Contract in force until the
Equipment is surrendered to ELEX. Said maintenance contract shall provide for
at least the same services by the manufacturer as those furnished under the
manufacturer's standard maintenance contract for nine-hour per day use of the
Equipment, and shall provide for the incorporation of such engineering changes
and improvements in the Equipment which arc available without additional charge
as part of such services. A maintenance contract for the Equipment may not be
entered into with other than the manufacturer of the Equipment without the
approval of ELEX, which approval will not be unreasonably withheld.
All replacements, repairs, parts, and supplies shall be obtained at Lessee's
expense and shall be performed and supplied only by such persons as shall be
approved by ELEX. All replacements, repairs, parts, supplies, accessories,
equipment, devices, or other items furnished or affixed to any Unit shall
thereupon become ELEX's property and Lessee shall arrange that there be
delivered promptly to ELEX all instruments or documents as may be necessary to
evidence ELEX's original and free, clear and unencumbered title thereto and
ownership thereof.
(4) Provisioning. Provide all labor, materials, services, utilities,
electric power, parts, and other supplies or items consumed by, or required for,
or in connection with the recommended use of, each Unit.
(5) Compliance with Law. Observe and comply with, and perform and execute,
all laws, rules, regulations, or orders of all state, federal, and local
governments or agencies which in anyway affect or relate to, or are applicable
to, any Unit, or the use, operation, maintenance, or storage thereof; and Lessee
shall, and does hereby, indemnify ELEX and agrees to hold ELEX harmless from any
and all liability that may arise from any infringement or violation of any such
law, rule, regulation, or order by Lessee, or Lessee's employees, or any other
person.
(6) Use and Operation. Not use, operate, maintain, or store any Unit
improperly, carelessly, or in violation of the Lease or any instructions
furnished therefore by the manufacturer or by ELEX; nor install or operate the
same other than as specified in the Lease; nor permit anyone other than its
authorized agents, persons, and employees, all of whom must be competent
operators to operate the same, and for whom Lessee agrees to be responsible.
(7) Non -Transferability. Not, without ELEX's prior written consent, which
shall not be unreasonably withheld, let or sublet any Unit; nor lend or part
with the possession of any Unit, or any part thereof; nor assign the Lease or
any interest therein.
(8) Risk Bear and assume all risk and liability for (and Lessee does hereby
agree to indemnify and hold ELEX harmless from any and all claims, liens,
demands, or liability arising out of the loss of or damage to each Unit, the
use, operation, maintenance, and storage thereof, and the loads thereon, and the
injury or death of persons and/or damage to property howsoever arising therefrom
or the use therefore, or the condition of such Unit, during the continuance of
the Lease and until the return of such Unit. The indemnities and assumptions of
liability herein provided - continue in full force and effect notwithstanding
the termination of the Lease, whether by expiration of time, by operation of
law, or other.
(9) Inspection. Upon ELEX's demand, permit ELEX, its agents oe
representatives and persons designated by ELEX to enter upon the premises where
each Unit is located and to inspect each Unit, and its manner of use, at any
reasonable time and from time to time.
(10) Notice of Location. Not, without ELEX's written consent, remove any Unit
from the location of original use; and at all time keep ELEX advised of the
location of any Unit should Lessee remove it from the location of original use.
(d) Representations. Lessee does hereby agree that each Unit is of a size,
design, capacity, and material selected by Lessee, and that Lessee is satisfied
that each such Unit is suitable for Lessee's purposes, and sufficiently durable
under the conditions of usage thereof by Lessee, and that ELEX has made no
representations or warranties with respect to the suitability or durability of
any Unit for the purposes or uses of Lessee, or with respect to the permissible
load thereof, or any other representation or warranty, express or implied, with
respect thereto. Lessee understands and acknowledges that no broker or supplier,
nor any salesman, broker or agent of any broker or supplier is an agent of ELEX
Lessee represents to ELEX that the Equipment will be used exclusively for
business or commercial purposes and will not be used at any time during the term
of the Lease for personal, family or household purposes.
NO REPRESENTATIONS
ELEX DOES NOT WARRANT THE EQUIPMENT IN ANY RESPECT, EITHER EXPRESSLY OR BY
IMPLICATION AND WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ELEX EXPRESSLY
DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS OR ADEQUACY FOR ANY
PURPOSE OR USE, QUALITY, PRODUCTIVENESS OR CAPACITY.
(e) Non-Liability of ELEX ELEX shall not be liable to Lessee for any loss,
incidental or consequential damage, expense of any kind or nature Caused,
directly, indirectly, by any Unit or the Equipment or the use, maintenance,
operation, handling, or storage thereof, or loads thereon, or the repairs,
servicing, or adjustments thereto, or because the same is, or has become,
unsuitable, or unserviceable, or by any interruption of service or loss of use
thereof, or strict liability with respect thereto, or for any loss of business
or damage whatsoever or howsoever caused. ELEX shall not be liable to Lessee
for delay in delivering, or failure to deliver any Unit.
(f) Insurance. Lessee will procure and maintain at its sole cost and
expense, bodily injury and third party property damage insurance, with insurers
satisfactory to ELEX, for the Equipment, with liability limits of not less than
those specified in the Lease. Lessee will further, without cost to ELEX,
maintain or cause to be maintained in effect throughout the term of the Lease
for the Equipment, with insurers satisfactory to ELEX, insurance policies
insuring against all-risk physical loss or damage to such Equipment for an
amount equal to the Casualty Value (hereinafter defined) of such Equipment as of
the last monthly rent payment date set forth in Schedule of Casualty Values
attached to the Lease. All policies shall name as additional insured ELEX, and
assignees of ELEX and Lessee as their interest may appear and provide that they
cannot be amended or canceled with respect to ELEX and its assignees except on
at least thirty (30) days prior written notice to ELEX and its assignees. All
policies or certificates thereof and endorsement thereto shall be delivered to
ELEX effective and enforce at the time of execution of the Lease. All renewals
thereof shall be delivered to ELEX at least ten (10) days prior to the
expiration of the current policy. Lessee hereby appoints ELEX as its attorney-
in-fact, coupled with an interest, with full power of substitution, for purposes
of executing any proof of loss or related document, endorsing any check, draft
or other means of payment in connection with any loss, compensable under such
policies. This power is irrevocable for so long as the Lessee remains indebted
to ELEX or its assignee hereunder or under any other agreement or instrument.
Damage. Should any Unit:
(1) be damaged by reason of any cause, and be capable of repair without
impairment of value, Lessee shall repair the same at Lessee's Sole expense, as
quickly as circumstances permit, without any abatement of rent. In such event,
should ELEX be indemnified under any insurance policy or policies pursuant to
the provisions of the Lease covering such Unit, ELEX shall pay to Lessee the
proceeds received by ELEX from such insurance but only to the extent necessary
to reimburse Lessee for all amounts paid by it pursuant to this paragraph and
properly documented. In any event ELEX shall not be liable for any amount in
excess of said insurance proceeds; or
(2) be lost, stolen, destroyed, taken for a public use, or damaged beyond
repair by any cause whatsoever, ("Casualty") Lessee shall pay ELEX within
fifteen (15) days thereafter an amount equal to ELEX's original cost of said
Unit, as shown in Schedule A of the Lease of said Unit, multiplied by the
casualty loss percentage applicable to the date of Casualty, as shown in
Schedule B of the Lease of said Unit, ("Casualty Value"). Upon such payment, and
if the Lessee shall then not be in default under the Lease, the balance of the
rent due under the Lease shall abate in an amount determined by the same
percentage as the original cost of the Unit(s) suffering the Casualty bears to
the cost of the Equipment. Until such payment Lessee shall continue the prompt
payment of all rent under the Lease and any such rent due for the period before
payment shall not abate. Following payment of the Casualty Value Lessee shall be
entitled to the proceeds of any insurance covering the Unit(s) suffering a
Casualty, but in no event shall the amount of such reimbursement exceed the
Casualty Value previously paid by Lessee, and any excess shall be the property
of ELEX
(h) Return of Equipment. Within ten (10) days after the expiration or sooner
termination of the term of the Lease (or of any extension thereof), Lessee will,
at Lessee's expense, return each Unit which has not been lost, stolen,
destroyed, or damaged beyond repair, to ELEX or ELEX's designee or designees,
loaded on such appropriate conveyance and properly packed and at such
destination or destinations as ELEX may designate, free of all advertising or
insignia placed thereon pursuant to Section 2(c) (3) by Lessee (other than
identification tags of ELEX), and in the same operating condition, order,
repair, and appearance as when received [reasonable wear and tear (except as
provided in Paragraph 2 (c) (3) above) and damage by any cause for which ELEX
has recovered under insurance, excepted]. If any such Unit is not so returned
within the time specified herein, Lessee shall continue to pay the rent
specified in the Lease until the Equipment is so returned in the aforesaid
condition.
(i) Time of Essence. Time is of the essence of this Agreement. No express or
implied waiver by ELEX of any default hereunder shall in any way be, or be
construed to be, a waiver of any future or other default of Lessee, or a waiver
of any rights of ELEX, or a modification of any of the Lease terms, or an
extension or enlargement of Lessee's rights under the Lease.
(j) Default by Lessee.
(1) If (a) Lessee shall fail to pay the rent when due; or (b) Lessee shall
fail to perform any other term or condition of the Lease and such failure shall
continue for a period of thirty (30) days; or (c) proceedings under the Federal
Bankruptcy Code shall be instituted against Lessee, or a receiver shall be
appointed for Lessee or any of its property, or any of the Equipment shall be
attached or levied upon, and such proceedings shall not be vacated, or fully
stayed within ninety (90) days in the case of proceedings under the Federal
Bankruptcy Code, otherwise within twenty (20) days thereof; or (d) Lessee shall
make an assignment for the benefit of creditors, or institute .proceedings for
debtor relief under the Federal Bankruptcy Code, or admit in writing its
inability to pay its debts generally as they become due; or (e) if any
representations or warranty made by Lessee hereunder or in connection herewith
shall be false, misleading or untrue in any material respect,
(2) then ELEX. at its option, may declare the balance of the rent due under
the Lease, as well as any amounts specified herein or in the Lease as items of
additional rent and not then accrued and owing, immediately due and payable, and
upon any such declaration the same, plus the aggregate amounts of any
installment of rent(including any late charge thereon) and any other sums then
accrued and unpaid, shall be due and payable forthwith, and ELEX shall have the
right to take all steps appropriate to collect the same and
(a) to take immediate possession of the Equipment, and
(b) to lease or sell, or both, the Equipment or any Unit upon such
terms as ELEX may elect, and apply the net proceeds on account of Lessee's
obligations hereunder, and
(c) in accordance with the terms of the Lease to confess a judgment
against the Lessee for the full amount of the rent and other sums due and owing
under the Lease.
The foregoing remedies and any other remedy available at law or equity are
cumulative and available to ELEX but ELEX shall be under no obligation to
exercise any such remedy. The exercise by ELEX of any such remedies shall not
release Lessee from its obligations hereunder or bar ELEX from proceeding
otherwise. Lessee shall additionally pay ELEX a reasonable sum as and for
attorneys' fees and an amount equal to such unreimbursed expenses as shall have
been paid or incurred by ELEX in the seizure of the Equipment or any Unit, or in
the enforcement of any of ELEX's rights or privileges hereunder.
(k) Assignment by ELEX ELEX shall have the right to assign all or any part
of its rights under the Lease. In such event, the assignee shall be entitled to
enforce the rights so assigned but shall be under no liability to the Lessee to
perform any of the obligation of ELEX unless assignee assumes such liability in
writing, in which case ELEX shall, to the extent assignee assumes such
liability, be released from all of its obligations to Lessee.
Lessee agrees that it will pay the rent and all other sums due by Lessee
hereunder directly to such assignee after receipt of notice of such Assignment.
Any assignee of ELEX's rights may reassign such rights with the same force and
effect as an original assignment.
(l) Security. As security for the faithful performance by Lessee of the
terms and conditions of the Lease, Lessee shall deposit with ELEX the amount
indicated in the Lease as security deposit and/or advance rentals. Provided
Lessee has at all times fully performed all its covenants and conditions agreed
upon to be performed, ELEX will return to Lessee the security deposit at the
expiration of the Lease. ELEX may, but shall not be required to, apply such
security deposit and/or advance rentals to discharge any overdue obligation of
the Lease.
(in) Notices. All notices, consents, waivers or other communications required
under the Lease shall be in writing by certified mail, and any such notice,
consent, waiver or communications shall be irrevocable and become effective when
deposited in the United States mail, with proper postage prepaid, addressed to
the party intended to be served at its address appearing in this Agreement or in
the Lease, or at such other address as such party may, from time to time,
designate in writing.
(n) General. This is a contract of lease only, and nothing herein shall be
construed as conveying to Lessee any right, title, or interest in or to the
Equipment. except its rights as a Lessee only. Title to the Equipment shall at
all times remain in ELEX and Lessee shall at all times, at Lessee's expense,
protect and defend ELEX's title thereto against all claims, liens, and legal
processes of Lessee's creditors, or persons claiming through Lessee, and keep
the Equipment free and clear from all such liens, claims, and processes. ELEX
covenants, subject to performance by Lessee of all of its obligations under the
Lease, that Lessee will have quiet enjoyment of the Equipment during the term of
the Lease. Each Unit is, and shall remain, Personal property irrespective of its
use or manner of attachment to real property, and Lessee shall obtain for ELEX a
real property waiver from owner Or mortgagee of the premises where any Unit is
kept, Said waiver shall provide that the Equipment shall remain personal
property removable by ELEX or its a at any time without notice; ELEX or its
assigns shall have access to the premises as may be required for the purpose of
inspection, sale, and removal, the real property owner waives any right, title,
lien, or interest which he may otherwise have in the Equipment . The parties
agree that this Agreement for Leasing and each Lease are intended to qualify as
a "finance lease" under Article 2A of the Uniform Commercial Code. Lessee
acknowledges that (a) Lessee has received a copy of the contract by which ELEX
acquired the Equipment (the" Supply Contract') or (b) Lessee has reviewed and
approved the Supply Contract or (c) ELEX has informed Lessee in writing that
Lessee may have rights under the Supply Contract and that Lessee should contact
the supplier of the description of any such rights.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, LESSEE HEREBY WAIVES ANY RIGHTS TO
(i) CANCEL ANY LEASE, (ii) REPUDIATE ANY LEASE, (iii) REVOKE ACCEPTANCE OF THE
EQUIPMENT, (iv) RECOVER DAMAGES FROM ELEX FOR ANY BREACHES OF WARRANTY OR FOR
ANY OTHER REASON, (v) A SECURITY INTEREST IN THE EQUIPMENT IN LESSEE'S
POSSESSION OR CONTROL FOR ANY REASON, (vi) DEDUCT ALL OR ANY PART OF ANY
CLAIMED DAMAGES RESULTING FROM ELEX'S DEFAULT, IF ANY, UNDER ANY LEASE, (vi)
- - -COVER- BY MAKING ANY PURCHASE OR LEASE OF, OR CONTRACT TO PURCHASE OR LEASE,
EQUIPMENT IN SUBSTITUTION FOR THAT DUE FROM ELEX, (viii) RECOVER ANY GENERAL,
SPECIAL INCIDENTAL OR CONSEQUENTIAL DAMAGES FOR ANY REASON WHATSOEVER, AND (ix)
SPECIFIC PERFORMANCE, REPLEVIN, DETINUE, SEQUESTRATION, CLAIM OR DELIVERY OR
THE LIKE FOR ANY EQUIPMENT IDENTIFIED TO ANY LEASE.
Each individual Lease executed pursuant to the Agreement for Leasing shall
constitute a separate and independent lease.
ELEX's obligations shall be suspended to the extent that ELEX is hindered or
prevented from complying therewith because of strikes, lockouts, war, acts of
God, fires, storms, accidents, governmental regulations or interference or
other acts beyond ELEX's control. No obligation of ELEX, except as otherwise
specified herein, shall survive the term of the Lease, or sooner termination
thereof, and should ELEX permit use by Lessee of any Unit beyond the term
specified therefore, the Lease obligations of Lessee shall continue and such
permissive use shall not be construed as a renewal of the term thereof, or as a
waiver of any right or continuation of any obligation of ELEX thereunder, and
ELEX may take possession of any such Unit at any time upon demand after 10 days
written notice. The cancellation or other termination, whether by operation of
law or otherwise, of the Lease shall not release Lessee from any of its
obligations hereunder or thereunder save [except as provided in Paragraph 2(c)
(8) above] upon payment in full by Lessee to EL.EX of the Termination Value set
forth in the Lease. In the event ELEX shall be entitled, pursuant to any
provision hereof, to repossess any Unit, ELEX shall not be liable to the
Lessee in respect of any damage arising out of any such repossession except
for ELEX's negligent or wrongful act. This Agreement contains the entire
understanding between ELEX and Lessee, and any change or modification must be
in writing and signed by both parties. This Agreement is entered into under
and shall be construed in accordance with the laws of the State of New Jersey
insofar as applicable to the rights of ELEX Lessee and any third party as to the
Equipment.
No term or provision of this Agreement for Leasing or any Lease may be amended,
ltered, waived, discharged or terminated except by a written instrument signed
by the parties hereto, and in compliance with Section 2-208(2) of the Uniform
Commercial Code requiring separate signature of this provision, Lessee has
signed in e space provided below.
__________s/s JB________________
(Lessee's initials)
(o) Lessee shall furnish to ELEX (i) within ninety (90) days after the close
of each fiscal year of Lessee, a copy of its financial statements, including a
Balance Sheet and Profit and Loss Statement of Lessee as of the end of such year
in each case certified by public accountants of recognized standing acceptable
to ELEX and (ii) other such financial information respecting the financial
condition and operation of Lessee as ELEX may from time to time reasonably
request.
3. Special Provisions.
4. Resolutions and Recording Costs.
(a) Lessee agrees that it will provide ELEX or its assignee with appropriate
opinions of counsel and certified copies of all necessary authorizing
resolutions, as may be reasonably requested by ELEX or any assignee or counsel
therefore.
(b) Lessee agrees that it will pay any and all recording costs necessarily
incurred to establish and record any lien in favor of any assignee of ELEX.
5. Miscellaneous.
(a) It is understood and agreed between the parties hereto that, subject to
Lessee's rights to the Equipment so long as Lessee is not in default under the
Lease, the several instruments and documents incidental or related to this
Agreement, to the assignment of any 'Lease, and/or to the mortgaging of any of
the Equipment by ELEX may contain such provisions as may be required by reason
of the laws of the place where any of the Equipment is located in order that
ELEX or its assignees or a mortgagee or holder of a security interest may obtain
the full benefits of this Agreement in accordance, with its original intendments
and purposes, or as may be reasonably required by any such assignee for the full
protection of any security interest which such assignee may have in the
Equipment or any Lease, and the provisions of this Agreement are subject to all
such requirements.
(b) The headings and sub-headings contained in this Agreement are solely for
convenience and are not intended to be complete or accurate summations or
indices of the contents of their respective paragraphs.
(c) Any provision of this Agreement found to be prohibited by law shall be
ineffective to the extent of such prohibition without invalidating the rest of
this Agreement.
(d) Lessee agrees that at any time and from time to time, upon the written
request of ELEX or its Assignees, Lessee will promptly and duly execute and
deliver any and all such further instruments and documents as ELEX or its
Assignees may deem desirable in obtaining the full benefits of this Agreement
and any Lease herewith and of the rights and powers granted thereunder. Lessee
hereby grants ELEX the authority to sign and file on Lessee's behalf any
document or financing statement ELEX deems necessary to perfect or protect
ELEX's interest in the Equipment or pursuant to the Uniform Commercial Code.
(e) This Agreement contains the whole understanding of the parties; shall be
construed and enforced in accordance with the laws of the State of New Jersey
and shall inure to the benefit of, and be binding upon, the respective legal
representatives and heirs of the individual parties; and the successors and
assigns of the corporate parties. 'Me Lessee irrevocably waives and covenants
that they will not assert (as Plaintiff, Defendant, or otherwise), any right to
trial by jury in any action, counterclaim, dispute, or proceeding based upon, or
related to the subject matter of any Lease or otherwise relating to the
Obligations of the Lessee to ELEX
IN WITNESS WHEREOF, the parties hereto have executed these presents, the
corporate parties by their officers thereunto duly authorized, this 29th
day of March 1999.
ICT GROUP, INC. THE ELEX GROUP, INC Lessee)
(ELEX)
BY_____________John J. Brennan BY______________________________
TITLE__ President & CFO__________________ TITLE______Secretary_____________
Signed in my presence in the Commonwealth of Pennsylvania
_______Diane Haeselin__________
Notary
Notarial Seal
Diane Haeselin, Notary Public
Middletown Twp., Bucks County
My Commission Expires May 12, 2001
Member, Pennsylvania Association of Notaries
LEASE
990727
THE ELEX GROUP, INC., a New Jersey corporation, whose address is P.O. Box 14,
Medford, New Jersey 08055 ("ELEX"), hereby leases to ICT GROUP, INC., a
Pennsylvania corporation whose address is 80.0 Town Center Drive, Langhorne PA
19047
("Lessee"), and Lessee hereby hires and takes from ELEX, the equipment
described in Schedule A attached hereto and made a part hereof ("Equipment"),
at the rent and upon the terms and conditions herein set forth:
1. Location of original use: 1398 South Woodland Blvd., DeLand FL 32720
2. Initial Term: Commencing on the first day of the month following the
Date of Acceptance of the Equipment under Lease and expiring Fifty-Four (54)
months thereafter.
3. Rental: Monthly Rent: $ 18,395.00 Security Deposit: S 36,790.00
Advanced Rentals: $ None
Total Rent: $ Payable in Fifty Four (54) successive equal monthly
installments of Eighteen Thousand Three Hundred Ninety Five Dollars and No Cents
($18,395.00) each plus the Additional Rent specified in the Special Provision
For Terminal Rental Adjustment.
Each installment shall be due upon the first day of each and every month
after the Date of Acceptance of the Equipment, except for the first monthly
installment thereof and any Security which is due upon the execution of this
Lease. Additionally the Lessee shall pay to ELEX an interim rent for the period
from the Date of Acceptance of the Equipment to the first day of the month
following such date ("Interim Rent Period"). Said interim rent shall be that
proportion of a monthly rent installment which bears the same ratio as the
number of days of the Interim Rent Period bears to thirty (30) days, and shall
be payable on the first day of the month following the Interim Rent Period.
4. Reports and Payment of Rental: Lessee shall make all payment and send
all notices to ELEX at the address of ELEX set forth above, or at such other
address as ELEX may, from time to time, designate in writing.
5. Liability Insurance: Lessee shall provide and maintain the following
liability insurance:
A. Public Liability Bodily Injury, not less than $500,000 per one
person, $1,000,000 per one accident.
B. Property Damage, not less than $500,000.
6. Confession of Judgment: In the event of any default by Lessee under this
Lease as provided in Paragraph 2 (j) of the Agreement For Leasing, Lessee hereby
empowers any Prothonotary, Clerk of Court or attorney of any Court of Record to
appear for Lessee and, with or without complaint filed, confess judgment, or a
series of judgments, against Lessee in favor of ELEX or any assignees of ELEX,
as of any term, present or future, for all or any part of the rent specified in
this Lease and then unpaid including at ELEX's option the rent for the entire
unexpired balance of the term of this Lease and all other charges, payments,
costs and expenses reserved as rent or additional rent, together with interest
thereon, costs of suit and an attorney's commission for collection of five (5%)
percent of the total of the foregoing sums; but in any event said attorney's
commission shall be not less than One Thousand Dollars ($l,000.00); and for so
doing, this Lease or a copy hereof, verified by affidavit, shall be a sufficient
warrant; and the said judgment from and after entry thereof, shall bear interest
at the highest rate of interest a judgment may bear under the laws of the State
of New Jersey.
Lessee hereby waves the benefit of any laws which might now or hereafter
authorize the stay of any execution to be issued on any judgment recovered on
this Lease or the exemption of any property from levy or sale thereunder. Lessee
also waives and releases ELEX or any assignee of ELEX and said attorney, from
all errors, defects and imperfections whatsoever of a procedural nature in the
entering of any judgment or any process or proceedings relating thereto.
7. WARRANTIES AND REPRESENTATIONS: LESSEE DOES HEREBY AGREE THAT EACH UNIT
IS OF A SIZE, DESIGN, CAPACITY AND MATERIAL SELECTED BY LESSEE, AND THAT LESSEE
IS SATISFIED THAT EACH SUCH UNIT IS SUITABLE FOR LESSEE'S PURPOSES, AND
SUFFICIENTLY DURABLE UNDER THE CONDITIONS OF USAGE THEREOF BY LESSEE, AND THAT
ELEX MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE SUITABILITY,
DURABILITY, MERCHANTABILITY OR FITNESS FOR ANY PURPOSE OF ANY UNIT OR ANY OTHER
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT THERETO.
8. Special Provisions: The following special provisions shall be
incorporated herein by reference:
Special Provision For Option To Purchase
Special Provision For Option To Renew
Special Provision For Option to Early Terminate
Special Provision For Terminal Rental Adjustment
"This is Counterpart No. 2 of 3 signed counterparts. A security interest
in this Lease may be created only by possession of Counterpart No. 1."
9. By the execution hereof, there are incorporated and made a part hereof
for all purposes, as though set forth herein at length, each, and all of the
terms, conditions and provisions of Paragraphs 2 through 5 of the Agreement For
Leasing dated March 1999 between Lessee and THE ELEX GROUP, INC. a copy of which
is attached hereto. Unless specifically defined in this Lease i7b defined terms
used herein shall have the same meaning as set forth in the Agreement For
Leasing.
10. UPON ACCEPTANCE OFTHE EQUIPMENT, THIS LEASE SHALL CONSTITUTE A
NONCANCELABLE NET LEASE COVERING THE EQUIPMENT. LESSEE'S OBLIGATIONS TO PAY ALL
RENT AND OTHER AMOUNTS WHEN DUE AND TO PERFORM AS REQUIRED UNDER THIS LEASE ARE
UNCONDITIONAL AND IRREVOCABLE- SUCH OBLIGATIONS ARE NOT SUBJECTO CANCELLATION,
MODIFICATION, REPUDIATION, REVOCATION OR EXCUSE. LESSEE SHALL NOT BE ENTITLED TO
ANY ABATEMENT, REDUCTION, OFFSET OR COUNTERCLAIM WITH RESPECT TO THESE
OBLIGATIONS FOR ANY REASON WHATSOEVER, WHETHER ARISING OUT OF CLAIMS AGAINST
ELEX, THE MANUFACTURER OR SUPPLIER, DEFECT IN LACK OF FITNESS FOR USE OF, LOSS
OF POSSESSION OR USE OF OR DAMAGE OR DESTRUCTION OF THE EQUIPMENT ANY
PROHIBITION AGAINST USE OR OTHERWISE.
11. Lessee warrants and agrees that it has not and will not use or operate
any Unit(s) of Equipment prior to the Date of Acceptance o the Unit(s) under
Lease. In order to assure ELEX of the tax benefits available to an owner of
Equipment with whom the first use begins the parties incorporate herein the
provisions of "Schedule C" attached hereto.
This Lease shall inure to the benefit of and shall be binding upon ELEX and
Lessee, their assigns and successors.
12 IN WITNESS WHEREOF, the parties hereto have hereunto caused this
Lease to be duly executed as of the 29th day of March 1999
ICT GROUP, INC.__________________ THE ELEX GROUP, INC.___
(Lessee)
(ELEX)
By_s/s John J Brennan BY________________________
Title: ___President & CFO ___________ Title_____Secretary _______
(SEAL)
Attest ______David J. McHugh_______
Signed in my presence in the Commonwealth of Pennsylvania
seal
___Diane Haeselin____________________
Notary
Notarial Seal
Diane Haeselin, Notary Public
Middletown Twp., Bucks County
My Commission Expires May 12, 2001
Member, Pennsylvania Association of Notaries
SCHEDULE A
Page 1 of 1 Page
DESCRIPTION OF EQUIPMENT
Manufacturer: Abell's Floor Covering, Aspect Telecommunications, C&R Roofing
Enterprises, Inc., Center Core, Charles B. Flynn & Company, Inc., Commercial
Business Interiors, Creative Design, DeLand Heating & Air Conditioning Co.,
Florida Electric Works, Inc., GTE Corp., Ikon, Lemoine's Welding, Inc., Mills &
Nebraska, Pioneer Appliance Company, Quality Precast & Co., Stebilla Drywall
Services, Inc., STEPP Office Supply, Tarmac, U.S. Blinds Fabrications, Inc.,
West Volusia Fire Equipment, Inc.
Location: 1398 South Woodland Boulevard, Deland, FL 32720
QTY. MODEL# DESCRIPTION SERIAL NUMBER
Various Furniture and Fixtures and Telecommunications Equipment
L-A1951
SCHEDULE B
CASUALTY LOSS AND TERMINAUON
VALUE SCHEDULE
Casualty Loss Occurring
or Notification of
Termination Given After Casualty Termination
Rental Payment Number Loss Values* Values*
0 115
12 97
24 76 69.56
36 55 48.60
48 28 26.11
54 12 12.00
*Values are given as a percentage of original cost.
LBIM4 Lease Number- 990727 -
SCHEDULE c
Indemnify for Loss of Depreciation
If ELEX shall not be entitled to a deduction with respect to ELEX's cost of any
Unit of Equipment listed in Schedule A of this Lease based upon The Accelerated
Cost Recovery System provided by Section 168 of the Internal Revenue Code of
1986, as amended, in the amounts specifiedin Section 168 (b) (1) thereof for
Recovery Property defined therein as having a class life of 5-Year Property
(Deduction") then Lessee shall pa) to ELEX within 30 days of ELEX's demand, as
additional rent hereunder, an amount which, after deduction of all taxes
required to be paid b) ELEX in respect of the receipt thereof, shall be equal to
the sum of (x) an amount equal to the additional taxes paid or payable by ELEX
in consequence of the failure to obtain the benefit of such Deduction and (z)
any interest or penalty which may be assessed against ELEX in connection with
such inability to obtain the benefit of such Deduction, all of which amounts
shall be payable on written demand made at any time after payment of the
additional income tax. Notwithstanding the indemnity given by Lessee hereby, it
is understood and agreed that ELEX shall have full control over the filing of
its tax returns and any and all negotiations with tax authorities with respect
thereto; and shall be the sole judge of the terms upon which it is appropriate
to settle any controversy with the taxing authorities with respect thereto.
Without limiting the generality of the preceding sentence, in the event of any
such controversy, ELEX shall, to the extent practicable, notify Lessee -of, and
consult with Lessee in connection with, any negotiations with tax authorities
relative to such controversy. The term, "tax return" as used herein shall
include any tax return filed separately by ELEX or any consolidated return in
the filing of which ELEX may join with an affiliated corporation.
Special Provision For Option To Purchase
In the event that the Lease has not been earlier terminated and that no defaul
thas occurred Lessee may, by written notice delivered to ELEX at least one
hundred eighty (180) days prior to the expiration date of the term or any
previously extended term (the "Expiration Date"), elect to purchase the
Equipment then subject to the Lease for a purchase price equal to the "Fair
Market Value" thereof as of the end of such term, such purchase to be on an
as-is, where-is basis, without representation or warranty, expressed or implied,
of any kind whatsoever by ELEX. As used in this Section, "Fair Market Value"
shall be determined by ELEX and Lessee on the basis of what would be obtained
in an arm's length transaction between an informed and willing buyer (other than
a buyer currently in possession or a used equipment dealer) and an informed
seller under no compulsion to sell, and in determining such amount (i) the cost
of removal from the location of current use all not be a deduction from such
amount and (ii) it shall be assumed that each Unit is in the condition required
by the Lease. If on or before sixty (60) days prior to the Expiration Date ELEX
and Lessee are unable to agree upon "Fair Market Value" such Fair Market Value
shall be determined by an independent appraiser mutually agreed upon by ELEX and
Lessee within (10) days after selection, or failing such agreement, by a panel
of three independent, qualified appraisers, one of whom shall be selected by
ELEX the second by Lessee and third appointed by the first two selected all
within the ten (10) days. The appraiser or panel of appraisers, as the case may
be, shall make its determination within a period of thirty (30) days following
appointment. The determination so made shall be conclusively binding upon both
ELEX and Lessee. The expenses and fees of all appraisers shall be borne by
Lessee.
Special Provision For Option To Renew
(1) Renewal option. In the event that the Lease has not been earlier
terminated and that no default has occurred and is continuing, Lessee, shall
have the option to extend the term of this Lease or prior extensions thereof
with respect to the Equipment for a period specified by Lessee but in any event
each extension shall be for not less than six (6) months in duration
("Additional Term") commencing on the expiration date of the term or any
previously extended term (the "Expiration Date") if notice of the exercise of
such option is given by Lessee in writing to ELEX at least one hundred eighty
(180) days prior to the Expiration Date of its intention to extend the term Of
this Lease for the Additional Term.
(2) Rentals During Additional Term The rental to be paid during all such
extensions shall be an amount equal to "Fair Market Rental" as of the
commencement of the Additional Term, payable in advance in equal and
consecutive monthly installments on each monthly anniversary of the Expiration
Date commencing with the Expiration Date. As used in this section, the term
"Fair Market Rental" shall mean an amount equal to the aggregate net rental
which would be obtained in an arm's length transaction between an informed and
willing lessee (other than a lessee in possession or a used equipment dealer)
and an informed and willing lessor under no compulsion to lease, and in
determining such amount (i) the cost of removal from the location of current
use shall not be a deduction, from such amount and (ii) it shall be assumed
that at the time of the commencement of such Additional Term, each Unit is in
the condition required by the Lease. If on or before sixty (60) days prior to
the Expiration Date, ELEX and Lessee are unable to agree upon a determination of
Fair Market Rental, such Fair Market Rental shall be determined by an
independent appraiser mutually agreed upon by ELEX and Lessee within ten (10)
days after selection, or failing such agreement, by a panel of three
independent, qualified appraisers, one of whom shall be selected by ELEX, the
second by Lessee and the third appointed by the first two selected all within
the ten (10) days. The appraiser or panel of appraisers, as the case may be,
shall make its determination within a period of thirty (30) days following
appointment. The determination so made shall be conclusively binding upon both
ELEX and Lessee. The expenses and fees of all appraisers shall be borne by
Lessee.
SP-OTR95 Lease Number 990727
Special Provision For Early Termination
1) If during the Initial Term all or part of the Equipment becomes
obsolete or surplus to Lessee's requirements, and provided no default has
occurred, Lessee may at any time after the thirty sixth (36th) month, upon not
less than ninety (90) days prior written notice to ELEX, terminate the Lease
with respect to such Equipment, or any Unit(s) thereof, ("Terminated Unit(s)"),
as of any succeeding rental payment date specified in said notice
("Termination Date").
(2) On the Termination Date the Lessee shall return the Terminated Unit(s)
to ELEX pursuant to the provisions of sub-paragraph 2(h) of the Agreement For
Leasing.
(3) Following the giving of written notice to terminate the Lease as to any
Unit(s), ELEX and Lessee shall endeavor to obtain bids for the purchase or lease
of the Terminated Unit(s) on an as-is, where-is basis and without
representations or warranties, expressed or implied, of any kind whatsoever.
(4) Upon the Termination Date, Lessee shall pay ELEX the regular monthly
installment of rent, without any abatement as described in paragraph ten (10)
hereof, plus the net Termination Value, which shall be deemed to be the amount,
if any, by which the Termination Value, defined in paragraph seven (7) hereof,
exceeds the net amount received by ELEX for the Terminated Unit(s).
(5) If by the Termination Date a satisfactory bidder(s) has not been
obtained for the sale or lease of all of the Terminated Unit(s), ELEX shall
within ninety (90) days after the return of the remaining Unit(s) to ELEX sell
or lease the Unit(s) for the highest offer then available.
(6) Lessee shall be refunded an amount equal to the proceeds of the sale or
the present value of the lease, as defined in paragraph eight (8) hereof, less
the actual expenses incurred by ELEX in making the sale(s) or lease(s)
including, without limitation, storage, insurance, advertising, sales taxes and
attorneys' fees for the Terminated Unit(s) and, but in no event shall the refund
be in excess of the net Termination Value previously paid by Lessee to ELEX
(7) The Termination Value shall be computed by multiplying ELEX's original
cost for the Terminated Unit(s) as shown on Schedule A of the Lease, by the
applicable termination percentage shown on Schedule B of the Lease
("Termination Value").
(8) The present value of a lease shall be deemed to be equal to the
aggregate net rentals of such lease discounted at a rate equal to three percent
(3%) over the average then current prime interest rate or equivalent thereof
charged by the three largest New York commercial banks on the Termination Date.
(9) In the event that no bidder has been obtained for the sale or lease of
all of the Terminated Unit(s) within ninety (90) days after the Termination
Date, ELEX shall transfer ownership of the Unit(s) to Lessee.
(10) In the event of termination of the Lease as to any Unit(s), the amount
of each remaining installment of rent as provided in the Lease shall be reduced
and abated by the same percentage as ELEX's original cost of such Terminated
Unit(s) bears to the total original cost of all Unit(s) as shown in Schedule
A of the Lease.
SP-PET95 Lease Number 990727 -
SPECIAL PROVISION FOR TERMINAL RENTAL ADJUSTMENT
(1) Since the rental payments due under the Lease are based upon the
anticipated residual value of the Equipment being equal to or greater than 10%
of the original cost, as shown on Schedule A of the Lease, ("Residual Value"),
it is agreed that notwithstanding anything to the contrary contained herein
Lessee shall pay to ELEX prior to the termination of the Term of the Lease
('Termination Date") as "Additional Rent" the amount, if any, by which the
Termination Value, as specified on Schedule B of the Lease, exceeds the net
proceeds received as of the date thereof from the sale of the Equipment.
(2) Following the giving of written notice to terminate the Lease, ELEX and
Lessee shall endeavor to obtain bids for the purchase of the Units of Equipment
on an as-is, where-is basis and without representations or warranties, express
or implied, of any kind whatsoever. Within ninety (90) days after the
Termination Date, ELEX shall sell said Unit(s) for the highest offer then
available. Upon such sale, Lessee shall be refunded an amount equal to
the proceeds of the sale less the actual expense incurred by ELEX in making
the sale, including, without limitation, storage, insurance, advertising, sales
taxes and attorneys' fees, but in no event shall the refund be in excess of the
Additional Rent previously paid.
(3) In the event that no bidder has been obtained for the sale of all of the
Units of Equipment within ninety (90) days after the Termination Date, ELEX
may at its option transfer title to Lessee for those Units of Equipment which
have not been sold.
AGREEMENT FOR THE PURCHASE OF EQUIPMENT UNDER LEASE
By and between The ELEX Group, Inc., a New Jersey corporation whose address is
P.O. Box 14,' Medford, New Jersey 08055 ("ELEX"), and ICT GROUP, INC., a
Pennsylvania corporation whose address is 800 Town Center Drive, Langhorne, PA
19047 ("Lessee").
WITNESSETH:
WHEREAS, ELEX and Lessee have entered into a lease covering the equipment set
orth on Schedule A attached hereto and made a part hereof ("Equipment") dated
March 1999 -#990727 ("Lease"); and
WHEREAS, the parties now wish to modify some of the terms and conditions of the
Lease;
NOW, THEREFORE, in consideration of the mutual promises set forth hereinafter
and in the Lease and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is hereby agreed as follows:
1) In the event that the Lease has not been earlier terminated and that no
continuing default is then occurring, either party may, by giving written
notice to the other party at least one hundred eighty (180) days prior to the
expiration date of the term of the Lease ("Expiration Date"), elect to have the
equipment then subject to the Lease purchased by the Lessee on the Expiration
date for a purchase price equal to ten percent (10%) of the original cost of
the Equipment, such purchase to be on an as-is, where-is basis, without
representation or warranty, expressed or implied, of any kind whatsoever by
ELEX.
2) In the event of a conflict between the provisions of the aforesaid Lease and
this Agreement, the provisions of this Agreement shall govern.
In witness whereof, the parties hereto have caused this Agreement For The
Purchase Of Equipment Under Lease to be duly executed this 29th day of March
1999.
ICT GROUP, INC. THE ELEX GROUP, INC.
(Lessee) (ELEX)
BY: /s/ John J. Brennan BY:___________________
Title: President & CFO Title: Secretary
AGRPUREQ - 1961
EXHIBIT I
CERTIFICATE OF ACCEPTANCE
TO: THE ELEX GROUP, INC. (-ELEX-)
1, a duly appointed inspector and authorized representative of ICT GROUP, INC.,
a Pennsylvania corporation whose address is 800 Town Center Drive, Langhorne, PA
19047
("Lessee"), do hereby certify in accordance with the Lease dated March 29, 1999
between Lessee and ELEX that (i) I do accept the Unit(s) of Equipment listed in
the Schedule A attached hereto and made a part hereof which has (have) a
purchase price of $ 936,734 (ii) the Date of Acceptance is as set forth below
and (iii) the Unit(s) has (have) been delivered and installed at:
1398 South Woodland Blvd., DeLand FL 32720
The execution of this Certificate of Acceptance will in no way relieve or
decrease the responsibility of any manufacturer of any Unit(s) of Equipment for
any warranties it has made with respect to any Unit(s) of Equipment.
ICT GROUP, INC.____________
(Lessee)
BY /s/ John J. Brennan
TITLE President and CFO
DATE 3/29/99
Signed in my presence in the Commonwealth of Pennsylvania
Dian Haeselin______
Notary
Notarial Seal
Diane Haeselin, Notary Public
Middletown Twp., Bucks County
My Commission Expires May 12, 2001
Member, Pennsylvania Association of Notaries
ELEX hereby accepts Lessee's Certificate of Acceptance and grants Lessee the
right to use the Equipment.
THE ELEX GROUP, INC._______________
(ELEX)
BY_________________________________
TITLE______Secretary_________________
Lease Number 990727
COA-1971
LESSEE'S CONSENT AND AGREEMENT
The undersigned ("Lessee") acknowledges receipt of notice that ELEX will
execute a Collateral Assignment(s) relating to the Lease of even date herewith
("Lease"), and for good and valuable consideration, receipt whereof is hereby
acknowledged, Lessee hereby consents to the execution and delivery of said
Collateral Assignment(s) and to all the terms and provisions thereof and
agrees that upon notice to the, Lessee of such Collateral Assignment(s):
(a) The Lessee will pay directly to the last Assignee or to whomsoever such
Assignee shall direct (i) all rent and other moneys due and to become due from
the Lessee as set forth in the Lease, (ii) all amounts payable by reason of
acceleration of the liability of the Lessee for such rent or other moneys and
(iii) all other amounts at any time owing under the Lease by the Lessee.
(b) The Lessee will not assert against such last Assignee, or against
whomsoever such Assignee shall have directed payment to be made, any defense,
setoff or counterclaim (including recoupment against, or other diminution of,
amounts payable by the Lessee to such Assignee) which it may have against ELEX
or anyone, whether arising under the Lease, hereunder or otherwise.
(c) The Lessee will not modify or consent to any modification of the terms
of the Lease without the written consent of ELEX and such last Assignee.
(d) All obligations and warranties of ELEX contained in the Lease shall be
and remain enforceable by the Lessee against and only against ELEX and its
successors and assigns and not against the Collateral Assignee.
(e) Any assignment executed and delivered pursuant to the right reserved
to ELEX and its assignees in Paragraph 2(k) of the Agreement for Leasing shall
be deemed to be included within this Consent and Agreement.
Dated: March 29, 1999 ICT GROUP, INC___________
(Lessee)
BY__________John J. Brennan_____________
TITLE______President and CFO____________
SEAL
Attest________David F. McHugh___________
TRANSFER & ASSUMPTION AGREEMENT
Assumption Agreement made by and between ICT Group, Inc., ("Lessee"),
Boston Communications Group, Inc. ("Transferee"), The ELEX Group, Inc.,
("Lessor"), and EUROPEAN AMERICAN BANK ("EAB"), a corporation organized under
the Banking Laws of the State of New York ("Assignee").
WHEREAS, Lessee is presently indebted to Lessor under an Agreement for
Leasing dated September 24, 1998, and Lease #990729(collectively the "Lease")
between Lessee and ELEX, and duly assigned to EAB, copies of which Lease,
delivery and acceptance receipt, sale and Collateral Assignment by ELEX to
EAB, notice of assignment and financing statements filed with the Secretary of
State of Pennsylvania and Florida, with regard to the following equipment, are
annexed hereto as Exhibit A.
SEE ATTACHED SCHEDULE "A"
and,
WHEREAS, Lessee has agreed to sell, transfer and assign its interest
in such equipment and Lease to Transferee, and Transferee has agreed to assume
all of Lessee's obligations to Lessor:
NOW, THEREFORE, IT IS AGREED:
1. Rent Balance All of the parties acknowledge that the
balance due to Lessor as of the date hereof is payable in the manner set forth
in the Lease, or other evidences of indebtedness and any other documents,
waivers or agreements in connection therewith heretofore executed by Lessee
(herein collectively referred to as the "Obligations").
2. Rent Payments Lessee and Transferee hereby agree jointly and
severally to pay and discharge the lease payments and all other amounts
payable under the Obligations to Lessor or its successors and assigns, in
accordance with the terms of the Obligations and upon execution of this
Agreement, to pay to EAB the monthly installments of $8,960.00 for the next 47
remaining months including the installment beginning with 11/1/99.
3. Assumption Transferee hereby assumes and agrees to perform
all the covenants of Lessee set forth in the Obligations.
4. Lessee's Liability Lessee shall continue to remain liable on
the Obligations and remain firmly bound as though this Agreement had never
been entered into.
5. Lease Terms All terms, conditions, and covenants of the
Obligations shall remain unchanged and shall continue to remain in full force
and effect.
6. Estoppel Lessee and Transferee hereby warrant, represent, and
covenant that the Obligations are not subject to any disputes, offsets, or
counterclaims of any kind or nature whatsoever.
7. Security Transferee acknowledges that Lessor has a valid first
security interest in the equipment and in confirmation thereof agrees to
execute all financing statements and other documents which Lessor may, in its
sole discretion, deem necessary to protect such security interest.
8. No release Lessee agrees that its obligations hereunder shall
not be impaired by any modification, release, or other alteration of any
Obligations of Lessee or of any security therefore, to all of which Lessee
hereby consents and that the liability of Lessee hereunder is direct and
unconditional and may be enforced without requiring Lessor or its assignees
first to resort to any other right, remedy, or security.
9. Consent Lessor hereby consents to the aforesaid transfer by Lessee to
Transferee.
Transferee: Lessee:
Boston Communications Group Inc. ICT Group, Inc.
By: /s/ Karen A. Walker______ By: /s/ V A Paccapaniccia
Title Chief Financial Officer____ Title Sr. VP Financial & CFO
CONSENTED TO: CONSENTED TO:
Assignee: Lessor:
EUROPEAN AMERICAN BANK The ELEX Group, Inc.
By: Frederick W. Frinkelmare By:_/s/ JoDee B. Pettine
Title ___A V P__________________ Title: President
AGREEMENT FOR LEASING
THIS AGREEMENT by and between THE ELEX GROUP, INC., a New Jersey
corporation, whose address is P.O. Box 14, Medford, New Jersey 08055 ('ELEX'),
and ICT GROUP, INC., a Pennsylvania corporation whose address is 800 Town
Center Drive, Langhorne, PA 19047 ("Lessee").
WITNESSETH
WHEREAS, Lessee desires to lease items of equipment from ELEX or certain
lessors represented by ELEX, and ELEX is willing to arrange such leases; and
WHEREAS, the parties wish to set forth in full certain terms to be incorporated
in all leases to be executed pursuant to this Agreement For Leasing:
NOW THEREFORE, in consideration of the mutual covenants herein contained and
intending to be legally bound hereby, it is agreed as follows:
1. Leasing. Lessee hereby authorizes ELEX, and ELEX agrees to use its best
efforts to arrange leases of equipment wherein Lessee shall be the lessee and
ELEX or the other party or parties represented by ELEX shall be the lessor.
Such leases shall cover such equipment and shall contain such provisions
respecting payments, terms, covenants, conditions and provisions ("Provisions")
as the respective parties thereto may agree. Lessee will execute such leases
when ELEX or a lessor secured by ELEX is ready to enter into such leases. ELEX
shall make all arrangements between Lessee, and all lessor(s) represented by
ELEX
2, Lease Provisions. Each such lease, ("Lease") shall, in addition to its
Provisions, incorporate by reference all of the following terms and conditions,
covenants and provisions (the term "ELEX as used hereafter, being deemed to
refer to the lessor under each such Lease; the term "Unit" being deemed to refer
to each item of equipment described in and covered by a Lease; the term
"Equipment" being deemed to refer to all items of equipment described in and
covered by a Lease; and the term "Date of Acceptance" being deemed to refer to
the date a Unit is available to be placed in service for its intended purpose):
(a) Term The Lease of the Equipment shall commence as of the date thereof
and shall continue in full force and effect until terminated by either party
as of any succeeding rental payment date, upon not less than one hundred eighty
days prior written notice to the other party; provided, however, that the term
of the Lease shall in no event be less than the period specified as the
"Initial Term" in the Lease covering such Equipment.
If any term shall be extended or any renewal options shall be exercised, the
word "term" as used herein shall be deemed to refer to the Initial Term and
all extended or renewal terms of any Lease hereto, and all provisions of this
Agreement For Leasing shall apply during extended or renewal terms.
(b) Rent. As used herein, "rent" for the Equipment shall be the "total
rent" specified in the Lease, payable in successive installments at the times
set forth in the Lease. It is understood and agreed by the Lessee that such
"total rent" shall be of the essence of the Lease and that ELEX shall be
entitled to the payment of the full amount thereof in consideration of the
letting of the Equipment, including payment of the then outstanding balance
of such total rent (plus all other sums due under the Lease) in the event of
the happening of any default specified in Paragraph 20) below, subject to
reduction only as provided in Paragraph 20)(2)(b). Rent shall be paid to ELEX
at its address specified in the Lease, or as otherwise directed by ELEX free
from all claims, demands, or setoffs against ELEX, the manufacturer of the
Equipment or any assignee of ELEX. If ELEX is subjected to any liability
because of any non-compliance with the Lease or any regulatory law applicable
to any of the Equipment on the part of the Lessee, then upon notice to the
Lessee of the nature and/or amount thereof, the Lessee shall forthwith
discharge the same, and if ELEX shall incur any expense by reason thereof,
the amount of such expense shall be added to the installment of rent next
falling due as additional rent.
If any installment of rent is not paid within ten (10) days following the due
date thereof, a late charge equal to five percent (5%) of such installment
shall be due and payable as additional rent, and thereafter an additional late
charge of five percent (5%) of the then unpaid installment and late charges
shall be due and payable as of the eleventh day of each succeeding month
thereafter until such installment is paid.
(c) Use, Care and Operation. Lessee shall, at its expense:
(l) Receipt and Acceptance. Receive each Unit of Equipment at, and pay all
delivery charges for each Unit to, the location of original use specified
therefore; unload, and, if required, assemble and install the same.
Lessee will signify the Date of Acceptance of each Unit of the Equipment by the
prompt execution and delivery to ELEX of a Certificate of Acceptance in the
form attached hereto as Exhibit 1 ("Certificate of Acceptance"). The Lessee's
execution and delivery to ELEX of the Certificate of Acceptance, signed by an
officer of Lessee, shall conclusively establish as between ELEX and the Lessee
that each Unit is in good operating order, repair, condition, appearance, is
suitable for the purpose of Lessee and the Lease, conforms to the
specifications applicable thereto and that such unit has not been used or
operated prior to the Date of Acceptance indicated therein. Such acceptance
shall not affect Lessee's claims against the manufacturer or manufacturer's
warranties.
(2) Fees and Tares. Pay, and file any necessary returns with respect to,
all license fees, assessments or other governmental charges, and sales, use,
gross receipts, personal property, and other tax or taxes, now or hereafter
imposed by any state, federal or local government or agency upon any Unit or
upon the leasing, use or operation thereof, or upon the receipt of rentals
therefore or earnings arising therefrom (excluding taxes imposed on ELEX's net
income, except any such taxes which are in substitution for, or relieve the
Lessee from, the payment of taxes which it would otherwise be obligated to pay
or reimburse as herein provided) before the same shall become in default or
subject to the payment of any penalty or interest and supply ELEX with receipts
or other evidence of payment satisfactory to ELEX; Lessee shall promptly
reimburse ELEX for all property taxes, or levies assessed upon any Unit, paid
by ELEX; however, there shall be no obligation of ELEX to make payment of any
property taxes assessed upon any Unit.
(3) Maintenance. At all times keep and maintain each Unit in good working
order, repair, and appearance; install, keep, and maintain each unitsuch
insignia and identification as ELEX may designate, and certify that such has
been done; make any and all necessary repairs and replacement thereto in order
that each Unit, its components and accessories, shall continue to fulfill their
intended function or use; and keep and operate the same as specified in the
Lease therefore; except that Lessee shall not, without ELEX's prior written
consent, affix or install any accessory, equipment, device, advertising matter
or insignia to any Unit. ELEX passes through to Lessee all warranties of the
manufacturer of the Equipment and Lessee shall have the right to, and will,
directly avail itself of all warranties and representations made by the
manufacturer with respect to the Equipment and ELEX agrees to execute such
documents as may be required to enable Lessee to obtain customary warranty
service for each Unit of Equipment from the manufacturer.
The Lessee agrees to execute at its own expense a maintenance contract with the
manufacturer of the Equipment and to keep said Contract in force until the
Equipment is surrendered to ELEX. Said maintenance contract shall provide for
at least the same services by the manufacturer as those furnished under the
manufacturer's standard maintenance contract for nine-hour per day use of the
Equipment, and shall provide for the incorporation of such engineering changes
and improvements in the Equipment which are available without additional charge
as part of such services. A maintenance contract for the Equipment may not be
entered into with other than the manufacturer of the Equipment without the
approval of ELEX, which approval will not be unreasonably withheld.
All replacements, repairs, parts, and supplies shall be obtained at Lessee's
expense and shall be performed and supplied only by such persons as shall be
approved by ELEX. All replacements, repairs, parts, supplies, accessories,
equipment, devices, or other items furnished or affixed to any Unit shall
thereupon become ELEX's property and Lessee shall arrange that there be
delivered promptly to ELEX all instruments or documents as may be necessary to
evidence ELEX's original and free, clear and unencumbered title thereto and
ownership thereof.
(4) Provisioning. Provide all labor, materials, services, utilities,
electric power, parts, and other supplies or items consumed by, or required
for, or in connection with the recommended use of, each Unit.
(5) Compliance with Law. Observe and comply with, and perform and execute,
all laws, rules, regulations, or orders of all state, federal, and local
governments or agencies which in any way affect or relate to, or are applicable
to, any Unit, or the use, operation, maintenance, or storage thereof; and
Lessee shall, and does hereby, indemnify ELEX and agrees to hold ELEX harmless
from any and all liability that may arise from any infringement or violation
of any such law, rule, regulation, or order by Lessee, or Lessee's employees,
or any other person.
(6) Use and Operation. Not use, operate, maintain, or store any Unit
improperly, carelessly, or in violation of the Lease or any instructions
furnished therefore by the manufacturer or by ELEX; nor install or operate the
same other than as specified in the Lease; nor permit anyone other than its
authorized agents, persons, and employees, all of whom must be competent
operators to operate the same, and for whom Lessee agrees to be responsible.
(7) Non -Transferability. Not, without ELEX's prior written consent, which
shall not be unreasonably withheld, let or sublet any Unit; nor lend or part
with the possession of any Unit, or any part thereof, nor assign the Lease or
any interest therein.
(8) Risk. Bear and assume all risk and liability for (and Lessee does
hereby agree to indemnify and hold ELEX harmless from any and all claims,
liens, demands, or liability arising out of the loss of or damage to each Unit,
the use, operation, maintenance, and storage thereof, and the loads thereon,
and the injury or death of persons and/or damage to property howsoever arising
therefrom or the use therefore, or the condition of such Unit, during the
continuance of the Lease and until the return of such Unit. The indemnities
and assumptions of liability herein provided shall continue in full force and
effect notwithstanding the termination of the Lease, whether by expiration of
time, by operation of law, or other.
(9) Inspection. Upon ELEX's demand, permit ELEX, its agents or
representatives and persons designated by ELEX to enter upon the premises where
each Unit is located and to inspect each Unit, and its manner of use, at any
reasonable time and from time to time.
(10) Notice of Location. Not, without ELEX's written consent, remove any
Unit from the location of original use; and at all time keep ELEX advised of
the location of any Unit should Lessee remove it from the location of original
use.
(d) Representations. Lessee does hereby agree that each Unit is of a size,
design, capacity, and material selected by Lessee, and that Lessee is satisfied
that each such Unit is suitable for Lessee's purposes, and sufficiently durable
under the conditions of usage thereof by Lessee, and that ELEX has made no or
uses of Lessee, or with respect to the permissible load thereof, or any other
representation or warranty, express or implied, with respect thereto. Lessee
understands and acknowledges that no broker or supplier, nor any salesman,
broker or agent of any broker or supplier is an agent of ELEX Lessee represent
to ELEX that the Equipment will be used exclusively for business or commercial
purposes and will not be used at any time during the term of the Lease for
personal, family or household purposes.(e)
NO REPRESENTATIONS
ELEX DOES NOT WARRANT THE EQUIPMENT IN ANY RESPECT, EITHER EXPRESSLY OR BY
IMPLICATION AND WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ELEX
EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS OR
ADEQUACY FOR ANY PURPOSE OR USE, QUALITY, PRODUCTIVENESS OR CAPACITY.
(e) Non-Liability of ELEX ELEX shall not be liable to Lessee for any loss,
incidental or consequential damage, expense of any kind or nature caused,
directly, indirectly, by any Unit or the Equipment or the use, maintenance,
operation, handling, or storage thereof, or loads thereon, or the repairs,
servicing, or adjustments thereto, or because the same is, or has become,
unsuitable, or unserviceable, or by any interruption of service or loss of
use thereof, or strict liability with respect thereto, or for any loss of
business or damage whatsoever or howsoever caused. ELEX shall not be liable to
Lessee for delay in delivering, or failure to deliver any Unit.
(f) Insurance. Lessee will procure and maintain at its sole cost and
expense, bodily injury and third party property damage insurance, with insurers
satisfactory to ELEX, for the Equipment, with liability limits of not less than
those specified in the Lease. Lessee will further, without cost to ELEX
maintain or Cause to be maintained in effect throughout the term of the Lease
for the Equipment, with insurers satisfactory to ELEX, insurance policies
insuring against all-risk physical loss or damage to such Equipment for an
amount equal to the Casualty Value (hereinafter defined) of such Equipment as
of the last monthly rent payment date set forth in Schedule of Casualty Values
attached to the Lease. All policies shall name as additional insured ELEX, and
assignees of ELEX and Lessee as their interest may appear and provide that they
cannot be amended or canceled with respect to ELEX, and its assignees except on
at least thirty (30) days prior written notice to ELEX and its assignees. All
policies or certificates thereof and endorser, thereto shall be delivered to
ELEX effective and enforce at the time of execution of the I-ease. All renewals
thereof shall be delivered to ELEX, least ten (10) days prior to the expiration
of the current policy. Lessee hereby appoints ELEX as its attorney-in-fact,
coupled with an interest, With full power of substitution, for purposes of
executing any proof of loss or related document, endorsing any check, draft or
other means of payment in connection with any loss, compensable under such
policies. This power is irrevocable for so long as the Lessee remains indebted
to ELEX or its assignee hereunder or under any other agreement or instrument.
(g) Damage. Should any Unit:
(1) be damaged by reason of any cause, and be capable of repair without
impairment of value, Lessee shall repair the same at Lessee's sole expense, as
quickly as circumstances permit, without any abatement of rent. In such event,
should ELEX be indemnified under any insurance policy or policies pursuant to
the provisions of the Lease covering such Unit, ELEX shall pay to Lessee the
proceeds received by ELEX from such insurance but only to the extent necessary
to reimburse Lessee for all amounts paid by it pursuant to this paragraph and
properly documented. In any even, ELEX shall not be liable for any amount in
excess of said insurance proceeds; or
(2) be lost, stolen, destroyed, taken for public use, or damaged beyond
repair by any cause whatsoever, ("Casualty") Lessee shall pay ELEX within
fifteen (15) days thereafter an amount equal to ELEX's original cost of said
Unit, as shown in Schedule A of the I-ease of said Unit, multiplied by the
casualty loss percentage applicable to the date of Casualty, as shown in
Schedule B of the Lease of said Unit, ("Casualty Value'). Upon such payment,
and if the Lessee shall then not be in default under the Lease, the balance of
the rent due under the Lease shall abate in an amount determined by the same
percentage as the original cost of the Unit(s) suffering the Casualty bears to
the cost of the Equipment. Until such payment Lessee shall continue the prompt
payment of all rent under the Lease and any such rent due for the period before
payment shall not abate. Following payment of the Casualty Value Lessee shall
be entitled to the proceeds of any insurance covering the Unit(s) suffering a
casualty, but in no event shall the amount of such reimbursement exceed the
Casualty Value previously paid by Lessee, and any excess shall be the property
of ELEX
(h) Return of Equipment. Within ten (10) days after the expiration or
sooner termination of the term of the Lease (or of any extension thereof),
Lessee will, at Lessee's expense, return each Unit which has not been lost,
stolen, destroyed, or damaged beyond repair, to ELEX, or ELEX's designee or
designees, loaded on such appropriate conveyance and properly packed and at
such destination or destinations as ELEX may designate, free of all advertising
or insignia placed thereon pursuant to Section 2(c) (3) by Lessee (other than
identification tags of ELEX), and in the same operating condition, order,
repair, and appearance as when received (reasonable wear and tear (except as
provided in Paragraph 2 (c) (3) above) and damage by any cause for which ELEX
has recovered under insurance, excepted]. If any such Unit is not so returned
within the time specified herein, Lessee shall continue to pay the rent
specified in the Lease until the Equipment is so returned in the aforesaid
condition.
(i) Time of Essence. Tune is of the essence of this Agreement. No expres
or implied waiver by ELEX of any default hereunder shall in any way be, or be
construed to be, a waiver of any future or other default of Lessee, or a waiver
of any rights of ELEX or a modification of any of the Lease terms, or an
extension or enlargement of Lessee's rights under the Lease.
(j) Default by Lessee.
(1) If (a) Lessee shall fail to pay the rent when due; or (b) Lessee shall
fail to perform any other term or condition of the Lease and such failure shall
continue for a period of thirty (30) days; or (c) proceedings under the Federal
Bankruptcy Code shall be instituted against Lessee, or a receiver shall be
appointed for Lessee or any of its property, or any of the Equipment shall be
attached or levied upon, and such proceedings shall not be vacated, or fully
stayed within ninety (90) days in the case of proceedings under the Federal
Bankruptcy Code, otherwise within twenty (20) days thereof; or (d) Lessee shall
make an assignment for the benefit of creditors, or institute proceedings for
debtor relief under the Federal Bankruptcy Code, or admit in writing its
inability to pay its debts generally as they become due; or (e) if any
representations or warranty made by Lessee hereunder or in connection herewith
shall be false, misleading or untrue in any material respect,
(2) then ELEX, at its option, may declare the balance of the rent due under
the Lease, as well as any amounts specified herein or in the Lease as items of
additional rent and not then accrued and owing, immediately due and payable,
and upon any such declaration the same, plus the aggregate amounts of any
installment of rent (including any late charge thereon) and any other sums
then accrued and unpaid, shall be due and payable forthwith, and ELEX shall
have the right to take all steps appropriate to collect the same and
(a) to take immediate possession of the Equipment, and
(b)to lease or sell, or both, the Equipment or any Unit upon such terms
as ELEX may elect, and apply the net proceeds on account of Lessee's
obligations hereunder, and
(c) in accordance with the terms of the Lease to confess a judgment
against the Lessee for the full amount of the rent and other sums due and
owing under the Lease.
The foregoing remedies and any other remedy available at law or equity are
cumulative and available to ELEX but ELEX shall be under no obligation to
exercise any such remedy. The exercise by ELEX of any such remedies shall not
release Lessee from its obligations hereunder or bar ELEX from proceeding
otherwise. Lessee shall additionally pay ELEX a reasonable sum as and for
attorneys' fees and an amount equal to such unreimbursed expenses as shall have
been paid or incurred by ELEX in the seizure of the Equipment or any Unit, or
in the enforcement of any of ELEX's rights or privileges hereunder.
(k) Assignment by ELEX ELEX shall have the right to assign all or any part
of its rights under the Lease. In such event, the assignee shall be entitled
to enforce the rights so assigned but shall be under no liability to the Lessee
to perform any of the obligation of ELEX, unless assignee assumes such
liability in writing, in which case ELEX shall, to the extent assignee assumes
such liability, be released from all of its obligations to Lessee. Lessee
agrees that it will pay the rent and all other sums due by Lessee hereunder
directly to such assignee after receipt of notice of such Assignment. Any
assignee of ELEX's rights may reassign such rights with the same force and
effect as an original assignment.
(1) Security. As security for the faithful performance by Lessee of the
terms and conditions of the Lease, Lessee shall deposit with ELEX the amount
indicated in the Lease as security deposit and/or advance rentals. Provided
Lessee has at all times fully performed all its covenants and conditions agreed
upon to be performed, ELEX will return to Lessee the security deposit at the
expiration of the Lease. ELEX may, but shall not be required to, apply such
security deposit and/or advance rentals to discharge any overdue obligation of
the Lease.
(m) Notices. All notices, consents, waivers or other communications
required under the Lease shall be in writing by certified mail, and any such
notice, consent, waiver or communications shall be irrevocable and become
effective when deposited in the United States mail, with proper postage prepaid
addressed to the party intended to be served at its address appearing in this
Agreement or in the Lease, or at such other address as such party may, from
time to time, designate in writing.
(n) General. This is a contract of lease only, and nothing herein shall be
construed as conveying to Lessee any right, title, or interest in or to the
Equipment, except its rights as a Lessee only. Title to the Equipment shall at
all times remain in ELEX, and Lessee shall at all times, at Lessee's expense,
protect and defend ELEX's title thereto against all claims, liens, and legal
processes of Lessee's creditors, or persons claiming through Lessee, and keep
the Equipment free and clear from all such liens, claims, and processes. ELEX
covenants, subject to performance by Lessee of all of its obligations under the
Lease, that Lessee will have quiet enjoyment of the Equipment during the term
of the Lease. Each Unit is, and shall remain, personal property irrespective of
its use or manner of attachment to real property, and Lessee shall obtain for
ELEX a real property waiver from owner or mortgage, of the premises where any
Unit is kept. Said waiver shall provide that the Equipment shall remain
personal property removable by ELEX or its assigns at any time without notice;
ELEX or its assigns shall have access to the premises as may be required for
the purpose of inspection, sale, and removal, the real property owner waives
any right, title, lien, or interest which he may otherwise have in the
Equipment. The parties agree that this Agreement for Leasing and each Lease are
intended to qualify as a "finance lease" under Article 2A of the Uniform
Commercial Code. Lessee acknowledges that (a) Lessee has received a copy of the
contract by which ELEX acquired the Equipment (the" Supply Contract") or (b)
Lessee has reviewed and approved the Supply Contract or (c) ELEX has informed
Lessee in writing that Lessee may have rights under the Supply Contract and
that Lessee should contact the supplier of the description of any such rights.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, LESSEE HEREBY WAIVES ANY RIGHTS TO
(i) CANCEL ANY LEASE, (ii) REPUDIATE ANY LEASE, (iii) REVOKE ACCEPTANCE OF THE
EQUIPMENT, (iv) RECOVER DAMAGES FROM ELEX FOR ANY BREACHES OF WARRANTY OR FOR
ANY OTHER REASON, (v) A SECURITY INTEREST IN THE EQUIPMENT IN LESSEE'S
POSSESSION OR CONTROL FOR ANY REASON, (vi) DEDUCT ALL OR ANY PART OF ANY
CLAIMED DAMAGES RESULTING FROM ELEX'S DEFAULT, IF ANY, UNDER ANY LEASE, (viii)
"COVER" BY MAKING ANY PURCHASE OR LEASE OF, OR CONTRACT TO PURCHASE OR LEASE,
EQUIPMENT IN SUBSTITUTION FOR THAT DUE FROM ELEX, (viii) RECOVER ANY GENERAL,
SPECIAL INCIDENTAL OR CONSEQUENTIAL DAMAGES FOR ANY REASON WHATSOEVER, AND (ix)
SPECIFIC PERFORMANCE, REPLEVIN, DETINUE, SEQUESTRATION, CLAIM OR DELIVERY OR
THE LIKE FOR ANY EQUIPMENT IDENTIFIED TO ANY LEASE.
Each individual Lease executed pursuant to the Agreement for Leasing shall
constitute a separate and independent \lease.
ELEX's obligations shall be suspended to the extent that ELEX is hindered or
prevented from complying therewith because of strikes, lockouts, war, acts of
God, fires, storms, accidents, governmental regulations or interference or
other acts beyond ELEX's control. No obligation of ELEX, except as otherwise
specified herein, shall survive the term of the I-ease, or sooner termination
thereof, and should ELEX permit use by Lessee of any Unit beyond the term
specified therefore, the Lease obligations of Lessee shall continue and such
permissive use shall not be construed as a renewal of the term thereof, or as a
waiver of any right or continuation of any obligation of ELEX thereunder, and
ELEX may take possession of any such Unit at any time upon demand after 10 days
written notice. The cancellation or other termination, whether by operation of
law or otherwise, of the Lease shall not release Lessee from any of its
obligations hereunder or thereunder save [except as provided in Paragraph 2(c)
(8) above] upon payment in full by Lessee to ELEX of the Termination Value set
forth in the Lease. In the event ELEX shall be entitled, pursuant to any
provision hereof, to repossess any Unit, ELEX shall not be liable to the Lessee
in respect of any damage arising out of any such repossession except for ELEX's
negligent or wrongful act. This Agreement contains the entire understanding
between ELEX and Lessee, and any change or modification must be in writing and
signed by both parties. This Agreement is entered into under and shall be
construed in accordance with the laws of the State of New Jersey insofar as
applicable to the rights of ELEX, Lessee and any third party as to the
Equipment.
No term of provision of this Agreement for Leasing or any Lease may be amended,
altered, waived, discharged, or terminated except by a written instrument
signed by the parties hereto, and in compliance with Section 2-208(2) of the
Uniform Commercial Code requiring separate signature of this provision, Lessee
has signed in the space provided below.
VP
_________________________________
(Lessee's initials)
(o) Lessee shall furnish to ELEX (i) within ninety (90) days after the
close of each fiscal year of Lessee, a copy of its financial statements,
including a Balance Sheet and Profit and Loss Statement of Lessee as of the
end of such year, in each case certified by public accountants of recognize
standing acceptable to ELEX and (ii) other such financial information
respecting the financial condition and operation of Lessee as ELEX may from
time to time reasonable request.
3. Special Provisions.
4 Resolutions and Recording Costs.
(a) Lessee agrees that it will provide ELEX or its assignee with
appropriate opinions of counsel and certified copies of all necessary
authorizing resolutions, as may be reasonably requested by ELEX or any
assignee or counsel therefore.
(b) Lessee agrees that it will pay any and all recording costs necessarily
incurred to establish and record any lien in favor of any assignee of ELEX
5. Miscellaneous
(a) It is understood and agreed between the parties hereto that,
subject to Lessee's rights to the Equipment so long as Lessee is not in default
under the Lease, the several instruments and documents incidental or related to
this Agreement, to the assignment of any Lease,and/or to the mortgaging of any
of the Equipment by ELEX may contain such provisions -as may be required by
reason of the laws of the place where any of the Equipment is located in order
that ELEX or its assignees or a mortgagee or holder of a security interest may
obtain the full benefits of this Agreement in accordance with its original
intendments and purposes, or as may be reasonably required by any such assignee
for the full protection of any security interest which such assignee may have
in the Equipment or any Lease, and the provisions of this Agreement are subject
to all such requirements.
(b) The headings and sub-headings contained in this Agreement arc solely for
convenience and are not intended to be complete or accurate summations or
indices of the contents of their respective paragraphs.
(c) Any provision of this Agreement found to be prohibited by law shall be
ineffective to the extent of such prohibition without invalidating the rest of
this Agreement.
(d) Lessee agrees that at any time and from time to time, upon the
written request of ELEX or its Assignees, Lessee will promptly and duly execute
and deliver any and all such further instruments and documents as ELEX or its
Assignees may deem desirable in obtaining the full benefits of this Agreement
and any Lease herewith and of the rights and powers granted thereunder. Lessee
hereby grants ELEX the authority to sign and file on Lessee's behalf any
document or financing statement ELEX deems necessary to perfect or protect
ELEX's interest in the Equipment or pursuant to the Uniform Commercial Code.
(e) This Agreement contains the whole understanding of the parties; shall
be construed and enforced in accordance with the laws of the State of New
Jersey and shall inure to the benefit of, and be binding upon, the respective
legal representatives and heirs of the individual parties; and the successors
and assigns of the corporate parties.
IN WITNESS WHEREOF, the parties hereto have executed these
presents, the corporate parties by their officers thereunto duly authorized
this. 29th day of September 1998
ICT GROUP, INC. THE ELEX GROUP, INC.
(Lessee) (ELEX)
By /s/ V.A. Paccapaniccia BY /s/ JoDee B Pettine
TITLE Sr. V P Finance & CFO TITLE President
Signed in my presence in the Commonwealth of Pennsylvania
/s/ __Diane Haeselin,____
Notary
Notarial Seal
Diane Haeselin, Notary Public
Middletown Twp., Bucks County
My Commission expires May 12, 2001 4;
Member, Pennsylvania Association of Notaries
LEASE 990729
THE ELEX GROUP, INC., a New Jersey corporation, whose address is P.O. Box 14,
Medford, New Jersey 08055 ("ELEX"), hereby leases to ICT GROUP, INC., a
Pennsylvania corporation whose address is 800 Town Center Drive, Langhorne, PA
19047
("Lessee"), and Lessee hereby hires and takes from ELEX, the equipment
described in Schedule A attached hereto and made a part hereof ("Equipment"),
at the rent and upon the terms and conditions herein set forth:
1. Location of Original Use: 1398 South Woodland Boulevard, DeLand, FL
32720
2. Initial Term: Commencing on the first day of the month following the
Date of Acceptance of the Equipment under Lease and expiring Fifty-One (51)
months thereafter.
3. Rental: Monthly Rent: $ 8,960.00 Security Deposit: $ 17,920.00
Advanced Rentals: $ None
Total Rent: Payable in Fifty One (51) successive equal monthly installments
of Eight Thousand Nine Hundred Sixty Dollars and No Cents ($8,960.00) each plus
the Additional Rent specified in the Special Provision For Terminal Rental
Adjustment.
Each installment shall be due upon the first day of each and every month after
the Date of Acceptance of the Equipment, except for the first monthly
installment thereof and any Security which is due upon the execution of this
Lease. Additionally the Lessee shall pay to ELEX an interim rent for the period
from the Date of Acceptance of the Equipment to the first day of the month
following such date ("Interim Rent Period"). Said interim rent shall be that
proportion of a monthly rent installment which bears the same ratio as the
number of days of the Interim Rent Period bears to thirty (30) days, and shall
be payable on the first day of the month following the Interim Rent Period.
4. Reports and Payment of Rental: Lessee shall make all payment and send
all notices to ELEX at the address of ELEX set forth above, or at such other
address as ELEX may, from time to time, designate in writing.
S. Liability Insurance: Lessee shall provide and maintain the following
liability insurance:
A. Public Liability Bodily Injury, not less than S500,000 per one
person, $1,000,000 per one accident.
B. Property Damage, not less than $500,000.
6. Confession of Judgment: In the event of any default by Lessee under
this Lease as provided in Paragraph 2(j) of the Agreement For Leasing, Lessee
hereby empowers any Prothonotary, Clerk of Court or attorney of any Court of
Record to appear for Lessee and, with or without complaint filed, confess
judgment, or a series of judgments, against Lessee in favor of ELEX or any
assignees of ELEX, as of any term, present or future, for all or any part of
the rent specified in this Lease and then unpaid including at ELEX's option the
rent for the entire unexpired balance of the term of this Lease and all other
charges, payments, costs and expenses reserved as rent or additional rent,
together with interest thereon, costs of suit and an attorney's commission for
collection of five (5%) percent of the total of the foregoing sums; but in any
event said attorney's commission shall be not less than One Thousand Dollars
($1,000.00); and for so doing, this Lease or a copy hereof by affidavit, shall
be a sufficient warrant; and the said judgment from and after entry thereof,
shall bear interest at the highest rate of interest a judgment may bear under
the laws of the State of New Jersey.
Lessee hereby waves the benefit of any laws which might now or hereafter
authorize the stay of any execution to be issued on any judgment recovered on
this Lease or the exemption of any property from levy or sale thereunder.
Lessee also waives and releases ELEX or any assignee of ELEX and said attorney,
from all errors, defects and imperfections whatsoever of a procedural nature in
the entering of any judgment or any process or proceedings relating thereto.
1
7. WARRANTIES AND REPRESENTATIONS: LESSEE DOES HEREBY AGREE THAT EACH UNIT
IS OF A SIZE, DESIGN, CAPACITY AND MATERIAL SELECTED BY LESSEE, AND THAT LESSEE
IS SATISFIED THAT EACH SUCH UNIT IS SUITABLE FOR LESSEES PURPOSES, AND
SUFFICIENTLY DURABLE UNDER THE CONDITIONS OF USAGE THEREOF BY LESSEE, AND THAT
ELEX MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE SUITABILITY,
DURABILITY, MERCHANTABILITY OR FITNESS FOR ANY PURPOSE OF ANY UNIT OR ANY OTHER
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT THERETO.
8. Special Provisions: The following special provisions shall be
incorporated herein by reference:
Special Provision For Option To Purchase
Special Provision For Option To Renew
Special Provision For Option To Early Terminate
Special Provision For Terminal Rental Adjustment
This is Counterpart No. 2 of 3 signed counterparts. A security interest in
this Lease may be created only by possession of Counterpart No. 1.
9. By the execution hereof, there are incorporated and made a part hereof for
all purposes, as though set forth herein at length, each and all of the terms,
conditions and provisions of Paragraphs 2 through 5 of the Agreement For
Leasing dated - September 24, 1998 between Lessee and THE ELEX GROUP, INC. a
copy of which is attached hereto. Unless specifically defined in this Lease
the defined terms used herein shall have the same meaning as set forth in the
Agreement For Leasing.
10. UPON ACCEPTANCE OF THE EQUIPMENT, THIS LEASE SHALL CONSTITUTE A
NONCANCELABLE NET LEASE COVERING THE EQUIPMENT. LESSEE'S OBLIGATIONS TO PAY ALL
RENT AND OTHER AMOUNTS WHEN DUE AND TO PERFORM AS REQUIRED UNDER THIS LEASE ARE
UNCONDITIONAL AND IRREVOCABLE. SUCH OBLIGATIONS ARE NOT SUBJECT TO
CANCELLATION, MODIFICATION, REPUDIATION, REVOCATION OR EXCUSE. LESSEE SHALL NOT
BE ENTITLED TO ANY ABATEMENT, REDUCTION, OFFSET OR COUNTERCLAIM WITH RESPECT TO
THESE OBLIGATIONS FOR ANY REASON WHATSOEVER, WHETHER ARISING OUT OF CLAIMS
AGAINST ELEX, THE MANUFACTURER OR SUPPLIER, DEFECT IN, LACK OF FITNESS FOR USE
OF, LOSS OF POSSESSION OR USE OF OR DAMAGE OR DESTRUCTION OF TIRE EQUIPMENT,
ANY PROHIBITION AGAINST USE OR OTHERWISE.
11. Lessee warrants and agrees that it has not and will not use or operate
any Unit(s) of Equipment prior to the Date of Acceptance of the Unit(s) under
Lease. In order to assure ELEX of the tax benefits available to an owner of
Equipment with whom the first use begins the parties incorporate herein the
provisions of "Schedule C" attached hereto.
This Lease shall inure to the benefit of and shall be binding upon ELEX and
Lessee, their assigns and successors.
12.. IN WITNESS WHEREOF, the parties hereto have hereunto caused this Lease to
be duly executed as of the 25th day
of June 1999
ICT GROUP, INC. THE ELEX GROUP, INC.
(Lessee) (ELEX)
By____/s/ V A Paccapaniccia_________ By /s/ JoDee B Pettine
Title Sr. VP Finance & CFO Title President
(SEAL)
Attest s/s David J McHugh,_____
VP Corporate Controller
Signed in my presence in the State of New Jersey
s/s Loretta J. Bozoski 6-25-99
LORETTA J. BOZOSKI
A Notary Public of New Jersey
My Commission Expires Jan, 7, 2000
Signed in my presence in the Commonwealth of Pennsylvania
s/s Diane Haeselin_____
Notary
Notarial Seal
Diane Haeselin, Notary Public
Middletown Twp., Bucks County
MY Commission Expires May 12, 2001
Member, Pennsylvania Association of Notaries
SCHEDULE A
Page 1 of 1 Page
DESCRIPTION OF EQUIPMENT
Manufacturer Aspect Telecommunications Corp., GTE, Abell's Floor Covering,
Inc., Florida Electric Works, Inc., Stebilla Drywall Services, Inc., MN Mills &
Nebraska, John Stoudenmire Car-ter Architect, P.A, DeLand Metal Craft Co.,
Hardy Construction, Inc., Quality Precast & Co., A&S Tile Outlet, Inc., Colson
Corporation Inc.
Location: 1398 South Woodland Boulevard, DeLand, FL 32720
QTY. MODEL# DESCRIPTION SERIAL NUMBER
VARIOUS FURNITURE AND FIXTURES AND TELECOMMUNICATIONS EQUIPMENT
SCHEDULE B
CASUALTY LOSS AND TERMINATION
VALUE SCHEDULE
Casualty Loss Occurring
or Notification of
Termination Given After Casualty Termination
Rental Payment Number Loss Values* Values*
0 115
12 97
24 76 69.56
36 55 48.60
48 28 26.11
51 12 12.00
*Values are given as a percentage of original cost.
LBIOT54 Lease Number 990729
SCHEDULE C
Indemnity for Loss of Depreciation
If ELEX shall not be entitled to a deduction with respect to ELEX's
fill cost of any Unit of Equipment listed in Schedule A of this Lease based
upon The Accelerated Cost Recovery System provided by Section 168 of the
Internal Revenue Code of 1986, as amended, in the amounts specified in Section
168.(b) ~1) thereof for Recovery Property defined therein as having a class
life of 5-Year Property ("Deduction") then Lessee shall pay to ELEX within 30
days of ELEX's demand, as additional rent hereunder, an amount which, after
deduction of all taxes required to be paid by ELEX in respect of the receipt
thereof shall be equal to the sum of (x) an amount equal to the additional
taxes paid or payable by ELEX in consequence of the failure to obtain the
benefitof such Deduction and (z) any interest or penalty which may be assessed
against ELEX in connection with such inability to obtain the benefit of such
Deduction, all of which amounts shall be payable on written demand made at any
time after payment of the additional income tax. Notwithstanding the indemnity
given by Lessee hereby, it is understood and agreed that ELEX shall have full
control over the filing of its tax returns and any and all negotiations with
tax authorities with respect thereto; and shall be the sole judge of the terms
upon which it is appropriate to settle any controversy with the taxing
authorities with respect thereto. Without limiting the generality of the
preceding sentence, in the event of any such controversy, ELEX shall, to the
extent practicable, notify Lessee of and consult with Lessee in connection
with, any negotiations with tax authorities relative to such controversy. The
term, "tax return" as used herein shall include any tax return filed separately
by ELEX or any consolidated return in the filing of which ELEX may join with
an affiliated corporation.
Special Provision For Option To Purchase
In the event that the Lease has not been earlier terminated and that no default
has occurred Lessee may, by written notice delivered to ELEX at least one
hundred eighty (180) days prior to the expiration date of the term or any
previously extended term (the "Expiration Date"), elect to purchase the
Equipment then subject to the Lease for a purchase price equal to the "Fair
Market Value-thereof as of the end of such term, such purchase to be on an
as-is, where-is basis, without representation or warranty, expressed or
implied, of any kind whatsoever by ELEX As used in this Section, T-air Market
Value" shall be determined by ELEX and Lessee on the basis of what would be
obtained in an arm's length transaction between an informed and willing buyer
(other than a buyer currently in possession or a used equipment dealer) and an
informed seller under no compulsion to sell, and in determining such amount (i)
the cost of removal from the location of cur-rent use shall not be a deduction
from such amount and (h) it shall be assumed that each Unit is in the condition
required by the Lease. If on or before sixty (60) days prior to the Expiration
Date = and Lessee are unable to agree upon "Fair Market Value, such Fair Market
Value shall be determined by an independent appraiser mutually agreed upon by
M and Lessee within (10) days after selection, or failing such agreement, by a
panel ofthree independent, qualified appraisers, one of whom shall be selected
by El EX the second by Lessee and third appointed by the first two selected all
within the ten (10) days. The appraiser or panel of appraisers, as the case may
be, shall make its determination within a period of thirty (30) days following
appointment. The determination so made shall be conclusively binding upon both
ELEX and Lessee. The expenses and fees of all appraisers shall be borne by
Lessee.
Special Provision For Option To Renew
(1) Renewal Option. In the event that the Lease has not been earlier
terminated and that no default has ccurred and is continuing. Lessee shall
have the option to extend the term of this Lease or prior extensions thereof
with respect to the Equipment for a period specified by Lessee but in any event
each extension shall be for not less than six (6) months in duration
("Additional Term") commencing the expiration date of the term or any
previously extended -term (the 'Expiration Date"), if notice of the exercise of
such option is given by Lessee in writing to ELEX at least one hundred eighty
(180) days prior to the Expiration Date of its intention to extend the term of
this Lease for the Additional Term.
(2) Rentals During Additional Term The rental to be paid during all such
extensions shall be an amount equal to "Fair Market Rental" of the commencement
of the Additional Term, payable in advance in equal and consecutive monthly
installments on each monthly anniversary of the Expiration Date commencing with
the Expiration Date. As used in this section, the term "Fair Market Rental"
shall mean an amount equal to the aggregate net rental which would be obtained
in an arm's length transaction between an informed and willing lessee (other
than a lessee in possession or a used equipment dealer) and an informed and
willing lessor under no compulsion to lease, and in determining such amount (i)
the cost of removal from the location of current use shall not be a deduction
from such amount and (ii) it shall be assumed that at the time of the
commencement of such Additional Term, each Unit is in the condition required
by the Lease. If on or before sixty (60) days prior to the Expiration Date,
ELEX and Lessee are unable to agree upon a determination of air Market Rental,
such Fair Market Rental shall be determined by an independent appraiser
mutually agreed upon by ELEX and Lessee within ten (10) days after selection,
or failing such agreement, by a panel of three independent, qualified
appraisers one of whom shall be selected by ELEX the second by Lessee and the
third appointed by the first two selected all within the ten (10) days. The
appraiser or panel of appraiser, as the case may be, shall make its
determination within a period of thirty (30) days following appointment. The
determination so made shall be conclusively binding upon both ELEX and Lessee.
The expenses and fees of all appraisers shall be born by Lessee.
Special Provision For Early Termination
(1) If during the Initial term all or part of the Equipment becomes
obsolete or surplus to Lessee's requirements, and provided no default has
occurred, Lessee may at any time after the thirty sixth (36th) month, upon not
less than ninety (90) days prior written notice to ELEX, terminate the Lease
with respect to such Equipment, or any Unit(s) thereof, (Terminated Unit(s)"),
as of any succeeding rental payment date specified in said notice ("Termination
Date").
(2) On the Termination Date the Lessee shall return the Terminated Unit(s)
to ELEX pursuant to the provisions of sub-paragraph 2(h) of the Agreement For
Leasing
(3) Following the giving of written notice to terminate the Lease as to any
Unit(s), ELEX and Lessee shall endeavor to obtain bids for the purchase or
lease of the Terminated Unit(s) on an as-is, where-is basis and without
representations or wan-antics, expressed or implied, of any kind whatsoever.
(4) Upon the Termination Date, Lessee shall pay ELEX the regular monthly
installment of rent, without any abatement as described in paragraph ten (10)
hereof, plus the net Termination Value, which shall be deemed to be the amount,
if any, by which the Termination Value, defined in paragraph seven (7) hereof,
exceeds the net amount received by ELEX for the Terminated Unit(s).
(5) If by the Termination Date a satisfactory bidder(s) has not been
obtained for the sale or lease of all of the Terminated Unit(s), ELEX shall
within ninety (90) days after the return of the remaining Unit(s) to ELEX sell
or lease the Unit(s) for the highest offer then available.
(6) Lessee shall be refunded an amount equal to the proceeds of the sale or
the present value of the lease, as defined in paragraph eight (8) hereof, less
the actual expenses incurred by ELEX in making the sale(s) or lease(s),
including, without limitation, storage, insurance, advertising, sales taxes and
attorneys' fees for the Terminated Unit(s) and, but in no event shall the
refund be in excess of the net Termination Value previously paid by Lessee to
ELEX
(7) The Termination Value shall be computed by multiplying ELEX's original
cost for the Terminated Unit(s) as shown on Schedule A of the Lease, by the
applicable termination percentage shown on Schedule B of the Lease
("Termination Value").
(8) The present value of a lease shall be deemed to be equal to the
aggregate net rentals of such lease discounted at a rate equal to three
percent (3%) over the average then current prime interest rate or equivalent
thereof charged by the three largest New York commercial banks on the
Termination Date.
(9) In the event that no bidder has been obtained for the sale or lease of
all of the Terminated Unit(s) within ninety (90) days after the Termination
Date, ELEX shall transfer ownership of the Unit(s) to Lessee.
(10) In the event of termination of the Lease as to any Unit(s), the amount
of each remaining installment of rent as provided in the Lease shall be
reduced and abated by the same percentage as ELEX s original cost of such
Terminated Unit(s) bears to the total original cost of all Unit(s) as shown in
Schedule A of the Lease.
SPECIAL PROVISION FOR TERMINAL RENTAL ADJUSTMENT
(1) Since the rental payments due under the Lease are based upon the
anticipated residual value of the Equipment being equal to or greater than
10% of the original cost, as shown on Schedule A of the Lease,("Residual
Value"), it is agreed that notwithstanding anything to the contrary contained
herein Lessee shall pay to ELEX prior to the termination of the term of the
Lease ("Termination Date") as "Additional Rent" the amount, if any, by which
the Termination Value, as specified on Schedule B of the Lease, exceeds the
net proceeds received as of the date thereof from the sale of the Equipment.
(2) Following the giving of written notice to terminate the Lease, ELEX and
Lessee shall endeavor to obtain bids for the purchase of the Units of Equipment
on an as-is, where-is basis and without representations or warranties, express
or implied, of any kind whatsoever. Within ninety (90) days after the
Termination Date, ELEX shall sell said Unit(s) for the highest offer then
available. Upon such sale, Lessee shall be refunded an amount equal to the
proceeds of the sale less the actual expense incurred by ELEX in making the
sale, including, without limitation, storage, insurance, advertising, sales
taxes and attorneys' fees, but in no event shall the refund be in excess of the
Additional Rent previously paid.
(3) In the event that no bidder has been obtained for the sale of all of the
Units of Equipment within ninety (90) days after the Termination Date, ELEX
may at its option transfer title to Lessee for those Units of Equipment which
have not been sold.
AGREEMENT FOR THE PURCHASE OF EQUIPMENT UNDER LEASE
By and between The ELEX Group, Inc., a New Jersey corporation whose address is
P.O. Box 14, Medford, New Jersey 08055 ("ELEX"), and ICT GROUP, INC., a
Pennsylvania corporation whose address is 800 Town Center Drive, Langhorne, PA
19047 ("Lessee").
WITNESSETH:
WHEREAS, ELEX and Lessee have entered into a lease covering the equipment set
forth on Schedule A attached hereto and made a part hereof ("Equipment") dated
June 1999 - #990729 ("Lease"); and
WHEREAS, the parties now wish to modify some of the terms and conditions of
the Lease;
NOW, THEREFORE, in consideration of the mutual promises set forth hereinafter
and in the Lease and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is hereby agreed as follows:
1) In the event that the Lease has not been earlier terminated and that no
continuing default is then occurring, either party may, by giving writ ten
notice to the other party at least one hundred eighty (180) days prior to the
expiration date of the term of the Lease ("Expiration Date"), elect to have the
equipment then subject to the Lease purchased by the Lessee on the Expiration
date for a purchase price equal to ten percent (10%) of the original cost of
the Equipment, such purchase to be on an as-is, where-is basis, without
representation or warranty, expressed or implied, of any kind whatsoever by
ELEX
2) In the event of a conflict between the provisions of the aforesaid Lease
and this Agreement, the provisions of this Agreement shall govern.
In witness whereof, the parties hereto have caused this Agreement For The
Purchase Of Equipment
Under Lease to be duly executed this 25th day of June 1999.
ICT GROUP, INC. THE ELEX GROUP, INC.
By: /s/ V.A. Paccipanaccia By: JoDee B.Pettine
Title: Sr. VP Finance and CFO Title: President
SCHEDULE A
Page 1 of 1 Pages
DESCRIPTION OF EQUIPMENT
Manufacturer. Aspect Telecommunications Corp., GTE, Abell's Floor Covering,
Inc., Florida Electric Works,Inc., Stebilla Drywall Services, Inc., MN Mills &
Nebraska, John Stoudenmire Carter Architect, P.A., DeLand Metal Craft Co.,
Hardy Construction, Inc., Quality Precast & Co., A&S Tile Outlet, Inc.,
Colson Corporation Inc.
Location: 1398 South Woodland Boulevard, DeLand, FL 32720
QTY. MODEL# DESCRIPTION SERIAL NUMBER
VARIOUS FURNITURE AND FIXTURES AND TELECOMMUNICATIONS EQUIPMENT
LESSEE'S CONSENT AND AGREEMENT
The undersigned ("Lessee") acknowledges receipt of notice that ELEX will
execute a Collateral Assignment(s), relating to the Lease of ven date herewith
("Lease"), and for good and valuable consideration, receipt whereof is hereby
acknowledged, Lessee hereby consents to the execution and delivery of said
Collateral Assignment(s) and to all the terms and provisions thereof and
agrees that upon notice to the Lessee of such Collateral Assignment(s):
(a) The Lessee will pay directly to the last Assignee or to whomsoever such
Assignee shall direct (i) all rent and other moneys due and to become due from
the Lessee as set forth in the Lease, (ii) all amounts payable by reason of
acceleration of the liability of the Lessee for such rent or other moneys and
(iii) all other
amounts at any time owing under the Lease by the Lessee.
(b) The Lessee will not assert against such last Assignee, or against
whomsoever such Assignee shall have directed payment to be made, any defense,
setoff or counterclaim (including recoupment against, or other diminution of,
amounts payable by the Lessee to such Assignee) which it may have against ELEX
or anyone, whether arising under the Lease, hereunder or otherwise. Lessee
acknowledges that any assignment or transfer by ELEX shall not materially
change Lessee's duties or obligations under the Lease.
(c) The Lessee will not modify or consent to any modification of the terms
of the Lease without the written consent of ELEX and such last Assignee.
(d) All obligations and warranties of ELEX contained in the Lease shall be
and remain enforceable by the Lessee against and only against ELEX and its
successors and assigns and not against the Collateral Assignee.
(e) Any assignment executed and delivered pursuant to the right reserved
to ELEX and its assignees in Paragraph 2(k) of the Agreement for Leasing shall
be deemed to be included within this Consent and Agreement.
Dated: June 25 1999 ICT GROUP, INC.
BY /s/ VA Paccapnaccia
Title Sr. VP Finance and CFO
SEAL
Attest David F. Mc Hugh Coporate Controller
EXHIBIT I
CERTIFICATE OF ACCEPTANCE
THE ELEX GROUP, INC. ('ELEX")
I, a duly appointed inspector and authorized representative of ICT GROUP, INC.,
a Pennsylvania corporation whose address is 800 Town Center Drive, Langhorne, PA
19047 ("Lessee"), do hereby certify in accordance with the Lease dated June 25,
1999 between
Lessee and ELEX that i) I do accept the Unit(s) of Equipment listed in the
Schedule A attached hereto and made a part hereof which has (have) a purchase
price of $435,320, (ii) the Date of Acceptance is as set forth below and (iii)
the Unit(s) has (have) been delivered and installed at:
1398 South Woodland Boulevard, DeLand, FL 32720
The execution of this Certificate of Acceptance will in no way relieve or
decrease the responsibility of any manufacturer of any Unit(s) of Equipment
for any warranties it has made with respect to any Unit(s) of Equipment.
ICT GROUP INC.
BY /s/ VA Paccapanaccia
(Person authorized to sign)
TITLE Sr VP Finance amd CFO
DATE June 25, 1999
Signed in my presence in the Commonwealth of Pennsylvania
Notary Notarial Seal
Diane Haeselin, Notary Public
Middletown Twp., Bucks County
My Commission Expires May 12, 2001
Member Pennsylvania Association of Notaries
Signed in my presence in the State of New Jersey
Lorretta J. BOZOSKI 6\25\99
Lorretta J. BOZOSKI
A Notary Public of New Jersey
ELEX hereby accepts Lessee's Certificate of Acceptance and grants Lessee the
right to use the Equipment. My Commission
Expires Jan. 7, 2000
THE ELEX GROUP,INC
By: JoDee B. Pettine
TITLE: President
EQUIPMENT LEASE
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption is dated September 30, 1999 by and between ICT
Group, Inc., A Pennsylvania Corporation ("Assignor") and Cellular Express, Inc.
d/b/a Boston Communications Group, a Massachusetts corporation ("Assignee").
WHEREAS, Assignor leases certain equipment located at 1398 South Woodland Blvd,
DeLand L, 32720 (the "Premises") pursuant to that certain equipment lease
agreements dated as of September 24, 1998 (#980715), March 29, 1999 (#990727),
and June 25, 1999 (#990729) (the "Leases") between Assignor as lessee and The
ELEX Group, Inc. ("Lessor"); and
WHEREAS, Assignor proposes to transfer to Assignee the operations relating to
the business conducted at the Premises (the "Transaction").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Assignor hereby assigns and sets over to Assignee all of Assignor's rights,
title and interest in, under and to the Leases .
2. Assignee hereby agrees to accept and undertake to discharge each and
everyone of the obligations of Assignor under the Leases arising solely from
and after September 30, 1999.
3. This Assignment and Assumption Agreement shall become effective upon the
consummation of the Transaction, the signing hereof by both Assignor and
Assignee and the execution by the Landlord of the consent hereto in the form
set forth below.
4. Assignor hereby warrants and represents:
f. That the Leases is in full force and effect and is a valid legally binding
obligations of the parties thereto.
g. That Assignor is not in breach of any of the terms and conditions of said
Leases and is current in the payment of all rent, additional rent, utilities
and other payments due under the terms of said Leases .
h. That Assignor has not assigned any of its rights under the Leases to any
third party.
i. That Assignor has full corporate power and authority to enter into this
Assignment and to carry out its obligations hereunder, that the execution
and delivery hereof have been duly authorized by the Board of Directors
of Assignor and no other corporate proceedings on the part of Assignor are
necessary to authorize this Assignment, and that the Assignment
constitutes the valid and binding obligations of Assignor.
j. That the execution, delivery and performance of this Agreement by
Assignor do not require the consent, waiver, approval, or authorization of
any person or authority (other than the lessor of the Leases ) and will not
violate, result in a breach of or the acceleration of any obligation under or
constitute a default under, any provision of any charter, by-law, indenture,
mortgage, lien, Leases , agreement, contract, instrument, order, judgment,
decree, ordinance, or regulations or any restriction to which any property
of Assignor is subject or by which Assignor is bound or affected.
5. Assignor hereby warrants and represents:
a. That all equipment assigned hereunder is in good working order and that
all documentation relating to such equipment will be provided to Assignee
upon execution of this Agreement.
b. That all equipment assigned hereunder is year 2000 compliant, in that it
will record, store, process and present calendar dates falling on or after
January 1, 2000 with similar functionality and performance, as such
equipment on or before December 31, 1999. Such equipment shall ensure
year 2000 compatibility and shall include, but not be limited to, date data,
century recognition, calculations that accommodate same century and
multi-century formulas and date values, and data interface values that
reflect the century.
6. This Assignment and Assumption Agreement is subject to and conditioned upon
the consent of the lessor of said Leases to said Assignment in the form
provided below.
7. This Agreement shall be binding upon the successors and assigns of the
parties. The parties shall execute and deliver such further or additional
documents as may be necessary to evidence or carry out the provisions of this
Agreement.
8. This Assignment and Assumption Agreement may be executed in counterparts,
each of which shall be an original and all of which together shall constitute
one instrument.
9. This Assignment and Assumption Agreement shall be governed by and construed
in accordance with the internal laws of the Commonwealth of Pennsylvania,
without regard to its conflict of laws provisions.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their officers thereunto duly authorized as of the date first above written.
ICT GROUP, INC. CELLULAR EXPRESS, INC.
d/b/a BOSTON COMMUNICATION
GROUP
By: /s/ VA Paccapaniccia By: /s/ Karen A. Walker
Name: VA Paccapaniccia Name: Karen A. Walker
Title: Sr. VP Finance and CFO Title: CFO
Lessor hereby consents to the foregoing Assignment and Assumption Agreement,
agrees that the Lease shall remain in full force and effect with Assignee as
the lessee, and agrees that Assignor is hereby released and forever discharged
from any and all obligations and liabilities arising under the Lease.
The ELEX Group, Inc.
By: /s/ JoDee B. Pettine
Name: JoDee B. Pettine
Title: President
REAL ESTATE LEASE
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption is dated September 30, 1999 by and between ICT
Group, Inc., A Pennsylvania Corporation ("Assignor") and Cellular Express, Inc.
d/b/a Boston Communications Group, a Massachusetts corporation ("Assignee").
WHEREAS, Assignor leases certain equipment located at 1398 South Woodland Blvd,
DeLand L, 32720 (the "Premises") pursuant to that certain equipment lease
agreements dated as of September 24, 1998 (the "Lease") between Assignor as
lessee and The ELEX Group, Inc. ("Lessor"); and
WHEREAS, Assignor proposes to transfer to Assignee the operations relating to
the business conducted at the Premises (the "Transaction").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
4. Assignor hereby assigns and sets over to Assignee all of Assignor's rights,
title and interest in, under and to the Lease.
5. Assignee hereby agrees to accept and undertake to discharge each and
everyone of the obligations of Assignor under the Lease arising solely from and
after September 30, 1999.
6. This Assignment and Assumption Agreement shall become effective upon the
consummation of the Transaction, the signing hereof by both Assignor and
Assignee and the execution by the Landlord of the consent hereto in the form
set forth below.
10. Assignor hereby warrants and represents for each Lease to be assigned
thereunder:
k. That the Lease is in full force and effect and is a valid legally binding
obligations of the parties thereto.
l. That Assignor is not in breach of any of the terms and conditions of said
Lease and is current in the payment of all rent, additional rent, utilities
and other payments due under the terms of said Lease.
m. That Assignor has not assigned any of its rights under the Lease to any
third party [except for that certain Collateral Assignment dated
which shall be discharged prior to the execution of this Assignment
and Assumption Agreement.]
n. That Assignor has full corporate power and authority to enter into this
Assignment and to carry out its obligations hereunder, that the execution
and delivery hereof have been duly authorized by the Board of Directors
of Assignor and no other corporate proceedings on the part of Assignor are
necessary to authorize this Assignment, and that the Assignment
constitutes the valid and binding obligations of Assignor.
o. That the execution, delivery and performance of this Agreement by
Assignor do not require the consent, waiver, approval, or authorization of
any person or authority (other than the lessor of the Lease) and will not
violate, result in a breach of or the acceleration of any obligation under or
constitute a default under, any provision of any charter, by-law, indenture,
mortgage, lien, lease, agreement, contract, instrument, order, judgment,
decree, ordinance, or regulations or any restriction to which any property
of Assignor is subject or by which Assignor is bound or affected.
11. This Assignment and Assumption Agreement is subject to and conditioned upon
the consent of the lessor of said Lease to said Assignment in the form provided
below.
12. This Agreement shall be binding upon the successors and assigns of the
parties. The parties shall execute and deliver such further or additional
documents as may be necessary to evidence or carry out the provisions of this
Agreement.
13. This Assignment and Assumption Agreement may be executed in counterparts,
each of which shall be an original and all of which together shall constitute
one instrument.
14. This Assignment and Assumption Agreement shall be governed by and construed
in accordance with the internal laws of the Commonwealth of Pennsylvania,
without regard to its conflict of laws provisions.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their officers thereunto duly authorized as of the date first above written.
ICT GROUP, INC. CELLULAR EXPRESS, INC.
d/b/a BOSTON COMMUNICATION
GROUP
By: /s/ VA Paccapaniccia By: /s/ Karen A. Walker
Name: VA Paccapaniccia Name: Karen A. Walker
Title: Sr. VP Finance and CFO Title: CFO
Lessor hereby consents to the foregoing Assignment and Assumption Agreement,
agrees that the Lease shall remain in full force and effect with Assignee as
the lessee, and agrees that Assignor is hereby released and forever discharged
from any and all obligations and liabilities arising under the Lease.
The ELEX Group, Inc.
By: /s/ JoDee B. Pettine
Name: JoDee B. Pettine
Title: President
Exhibit 10.57
BOSTON COMMUNICATIONS GROUP, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
AMENDMENT NO. 3
August 12, 1999
This Amendment is made to the 1996 Employee Stock Purchase Plan (the
"Plan"), which was approved by the Board of Directors of Boston Communications
Group, Inc. (the "Company") on April 25, 1996, and by its stockholders on April
26, 1996, and amended by the Board of Directors on August 29, 1996 and May 20,
1999.
Section 2(a) of the Plan which reads as follows:
"(a) they are regularly employed by the Company or a Designated
Subsidiary for more than 20 hours a week and for more than five months in a
calendar year; and"
is hereby deleted.
This Amendment shall be effective for the Plan Period commencing September 1,
1999.
Except as herein provided, all other terms and conditions of the Plan remain
unchanged and in full force and effect.
This Amendment No. 3 to the Plan was adopted by the Board of Directors
of the Company on the 12th day of August, 1999.
ATTEST:
/s/ Alan J. Bouffard
Alan J. Bouffard, Clerk
EXHIBIT 11
COMPUTATION OF SHARES USED IN COMPUTING BASIC AND DILUTED NET LOSS PER SHARE
<TABLE>
Year ended December 31,
1999 1998 1997
-----------------------------
<S> <C> <C> <C>
Net Loss $ (786) $(1,800) $(1,116)
Basic and Diluted Net Loss
Per Share:
Weighted Average SharesUsed in Computing
Per Share Amounts 16,529 16,274 14,007
------- ------- -------
Basic and Diluted Net Loss Per Share $(0.05) $(0.11) $(0.08)
------- ------- -------
</TABLE>
Note: Options to purchase 1,523,489, 1935,976, and 248,342 shares of common
stock were outstanding as of December 31, 1999, 1998, and 1997, respectively,
and were not included in the computation of diluted earnings per share because
of the Company's net losses for those years.
[ARTICLE] 5
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
Names under which
Place of Incorporation doing business
----------------------- -----------------
1. Voice Systems Technology Inc. Delaware Boston Communications Group
2. Cellular Express, Inc. Massachusetts Boston Communications Group
3. BCG Securities Corp. Massachusetts Boston Communications Group
4. BCGII Foreign Sales Corp. Barbados BCGII Foreign Sales Corp.
5. BCG de Mexico, S.r.l. Mexico Boston Communications Group
6. Wireless Roaming, Inc. Delaware Boston Communications Group
7. BCGI Communications Corp. Delaware Boston Communications Group
EXHIBIT 23
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 333-11139) pertaining to the Boston Communications Group, Inc.
1996 Stock Option Plan, (Form S-8 No. 333-11191) pertaining to the Boston
Communications Group, Inc. Non-Qualified Stock Options Pursuant to Written
Option Agreements, (Form S-8 No. 333-11195) pertaining to the Boston
Communications Group, Inc. 1996 Employee Stock Purchase Plan, (Form S-8 No. 333-
57643) pertaining to the Boston Communications Group, Inc. 1998 Stock Incentive
Plan and (Form S-8 No. 333-57641) pertaining to the Boston Communications Group,
Inc. Non-Statutory Stock Option and (Form S-8 No. 333-85247) pertaining to the
Boston Communications Group, Inc. Non-Qualified Stock Options Pursuant to
Written Option Agreements and of our report dated January 28, 2000, with respect
to the consolidated financial statements and schedule of Boston Communications
Group, Inc. included in the Annual Report (Form 10-K) for the year ended
December 31, 1999.
/s/ Ernst & Young LLP
Boston, Massachusetts
March 24, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> Dec-31-1999 Dec-31-1999
<PERIOD-START> Oct-01-1999 Jan-01-1999
<PERIOD-END> Dec-31-1999 Dec-31-1999
<CASH> 21,145 21,145
<SECURITIES> 9,091 9,091
<RECEIVABLES> 18,546 18,546
<ALLOWANCES> 2,025 2,025
<INVENTORY> 2,007 2,007
<CURRENT-ASSETS> 53,716 53,716
<PP&E> 44,995 44,995
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 102,081 102,081
<CURRENT-LIABILITIES> 18,836 18,836
<BONDS> 0 0
<COMMON> 167 167
0 0
0 0
<OTHER-SE> 79,202 79,202
<TOTAL-LIABILITY-AND-EQUITY> 102,081 102,081
<SALES> 27,352 105,051
<TOTAL-REVENUES> 27,352 105,051
<CGS> 16,608 69,123
<TOTAL-COSTS> 26,529 106,338
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (148) (896)
<INCOME-PRETAX> 971 (391)
<INCOME-TAX> 395 395
<INCOME-CONTINUING> 576 (786)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 576 (786)
<EPS-BASIC> 0.03 (0.05)
<EPS-DILUTED> 0.03 (0.05)
</TABLE>
