<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1996
REGISTRATION NO. 333-4150
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
------
Amendment No. 2
to
Form S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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ICT GROUP, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 7389 23-2458937
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification No.) Identification No.)
incorporation or
organization)
800 Town Center Drive
Langhorne, PA 19047
(215) 757-0200
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
JOHN J. BRENNAN
Chairman, President and Chief Executive Officer
ICT Group, Inc.
800 Town Center Drive
Langhorne, PA 19047
(215) 757-0200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------
Copies of all communications to:
STEPHEN M. GOODMAN KENNETH L. GUERNSEY
JAMES W. McKENZIE, JR. KARYN R. SMITH
Morgan, Lewis & Bockius LLP LAURA M. RANDALL
2000 One Logan Square Cooley Godward Castro Huddleson & Tatum
Philadelphia, PA 19103-6993 One Maritime Plaza, 20th Floor
(215) 963-5000 San Francisco, CA 94111
(415) 693-2000
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement the same offering. [ ]_______
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]_______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [B]
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
=============================================================================
<PAGE>
ICT GROUP, INC.
Cross-Reference Sheet
Pursuant to Item 501(b) of
Regulation S-K
<TABLE>
<CAPTION>
Item Number in Form S-1 Location in Prospectus
--------------------------------------------------- -------------------------------------------------------
<S> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus ................ Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus ..................................... Inside Front and Outside Back Cover Pages of Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges ..................... Summary; Risk Factors
4. Use of Proceeds ............................... Use of Proceeds
5. Determination of Offering Price ............... Outside Front Cover Page of Prospectus; Underwriting
6. Dilution ...................................... Risk Factors; Dilution
7. Selling Security Holders ...................... Principal and Selling Shareholders
8. Plan of Distribution .......................... Outside Front Cover Page of Prospectus; Underwriting
Outside Front Cover Page of Prospectus; Prior S Corporation
9. Description of Securities to be Registered .... Status; Dividend Policy; Description of Capital Stock
10. Interests of Named Experts and Counsel ........ Not Applicable
Outside Front Cover Page of Prospectus; Summary; Prior S
Corporation Status; Dividend Policy; Selected Consolidated
Financial Data; Management's Discussion and Analysis of
Financial Condition and Results of Operations; Business;
Management; Certain Transactions; Principal and Selling
Shareholders; Description of Capital Stock; Consolidated
11. Information with respect to the Registrant .... Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.. Not Applicable
</TABLE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
SUBJECT TO COMPLETION, DATED JUNE 4, 1996
2,500,000 SHARES
LOGO
COMMON STOCK
Of the 2,500,000 shares of Common Stock offered hereby, 2,411,552 shares
are being offered by ICT Group, Inc. ("ICT" or the "Company") and 88,448
shares are being offered by the Selling Shareholders. See "Principal and
Selling Shareholders." The Company will not receive any proceeds from the sale
of shares of Common Stock by the Selling Shareholders. Approximately 56% of
the estimated net proceeds from this offering will be used by the Company to
repay indebtedness and to make a distribution to existing shareholders of S
corporation earnings. See "Use of Proceeds." Prior to this offering, there has
been no public market for the Common Stock of the Company. It is currently
estimated that the initial public offering price will be between $12.00 and
$14.00 per share. See "Underwriting" for information relating to the method of
determining the initial public offering price.
------
The Common Stock offered hereby involves a high degree of risk.
See "Risk Factors" at page 6.
------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
==============================================================================
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions Company(1) Shareholders
- ------------------------------------------------------------------------------
Per Share ..... $ $ $ $
- ------------------------------------------------------------------------------
Total(2) ..... $ $ $ $
==============================================================================
(1) Before deducting offering expenses payable by the Company, estimated at
$750,000.
(2) John J. Brennan, the Chairman, President and Chief Executive Officer of
ICT, and Donald P. Brennan, the Vice Chairman of ICT, have granted the
Underwriters a 30-day option to purchase up to 375,000 additional shares
of Common Stock owned by them, solely to cover over-allotments, if any.
If such option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Selling
Shareholders will be $ , $ and $ , respectively. See
"Underwriting."
------
The Common Stock is offered by the Underwriters as stated herein, subject
to receipt and acceptance by them and subject to their right to reject any
order in whole or in part. It is expected that delivery of the shares will be
made through the offices of Robertson, Stephens & Company LLC ("Robertson,
Stephens & Company"), San Francisco, California, on or about , 1996.
Robertson, Stephens & Company Smith Barney Inc.
The date of this Prospectus is , 1996.
<PAGE>
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company, any Selling Shareholder or any Underwriter. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any
securities other than the registered securities to which it relates or an
offer to, or solicitation of, any person in any jurisdiction where such an
offer or solicitation would be unlawful. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date hereof or that the information contained herein is correct as
of any time subsequent to the date hereof.
Until , 1996 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This delivery requirement is in addition to the obligation of dealers to
deliver a Prospectus when acting as Underwriters and with respect to their
unsold allotments or subscriptions.
------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
--------
<S> <C>
Summary ................................................................................ 3
Risk Factors ........................................................................... 6
Use of Proceeds ........................................................................ 12
Prior S Corporation Status ............................................................. 12
Dividend Policy ........................................................................ 12
Capitalization ......................................................................... 13
Dilution ............................................................................... 14
Selected Consolidated Financial Data ................................................... 15
Management's Discussion and Analysis of Financial Condition and Results of Operations .. 16
Business ............................................................................... 22
Management ............................................................................. 33
Certain Transactions ................................................................... 44
Principal and Selling Shareholders ..................................................... 46
Description of Capital Stock ........................................................... 47
Shares Eligible for Future Sale ........................................................ 49
Underwriting ........................................................................... 50
Legal Matters .......................................................................... 51
Experts ................................................................................ 51
Additional Information ................................................................. 51
Index to Consolidated Financial Statements ............................................. F-1
</TABLE>
------
ICT(TM), ICT Group(TM), ICT Research Services(TM), Eurotel(TM), ICT/Canada
Marketing(TM), ICT Spantel(TM), Smartline(TM) and the ICT logo are trademarks
or service marks of the Company. All other trademarks, service marks or trade
names referred to in this Prospectus are the property of their respective
owners.
ICT was incorporated in Pennsylvania in March 1987. The Company's
principal executive offices are located at 800 Town Center Drive, Langhorne,
PA 19047, and its telephone number is (215) 757-0200.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and Financial Statements and Notes
thereto, appearing elsewhere in this Prospectus.
THE COMPANY
ICT Group, Inc. ("ICT" or the "Company") is a leading independent provider
of call center teleservices, which consist of outbound and inbound
telemarketing and customer support services, together with related value-added
services such as marketing, research and consulting services, to businesses
domestically and internationally. The Company's call center management
experience, technological leadership and expertise in target industries enable
it to provide its clients with high quality, cost-effective call center
services. In addition to supporting customers' teleservices programs from its
own call centers, ICT is pursuing opportunities to manage clients' call
centers on a contract basis. The Company believes there is a trend by
businesses to outsource many of their internal telephone sales, customer
service and product support functions. In order to capitalize on this trend,
the Company is incurring certain startup costs and expenses (the amount of
which has not been material to date) without any associated revenues; however,
the Company has recently entered into two call center management contracts.
The Company believes it was among the first teleservices firms to establish
international call centers with multilingual capabilities, which it intends to
further expand to meet the global needs of multinational clients.
The Company is recognized as one of the largest independent teleservices
organizations in the United States, with 24 domestic and international call
centers utilizing 1,648 automated workstations. ICT has grown significantly
since becoming an independent company in 1987, and its net revenues increased
by more than 50% per year in each of the last two years, from $22.3 million
in 1993 to $52.1 million in 1995. The Company's current customers include
Mass Marketing Insurance Group, which represented approximately 43% of the
Company's revenues in 1995, and Advanta, Alpha Software, Bertelsmann Music
Group, Citibank, Greater Atlantic Health Service, MBNA, MCI, J.C. Penney Life
Insurance Company, Providian, SmithKline Beecham, Sun Microsystems, TV Guide
and the United States Army. In general, the Company's customers have written
agreements with the Company that are typically terminable with 30 days
notice.
Direct Marketing magazine estimates that telemarketing industry
expenditures in the United States were approximately $77 billion in 1995. The
Company believes that all but a small percentage of this spending was
incurred for services performed by in-house call centers. The call center
teleservices industry is highly fragmented, consisting primarily of in-house
sales and service organizations but also including numerous independent call
center operations, many of which are technologically unsophisticated and
provide only a limited range of services. Telemarketing and other call center
services have evolved rapidly in recent years, as businesses have
increasingly turned to outside specialists that have industry-specific
expertise and utilize highly personalized and technologically sophisticated
services, to target and support consumer and business customers. At the same
time, the use of telemarketing and other call center services has expanded
and is continuing to expand to include more complex applications, new
industries and broader geographic markets.
ICT directly addresses the growing demand for cost-effective,
comprehensive teleservices by providing its clients with high quality
services, expertise in target industries, marketing, research, consulting and
other value-added services, multilingual capabilities and international
presence. The Company believes its technology leadership and focus on a
limited number of industries enable it to provide its clients with highly
effective marketing and customer service capabilities. ICT has expanded
beyond its traditional markets of insurance, financial services, publishing
and telecommunications to include the pharmaceutical, health care services
and computer software and hardware industries, which are emerging as areas of
rapid growth in the use and outsourcing of call center teleservices. The
Company believes that its focus on a limited number of target industries,
combined with its innovative technology and operations experience, has
positioned it to secure call center management relationships.
ICT has successfully completed and integrated several key acquisitions and
entered into joint ventures to broaden its range of teleservices
capabilities, including inbound teleservices, research data collection,
telebanking and international multilingual telemarketing services targeted at
non-English speaking markets in the United States, Europe, Latin America and
Canada. The Company intends to pursue continued expansion through a
combination of internal growth, strategic alliances, and acquisitions of
domestic and international businesses that provide teleservices that are
complementary to ICT's core telemarketing expertise.
3
<PAGE>
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Common Stock offered by the Company .................. 2,411,552 shares
Common Stock offered by the Selling Shareholders ..... 88,448 shares
Common Stock to be outstanding after this offering ... 11,500,000 shares(1)
Use of Proceeds ...................................... To repay indebtedness, to pay a distribution of S corporation
earnings, and for working capital and other general corporate
purposes, including possible future acquisitions.
Proposed Nasdaq National Market symbol ............... ICTG
</TABLE>
SUMMARY FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
---------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues ........... $16,019 $17,502 $22,271 $34,123 $52,116 $9,294 $16,220
Operating income ....... 702 388 895 1,409 2,404 226 657
Net income before taxes . 336 50 569 898 1,570 62 424
Pro forma net income(2) . 903 254
Pro forma net income per
share(2) .............. $ .09 $ .03
Shares used in computing pro
forma net income per
share(2) .............. 9,697 9,697
</TABLE>
<TABLE>
<CAPTION>
March 31, 1996
--------------------------------------------
Pro Forma
As
Actual Pro Forma(3) Adjusted(3)(4)
---------- ------------ ---------------
<S> <C> <C> <C>
Balance Sheet Data:
Working capital (deficit) ............................. $(2,484) $(5,078) $20,821
Total assets .......................................... 21,418 21,418 36,366
Long-term debt, less current maturities ............... 705 705 --
Capitalized lease obligations, less current maturities . 1,811 1,811 --
Shareholders' equity .................................. 4,294 658 29,073
</TABLE>
(1) Excludes shares of Common Stock issuable upon the exercise of outstanding
options. As of the date of this Prospectus, there were 1,121,602 shares
of Common Stock reserved for issuance upon the exercise of outstanding
options with a weighted average exercise price of $.37 per share
(excluding 88,448 shares of Common Stock underlying options to be
exercised by the Selling Shareholders in connection with this offering)
and 1,150,000 shares of Common Stock reserved for future issuance under
the Company's stock plans. See "Management -- Employee Benefit Plans."
(2) The Company has operated as an S corporation for income tax purposes
since its inception in 1987 and will terminate such status in connection
with this offering. See Note 3 of Notes to Consolidated Financial
Statements for information concerning the computation of pro forma net
income and pro forma net income per share.
(3) Reflects the S Corporation Distribution and the Deferred Tax Liability
described in "Prior S Corporation Status." See "Use of Proceeds" and Note
3 of Notes to Consolidated Financial Statements.
(4) Adjusted to give effect to the sale by the Company of 2,411,552 shares of
Common Stock offered hereby (at an assumed initial public offering price
of $13.00 per share) and the application of the net proceeds as set forth
in "Use of Proceeds."
4
<PAGE>
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk. See "Risk
Factors" at page 6.
Except as otherwise noted, all information contained in this Prospectus (i)
assumes no exercise of the Underwriters' over-allotment option, (ii) reflects
a nine-for-one stock split (in the form of a stock dividend) of the Common
Stock to be effected prior to the completion of this offering, (iii) reflects
the filing of amendments to the Company's Articles of Incorporation to
reclassify the Class A Common Stock and Class B Common Stock as Common Stock,
to authorize an aggregate of 40,000,000 shares of Common Stock and to
authorize 5,000,000 shares of undesignated Preferred Stock and (iv) assumes
no exercise of stock options other than options to purchase an aggregate of
88,448 shares of Common Stock to be exercised in connection with this
offering (all of which shares are being offered and sold hereby). See
"Capitalization," "Principal and Selling Shareholders," "Description of
Capital Stock" and "Underwriting."
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those set forth under "Risk Factors" and elsewhere in this
Prospectus.
5
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
matters should be considered carefully in evaluating an investment in the
shares of Common Stock offered by this Prospectus. This Prospectus contains
forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including
those set forth in the following risk factors and elsewhere in this
Prospectus.
RELIANCE ON MAJOR CLIENT RELATIONSHIP
A substantial portion of ICT's net revenues is generated from its services
to Mass Marketing Insurance Group ("MMIG"), which serves as telemarketing
manager for J.C. Penney Life Insurance Company ("J.C. Penney") with respect
to certain insurance products. In 1995, 1994 and 1993, MMIG represented 43%,
41% and 43%, respectively, of ICT's net revenues. Neither MMIG nor J.C.
Penney is contractually obligated to continue to use the Company's services,
and there can be no assurance that such use will continue at historic levels
or at all. The loss of all or a substantial portion of the business resulting
from this relationship would have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business--Clients."
DEPENDENCE ON INDUSTRIES SERVED
The Company's success is dependent in large part on continued demand for the
Company's services from businesses within the industries served by the Company.
A significant downturn in the insurance or financial services industries, which
accounted for 46% and 22% of the Company's net revenues in 1995, respectively,
or a trend in either of these industries to reduce or eliminate their use of
teleservices, could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Target
Industries."
TELEMARKETING INDUSTRY; NEGATIVE IMPACT OF COMPETING INDUSTRIES
Providers of telemarketing services compete for client marketing budget
dollars with other marketing activities and, in particular, other forms of
direct marketing activities, such as direct mail. In recent years, there have
been significant advances in new forms of direct marketing, such as the
development of interactive shopping and data collection through television,
the Internet and other media. Many industry experts predict that electronic
interactive commerce, such as shopping and information exchange via the
network of computers known as the World Wide Web, will proliferate
significantly in the foreseeable future. To the extent such proliferation
occurs, it could have a material adverse effect on the demand for
telemarketing services. In addition, the increased use of new telephone-based
technologies, such as voice response systems, could reduce the demand for
certain of the Company's services. As the telemarketing industry continues to
grow, the effectiveness of telemarketing as a direct marketing tool may
decrease as a result of consumer saturation and increased consumer resistance
to telemarketing generally. See "Business--Industry Overview."
CHALLENGES OF MANAGING GROWTH
ICT's operations have expanded significantly in the past several years,
which has placed demands on its administrative, operational and financial
resources. The planned continued growth of the Company's client base and
services, should it occur, could place a significant strain on the Company's
existing management and operations, ICT's future performance and
profitability will depend in part on its ability to successfully implement
improved financial and management systems and to increase personnel to
respond to changes in its business. The failure to implement such systems or
to increase personnel adequately may have a material adverse effect on ICT's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
RISKS ASSOCIATED WITH ACQUISITIONS
ICT intends to continue to pursue strategic acquisitions that either expand
or complement its business. There can be no assurance that the Company will be
able to identify acceptable acquisition candidates on
6
<PAGE>
terms favorable to the Company or in a timely manner. In addition, there can
be no assurance that ICT will successfully integrate any such acquisition into
the Company's business or that any acquired business will be profitable. A
significant portion of the Company's capital resources, including a portion of
the net proceeds from this offering, could be used for future acquisitions.
The Company may require additional debt or equity financing for future
acquisitions, which additional financing may not be available on terms
favorable to the Company, if at all. See "Use of Proceeds" and "Business --
Strategy."
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; SEASONALITY
ICT has experienced and expects to continue to experience significant
fluctuations in quarterly results of operations. ICT's results of operations
depend on numerous factors, including the timing of clients' telemarketing
campaigns, the commencement and expiration of contracts, the timing and
amount of new business generated by the Company, the Company's revenue mix,
the timing of additional selling, general and administrative expenses and the
competitive conditions in the telemarketing industry. Demand for the
Company's services tends to be somewhat lower in the first quarter of each
year following the increased telemarketing activities of clients in the
fourth quarter of the previous year, prior to the holiday season. Moreover,
the first quarter operating results typically are adversely affected by
increased operating expenses incurred by the Company in anticipation of
increased demand for its services in the second quarter. Demand for the
Company's services typically slows or decreases in the third quarter as the
volume of telemarketing projects decreases during the summer months. In
addition, the Company's operating expenses increase during the third quarter
in anticipation of higher demand for its services during the fourth quarter.
Due to the above- described factors, ICT believes period-to-period
comparisons of results of operations are not necessarily meaningful and
should not be relied upon as an indication of future results of operations.
The Company's planned operating expenditures are based on revenue forecasts,
and if revenues are below expectations in any given quarter, operating
results are likely to be materially adversely affected. There can be no
assurance that, in the future, ICT will experience revenue growth or be
profitable on a quarterly or annual basis or that its financial results will
be consistent with predictions by securities analysts. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
NON-RECURRING CHARGES; EXPECTED LOSS IN 1996 SECOND QUARTER AND YEAR ENDING
DECEMBER 31, 1996
The Company will incur a non-recurring, non-cash charge of approximately
$10.3 million (based on an assumed initial public offering price of $13.00
per share) in the quarter in which this offering is completed, expected to be
the second quarter of 1996. This charge relates to the granting of options to
replace certain previously granted options to provide for an extended option
period of five years and the vesting of certain options upon the completion
of this offering. To the extent the initial public offering price is higher
or lower than $13.00 per share, the charge will be more or less,
respectively, than $10.3 million. In addition, the Company will record a
significant net deferred income tax liability and corresponding income tax
expense as a result of the Company's termination of its S corporation status.
As a result of these charges, the Company expects to incur a net loss for the
quarter in which this offering is completed and for the year ending December
31, 1996. See "Prior S Corporation Status," "Management's Discussion and
Analysis of Financial Condition and Results of Operations,"
"Management--Employee Benefit Plans" and Notes 3 and 10 of Notes to
Consolidated Financial Statements.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
The Company currently conducts operations internationally, and such
operations accounted for approximately 5% of the Company's net revenues in 1995.
The Company anticipates that operations outside the United States will represent
an increasing portion of its total operations in the future. Although ICT's
telemarketing services constitute generally accepted business practices in the
United States, such practices may not be accepted in certain international
markets. To the extent there is consumer, business or government resistance to
the use of telemarketing services in international markets targeted by the
Company, ICT's growth prospects could be materially adversely affected. In
addition, international operations are subject to numerous inherent challenges
and risks, including the difficulties associated with operating in multilingual
and multicultural
7
<PAGE>
environments, generally higher telecommunications costs, varying and potentially
burdensome regulatory requirements, fluctuations in currency exchange rates,
political and economic conditions in various jurisdictions, tariffs and other
trade barriers, longer accounts receivable collection cycles, barriers to the
repatriation of earnings and potentially adverse tax consequences. Moreover,
expansion into new geographic regions will require considerable management and
financial resources and, as a result, may negatively impact the Company's
results of operations. There can be no assurance that factors such as those
discussed above will not have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business--Strategy" and "--ICT's Services."
RISKS ASSOCIATED WITH CALL CENTER MANAGEMENT STRATEGY
A key element of ICT's strategy is to pursue opportunities to manage new or
existing call centers for clients on an outsourced basis. The Company's
operating expenses have increased, and the Company anticipates further operating
expense increases in the future, with the addition of management and other
personnel with responsibility for the Company's call center management
activities. In addition, pursuing outsourcing opportunities will require members
of ICT's management team to devote time and attention that would otherwise be
devoted to other activities of the Company. ICT has limited experience operating
call centers for clients on an outsourced basis. ICT has recently entered into
two outsourced call center management contracts, but there can be no assurance
that ICT will be successful in entering into any additional such contracts or
that the two contracts into which it has entered or any additional contracts
into which it may enter will be profitable for the Company. If ICT is
unsuccessful in entering into a sufficient number of call center management
contracts, its future business prospects could be materially adversely affected.
See "Business--Strategy" and "--ICT's Services."
RISKS ASSOCIATED WITH LABOR FORCE
By its nature, the telemarketing industry is very labor intensive. Service
representatives, who make up the majority of the Company's workforce,
generally receive modest hourly wages, and many are part-time students or
homemakers. These personnel are characterized by a high turnover rate, which
increases the Company's recruiting and training costs. Some of the Company's
telemarketing activities, particularly insurance products sales and inbound
customer service, require highly trained employees. The Company competes for
qualified personnel with other telemarketing firms and in some instances is
required to pay premium hourly wages to attract and retain personnel. An
increase in hourly wages, costs of employee benefits or employment taxes
could materially adversely affect the Company. There can be no assurance that
the Company will be able to continue to hire and retain a sufficient number
of qualified personnel to support its planned growth. If the Company were
unable to recruit and retain a sufficient number of qualified employees, its
business, financial condition and results of operations could be materially
adversely affected. See "Business--Personnel and Training."
RELIANCE ON COMPUTER AND COMMUNICATIONS SYSTEMS; TECHNOLOGY RISKS
The Company's business is highly dependent on its computer system, including
its proprietary telemarketing software system, referred to as the Company's call
transaction management system ("CTMS"), and its telecommunications system, and
the temporary or permanent loss of all or a portion of either system, for
whatever reason, could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, ICT's ability to
compete effectively and meet its clients' needs is dependent upon its ongoing,
significant investment in sophisticated computer and telecommunications
technology, including CTMS, predictive dialers, automated call distributors and
digital switches. The Company has invested significantly in technology in the
past and anticipates that it will be necessary to continue to do so. Moreover,
the technologies upon which the Company is dependent are rapidly evolving and
characterized by short product life cycles, which require the Company to
anticipate and adapt to technological shifts. There can be no assurance that the
Company will be successful in anticipating or adapting to technological changes
or in selecting and developing new and enhanced technology on a timely basis.
See "Business--Strategy" and "--Technology."
DEPENDENCE ON TELEPHONE SERVICE
ICT's business is highly dependent upon telephone service provided by
various local and long distance telephone companies. Any significant
interruption in telephone service could adversely affect the Company.
8
<PAGE>
Additionally, limitations on the ability of telephone companies to provide
ICT with increased capacity in the future could adversely affect the
Company's growth prospects. Rate increases imposed by these telephone
companies will increase the Company's operating expenses and could materially
adversely affect its business, financial condition and results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
COMPETITION
The telemarketing industry is intensely competitive. The Company competes
with numerous independent telemarketing firms, many of which are as large as
or larger than ICT, as well as the in-house telemarketing operations of many
of its clients or potential clients. In addition, most businesses that are
significant consumers of telemarketing services utilize more than one
telemarketing firm at a time and reallocate work among various firms from
time to time. A significant amount of such work is contracted on an
individual project basis, with the effect that the Company and other firms
seeking such business are required to compete with each other frequently as
individual projects are initiated. Furthermore, the Company believes there is
a trend among businesses with telemarketing operations toward outsourcing the
management of those operations to others and that this trend may attract new
competitors, including competitors that are substantially larger and better
capitalized than ICT, into the Company's market. There can be no assurance
that the Company will be able to compete effectively against its current
competitors or that additional competitors with greater resources than the
Company will not enter the industry and compete effectively against the
Company. To the extent the Company is unable to compete successfully against
its existing and future competitors, its business, financial condition and
results of operations will be materially adversely affected. See "Business --
Competition."
GOVERNMENT REGULATION
The telemarketing industry has become subject to an increasing amount of
federal and state regulation in the past five years. The Federal Telephone
Consumer Protection Act of 1991 (the "TCPA") limits the hours during which
telemarketers may call consumers and prohibits the use of automated telephone
dialing equipment to call certain telephone numbers. The TCPA creates a right
of action for both consumers and state attorneys general. A court may award
damages or impose penalties of $500 per violation, which may be trebled for
willful or knowing violations. The Federal Telemarketing and Consumer Fraud
and Abuse Prevention Act of 1994 and Federal Trade Commission ("FTC")
regulations prohibit deceptive, unfair or abusive practices in telemarketing
sales. Pursuant to its general enforcement powers, the FTC can obtain a
variety of types of equitable relief, including injunctions, refunds,
disgorgement, posting of bonds, and bars from continuing to do business, for a
violation of the acts and regulations it enforces. Both the FTC and state
attorneys general have authority to prevent telemarketing activities that
constitute "unfair or deceptive acts or practices." Under these general
enabling statutes, depending on the willfulness and severity of the violation,
penalties can include imprisonment, fines and a range of equitable remedies
such as consumer redress or the posting of bonds before continuing in
business. Additionally, some states have enacted laws and others are
considering enacting laws targeted directly at telemarketing practices. Most
of these statutes allow a private right of action for the recovery of damages
or provide for enforcement by state agencies permitting the recovery of
significant civil or criminal penalties, costs and attorneys' fees. There can
be no assurance that any such laws, if enacted, will not adversely affect or
limit the Company's current or future operations. Several of the industries
served by ICT, particularly the insurance and financial services industries,
are subject to government regulation. Although compliance with these
regulations is generally the responsibility of the Company's clients, ICT
could be subject to a variety of enforcement or private actions for its
failure or the failure of its clients to comply with such regulations. The
imposition of fines and penalties resulting from the Company's noncompliance
with these and other related laws and regulations could have an adverse effect
on the Company's business, financial condition and results of operations. The
Company and its employees who sell insurance products are required to be
licensed by various state insurance commissions for the particular type of
insurance product to be sold and participate in regular continuing education
programs, which currently are provided by the Company. The Company's provision
of such programs requires ICT to comply with certain state regulations,
changes in which could materially increase the Company's operating costs
associated
9
<PAGE>
with complying with such regulations. In the financial services industry, the
Company is subject to various federal regulations governing the use of
information disclosed by credit card holders. The Company's failure to comply
with these regulations could result in monetary penalties. See "Business --
Government Regulation."
DEPENDENCE ON KEY PERSONNEL
The Company's success is highly dependent on the efforts of its executive
officers and other key operations and technical personnel, particularly John
J. Brennan, the Company's Chairman, President and Chief Executive Officer.
The loss of the services of any of these individuals could have a material
adverse effect on the Company, and there can be no assurance that ICT will be
able to retain its existing key personnel or recruit additional key personnel
as needed. The Company maintains key-man life insurance policies on the lives
of certain officers of the Company, including John J. Brennan. In the event
of Mr. Brennan's death, the Company would receive approximately $1.25 million
in life insurance proceeds. The life insurance proceeds receivable upon the
death of other executive officers total approximately $435,000. Such proceeds
may not be sufficient to compensate the Company for the loss of such
officers' services, particularly with respect to Mr. Brennan. Although the
Company has entered into employment contracts with its executive officers,
the Company does not have non-competition agreements with its key personnel.
See "Management."
CONCENTRATION OF STOCK OWNERSHIP; VOTING TRUST AGREEMENT; SHAREHOLDERS'
AGREEMENT
Immediately following the completion of this offering, the Company's
Chairman, President and Chief Executive Officer, John J. Brennan, and his
brother, the Vice Chairman of the Company, Donald P. Brennan, will
beneficially own (as defined in the regulations of the Securities and
Exchange Commission) approximately 74.4% and 72.2%, respectively, of the
Common Stock (approximately 71.4% and 68.9%, respectively, if the
Underwriters' over-allotment option is exercised in full). As a result,
Messrs. Brennan will be able to elect the entire Board of Directors and
control the outcome of all matters requiring shareholder approval. Such
voting concentration may have the effect of delaying or preventing a change
in control of the Company. In addition, Messrs. Brennan and the Company have
entered into a voting trust agreement with Messrs. Brennan as voting
trustees. Under the terms of the voting trust agreement, all acts of the
voting trustees must be by unanimous consent, although the agreement provides
that the voting trustees will be present for purposes of constituting a
quorum at any meeting of the shareholders, regardless of whether the shares
subject to the voting trust agreement are to be voted at the meeting. The
Company and Messrs. Brennan are also parties to a shareholders' agreement
which, among other things, restricts their ability to transfer shares of
Common Stock. See "Management," "Certain Transactions" and "Principal and
Selling Shareholders."
BENEFITS TO AFFILIATES
In connection with this offering, certain officers and directors and
affiliates thereof will receive substantial benefits. Certain officers of the
Company are selling shareholders in this offering, and, if the Underwriters'
over-allotment option is exercised, John J. Brennan, the Company's Chairman,
President and Chief Executive Officer, and Donald P. Brennan, the Company's
Vice Chairman, will also be selling shareholders. The selling shareholders
will receive the full proceeds from the sale of their respective shares of
Common Stock in this offering. The Company will use a portion of the net
proceeds it receives in this offering to distribute to its current
shareholders, Messrs. Brennan and their affiliates, previously taxed but
undistributed S corporation earnings through the date the Company terminates
its S corporation status, which as of March 31, 1996 was approximately
$2.5 million. The Company will also use approximately $210,000 of the net
proceeds to repay certain outstanding promissory notes to Donald P. Brennan
and an affiliate of Messrs. Brennan. In addition, the Company will use a
portion of the net proceeds to repay certain outstanding bank indebtedness
for which Messrs. Brennan have each issued personal, unconditional
guarantees. Although the guarantees will remain outstanding after this
offering, as a result of the repayment of the outstanding indebtedness, the
obligations of Messrs. Brennan pursuant to the guarantees will be reduced.
Certain executive officers of the Company will receive replacement options in
connection with this offering which have the effect of extending, for a
period of up to five years, the exercisability of previously granted options,
the large majority of which would expire in 1997. See "Use of Proceeds,"
"Prior S Corporation Status," "Principal and Selling Shareholders" and
"Management--Executive Compensation."
10
<PAGE>
RISKS OF WORKING CAPITAL DEFICIENCY
The Company anticipates funding its ongoing working capital needs
principally through the net proceeds to the Company from this offering and
cash generated from operations. However, in the event that the Company
encounters difficulties in collecting accounts receivable or experiences
reduced contract renewal rates, any resulting deficiency in working capital
might require the Company to seek additional sources of capital. There can be
no assurance that such capital would be available on terms satisfactory to
the Company. See "Use of Proceeds" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
NO PRIOR PUBLIC MARKET FOR COMMON STOCK; POTENTIAL VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will
develop or be sustained after this offering. The initial public offering
price will be determined through negotiation between the Company and the
Representatives of the Underwriters and may bear no relationship to the price
at which the Common Stock will trade after this offering. See "Underwriting"
for a discussion of the factors to be considered in determining the initial
public offering price. The market price of the Common Stock may be volatile
and may be significantly affected by factors such as actual or anticipated
fluctuations in the Company's operating results, announcements of new
services by the Company or its competitors, developments with respect to
conditions and trends in the telemarketing industry or in the industries
served by the Company, governmental regulation, changes in estimates by
securities analysts of the Company's or its competitors' or clients' future
financial performance, general market conditions and other factors, many of
which are beyond the Company's control. In addition, the stock market has
from time to time experienced significant price and volume fluctuations that
have adversely affected the market prices of securities of companies
irrespective of such companies' operating performances.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of the Company's Common Stock in the public
market following this offering could adversely affect the market price of the
Common Stock. Upon the completion of this offering, assuming no exercise of
outstanding options other than options to purchase an aggregate of 88,448
shares of Common Stock to be exercised in connection with this offering (all
of which shares are being offered and sold hereby), the Company will have
11,500,000 shares of Common Stock outstanding. Of these shares, the 2,500,000
shares of Common Stock sold in this offering will be freely tradeable without
restriction or registration under the Securities Act of 1933, as amended (the
"Securities Act"). The remaining 9,000,000 shares of Common Stock outstanding
as of the date of this Prospectus are "restricted securities" as defined by
Rule 144 under the Securities Act ("Rule 144"). Although an aggregate of
9,000,000 shares of Common Stock will be eligible for public sale upon the
completion of this offering, all of the Company's current shareholders have
agreed not to sell or otherwise dispose of any of such shares for a period of
180 days after the date of this Prospectus without the prior written consent
of Robertson, Stephens & Company.
Upon the completion of this offering, there will be 872,302 and 159,300
shares of Common Stock subject to outstanding options under the 1987 Stock
Option Plan and units under the Equity Incentive Plan, respectively, and
90,000 shares of Common Stock subject to a stock option granted outside of the
1987 Stock Option Plan. Substantially all of the outstanding options and units
will be exercisable upon the completion of this offering. However, pursuant to
the Underwriting Agreement, the Company has agreed not to file, at any time
prior to the date 180 days from the date of this Prospectus, a registration
statement under the Securities Act covering (i) 1,121,602 shares of Common
Stock reserved for issuance under the Company's 1987 Stock Option Plan, Equity
Incentive Plan and a stock option granted outside of the 1987 Stock Option
Plan, (excluding 88,448 shares of Common Stock underlying options to be
exercised by the Selling Shareholders in connection with this offering) and
(ii) 1,150,000 shares of Common Stock reserved for future issuance under the
Company's 1996 Equity Compensation Plan and 1996 Non-Employee Directors Plan.
The Company intends to file a Form S-8 registration statement covering a
portion of such shares of Common Stock within one year from the date of this
Prospectus. The shares registered under such registration statement will be
available for resale in the open market upon the exercise of vested options,
subject to Rule 144 volume limitations applicable to affiliates.
11
<PAGE>
POSSIBLE ISSUANCES OF PREFERRED STOCK; CERTAIN PROVISIONS OF ARTICLES OF
INCORPORATION, BYLAWS AND PENNSYLVANIA LAW
The Company's Board of Directors has the authority to issue up to
5,000,000 shares of preferred stock and to determine the price, rights,
preferences and privileges of those shares without shareholder approval. The
Company's Bylaws provide for the staggered election of directors to serve for
one-, two- and three-year terms, and for successive three-year terms
thereafter, subject to removal only for cause upon the vote of a majority of
the shares of Common Stock represented at a shareholders' meeting. In
addition, the Company is subject to certain anti-takeover provisions of the
Pennsylvania Business Corporation Law of 1988, as amended (the "PBCL"). All
of these provisions may, in certain circumstances, deter or discourage
takeover attempts and other changes in control of the Company not approved by
the Company's Board of Directors. See "Description of Capital Stock."
DILUTION
The initial public offering price is substantially higher than the net
tangible book value per share of the Common Stock. Purchasers of shares of
Common Stock in this offering will, therefore, suffer immediate and
substantial dilution of $10.54 in the net tangible book value per share of
Common Stock. To the extent that currently outstanding options (many of which
have nominal exercise prices) to purchase shares of the Company's Common
Stock are exercised, investors will experience substantial further dilution.
See "Dilution."
12
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from this offering are estimated to be
$28.4 million, after deducting underwriting discounts and commissions and
estimated offering expenses payable by the Company. The Company will use a
portion of such proceeds to make the S Corporation Distribution described
below in "Prior S Corporation Status." The remainder of the net proceeds will
be used to repay indebtedness estimated to be approximately $14.8 million as
of June 30, 1996, with the balance being used for working capital and general
corporate purposes, including possible future acquisitions. Although the
Company plans to regularly evaluate possible acquisition opportunities, it is
not currently engaged in any negotiations regarding any acquisition. Pending
such uses, the Company intends to invest the net proceeds to the Company from
this offering in investment grade, short-term, interest-bearing securities.
As of June 30, 1996, the Company's estimated $14.8 million of indebtedness
will include bank indebtedness consisting of $8.5 million under the Company's
line of credit (the "Revolver"), $675,000 and $439,000 under term loans,
$658,000 under an equipment loan facility (the "Equipment Line") and $1.5
million under an additional line of credit (the "Brennan Loan"), all of which
accrue interest at the bank's base rate, which was 8.25% as of April 30, 1996,
and which are due and payable in June 1997, September 1988, July 1997, April
2001 and November 1996, respectively. Borrowings under the Revolver are used
for working capital and vary depending on the Company's working capital needs.
From May 31, 1995 to May 31, 1996, the Company incurred net borrowings under
the Revolver of $2.9 million. In April 1996, the Company borrowed
approximately $669,000 under the Equipment Line to purchase telecommunications
equipment and $1.5 million under the Brennan Loan to make a loan to Messrs.
Brennan to provide them with funds to pay income tax obligations. In addition,
the Company's indebtedness includes Eurotel's total indebtedness to its local
bank, of approximately $500,000, which accrues interest at such bank's prime
rate of interest, which was 5.63% at April 30, 1996, and is due in June 1996,
the Company's capitalized lease obligations of approximately $2.3 million,
which have a weighted average interest rate of 10.0% and maturities ranging
from three to five years, and approximately $210,000 in promissory notes to
affiliates which are due on demand and have an annual interest rate of 12.0%.
See "Prior S Corporation Status," "Certain Transactions" for a description of
the indebtedness to be repaid to affiliates and Notes 6, 7 and 8 of Notes to
Consolidated Financial Statements.
PRIOR S CORPORATION STATUS
The Company has been an "S corporation" subject to taxation under
Subchapter S of the Internal Revenue Code since its inception in 1987. As a
result, the net income of the Company, for federal and certain state and
local tax purposes, has been reported by and taxed directly to the Company's
shareholders, rather than to the Company.
The Company will terminate its S corporation status on a date (the
"Termination Date") immediately prior to the commencement of this offering. The
Company will use a portion of the net proceeds from this offering to distribute
to its current shareholders an amount representing the Company's previously
taxed but undistributed S corporation earnings through the Termination Date (the
"S Corporation Distribution"). The amount of the S Corporation Distribution
would have been approximately $2.5 million if the Termination Date had been
March 31, 1996, but the actual amount will be adjusted to reflect the Company's
actual taxable income through the Termination Date, less any state income tax
payable by the Company with respect to such income. In April 1996, the Company
advanced $1.5 million of the S Corporation Distribution to its shareholders and
incurred the Brennan Loan primarily to provide the shareholders with funds to
pay their income tax obligations. As a result, in connection with this offering,
$1.5 million of the S corporation Distribution will be repaid to the bank as
described above in "Use of Proceeds" and the balance of the S Corporation
Distribution will be distributed to the shareholders.
In addition, as a result of the termination of its S corporation status,
the Company will record a net deferred income tax liability and corresponding
income tax expense (the "Deferred Tax Liability"), effective upon the
Termination Date. The amount of the Deferred Tax Liability would have been
approximately $1.2 million if the Termination Date had been March 31, 1996,
but the actual amount will be adjusted to reflect the effect of the Company's
actual operating results through the Termination Date.
DIVIDEND POLICY
The Company intends to retain its earnings to finance future operations
and expansion and does not expect to pay any dividends in the foreseeable
future. Under the terms of its bank loan agreement, the Company is prohibited
from paying cash dividends without the consent of its lender.
13
<PAGE>
CAPITALIZATION
The following table sets forth, as of March 31, 1996: (i) the actual
capitalization of the Company, (ii) the pro forma capitalization of the
Company after giving effect to the termination of the Company's S corporation
status and (iii) the pro forma capitalization of the Company as adjusted to
give effect to the sale by the Company of 2,411,552 shares of Common Stock
offered hereby (at an assumed initial public offering price of $13.00 per
share) and the application of the net proceeds as set forth in "Use of
Proceeds." This table should be reviewed in conjunction with the Consolidated
Financial Statements and Notes thereto appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
March 31, 1996
-----------------------------------------
Pro Forma
Actual Pro Forma(1) As Adjusted(1)
-------- ------------ --------------
(In thousands, except share data)
<S> <C> <C> <C>
Short-term debt:
Borrowings on lines of credit ....................... $6,853 $6,853 $ --
Current portion of long-term debt and capitalized
lease obligations ................................. 1,647 1,647 --
Total short-term debt .............................. $8,500 $8,500 $ --
======== ============ ===========
Long-term debt and capitalized lease obligations, net of
current portion(2) .................................. $2,516 $2,516 $ --
-------- ------------ -----------
Shareholders' equity:
Preferred Stock, $.01 par value; 5,000,000 shares
authorized, no shares issued and outstanding ..... -- -- --
Common Stock, $.01 par value; 40,000,000 shares
authorized, 9,000,000 shares issued and
outstanding, actual and pro forma, and 11,500,000
shares issued and outstanding, pro forma as
adjusted(3) ....................................... 90(4) 90(4) 115
Additional paid-in capital .......................... 426 653 29,043
Deferred compensation ............................... (109) (109) (109)
Retained earnings ................................... 3,863 -- --
Cumulative translation adjustment ................... 24 24 24
-------- ------------ -----------
Total shareholders' equity ......................... 4,294 658 29,073
-------- ------------ -----------
Total capitalization ............................ $6,810 $3,174 $29,073
======== ============ ===========
</TABLE>
- ------
(1) Reflects the effects of the termination of the Company's S corporation
status, including the S Corporation Distribution and the Deferred Tax
Liability. See "Prior S Corporation Status" and Note 3 of Notes to
Consolidated Financial Statements.
(2) See Notes 6, 7 and 8 of Notes to Consolidated Financial Statements for
information concerning the Company's long-term debt and capitalized lease
obligations.
(3) Based upon the number of shares outstanding as of March 31, 1996.
Excludes 1,121,602 shares of Common Stock issuable upon the exercise of
stock options outstanding on that date. See "Management-- Employee
Benefit Plans" and Note 10 of Notes to Consolidated Financial Statements.
(4) Represents 4,500,000 shares of Class A Common Stock, $.01 par value,
issued and outstanding and 4,500,000 shares of Class B Common Stock, $.01
par value, issued and outstanding, all of which will convert to Common
Stock upon the completion of this offering.
14
<PAGE>
DILUTION
The net tangible book value of the Company as of March 31, 1996 was
approximately $3,468,000, or $.38 per share. Net tangible book value per
share is equal to the total tangible assets of the Company less total
liabilities, divided by the number of shares of Common Stock outstanding. The
pro forma net tangible book value of the Company as of March 31, 1996, after
giving effect to the S Corporation Distribution and the Deferred Tax
Liability, would have been a deficit of approximately ($168,000), or ($.02)
per share. After giving effect to the sale by the Company of 2,411,552 shares
of Common Stock offered hereby (at an assumed initial public offering price
of $13.00 per share) and after deduction of underwriting discounts and
commissions and estimated offering expenses payable by the Company, the pro
forma net tangible book value of the Company as of March 31, 1996 would have
been approximately $28,247,000, or $2.46 per share. This represents an
immediate increase in pro forma net tangible book value of $2.48 per share to
existing shareholders and an immediate dilution in pro forma net tangible
book value of $10.54 per share to new shareholders purchasing Common Stock in
the offering. The following table illustrates this per-share dilution.
Assumed initial public offering price per share ......... $13.00
Pro forma net tangible book value per share before the
offering ............................................... ($ .02)
Increase in pro forma net tangible book value per share
attributable to new shareholders ..................... 2.48
--------
Pro forma net tangible book value per share after the
offering ............................................... 2.46
------
Dilution per share to new shareholders .................. $10.54
=======
The following table summarizes, on a pro forma basis as of March 31, 1996,
the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid by
existing shareholders and by purchasers of the shares offered by the Company
hereby (at an assumed initial public offering price of $13.00 per share).
<TABLE>
<CAPTION>
Shares Purchased(1) Total Consideration Average Price
------------------------- --------------------------
Number Percent Amount Percent Per Share
------------ --------- ------------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Existing shareholders(2) . 9,088,448 79.0% $ 408,996 1.3% $ .05
New shareholders ....... 2,411,552 21.0 31,350,176 98.7 13.00
------------ --------- ------------- ---------
Total ................ 11,500,000 100.0% $31,759,172 100.0%
============ ========= ============= =========
</TABLE>
- ------
(1) Sales by the Selling Shareholders in this offering will reduce the number
of shares held by existing shareholders to 9,000,000 shares, or 78.3% of
the total number of shares of Common Stock to be outstanding after this
offering, and will increase the number of shares held by new shareholders
to 2,500,000 shares, or 21.7% of the total number of shares of Common
Stock to be outstanding after this offering. See "Principal and Selling
Shareholders."
(2) Includes the exercise of options to purchase an aggregate of 88,448
shares of Common Stock which will occur prior to the completion of this
offering.
The foregoing table does not take into account the exercise of outstanding
stock options, other than options to purchase an aggregate of 88,448 shares
of Common Stock to be exercised in connection with the offering (all of which
shares are being offered and sold hereby). To the extent that any additional
options are exercised, there will be further dilution to new investors. See
"Management--Employee Benefit Plans."
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data as of and for each of the years
ended December 31, 1993, 1994 and 1995, are derived from the audited
consolidated financial statements of the Company included elsewhere in this
Prospectus. The selected consolidated financial data as of and for each of
the years ended December 31, 1991 and 1992 are derived from the audited
financial statements of the Company not included herein. The selected
consolidated financial data for the three months ended March 31, 1995 and
1996 have been derived from the unaudited financial statements of the Company
and, in the opinion of management, include all adjustments (consisting only
of normal recurring adjustments) which are necessary to present fairly the
results of operations and financial position of the Company for those periods
in accordance with generally accepted accounting principles. The selected
consolidated financial data for the three months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year. The
following selected consolidated financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Consolidated Financial Statements and Notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
---------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- -------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues ....................... 16,019 $17,502 $22,271 $34,123 $52,116 $9,294 $16,220
-------- --------- --------- --------- --------- -------- -------
Operating expenses:
Cost of services ................. 9,291 10,269 12,746 19,593 28,639 5,210 8,767
Selling, general and
administrative 6,026 6,845 8,630 13,121 21,073 3,858 6,796
-------- --------- --------- --------- --------- -------- -------
Total operating expenses ...... 15,317 17,114 21,376 32,714 49,712 9,068 15,563
-------- --------- --------- --------- --------- -------- -------
Operating income .............. 702 388 895 1,409 2,404 226 657
Interest expense .................. 366 338 326 511 834 164 233
-------- --------- --------- --------- --------- -------- -------
Net income before taxes ........... $ 336 $ 50 $ 569 $ 898 $ 1,570 $ 62 $ 424
======== ========= ========= ========= ========= ======== =======
Pro forma provision for income
taxes(1)......................... 667 170
--------- -------
Pro forma net income(1) ........... $ 903 $ 254
========= =======
Pro forma net income per share(1) .. $ .09 $ .03
========= =======
Shares used in computing pro forma
net income per share(1) ......... 9,697 9,697
========= =======
</TABLE>
<TABLE>
<CAPTION>
December 31, March 31, 1996
------------------------------------------------------- -----------------------------------------
Pro Forma
1991 1992 1993 1994 1995 Actual Pro Forma(2) Adjusted(2)(3)
--------- --------- -------- --------- ----------- ---------- ------------ --------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital (deficit) ..... $ (511) $ (398) $ (461) $ (462) $ (1,601) $(2,484) $(5,078) $20,821
Total assets .................. 5,732 6,298 7,410 12,044 18,481 21,418 21,418 36,366
Long-term debt, less current
maturities ................. 1,145 925 625 941 881 705 705 --
Capitalized lease obligations,
less current maturities ..... 174 257 512 807 1,632 1,811 1,811 --
Shareholders' equity .......... 751 801 1,371 2,270 3,843 4,294 658 29,073
</TABLE>
- ------
(1) The Company has operated as an S corporation for income tax purposes
since its inception in 1987 and will terminate such status in connection
with this offering. See Note 3 of Notes to Consolidated Financial
Statements for information concerning the computation of the pro forma
provision for income taxes, pro forma net income and pro forma net income
per share.
(2) Reflects the S Corporation Distribution and the Deferred Tax Liability.
See "Prior S Corporation Status" and Note 3 to Notes to Consolidated
Financial Statements.
(3) Adjusted to give effect to the sale by the Company of 2,411,552 shares of
Common Stock offered hereby (at an assumed initial public offering price
of $13.00 per share) and the application of the net proceeds as set forth
in "Use of Proceeds."
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In addition to historical information, the following Management's
Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ significantly from those anticipated in
these forward-looking statements as a result of certain factors, including
those discussed in "Risk Factors" and elsewhere in this Prospectus.
OVERVIEW
ICT is a leading independent provider of call center teleservices, which
consist of outbound and inbound telemarketing, and value-added services,
such as marketing, research and consulting services, to businesses
domestically and internationally. In addition, the Company is pursuing
opportunities to manage clients' call centers on a contract basis. Acquired
by management from Decision Industries Corporation, a computer peripherals
and service organization, in April 1987, ICT has become a full-service
teleservices provider for businesses within its targeted industries, which
include insurance, financial services, publishing, telecommunications,
consumer and, more recently, pharmaceutical and health care services and
computer software and hardware.
The Company has broadened its market position from its original outbound
consumer telemarketing orientation to its present range of call center services
through both internal growth and a series of strategic acquisitions. In 1988,
the Company entered into the market research data collection business by
acquiring the business of Valley Forge Information Services, Inc. In 1994, the
Company strengthened its inbound consumer operations by acquiring the business
of American Tele/Response, Inc. Also in 1994, ICT initiated its international
expansion by acquiring the business of Spantel, Inc. ("Spantel"), which provides
telemarketing services to Spanish-speaking markets in the United States and
Latin America, and by forming Eurotel Marketing Limited ("Eurotel"), a joint
venture with a subsidiary of R.R. Donnelley & Sons Company ("Donnelley"), to
provide multilingual pan-European telemarketing sevices. The Company recently
entered into an agreement with Donnelley to purchase Donnelley's 40% interest in
Eurotel for an amount equal to 40% of Eurotel's net book value. The purchase
price is not expected to be material to the Company's business, financial
condition or liquidity. In May 1995, the Company expanded its value-added
services through the acquisition of the business comprising its Smartline
division, a telebanking services provider. In January 1996, the Company further
expanded its international operations through the establishment of ICT/Canada
Marketing, Inc. ("ICT Canada"), a company that is controlled and 49% owned by
the Company and 51% owned by two Canadian nationals otherwise unaffiliated with
the Company. The Company provided substantially all of the initial
capitalization, has 100% of the voting control and is entitled to all earnings
of ICT Canada except for up to Cdn. $51,000 in earnings in any one year. The
Company consolidates ICT Canada in its consolidated financial statements.
The Company's net revenues have grown from $22.3 million in 1993 to $52.1
million in 1995. This rapid growth primarily resulted from the Company's
ability to meet increased client demands, to broaden its service offerings
and to expand internationally. Specifically, the Company's net revenues from
international services (services provided by Spantel and Eurotel) were
$700,000 and $2.4 million in 1994 and 1995, respectively. The Company
believes that its recent acquisitions and investments in technology
differentiate it in the marketplace and position it for long-term revenue
growth and improved profitability.
The Company's cost of services is directly related to providing
telemarketing services and consists principally of direct labor and
telecommunications costs. These costs have decreased as a percentage of net
revenues since 1994 as the Company has expanded its domestic telemarketing
operations to lower cost labor markets, improved its operating efficiencies
in certain telemarketing operations and negotiated more favorable
telecommunication contracts.
Selling, general and administrative expenses are comprised principally of
all expenses that directly support the operations of the business units,
including management, facilities costs, equipment depreciation and
maintenance, sales and marketing activities and client support services, as
well as corporate management
17
<PAGE>
costs, including accounting and finance, human resources, information services
and other administrative costs. Selling, general and administrative expenses
have increased significantly since 1993, as the Company has expanded its
domestic operations internally and through acquisitions and established an
international presence in Europe, Latin America and Canada.
The Company has been subject to taxation under Subchapter S of the
Internal Revenue Code since its inception in 1987. As a result, the net
income of the Company, for federal and certain state and local tax purposes,
has been reported by and taxed directly to the Company's shareholders, rather
than the Company. Pro forma net income has been computed as if the Company
had been fully subject to federal and state income taxes based upon the tax
laws in effect during the respective periods.
RESULTS OF OPERATIONS
The following table sets forth statement of operations data as a
percentage of net revenues for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
---------------------------------- ----------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues .......................... 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
--------- --------- --------- --------- ---------
Operating expenses:
Cost of services .................... 57.2 57.4 55.0 56.1 54.1
Selling, general and administrative . 38.8 38.5 40.4 41.5 41.9
--------- --------- --------- --------- ---------
Total operating expenses ........... 96.0 95.9 95.4 97.6 96.0
--------- --------- --------- --------- ---------
Operating income ................... 4.0 4.1 4.6 2.4 4.0
Interest expense ...................... 1.5 1.5 1.6 1.7 1.4
--------- --------- --------- --------- ---------
Net income before taxes ............... 2.5 2.6 3.0 .7 2.6
--------- --------- --------- --------- ---------
Pro forma provision for income taxes(1) . 1.1 1.2 1.3 .4 1.0
--------- --------- --------- --------- ---------
Pro forma net income(1) ............... 1.4% 1.4% 1.7% .3% 1.6%
========= ========= ========= ========= =========
</TABLE>
- ------
(1) See Note 3 of Notes to Consolidated Financial Statements for information
concerning the computation of the pro forma provision for income taxes
and pro forma net income.
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Net Revenues. Net revenues increased 74.5% to $16.2 million for the three
months ended March 31, 1996 from $9.3 million for the comparable period in
1995. Revenues increased primarily due to continued growth in consumer
telemarketing services to the insurance and financial services industries and
revenues from telebanking operations, which were added through the Company's
acquisition of the business comprising its Smartline division in May 1995.
Cost of Services. Cost of services increased 68.3% to $8.8 million for
the three months ended March 31, 1996 from $5.2 million for the comparable
period in 1995. As a percentage of net revenues, cost of services decreased
to 54.1% for the three months ended March 31, 1996 from 56.1% for the
comparable period in 1995, primarily due to increased productivity in the
Company's inbound operations.
Selling, General and Administrative. Selling, general and administrative
expenses increased 76.2% in the first quarter of 1996 to $6.8 million from
$3.9 million in the comparable 1995 period. As a percentage of net revenues,
selling, general and administrative expenses increased to 41.9% in the 1996
period from 41.5% in the 1995 period, primarily due to costs associated with
the Company's entry into the Canadian market.
Interest Expense. Interest expense increased to $233,000 in the 1996
period from $164,000 in the 1995 period, due to higher average outstanding
balances of bank and capitalized lease debt, which were partially offset by
lower average interest rates during the 1996 period.
18
<PAGE>
Pro Forma Provision for Income Taxes. The pro forma provision for income
taxes represents the provision for federal and state income taxes at an
effective tax rate of 40.1% for the three months ended March 31, 1996 and
42.5% for the comparable period in 1995. These rates reflect combined federal
and state income taxes as if the Company had been treated as a C corporation
in both periods.
YEARS ENDED DECEMBER 31, 1995 AND 1994
Net Revenues. Net revenues increased 52.7% to $52.1 million in 1995 from
$34.1 million in 1994. The increase in net revenues was attributable
primarily to continued growth in consumer telemarketing services to the
insurance and financial services sectors, revenues from the telebanking
operations of Smartline (acquired in May 1995) and an increase in consumer
inbound and business-to-business teleservices.
Cost of Services. Cost of services increased 46.2% to $28.6 million in
1995 from $19.6 million in 1994. As a percentage of net revenues, cost of
services decreased to 55.0% in 1995 from 57.4% in 1994, primarily due to the
full year effect of lower telephone rates negotiated in 1994 with its
telecommunications providers.
Selling, General and Administrative. Selling, general and administrative
expenses increased 60.6% to $21.1 million in 1995 from $13.1 million in 1994.
As a percentage of net revenues, these expenses increased to 40.4% in 1995
from 38.5% in 1994, primarily due to additional sales and support personnel
for new target industries and international expansion.
Interest Expense. Interest expense increased to $833,000 in 1995 from
$511,000 in 1994 due to higher average outstanding balances of bank and
capitalized lease debt and higher average interest rates during 1995.
Pro Forma Provision for Income Taxes. The pro forma provision for income
taxes represents the provision for federal and state income taxes at
effective tax rates of 42.5% in 1995 and 45.2% in 1994, as if the Company had
been treated as a C corporation in both years. The decrease in the effective
tax rate was primarily due to lower state income tax rates and the lower
percentage effect of certain non-deductible expenses.
YEARS ENDED DECEMBER 31, 1994 AND 1993
Net Revenues. Net revenues increased 53.2% to $34.1 million in 1994 from
$22.3 million in 1993, primarily as a result of increased teleservices
revenues from insurance clients.
Cost of Services. Cost of services increased 53.7% to $19.6 million in
1994 from $12.7 million in 1993. As a percentage of net revenues, cost of
services was relatively stable at 57.4% in 1994 and 57.2% in 1993.
Selling, General and Administrative. Selling, general and administrative
expenses increased 52.1% to $13.1 million in 1994 from $8.6 million in 1993.
As a percentage of net revenues, these expenses were relatively stable at
38.5% in 1994 and 38.8% in 1993.
Interest Expense. Interest expense increased to $511,000 in 1994 from
$325,000 in 1993 due to higher average outstanding balances of bank and
capitalized lease debt and higher average interest rates during 1994.
Pro Forma Provision for Income Taxes. The pro forma provision for income
taxes represents the provision for federal and state income taxes at
effective tax rates of 45.2% in 1994 at 46.2% in 1993, as if the Company had
been treated as a C corporation in both years.
19
<PAGE>
QUARTERLY RESULTS AND SEASONALITY
The following table sets forth statement of operations data for each of
the four quarters of 1995 and the first quarter of 1996, as well as such data
expressed as a percentage of net revenues. This quarterly information in
unaudited but has been prepared on a basis consistent with the Company's
audited financial statements presented elsewhere in this Prospectus and, in
the Company's opinion, includes all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the information
for the quarters presented. The results for any quarter are not necessarily
indicative of results for any future period.
<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31,
1995 1995 1995 1995 1996
---------- ---------- ----------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net revenues ........................ $9,294 $12,539 $14,246 $16,037 $16,220
---------- ---------- ----------- ---------- ----------
Operating expenses:
Cost of services .................. 5,210 7,090 7,856 8,483 8,767
Selling, general and administrative . 3,858 4,988 5,704 6,524 6,796
---------- ---------- ----------- ---------- ----------
Total operating expenses ......... 9,068 12,078 13,560 15,007 15,563
---------- ---------- ----------- ---------- ----------
Operating income .................. 226 461 686 1,030 657
Interest expense .................... 164 203 254 212 233
---------- ---------- ----------- ---------- ----------
Net income before taxes ............. $ 62 $ 258 $ 432 $ 818 $ 424
========== ========== =========== ========== ==========
Pro forma provision for income taxes . 26 110 184 347 170
---------- ---------- ----------- ---------- ----------
Pro forma net income ................ $ 36 $ 148 $ 248 $ 471 $ 254
========== ========== =========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31,
1995 1995 1995 1995 1996
---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net revenues ....................... 100.0% 100.0% 100.0% 100.0% 100.0%
---------- ---------- ----------- ---------- ----------
Operating expenses:
Cost of services ................. 56.1 56.5 55.2 52.9 54.1
Selling, general and administrative 41.5 39.8 40.0 40.7 41.9
---------- ---------- ----------- ---------- ----------
Total operating expenses ........ 97.6 96.3 95.2 93.6 96.0
---------- ---------- ----------- ---------- ----------
Operating income ................ 2.4 3.7 4.8 6.4 4.0
Interest expense ................... 1.7 1.6 1.8 1.3 1.4
---------- ---------- ----------- ---------- ----------
Net income before taxes ............ .7 2.1 3.0 5.1 2.6
========== ========== =========== ========== ==========
Pro forma provision for income taxes . .4 .9 1.3 2.2 1.0
---------- ---------- ----------- ---------- ----------
Pro forma net income ............... .3% 1.2% 1.7% 2.9% 1.6%
========== ========== =========== ========== ==========
</TABLE>
The Company has experienced and expects to continue to experience
significant quarterly variations in operating results, principally as a
result of the timing of clients' telemarketing campaigns, the commencement
and expiration of contracts, the timing and amount of new business generated
by the Company, the Company's revenue mix, the timing of additional selling,
general and administrative expenses to support the growth and development of
new business units and the competitive conditions in the telemarketing
industry. The Company's business tends to be strongest in the fourth quarter
due to the high level of client telemarketing activity prior to the holiday
season, particularly in the financial services and consumer industries.
In the first quarter, business generally slows as a result of reduced
telemarketing activities in the financial services industry and client
transitions to new marketing programs during the first quarter of the
calendar year. In addition, the Company typically expands its operations in
the first quarter to support anticipated business growth beginning in the
second quarter. As a result, selling, general and administrative costs
typically increase in the first quarter without a commensurate increase in
revenues, which results in decreased profitability for the first quarter
versus the previous fourth quarter. For example, in the first quarter of
1996, revenues were only 1.1% higher than those in the fourth quarter of
1995, while selling, general and admin-
20
<PAGE>
istrative expenses increased 4.2%, resulting in lower operating income and net
income than would otherwise have been the case. The Company's operating
results typically are similarly affected during the third quarter, as
marketing projects slow during the summer months while the Company invests in
additional operating capacity to support anticipated business demand in the
fourth quarter. This trend did not occur in the third quarter of 1995 due to
the Company's engagement in several major telemarketing projects during this
period.
In connection with this offering, the Company will incur a non-recurring,
non-cash compensation expense of $10.3 million (based on an assumed public
offering price of $13.00 per share) in the quarter in which this offering is
completed, expected to be the second quarter of 1996. The expense will result
from the granting of options to replace certain previously granted options to
provide for an extended exercise period and the vesting of certain options
contingent upon the completion of this offering. To the extent that the
initial public offering price is higher or lower than $13.00 per share, the
amount of this compensation expense will be more or less, respectively, than
$10.3 million. During the same quarter, the Company will record the Deferred
Tax Liability. These charges will result in a net loss for the quarter and an
anticipated net loss for the year ending December 31, 1996. See "Prior S
Corporation Status" and Notes 3 and 10 of Notes to Consolidated Financial
Statements.
LIQUIDITY AND CAPITAL RESOURCES
Historically, ICT's primary sources of liquidity have been cash flow from
operations and borrowing on its bank revolving line of credit. Acquisitions
and capital expenditures have been financed through bank term loans and
capitalized lease obligations. The Company has utilized any excess cash from
operations to repay its revolving bank loan and, historically, has maintained
a minimum cash balance.
Cash provided by operating activities was $614,000 for the three months
ended March 31, 1996 compared to cash used of $25,000 for the same period in
1995, and cash provided by operating activities was $528,000, $913,000 and
$1.1 million in 1993, 1994 and 1995, respectively. The increases in each
period were due to higher net income before depreciation and amortization,
which were partially offset by the cash used for working capital. The working
capital increases were principally related to higher accounts receivable
balances resulting from the increases in net revenues in each period.
Cash provided by financing activities was $181,000 for the three months
ended March 31, 1996 compared to $828,000 for the same period in 1995, and
was $113,000, $424,000 and $2.2 million in 1993, 1994 and 1995, respectively.
The cash provided by financing activities represented borrowings under the
Company's bank line of credit and various term loans, net of any repayments.
Cash used in investing activities was $1.3 million for the three months
ended March 31, 1996 compared to $692,000 for the same period in 1995, and
was $597,000, $1.4 million and $2.8 million in 1993, 1994 and 1995,
respectively. The increases in each period were due to increasing levels of
property and equipment purchases to support the growth in the Company's
telemarketing activities. From January 1, 1993 through March 31, 1996, the
Company's capital expenditures totalled $5.4 million and its additions to
capitalized leased assets totalled $4.0 million. During that period, the
Company increased its number of workstations by approximately 700. In
addition, cash in the aggregate amount of approximately $1.0 million was used
in 1994 and 1995 to expand the Company's international and value-added
services through the acquisition of certain businesses. See Note 5 of Notes
to Consolidated Financial Statements.
In April 1996, the Company entered into a loan agreement with a bank, which
provides for a $15.0 million line of credit, a $3.5 million equipment line of
credit and a $1.5 million short-term loan. Borrowings on the line of credit
are limited to 80% of eligible accounts receivable. The line of credit bears
interest at the bank's base rate (8.25% as of March 31, 1996) and expires on
June 30, 1997. The Company's outstanding balance on the line of credit at
March 31, 1996 was $6.3 million. The equipment line of credit is to be used to
finance 90% of the cost of equipment purchases. Individual borrowings must be
at least $200,000 and, once drawn, become, at the option of the bank, three to
five-year term loans due in equal monthly installments. Borrowings under the
equipment line bear interest at either the bank's base rate or a fixed rate
set at the U.S. Treasuries Reference Rate plus 2.75%, at the option of the
Company. If the fixed rate option is selected, any principal prepayments could
be subject to penalties. The $1.5 million short-term loan bears interest at
the bank's base rate and is due on November 30, 1996. The proceeds from the
loan were advanced by the Company to its shareholders in April 1996 in order
to allow the shareholders to pay their 1995 and estimated 1996
21
<PAGE>
income tax liabilities on the Company's taxable income, which, due to the
Company's S corporation status, is taxable to the Company's shareholders. Upon
the completion of this offering, the amount advanced to the shareholders will
be treated as a portion of the of S Corporation Distribution. See "Prior S
Corporation Status" and "Certain Transactions."
The Company's telemarketing activities will continue to require
significant capital expenditures. Capital expenditures, including capitalized
leases, were $1.3 million in 1993, $2.3 million in 1994 and $4.3 million in
1995. The Company expects to spend approximately $5.0 million on capital
expenditures in 1996. Equipment purchases have been financed through the
Company's equipment line of credit and through capitalized lease obligations
with various equipment vendors and lending institutions. The lease
obligations are payable in varying installments through 2000. Outstanding
obligations under capitalized leases at March 31, 1996 were $2.6 million. See
Notes 6 and 7 of Notes to Consolidated Financial Statements.
The Company believes that the funds generated from operations, together
with the net proceeds to the Company from this offering and available credit
under its line of credit and equipment line, will be sufficient to finance
its current operations and planned capital expenditures at least through
1997.
22
<PAGE>
BUSINESS
The following Business section contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus.
The Company is a leading independent provider of call center teleservices,
which consist of outbound and inbound telemarketing and customer support
services, together with related value-added services such as marketing,
research and consulting services, to businesses domestically and
internationally. The Company's call center management experience,
technological leadership and expertise in target industries enable it to
provide its clients with high quality, cost-effective call center services. In
addition to supporting customers' teleservices programs from its own call
centers, ICT is pursuing additional opportunities to manage clients' call
centers on a contract basis. The Company believes there is a trend by
businesses to outsource many of their internal telephone sales, customer
service and product support function. In order to capitalize on this trend,
the Company is incurring certain startup costs and expenses (the amount of
which has not been material to date) without any associated revenues; however,
the Company has recently entered into two call center management contracts.
The Company believes it was the first teleservices firms to establish
international call centers with multilingual capabilities, which it intends to
further expand to meet the global needs of multinational clients.
INDUSTRY OVERVIEW
The call center services market includes traditional telemarketing
activities such as outbound and inbound telephone marketing, as well as
customer support, call center management and value-added marketing, research
and consulting services. Telemarketing and other call center services have
evolved significantly in recent years, as businesses have increasingly
focused on utilizing highly personalized services to target consumer and
business customers to create sales growth, provide customer support services
and aid customer retention. Direct Marketing magazine estimates that
telemarketing industry expenditures in the United States grew to
approximately $77 billion by 1995. The Company believes that all but a small
percentage of this spending was incurred for services performed by in-house
call centers; however, companies are increasingly outsourcing existing and
new call center operations to specialists.
In today's competitive marketplace, the Company believes that businesses are
increasingly recognizing the competitive advantages of utilizing telemarketing
and other call center services to reach and communicate with their customers.
With response rates several times higher than those associated with direct mail
activities, telemarketing provides an effective channel through which businesses
are able to contact targeted customers. As a result, call centers have become
robust channels for the marketing and sale of a wide variety of products and
services, as sophisticated telemarketers are able to market effectively and
collect valuable market and customer data. Moreover, businesses utilize call
center services for a range of other functions, including providing customer
support, generating customer leads, conducting direct sales activities, managing
customer retention programs and testing telemarketing program effectiveness.
Industries that have traditionally used teleservices for targeted
marketing include insurance, financial services, publishing and
telecommunications. As technology continues to improve the capabilities and
productivity of call center representatives, companies in these industries
are increasing their use of call centers and expanding the breadth of the
applications they employ. For example, in the financial services industry,
where telemarketing historically was used primarily for customer acquisition
in the credit card business, call center services are now being employed to
market a wide range of products and services, including consumer and business
loans and mutual funds. In addition, businesses in industries that have not
customarily utilized call center services are becoming significant users, as
illustrated by the increasing use of call centers by pharmaceutical and
health care services companies to perform direct marketing and database
management functions and by computer software and hardware companies for
marketing and customer support activities. Moreover, multinational companies
in a variety of industries, including computer hardware and software and
publishing, have begun to utilize call center services on a global basis.
23
<PAGE>
The teleservices market has changed from a largely unregulated environment
dominated by small, technologically unsophisticated companies to today's
increasingly regulated and global marketplace in which technological
sophistication is essential. At the same time, the use of telemarketing and
other call center services is expanding into new applications and industries,
and large corporations are increasingly seeking to partner with independent
teleservices specialists for the management and enhancement of the call
center aspects of their marketing, sales and customer service activities. The
Company believes these trends present attractive opportunities for large,
technologically sophisticated teleservices firms such as ICT that provide a
full range of call center services.
THE ICT APPROACH
ICT believes that it has distinguished itself in the call center services
industry by focusing on target industries and by providing its domestic and
international customers with comprehensive teleservices. With extensive
experience in telemarketing, as well as other fields such as marketing,
research and consulting, the Company's management team has emphasized call
center management experience, economies of scale, technological leadership
and expertise in target industries as a means of establishing ICT as a
consistent provider of cost-effective call center services. By focusing on a
limited number of target industries, the Company has developed significant
expertise marketing products and services for customers in those target
industries. ICT believes this approach positions it to secure call center
management relationships with businesses seeking to outsource the management
of existing or new call center operations. In addition, the Company continues
to introduce value-added services, such as industry-focused marketing,
research and consulting services, and to increase its international presence
in order to provide multilingual teleservices domestically and
internationally.
STRATEGY
With the increasing use of teleservices by businesses and the trend toward
outsourcing call center activities, ICT believes significant opportunities
exist to expand its business. The Company's growth strategy includes the
following key elements:
o Pursue Outsourced Call Center Management Opportunities. ICT believes the
current trend toward outsourcing call centers will continue, and it intends to
pursue additional opportunities to manage new or existing call center operations
on an outsourced basis, either independently or through joint bids with
strategic partners, such as staffing agencies. ICT has recently secured
two call center management contracts and is currently in contract negotiations
or discussions with other prospective clients regarding outsourced call center
management relationships.
o Increase International Presence. The Company plans to broaden its
geographic reach and further develop its expertise in telemarketing in
international markets by focusing on businesses with multinational
operations. ICT currently provides multilingual telemarketing services in the
United States, Europe, Latin America and Canada. ICT intends to expand its
operations in these areas and to explore additional international operations
in areas such as the Pacific Rim.
o Develop Strategic Alliances and Acquisitions. ICT intends to continue
pursuing strategic alliances with, and acquisitions of, domestic and
international businesses that provide complementary call center teleservices.
The Company initiated its international expansion in 1994 through the
acquisition of the business of Spantel, which provides services to
Spanish-speaking markets in the United States and Latin America, and the
establishment of Eurotel to provide multilingual teleservices to pan-European
markets. In May 1995, the Company acquired the business comprising its
Smartline division, which provides telebanking services. These three
operations represented approximately $7 million, or 14%, of ICT's revenues in
1995.
o Expand Value-Added Marketing Services. The Company will continue to
complement its core telemarketing expertise with additional value-added
services, such as marketing, research and consulting services, with the goal
of providing comprehensive teleservices to businesses in its targeted
industries. For example, through its Smartline division, ICT offers
telebanking services to its financial services clients, allowing them to
establish "virtual" branch operations with minimal infrastructure investment.
24
<PAGE>
o Maintain Industry Specialization. The Company believes it has gained a
significant competitive advantage by concentrating on servicing businesses in
a limited number of select industries and intends to maintain its industry
specialization. In addition, the Company believes that industry
specialization will enable it to attract new clients because of its valuable
industry expertise and reputation for delivering high-quality service.
o Maintain Technology Leadership. The Company intends to continue making
substantial investments in technology to maintain its technological
leadership within the teleservices industry. ICT has been an industry leader
in the implementation of innovative teleservices technologies to lower its
effective cost per call and to improve its sales and customer service. The
Company has made significant investments in information and communications
technologies and believes it was the first fully automated teleservices
company and the first to implement predictive dialing equipment that it
believes is now recognized industry-wide to be essential in handling consumer
outbound telemarketing.
o Continue Commitment to Quality Service. ICT has consistently emphasized
quality service and extensive employee training by investing in quality
assurance personnel and procedures. The Company's commitment to providing
quality service will continue, as illustrated by its strategy to achieve
compliance with ISO 9000, a quality standard that the Company plans to
implement both domestically and internationally.
ICT'S SERVICES
ICT delivers its telemarketing services through seven separate business
units, each of which provides a particular type of service with the support
of the Company-wide marketing, sales and corporate units. ICT's domestic
sales force is organized into a series of industry sectors focused on selling
the full range of the Company's services to clients in their respective
target industries. ICT believes this organizational structure allows the
Company to provide comprehensive solutions to its clients' teleservices
needs, since it enables ICT's sales and customer service personnel to develop
in-depth knowledge of the needs of businesses in their designated industries.
ICT's suite of services presently includes traditional telemarketing
services, consisting of consumer outbound telemarketing, consumer inbound
telemarketing and business-to-business telemarketing, as well as value-added
services, consisting of marketing, research and consulting services. In
addition, ICT has organized a separate division specifically to pursue
opportunities to manage third parties' call centers on an outsourced basis,
and the Company offers domestic and international multilingual telemarketing
services that provide sales and service support to non-English speaking
markets in the United States, Europe, Latin America and Canada.
TeleServices
Traditional telemarketing services are offered through the Company's
TeleServices division, which is comprised of the following units:
Consumer Outbound Telemarketing--ICT TeleDirect. ICT TeleDirect provides
consumer outbound telemarketing services, which consists primarily of direct
sales activities initiated by the Company on behalf of clients in its target
industries. ICT's call transaction management system ("CTMS") receives data
for target customers electronically from ICT's clients. The data is retained
in the Company's database management systems and is then distributed for
calling by the Company's predictive dialing systems, which schedule and
launch outbound calls. Once a live connection is established, the system
transfers the call, along with the customer data and scripting information,
to the workstation of a service representative trained for that specific
client's program. The primary industries served by ICT TeleDirect are
insurance, financial services, publishing and telecommunications. As of April
30, 1996, ICT TeleDirect utilized 920 work stations in 16 call centers
located primarily in the eastern United States.
25
<PAGE>
Consumer Inbound Telemarketing--ICT TeleResponse. The Company provides
inbound teleservices support for activities such as catalog sales, customer
inquiry support, credit card and loan application processing and customer
service through ICT TeleResponse. ICT TeleResponse was formed by combining
the consumer inbound operations of ICT with those of American Tele/Response,
Inc., which ICT acquired in April 1994. Inbound telemarketing involves the
processing of incoming calls, often placed by customers using toll- free
numbers, to a customer service representative for service, order fulfillment
or information. The Company's automated system receives an inbound call and
directs it, together with scripting, pricing data, reference databases and
any other relevant information, to an available service representative's
workstation. The information recorded during the call can be sent
electronically to ICT's clients for order processing, service fulfillment or
database management. As of April 30, 1996, ICT TeleResponse utilized 160 work
stations, serving primarily the catalog, consumer goods and services,
financial services and publishing industries. Data and voice lines link ICT
TeleResponse's dedicated call center in Drexel Hill, Pennsylvania to ICT call
centers in Langhorne, Pennsylvania and Miami, Florida for backup support.
Business-to-Business Teleservices--ICT TeleProfessional. ICT
TeleProfessional was formed in 1995 to service the emerging and increasingly
complex needs of certain clients by targeting telephone-based sales, service
and support opportunities within the professional and business-to-business
environment. ICT TeleProfessional consists of a dedicated call center
equipped with advanced computer and telecommunications software and hardware
to service both outbound and inbound client applications. Work stations have
been designed to accommodate the needs of experienced service representatives
who are trained to meet the sophisticated product and customer profiles of
specific clients, which vary from software programs to health care products
and from design technicians to medical professionals. Most projects to date
have been in the publishing, pharmaceutical, health care services and
computer software and hardware industries, although applications cut across
many industry sectors. As of April 30, 1996, ICT TeleProfessional utilized 96
outbound and inbound workstations at its dedicated call center in Langhorne,
Pennsylvania.
International TeleServices
The Company offers domestic and international multilingual telemarketing
services through ICT TeleServices International, which currently consists of
Eurotel, Spantel and ICT Canada. These business units are designed to offer
outbound and inbound services, call center management services, marketing,
research and other value-added services to clients. The growth of
multinational corporations and the increase in non- English speaking
residents in the United States has increased the demand for the multilingual
capabilities that ICT provides. ICT TeleServices International will continue
to expand its operations and explore acquisition opportunities to increase
the Company's international presence. The division currently consists of the
following units:
Eurotel. This joint venture between ICT and Donnelley, a leading supplier
of integrated order fulfillment services, commenced operations in October
1994 and provides telephone marketing and information services in Europe.
Located in Dublin, Ireland, Eurotel's call center had 80 workstations, as of
April 30, 1996, that provide pan-European multilingual services. The Company
has recently reached an agreement with Donnelley for the purchase of
Donnelley's 40% ownership interest in Eurotel, for a purchase price equal to
40% of Eurotel's net book value as of June 30, 1996. The purchase price is
not expected to be material to the Company's business, financial condition or
liquidity.
Spantel. ICT acquired the business of Spantel in February 1994 to provide
services to the rapidly growing marketplace of Spanish-speaking American and
Latin American consumers and businesses. As of April 30, 1996, Spantel's
Miami, Florida call center utilized 64 workstations.
ICT Canada. The Company opened its first Canadian call center in January
1996 with service representatives who are fluent in French and English. As of
April 30, 1996, the ICT Canada call center, located in Saint John, New
Brunswick, Canada, utilized 80 workstations.
26
<PAGE>
Value-Added Marketing, Research and Consulting Services
ICT provides businesses in its target industries with marketing, research
and consulting services thus leveraging its traditional telemarketing
services and enabling it to offer comprehensive solutions for its clients'
teleservices needs. These services presently consist of the following:
ICT Marketing and Consulting Services. As part of its growth strategy, ICT
intends to continue to provide value-added marketing and consulting services to
businesses in its target industries. For example, the Company's acquisition of
Smartline, a telebanking services provider, in May 1995 allows ICT to leverage
traditional telemarketing capabilities and relationships into a more
comprehensive client engagement, in which ICT participates in the design,
management, review and implementation of marketing programs. Through Smartline,
the Company is a leading provider of telebanking services, with clients that
include many types of financial institutions. Smartline representives' sales and
service expertise spans a wide range of financial products, including home
equity loans and lines of credit, loans by phone, checking and deposit accounts,
credit and debit cards, mortgage loans, annuity and alternative investments and
small business loans. An example of the products offered by Smartline is its
Gold Marketing Package, which provides small to mid-sized banks with direct
response plans for key products, inbound call center support, customized
advertisements and direct mail packages, and action oriented follow-up
campaigns. Smartline also offers a wide range of market research programs
through Valley Forge Information Services ("VFIS"), which ICT acquired in 1988,
to help its clients retain and strengthen their current customer relationships
and to attract new customers.
Smartline's management team consists of professionals who have client-side
banking experience in branch management and operations, marketing,
advertising, research, electronic funds transfer, home and branchless banking,
customer service and systems support. Smartline's net revenues for the first
quarter of 1996 represented approximately one-third of the increase in the
Company's net revenues from the first quarter of 1995 to the first quarter of
1996. For 1995, Smartline accounted for 8.9% of the Company's net revenues. As
of April 30, 1996, Smartline utilized 152 automated outbound and inbound
workstations at its dedicated call center in Buffalo, New York.
ICT Research Services. Through VFIS, the Company provides businesses in
its target markets with value added market research survey design, data
collection and consulting services. ICT's Research Services division makes
extensive use of advanced technology, including integrated predictive dialing
and Computer Assisted Telephone Interviewing ("CATI"), to obtain market and
customer data cost effectively. ICT Research Services teams work closely with
the client during each phase of a research study, participating with the
client in the design of the questionnaire, the collection of the data and the
editing, coding and tabulation of the results. ICT's project direction teams
monitor the progress of studies and make recommendations to clients that are
designed to improve the usefulness and integrity of the data collected by the
Company. For 1995, VFIS accounted for 5.1% of the Company's net revenues. As
of April 30, 1996, ICT Research Services utilized 96 automated interviewing
stations in two call centers.
Call Center Management Services
ICT's Call Center Management Services ("CCMS") division was established in
the first quarter of 1996 to pursue outsourcing opportunities that exist for
call center management. To date, ICT has entered into two contracts to manage
call centers, and it is currently in discussions with other prospective
clients regarding additional call center, management opportunities. CCMS
offers services such as site and system equipment selection, facility launch,
program planning and implementation, staffing, technical support and ongoing
call center management. Depending on client needs, ICT will assume sole or
shared responsibility for the management of a call center's operations.
Through CCMS, ICT can either assume the management and operations of an
in-house call center facility, with any call overflow being rerouted to
existing ICT call centers, or move in-house operations to new or existing ICT
facilities. ICT has bid on opportunities to manage new and existing call
center operations on an outsourced basis, both independently as well as
jointly with staffing agencies that have relationships with large national
corporations. For example, the Company was recently awarded a contract with
Olsten Staffing Services, Inc., with which the Company submitted a joint bid,
to establish and manage a dedicated call center for a large multinational
company.
27
<PAGE>
TELESERVICES AND VALUE-ADDED CALL CENTERS
The following table lists the Company's call center facilities by
division, the number of workstations and the specialties served as of April
30, 1996:
<TABLE>
<CAPTION>
-------------------- ------------------------- -------------- -----------------------------
Number of
Division Location Workstations Specialty
-------------------- ------------------------- -------------- -----------------------------
<S> <C> <C> <C>
Chesapeake, VA 80 Insurance/Financial
------------------------- -------------- ----------------------------
Kearneysville, WV 80 Insurance/Financial
------------------------- -------------- ----------------------------
Norfolk, VA 80 Insurance/Financial
------------------------- -------------- ----------------------------
Louisville, KY 80 Financial
------------------------- -------------- ----------------------------
Louisville, KY 72 Insurance
------------------------- -------------- ----------------------------
Allentown, PA 56 Telecommunications
------------------------- -------------- ----------------------------
Cincinnati, OH 56 Financial
------------------------- -------------- ----------------------------
Virginia Beach, VA 56 Insurance
------------------------- -------------- ----------------------------
ICT TeleDirect Cherry Hill, NJ 48 Financial/Telecommunications
------------------------- -------------- ----------------------------
Fort Lauderdale, FL 48 Insurance
------------------------- -------------- ----------------------------
Lexington, KY 48 Financial/Publishing
------------------------- -------------- ----------------------------
Philadelphia, PA 48 Insurance
------------------------- -------------- ----------------------------
Trevose, PA 48 Financial
------------------------- -------------- ----------------------------
Christiana, DE 40 Insurance
------------------------- -------------- ----------------------------
Newark, DE 40 Insurance
------------------------- -------------- ----------------------------
Parkersburg, WV 40 Insurance/Financial
-------------------- ------------------------- -------------- ----------------------------
ICT TeleResponse Drexel Hill, PA 160 Consumer Inbound
-------------------- ------------------------- -------------- ----------------------------
ICT TeleProfessional Langhorne, PA 96 Computer/Pharmaceutical
-------------------- ------------------------- -------------- ----------------------------
Saint John, New Brunswick, 80 Bilingual
Canada English/French
International ------------------------- -------------- ----------------------------
TeleServices Dublin, Ireland 80 Multilingual Pan-European
------------------------- -------------- ----------------------------
64 Bilingual
Miami, FL English/Spanish
-------------------- ------------------------- -------------- ----------------------------
ICT Research Services Bethlehem, PA 48 Market Research
------------------------- -------------- ----------------------------
Langhorne, PA 48 Market Research
-------------------- ------------------------- -------------- ----------------------------
Smartline Buffalo, NY 152 Telebanking
-------------------- ------------------------- -------------- ----------------------------
TOTAL 1,648
-------------------- ------------------------- -------------- ----------------------------
</TABLE>
28
<PAGE>
Target Industries
ICT's domestic sales force is assigned to specific industry sectors, which
enables its sales personnel to develop in-depth industry and product
knowledge. They are supported by sales specialists resident within ICT's
business units. Many of the industries that ICT serves are undergoing
deregulation and consolidation, which provides the Company with additional
growth opportunities as businesses search for low cost solutions for their
marketing, sales and customer support needs. In 1995, business within the
insurance and financial services industries accounted for a majority of the
Company's revenues. The industries targeted by the Company and the principal
services provided are described below.
Insurance
ICT works with large consumer insurance companies and their agents,
marketing and providing customer support services for products such as life,
accident, health and property and casualty insurance. The Company's insurance
group operates in six dedicated call centers and in 1995, the Company sold
approximately 1.2 million insurance policies on behalf of its clients. ICT
employs more than 270 agents collectively holding over 4,000 state insurance
licenses. The Company has a full-service agent licensing and continuing
education department, which enables its agents to obtain licenses in 46
states and to maintain their compliance with insurance regulations. Key
clients include MMIG, J.C. Penney Life Insurance Company, Providian and Union
Fidelity Life Insurance Company.
Financial Services
ICT provides banks and other financial services clients with a wide range
of services, including cardholder acquisition, active account generation,
account balance transfer, account retention and customer service. ICT has
dedicated three call centers to these activities within its ICT TeleDirect
operations and utilizes six additional call centers as necessary. With the
Smartline acquisition in 1995, ICT began offering "virtual" banking services,
such as marketing and servicing home equity loans, lines of credit,
loan-by-phone, checking and deposit account acquisition, credit and debit
cards, mortgage loans and other traditional banking products. Smartline
provides consulting and telebanking services to financial services clients
from its dedicated inbound/outbound call center in Buffalo, New York. Among
ICT's key financial services clients are Citibank, Advanta, MBNA and Summit
Bancorp.
Publishing
ICT provides services such as subscription sales, subscription renewals,
book club membership sales and customer service to clients in the publishing
industry. ICT's program management professionals with publishing experience
also develop custom programs for clients to aid in their marketing and sales
efforts. The publishing division clients are supported in ICT's TeleDirect,
TeleResponse and TeleProfessional call centers. ICT's primary publishing
clients include TV Guide, Bertelsmann Music Group and D & B Marketplace.
Telecommunications
ICT provides telemarketing programs for major telecommunications companies
for long distance, cellular and cable products and services, as well as
regional telecommunications companies marketing advanced telephone features.
Through ICT TeleResponse, the Company is able to offer a range of services,
including customer service, sales and survey campaigns. Within the
telecommunications industry, ICT presently provides services to MCI.
Consumer Products and Services
ICT services its catalog and other consumer products and services clients
through new customer acquisition, customer service and order entry
applications, supporting inbound calls 24 hours per day and 365 days per
year. ICT has established advanced call center capabilities to capture
customers' orders and to make sales to these customers. During critical
buying seasons, ICT provides clients with added capacity and a scalable work
force on a variable cost basis. The consumer products and services clients
are supported in ICT's TeleResponse center. Clients in this category include
The Franklin Mint, Blair Corporation and the United States Army.
29
<PAGE>
Pharmaceuticals and Health Care Services
Leveraging ICT's insurance market position into the managed care industry,
the Company, through its ICT TeleProfessional division, serves pharmaceutical
manufacturers, medical advertising agencies, hospitals and other health care
related suppliers, using telemarketing services for the sale and marketing of
products to both health care professionals (hospitals, physicians,
pharmacists and nurses) and health care consumers (patients and prospective
patients). The applications consist of business-to-business,
business-to-professional and business-to-consumer, utilizing inbound and
outbound services to sell products, to conduct market research, develop
marketing databases and provide customer service. Clients in this category,
in addition to SmithKline Beecham and several other multinational
pharmaceutical companies, include Greater Atlantic Health Service.
Computer Software and Hardware
ICT provides sophisticated marketing resources for both outbound and
inbound applications on behalf of clients in the computer software and
hardware industries. Outbound applications include new customer acquisition,
customer retention and lead generation. Inbound applications include customer
service, first-level customer technical support and the sale of personal
computer-related products. ICT's clients frequently integrate outbound and
inbound call campaigns, seeking to achieve favorable compounding results. Key
computer industry clients include Sun Microsystems, Alpha Software, ON
Technology and Decision Data.
TECHNOLOGY
ICT invests heavily in system and software technologies designed to
improve call center productivity, thereby lowering the effective cost per
call made or received, and to improve sales and customer service
effectiveness by providing its sales and service representatives with
real-time access to customer and product information. Since January 1993, the
Company has invested over $7.8 million in information and communications
systems and software enabling it to be an industry leader in state of the art
call center technology. ICT believes it was the first fully automated
teleservices company and the first to implement predictive dialing equipment,
which the Company believes is now deemed essential by the teleservices
industry in handling consumer outbound telemarketing. ICT realizes
significant cost savings through the use of innovative call handling
technology, automatic call distributors ("ACD") and advanced scripting
software, all of which optimize agent utilization. A predictive dialing system
is an integrated computer and telephone switch that is used to dial a
pre-programmed list of customers. The system will detect when a customer
answers the call and will immediately transfer the call and the appropriate
data to an available agent. An ACD is a phone switch that accepts an inbound
call from the public network and routes that call to the most advantageous,
available resource to handle the call. Scripting software is used in call
centers to provide the agent with the appropriate information to use during
the call and to specify the content and sequence of the information captured
from the customer.
The Company utilizes a scalable set of UNIX processors to support its
outbound and inbound call center operations. The term scalable in the computer
industry generally means that a system or product line is configured to work
cost-effectively at both low and high volume. The Company migrated to an
open systems environment to take advantage of the diversity of software and
hardware available for use with this technology. Dedicated UNIX processors are
used at each inbound call center while predictive dialing systems, networked
to UNIX processors at the Company's corporate data center, are used at each
outbound call center. The predictive dialing systems support local call and
data management: the UNIX processors provide centralized list management, data
consolidation, report generation and interfaces with client order processing
systems.
ICT's proprietary CTMS telemarketing software is used to prepare outbound
and inbound scripts, manage, update and reference client data files, collect
statistical transaction and performance data and assist in the preparation of
internal and client reports. Service agency clients have changing needs that
require a flexible operating system, such as CTMS, which is easily
customizable and has the ability to interface with a variety of proprietary
data bases and software systems. Current CTMS enhancement projects scheduled
for completion in 1996 will expand the range of platforms upon which it runs,
streamline the creation of client telephone marketing scripts and enable the
Company to integrate telemarketing systems obtained through acquisitions and
to interface with client systems.
30
<PAGE>
ICT has recently developed advanced call blending telephone marketing
software for use on its inbound ACD switches and UNIX-based processors and
plans to test similar software currently under commercial development. The
Company intends to take advantage of the benefits of call blending
technology, which provides dynamic call-by-call allocation of both outbound
and inbound calls within the same system and enables inbound agents to
achieve the higher productivity levels normally associated with outbound call
centers using predictive dialing systems. This technology is particularly
appropriate for direct marketing programs that require integration of
outbound and inbound call handling and real-time data base updates.
QUALITY ASSURANCE
ICT emphasizes quality service and extensive employee training as a way to
compete effectively and invests heavily in quality assurance personnel and
practices. ICT's quality assurance department is responsible for the development
and enforcement of call center policies and procedures, the selection and
training of telephone service representatives, the training and professional
development of call center management personnel, monitoring of calls and
verification and editing of all sales. Through the Company's quality assurance
department, both the Company and its clients are able to perform real time
on-site and remote call monitoring to maintain quality and efficiency. Sales
confirmations are recorded (with the customer's consent) in order to verify the
accuracy and authenticity of transactions. Additionally, ICT is able to provide
to its clients immediate updates on the progress of an ongoing telemarketing
effort. Access to this data allows ICT and its clients to identify potential
campaign shortfalls and to immediately modify or enhance a telemarketing effort.
The Company's commitment to providing quality service is further illustrated by
its current effort toward compliance with ISO 9000 standards, which are
administered by the International Organization for Standardization and represent
an international consensus on the essential features of a quality system to
ensure the effective operation of a business. The Company plans to implement the
ISO 9000 standards both domestically and internationally.
PERSONNEL AND TRAINING
Management believes that a key driver of ICT's success is the quality of
its employees. The Company tailors its recruiting and training techniques
toward the industries it serves. All service representatives receive a
detailed review of each program in which they are to participate along with
training regarding the background, structure and philosophy of the client
that is sponsoring the program.
As is typical in the telemarketing industry, over 90% of the Company's
service representatives are part- time employees. As of March 31, 1996, ICT
employed 2,925 persons, of which more than 2,600 were service
representatives. None of ICT's employees is represented by a labor union. The
Company considers its relations with its employees to be good.
CLIENTS
The Company generally operates under month-to-month contractual
relationships with its clients. The pricing component of a contract often
comprises an initial fee, a base service charge and separate charges for
ancillary services. Service charges are usually based upon an hourly rate for
outbound calls and per-minute rates for inbound calls. On occasion, the
Company performs services for which it is paid commissions based on completed
sales under contracts terminable by the Company with 30 or fewer days notice.
ICT targets those companies which it believes have the greatest potential
to generate recurring revenues based on their ongoing direct sales and
customer service needs. Many of ICT's current clients have sizable in-house
telemarketing operations, and the Company often competes against those
in-house operations for the client's business. At March 31, 1996, ICT
provided direct sales and customer service to approximately 160 clients. The
Company's largest client in recent years has been MMIG, which accounted for
approximately 43% of the Company's net revenues in 1995. No other client
accounted for more than 5% of the Company's net revenues in 1995.
COMPETITION
The telemarketing industry is intensely competitive and the Company's
principal competition in its primary markets comes from large telemarketing
service organizations, including MATRIXX Marketing Inc.,
31
<PAGE>
SITEL Corporation, ITI Marketing Services, Inc., APAC TeleServices, Inc. and
West Telemarketing Corporation. The Company competes with numerous independent
telemarketing firms, many of which are as large as or larger than ICT, as well
as the in-house telemarketing operations of many of its clients or potential
clients. In addition, most businesses that are significant consumers of
telemarketing services utilize more than one telemarketing firm at a time and
reallocate work among various firms from time to time. A significant amount of
such work is contracted on an individual project basis, with the effect that
the Company and other firms seeking such business are required to compete with
each other frequently as individual projects are initiated. Furthermore, the
Company believes there is a trend among businesses with telemarketing
operations toward outsourcing the management of those operations to others and
that this trend may attract new competitors, including competitors that are
substantially larger and better capitalized than ICT, into the Company's
market.
GOVERNMENT REGULATION
Telemarketing sales practices are regulated at both the federal and state
level. The Federal Telephone Consumer Protection Act of 1991 (the "TCPA"),
enforced by the Federal Communications Commission, imposes restrictions on
unsolicited automated telephone calls to residential telephone subscribers.
Under the TCPA, it is unlawful to initiate telephone solicitations to
residential telephone subscribers before 8:00 a.m or after 9:00 p.m., local
time at the subscriber's location, or to use automated telephone dialing
systems or artificial or prerecorded voices to call certain subscribers.
Additionally, the TCPA requires telemarketing firms to develop a written
policy implementing a "do not call" list, including the training of its
telemarketing personnel to comply with these restrictions. The TCPA creates a
right of action for both consumers and state attorneys general. A court may
award damages or impose penalties of $500 per violation, which may be trebled
for willful or knowing violations. Currently, the Company trains its service
representatives to comply with the regulations of the TCPA and programs its
call management system to avoid initiating telephone calls during restricted
hours or to individuals maintained on the Company's "do not call" list.
The Federal Trade Commission (the "FTC") regulates both general sales
practices and telemarketing specifically. Under the Federal Trade Commission
Act (the "FTC Act"), the FTC has broad authority to prohibit a variety of
advertising or marketing practices that may constitute "unfair or deceptive
acts and practices." Pursuant to its general enforcement powers, the FTC can
obtain a variety of types of equitable relief, including injunctions, refunds,
disgorgement, the posting of bonds, and bars from continuing to do business
for a violation of the acts and regulations it enforces.
The FTC also administers the Federal Telemarketing and Consumer Fraud and
Abuse Prevention Act of 1994 (the "TCFAPA"). Under the TCFAPA, the FTC has
issued regulations prohibiting a variety of deceptive, unfair or abusive
practices in telemarketing sales. Generally, these rules prohibit
misrepresentations of the cost, quantity, terms, restrictions, performance or
characteristics of products or services offered by telephone solicitation or
of refund, cancellation or exchange policies. The regulations also regulate
the use of prize promotions in telemarketing to prevent deception and require
that a telemarketer identify promptly and clearly the seller on whose behalf
the telemarketer is calling, the purpose of the call, the nature of the goods
or services offered and, if applicable, that no purchase or payment is
necessary to win a prize. The regulations also require that telemarketers
maintain records on various aspects of their business. The Company believes
that it is in compliance with the TCPA and the regulations promulgated
pursuant to the TCFAPA.
Most states have enacted statutes similar to the FTC Act prohibiting unfair
or deceptive acts and practices. For example, telephone sales in certain
states are not final until a written contract is delivered to and signed by
the buyer, and such a contract often may be cancelled within three business
days. At least one state also prohibits telemarketers from requiring credit
card payment, and several other states require certain telemarketers to obtain
licenses, post bonds or submit sales scripts to the state's attorney general.
Under these general enabling statutes, depending on the willfulness and
severity of the violation, penalties can include imprisonment, fines and a
range of equitable remedies such as consumer redress or the posting of bonds
before continuing in business. Additionally, some states have enacted laws and
others are considering enacting laws targeted directly at telemarketing
practices. Most of these statutes allow a private
32
<PAGE>
right of action for the recovery of damages or provide for enforcement by state
agencies permitting the recovery of significant civil or criminal penalties,
costs and attorneys' fees. There can be no assurance that any such laws, if
enacted, will not adversely affect or limit the Company's current or future
operations.
The industries served by the Company's divisions are also subject to
government regulation, and, from time to time, bills are introduced in
Congress which, if enacted, would regulate the use of credit information. The
Company generally requires its clients to indemnify ICT against claims and
expenses arising with respect to the Company's services performed on its
clients' behalf, and the Company has never been held responsible for
regulatory noncompliance by a client. ICT and its employees who sell insurance
products are required to be licensed by various state insurance commissions
for the particular type of insurance product to be sold and to participate in
regular continuing education programs, which currently are provided by the
Company.
FACILITIES
The Company's corporate headquarters are located in Langhorne,
Pennsylvania in leased facilities consisting of approximately 29,500 square
feet of office space rented under leases that expire in December 2000. The
Company leases all of the facilities used in its call center operations, as
well as office space in Chicago, Illinois, Boston, Massachusetts and London,
England for its sales offices. With the exception of the facilities
located in Philadelphia, Pennsylvania and Kearneysville, West Virginia, which
are leased on a month-to-month basis, the leases for the Company's facilities
expire generally between May 1996 and March 2001 and typically contain
renewal options. The Company believes that its existing facilities are
suitable and adequate for its current operations, but additional facilities
will be required to support growth. The Company believes that suitable
additional or alternative space will be available as needed on commercially
reasonable terms.
LITIGATION
From time to time, the Company is involved in litigation incidental to its
business. In the opinion of management, no litigation to which the Company is
currently a party is likely to have a material adverse effect on the
Company's results of operations, financial condition or liquidity, if decided
adversely to the Company.
33
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
As of May 1, 1996, the directors, nominee for director and executive
officers of the Company were:
<TABLE>
<CAPTION>
Name Age Position
------------------ ----- --------------------------------------------------------
<S> <C> <C>
John J. Brennan . 52 Chairman, President, Chief Executive Officer and Director
Donald P. Brennan 55 Vice Chairman and Director
Bernard Somers . 47 Nominee for Director
John L. Magee .. 42 Executive Vice President, Operations and President of ICT
TeleServices
John D. Campbell . 40 Senior Vice President, Sales and Marketing and President
of ICT Direct
Maurice J. Kerins 42 Senior Vice President, Systems and Technology
Robert F. Small . 44 Senior Vice President, Corporate Planning and Development
Carl E. Smith .. 48 Senior Vice President, Finance and Administration,
Chief Financial Officer, and Secretary
</TABLE>
John J. Brennan has served as the Company's Chairman, President and Chief
Executive Officer and as a director since April 1987 when he managed the
buyout of ICT's predecessor company, International Computerized
Telemarketing, Inc., from Decision Industries Corporation ("DIC"). Mr.
Brennan was employed by DIC from May 1983 to March 1987 and over that period
served as Vice President of Product Marketing, Vice President of Corporate
Planning and Business Development and President of its subsidiary,
International Computerized Telemarketing.
Donald P. Brennan has served as a Vice Chairman and director of the
Company since April 1987. He has been an Advisory Director of Morgan Stanley
& Co. Incorporated since February 1996. Prior to that time, Mr. Brennan was a
Managing Director and Head of the Merchant Banking Division of Morgan Stanley
& Co. Incorporated since 1986, and also has served as Chairman of Morgan
Stanley Capital Partners III, Inc., Chairman of Morgan Stanley Leveraged
Equity Fund II, Inc., Chairman of Morgan Stanley Venture Partners and a
director of Morgan Stanley & Co. Incorporated. Mr. Brennan currently serves
as a director of Fort Howard Corporation, Jefferson Smurfit Corporation and
SITA Telecommunications, N.V.
Bernard Somers has been nominated to become a member of the Company's
Board of Directors and will become a director upon the completion of this
offering. Since 1988, Mr. Somers has been a partner of Somers & Associates,
Chartered Accountants, located in Dublin, Ireland. Mr. Somers currently
serves as a director of Eurotel Marketing Limited, a subsidiary of the
Company, and Commerzbank Europe (Ireland) Ltd.
John L. Magee has served as the Company's Executive Vice President,
Operations since January 1994 and has been the President of ICT TeleServices
since January 1996. From November 1987 to January 1994, he served as Senior
Vice President, Operations of the Company.
John D. Campbell has served as President of ICT Direct since January 1994
and as Senior Vice President, Sales and Marketing since January 1990. ICT
Direct is a sales and marketing division of the Company that supports all ICT
TeleServices operations with respect to the insurance, financial services and
pharmaceutical and health care services industries.
Maurice J. Kerins has served as the Company's Senior Vice President,
Systems and Technology since April 1991 and as the Company's Vice President,
Systems and Technology from November 1988 to April 1994.
Robert F. Small has served as the Company's Senior Vice President,
Corporate Planning and Business Development since April 1995. From January
1993 to April 1995, he served as the Company's Vice President, Client
Services, and from January 1987 to January 1993, he served as the Company's
Vice President, Finance.
34
<PAGE>
Carl E. Smith joined the Company as Senior Vice President, Finance and
Administration and Chief Financial Officer in October 1994 and was elected
Secretary of the Company in 1995. From April 1992 to October 1994, he was
employed by DNA Plant Technology Corporation, an agricultural biotechnology
company, where he served as Vice President of Finance. From April 1990 to
April 1992, Mr. Smith was employed by Envirosafe Service, Inc., a hazardous
waste management company, where he served as Vice President of Finance and
Chief Financial Officer.
John J. Brennan and Donald P. Brennan are brothers.
DIRECTORS; COMMITTEES
The Board of Directors is divided into three classes. Each class holds
office until the third annual meeting for the election of directors following
the election of such class, except that the initial terms of the Class I,
Class II and Class III directors expire in 1997, 1998 and 1999, respectively.
John J. Brennan is a Class I director, Bernard Somers will be a Class II
director, and Donald P. Brennan is a Class III director. Although the
Company's Board of Directors intends to appoint an additional independent
director within 90 days after the completion of this offering, the Company
does not currently have a candidate to fill the position.
The Board of Directors intends to establish a Compensation Committee and
an Audit Committee. The Compensation Committee will determine salaries and
bonuses and other compensation matters for officers of the Company, determine
employee health and benefit plans, and administer the Company's stock option
plans. The Audit Committee will recommend the appointment of the Company's
independent public accountants and will review the scope and results of
audits, internal accounting controls and tax and other accounting related
matters.
Officers of the Company are elected by the Board of Directors and serve at
the discretion of the Board.
COMPENSATION OF DIRECTORS
Following the completion of this offering, the independent directors will
be paid directors' fees of $2,000 for each quarterly Board meeting attended
and $500 for each special Board meeting attended and each committee meeting
attended. In addition, directors will be reimbursed for expenses incurred in
connection with attendance at Board and committee meetings.
Under the Company's 1996 Non-Employee Directors Plan, each independent
director owning less than 10% of the outstanding capital stock of the Company
will, upon initial election to the Board, receive an option to purchase 1,000
shares of Common Stock. The options will be fully vested and immediately
exercisable, will have an exercise price equal to the fair market value of
the Common Stock on the date of grant and will expire ten years after the
date of grant. Mr. Somers, nominee for director, will receive a fully vested
option to purchase 1,000 shares of Common Stock upon the completion of this
offering. In addition, each independent director owning less than 10% of the
outstanding capital stock of the Company will be granted an option to
purchase 1,000 shares of Common Stock on the date of each annual meeting;
these options will vest in full one year after grant, will have an exercise
price equal to the fair market value of the Common Stock on the date of grant
and will expire ten years after issuance. See "Management-- Employee Benefit
Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During its current and last completed fiscal years, the Company did not
have a Compensation Committee of the Board of Directors. The compensation of
the Company's executive officers for these periods was determined by John J.
Brennan in consultation with the Board of Directors. See "Certain
Transactions" for a description of certain transactions involving John J.
Brennan and the Company. The Board of Directors intends to establish a
Compensation Committee in the near future. The Committee will approve officer
compensation matters, determine employee health and benefit plans, and
administer the Company's stock option plans.
35
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth individual
compensation paid to the Chief Executive Officer and the four most highly
compensated executive officers of the Company (the "Named Executive
Officers") for all services rendered in all capacities to the Company during
1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
------------------------ ----------------------
Securities Underlying All Other
Name and Principal Position Salary Bonus Options/SARs(#) Compensation(1)
--------------------------------- ---------- ---------- ---------------------- ---------------
<S> <C> <C> <C> <C>
John J. Brennan ................. $307,000 $216,214 -- $20,402
Chairman, President and Chief
Executive Officer
John L. Magee ................... $129,904 $ 62,191 -- $ 5,365
Executive Vice President,
Operations and President of ICT
TeleServices
John D. Campbell ................ $127,817 $113,097 22,500 $ 5,388
Senior Vice President, Sales and
Marketing and President of ICT
Direct
Maurice J. Kerins ............... $109,807 $ 61,300 22,500 $ 4,370
Senior Vice President, Systems and
Technology
Carl E. Smith ................... $100,000 $ 25,276 22,500 $ 452
Senior Vice President, Finance and
Administration, Chief Financial
Officer, and Secretary
</TABLE>
- ------
(1) Includes: (i) Company contributions of $4,620, $4,562, $4,620, and $4,064
to the Company's 401(k) tax-qualified employee savings and retirement
plan on behalf of Mr. Brennan, Mr. Magee, Mr. Campbell and Mr. Kerins,
respectively; (ii) premiums paid by the Company in the amount of $1,152,
$388, $343, $306, and $452 for group term life insurance on behalf of Mr.
Brennan, Mr. Magee, Mr. Campbell, Mr. Kerins and Mr. Smith, respectively;
and (iii) premiums paid by the Company in the amount of $14,630, $415 and
$425 for life insurance on behalf of Mr. Brennan, Mr. Magee and Mr.
Campbell, respectively.
36
<PAGE>
Option Grants. The following table sets forth certain information
regarding stock options granted during the year ended December 31, 1995 to
each of the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------
Potential Realizable
Value
Number of Percent of at Assumed Annual
Securities Total Options Rates of Stock Price
Underlying Granted to Appreciation for
Options Employees in Exercise Price Expiration Option Term(3)
Name (#)(1) Fiscal Year Per Share(2) Date(1) 5% 10%
- ----------------- ------------ --------------- -------------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
John J. Brennan . -- -- -- -- -- --
John L. Magee ... -- -- -- -- -- --
John D. Campbell . 22,500 15.4% $ 1.02 12/31/04 $14,417 $36,537
Maurice J. Kerins . 22,500 15.4% $ 1.02 12/31/04 $14,417 $36,537
Carl E. Smith ... 22,500 15.4% $ 1.02 12/31/04 $14,417 $36,537
</TABLE>
- ------
(1) These options were granted under the Company's 1987 Stock Option Plan and
have a term of ten years, subject to earlier termination in certain
events related to the termination of employment or a change in control.
The options vest in five equal annual installments commencing on the date
of grant; provided, however, that in the event of an initial public
offering, the options become fully vested.
(2) Represents the fair market value of the underlying Common Stock as
determined by the Board of Directors on the date of grant.
(3) The potential realizable value is calculated based on the term of the
option at the time of grant. Pursuant to rules promulgated by the
Securities and Exchange Commission, stock price appreciation of 5% and
10% is based on the exercise price per share on the date of grant, which
calculated assumed prices are less than the assumed initial public
offering price, and assumes that the option is exercised at the exercise
price and sold on the last day of its term at the appreciated price. This
table does not take into account any appreciation in the fair market
value of the Common Stock from the date of grant to the date of this
Prospectus. There can be no assurance that the actual stock price
appreciation over the ten-year option term will be at the assumed 5% and
10% levels or at any other determined level.
<PAGE>
In January 1996, the Company granted options to purchase approximately
49,500 shares of Common Stock to certain employees of the Company, including
options to purchase 22,500 shares of Common Stock to Carl E. Smith. These
options were granted under the Company's 1987 Stock Option Plan, have an
exercise price of $1.57 per share, have a term of ten years from the date of
the grant and are subject to earlier termination in certain events related to
the termination of employment. The options vest in five equal annual
installments commencing on the date of grant. In connection with the options
granted in January 1996, the Company recorded $116,250 of deferred
compensation for the difference between the deemed value per share for
accounting purposes and the exercise price per share.
Year-End Values. The following table sets forth certain information
regarding options held as of December 31, 1995 by each of the Named Executive
Officers. None of the Named Executive Officers exercised options during the
year ended December 31, 1995.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-The-Money Options
at Fiscal Year-End (#) at Fiscal Year-End($)(1)
-------------------------------- --------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
------------------ ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
John J. Brennan .. -- -- -- --
John L. Magee .... 360,000 -- $4,664,000 --
John D. Campbell . 139,500 18,000 1,802,775 $215,660
Maurice J. Kerins . 139,500 18,000 1,802,915 215,660
Carl E. Smith .... 4,500 18,000 53,915 215,660
</TABLE>
- ------
(1) There was no public trading market for the Common Stock as of December
31, 1995. Accordingly, these values have been calculated on the basis of
an assumed initial public offering price of $13.00 per share minus the
applicable per-share exercise price.
37
<PAGE>
Replacement Options. In May 1996, the Company granted non-qualified
options ("Replacement Options") to purchase an aggregate of 555,750 shares of
the Company's Common Stock to those employees of the Company who held options
to purchase stock of the Company that had been granted in 1987 and 1988 (the
"Terminated Options") in replacement of such Terminated Options. Replacement
Options have a per- share exercise price of $.04, in the case of options to
purchase an aggregate of 546,750 shares, and $.06, in the case of options to
purchase an aggregate of 9,000 shares, and expire five years from the
completion of this offering but remain in effect despite termination of
employment of an optionee (including upon death). Shares received upon the
exercise of Replacement Options become eligible to be sold in five equal
installments beginning on the first anniversary of the completion of this
offering. Succeeding installments become eligible for sale on the second,
third, fourth and fifth anniversaries. In the event of the dissolution,
liquidation or merger or consolidation of the Company with another
corporation where the Company is not the surviving corporation, the
restrictions on the transfer of Replacement Options will automatically lapse.
EMPLOYMENT AGREEMENTS
In May 1996, the Company entered into an employment agreement with John J.
Brennan as President and Chief Executive Officer. The agreement is for a
three-year term ending April 30, 1999 and renews automatically for successive
three-year periods unless either party gives written notice of termination at
least 180 days prior to the expiration date, unless earlier terminated as
provided therein. The agreement provides for a base salary of $364,000, which
shall be increased by a minimum of 5% each year but may not be decreased
below the then current level. The Board, in its sole discretion, may award
incentive bonuses in the form of cash and/or stock to Mr. Brennan, who will
be eligible each year for a minimum bonus in an amount equal to his then
current salary. If Mr. Brennan is terminated by the Company for other than
willful misconduct, or terminates his employment for "good reason," then the
Company shall maintain its obligations under the agreement through the later
of (i) the expiration of the then current term of the agreement (or the
expiration of the next renewal term if there are less than 180 days remaining
in the current term and no notice of termination was given prior thereto), or
(ii) 24 months from the date of termination. Mr. Brennan may terminate his
agreement for "good reason" upon 30 days' written notice if there has been a
reduction in his salary or benefits, a substantial change in his duties or a
change of control, defined as the decrease below 50% of the combined voting
power of the Company's common stock by John J. Brennan and Donald P. Brennan
and their children and grandchildren.
In April 1987, the Company entered into employment agreements with John L.
Magee, Maurice J. Kerins and Robert F. Small that provided for base salaries
of $70,000, $55,000 and $45,000 per year, respectively. Each employment
agreement provides that the employee's salary is to be reviewed annually by
the Board of Directors. Messrs. Magee's, Kerins's and Small's current base
salaries are $150,000, $115,000, and $95,000, respectively. Each employment
agreement has an initial term of three years, but renews automatically each
year for an additional one-year term unless either party to the agreement
terminates prior to the end of the renewal term. Each of the agreements
renewed automatically on April 1, 1996 for additional one- year terms. In
addition to base salary, each agreement allows for discretionary bonuses to
be paid by the Company. The Company may terminate the employment agreements
described immediately above at any time, with or without cause. Each of the
employment agreements contains severance provisions which, if triggered,
entitle the employees to monthly severance payments in an amount equal to the
affected employee's then-current monthly salary for a period of 12 months.
The severance payments are triggered by the occurrence of any of the
following events: termination of employment by the Company without cause,
cessation of business operations in a business in which the employee is
employed, a merger, consolidation or acquisition of the Company, the filing
by the Company of a voluntary petition in bankruptcy or the filing of an
involuntary petition in bankruptcy against the Company which is not dismissed
within 60 days. In addition, if the employee terminates his employment upon
90 days prior written notice, in certain circumstances, the Company would be
required to continue to provide the employee with his regular payments of
base salary for a period of 90 days.
In October 1987, John D. Campbell entered into an employment agreement
with the Company that provided for a base salary of $43,200 per year. Mr.
Campbell's employment agreement has an initial term of one year, but renews
automatically each year for an additional one-year term unless either party
terminates prior to the end of the renewal term. Mr. Campbell's employment
agreement renewed automatically on
38
<PAGE>
October 1, 1995 for an additional one-year term. Mr. Campbell, whose current
base salary is $130,000, is eligible for discretionary bonuses from the
Company.
In October 1994, the Company entered into an employment agreement with
Carl E. Smith that provided for a base salary of $100,000 per year. Mr.
Smith's employment agreement had a term of one year. Pursuant to an amendment
entered into by the Company and Mr. Smith as of October 1995, his employment
agreement was extended for an additional one-year period and will renew
automatically for consecutive one-year periods unless terminated within 90
days prior to the expiration of the then-current term. In addition to his
base salary, which is currently $105,000, Mr. Smith is eligible for
discretionary bonuses from the Company.
The employment agreements discussed above contain non-tampering,
non-disclosure, non-solicitation and confidentiality provisions. Although the
employment contracts restrict the employee from interfering with the
Company's current, former or potential customers, there is no provision
restricting a terminated employee's ability to work for a competitor of the
Company.
Bernard Somers, a nominee for director, has served as a director of the
Company's subsidiary, Eurotel, since September 1994. In connection with his
service to Eurotel, Mr. Somers receives IRpounds sterling 1,000, or
approximately $1,600, per meeting as compensation.
EMPLOYEE BENEFIT PLANS
401(K) PLAN
The Company maintains a 401(k) retirement savings plan (the "401(k)
Plan"). All employees of the Company are eligible to participate in the
401(k) Plan. Employees may contribute from 1% to 15% of their pre- tax gross
compensation (up to a statutorily prescribed annual limit of $9,240 in 1995)
to the 401(k) Plan. The percentage elected by certain highly compensated
participants may be required to be lower. The Company matches employee
contributions in an amount equal to 50% of the employee's pretax contribution
but subject to a maximum of 6% of the employee's eligible compensation
contributed to the 401(k) Plan. All amounts contributed by employee
participants and earnings on these contributions are fully vested at all
times. Employee participants may elect to invest their contributions in
various established funds, which include fixed income, growth and equity
funds.
1987 STOCK OPTION PLAN
The ICT Group, Inc. 1987 Stock Option Plan (the "1987 Plan") was adopted by
the Board and approved by the shareholders in April 1987. The 1987 Plan
provides for grants of options to acquire shares of the Company's common stock
("Stock Options"). No additional Stock Options will be granted under the 1987
Plan after the completion of this offering.
General. Subject to adjustment in certain circumstances as discussed
below, the 1987 Plan authorizes up to 1,800,000 shares of Common Stock for
issuance pursuant to the terms of the 1987 Plan. If and to the extent a Stock
Option under the 1987 Plan expires, lapses or is terminated for any reason,
the unexercised portion of such Stock Option may again be the subject of a
Stock Option granted pursuant to the 1987 Plan.
Administration of the 1987 Plan. The 1987 Plan is administered and
interpreted by the Board of Directors; however, the Board may designate a
committee of the Board to administer the 1987 Plan. The Committee or the
Board in its administrative capacity with respect to the 1987 Plan is
hereinafter referred to as the "Committee".
Grants. Grants under the 1987 Plan may consist of (i) Stock Options
intended to qualify as incentive stock options ("ISOs") within the meaning of
section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
and (ii) nonqualified stock options that are not intended to so qualify
("NQSOs"). No additional grants will be made after the completion of this
offering.
39
<PAGE>
Eligibility for Participation. Employees (including directors of the
Company or the Company's parent or subsidiary within the meaning of section
424(e) or (f) of the Code ("Affiliate") and non-employee members of the Board
of the Company and any Affiliate ("Non-Employee Directors") may receive
grants of Stock Options ("Optionees"); provided, however, that ISOs may only
be granted to employees. As of March 31, 1996, ten employees held Stock
Options under the 1987 Plan and no Non-Employee Directors held any NQSOs. As
of May 8, 1996, Stock Options for the purchase of 960,750 shares of Common
Stock (872,302 shares after the completion of this offering) were outstanding
under the 1987 Plan, including the Replacement Options.
Terms and Conditions of Stock Options. The exercise price of any ISO
granted under the 1987 Plan must be at least 100% of the fair market value of
the underlying shares of Common Stock on the date of grant; provided,
however, that if an ISO is granted to an Optionee who then owns, directly or
by attribution under Section 424(d) of the Code, shares posessing more than
ten percent of the total combined voting power of all classes of stock of the
Company or an Affiliate, then the exercise price must be at least 110% of the
fair market value of the underlying shares of Common Stock on the date the
Stock Option is granted. The option price of an NQSO is determined by the
Committee in its sole discretion and may be greater than, equal to or less
than the fair market value of the underlying shares of Common Stock on the
date of grant.
The Committee may determine the term of each option; provided, however,
that the exercise period for an ISO may not exceed ten years from the date of
grant or five years from the date of grant if the Optionee on the date of
grant owns directly or by attribution under Section 424(d) of the Code,
shares posessing more than ten percent of the total combined voting power of
all classes of stock of the Company or an Affiliate and the exercise period
for an NQSO may not exceed ten years and six months from the date of grant.
An Optionee may pay the exercise price in cash or by such other mode of
payment as the Committee may approve, including the delivery of shares of
Common Stock held by the Optionee for more than one year.
If an Optionee ceases to serve as employee of the Company or one of its
subsidiaries for any reason other than disability, death or termination for
cause, the Optionee's Stock Option will terminate three months following the
date on which he or she ceases to serve. If the Optionee's service ceases due
to the Optionee's death or disability, the Optionee's Stock Option will
terminate one year following the date on which he or she ceases to serve. If
the Optionee's service ceases due to termination by the Company for cause, as
determined by the Committee, the Optionee's Stock Options will terminate
immediately. However, in each case described above, the Committee may specify
a different termination date with respect to an Optionee's Stock Option, but
in no event later than the date of expiration of the option term.
Amendment and Termination of the 1987 Plan. The Board may amend the 1987
Plan at any time; provided, however, that the Board may not amend the 1987
Plan to (i) change the class of employees eligible to receive ISOs under the
1987 Plan, (ii) extend the expiration date of the 1987 Plan, (iii) decrease
the minimum option price of an ISO granted under the 1987 Plan or (iv)
increase the maximum number of shares of Common Stock for which Grants may be
made under the 1987 Plan (except as provided pursuant to the adjustment
provision), without shareholder approval. The 1987 Plan will terminate on
March 31, 1997.
Adjustment Provisions. If there is any change in the number or kind of
shares of Common Stock outstanding by reason of a stock dividend,
recapitalization, stock split or other change in the number or class of
issued and outstanding equity securities of the Company, the Committee may
make adjustments to reflect any increase or decrease in the number or kind of
issued shares of Common Stock.
Change of Control of the Company. The Committee may, in its sole
discretion, accelerate the termination and/or exercisability provisions of
any Stock Option in the event of a dissolution or liquidation of the Company
or consummation of any transaction in which the Company is not the surviving
or acquiring entity or in which the Company becomes an 80% or more owned
subsidiary of another company.
EQUITY INCENTIVE PLAN
The ICT Group, Inc. Equity Incentive Plan (the "Incentive Plan") was
adopted by the Board and approved by the shareholders in December 1995. The
Incentive Plan provides opportunities for designated key employees to acquire
or increase their proprietary interest in the Company through the issuance of
awards ("Awards") covering Equity Incentive Units ("Units") relating to the
Company's common stock. No additional Units will be granted under the
Incentive Plan after the completion of this offering.
40
<PAGE>
General. The Incentive Plan authorizes up to 270,000 Units for issuance
pursuant to the terms of the Incentive Plan. If and to the extent Units under
the Incentive Plan are forfeited under the terms of an Award, such Units will
again be available for Awards under the Incentive Plan.
Administration of the Incentive Plan. The Incentive Plan is administered
and interpreted by the Board; however the Board may designate a committee of
the Board to administer the Incentive Plan. The Committee or the Board in its
administrative capacity with respect to the Incentive Plan is hereinafter
referred to as the "Committee".
Eligibility for Participation. All designated key employees, as determined
by the Committee, in its sole discretion, are eligible to receive Awards. As
of May 8, 1996, 113 employees were eligible to receive Awards under the
Incentive Plan, and 159,300 Units were outstanding under the Incentive Plan.
Terms and Conditions of Awards. Awards to designated key employees
("Grantees") under the Incentive Plan are subject to such terms and
conditions as the Committee may determine. The number of shares of Common
Stock to which an Award pertains, the purchase price, if any, which applies
to the Award on a per unit basis and such other conditions as determined by
the Committee are specified in the Award agreement. Each Grantee is fully
vested in his or her Award; provided, however, the Units may not be exercised
or redeemed by the Grantee prior to a public offering or a change of control,
as described below. In addition, upon a finding by the Committee that the
Grantee has breached his or her service contract, or has been engaged in
disloyalty to the Company, such Grantee shall automatically forfeit all
Units.
Public Offering. Upon a public offering, each employee has the right, upon
payment of the purchase price applicable to the Award, to receive a number of
shares of Common Stock of the Company equal to the number of Units granted
pursuant to the Award. All rights to exercise the Award terminate on the
earliest to occur of (i) the 10th anniversary of the date of grant of the
Award, (ii) any earlier termination date specified in the Award agreement, or
(iii) the 90th day following the employee's termination of employment.
Transfers of Common Stock pursuant to an Award are contingent on the
Grantee's grant of an irrevocable proxy, coupled with an interest, to such
person as the Committee may, in its sole discretion, designate for the
purpose of voting any such shares.
Change of Control of the Company. In the event of a change of control that
occurs prior to the Company's initial public offering, each holder of an
Award who is also an employee will fully vest in his or her Award and, for
purposes of such Grantee's rights to exercise under the terms of the
Incentive Plan and the Award, will be considered an employee at all times
thereafter. The Company may redeem all or any portion of a Grantee's Units in
exchange for an amount equal to the excess, if any, of the per-share value of
the Common Stock at the time of such redemption (as determined by the
Committee) over the purchase price per Unit provided in such Award,
multiplied by the number of Units redeemed.
Amendment of the Incentive Plan. The Board may amend the Incentive Plan at
any time; provided that the Board may not increase the maximum number of
shares as to which Units may be granted without shareholder approval.
1996 EQUITY COMPENSATION PLAN
The ICT Group, Inc. 1996 Equity Compensation Plan (the "Equity Compensation
Plan") was adopted by the Board in May 1996, contingent upon the completion of
this offering. The Equity Compensation Plan provides for grants of (i) stock
options, (ii) restricted stock, (iii) stock appreciation rights and (iv) other
awards that are valued in whole or in part by reference to, or are otherwise
based on, the Company's Common Stock (collectively "Grants").
General. Subject to adjustment in certain circumstances as discussed
below, the Equity Compensation Plan authorizes up to 1,120,000 shares of
common stock of the Company for issuance pursuant to the terms of the Plan.
If and to the extent Grants under the Equity Compensation Plan expire or are
terminated for any reason without being exercised, or the shares of Common
Stock subject to a Grant are forfeited, the shares of Common Stock subject to
such Grants again will be available for Grants under the Equity Compensation
Plan.
41
<PAGE>
Administration of the Equity Compensation Plan. The Equity Compensation
Plan is administered and interpreted by a Committee (the "Committee") of the
Board consisting of two or more persons appointed by the Board from among its
members, each of whom must be a "disinterested person" as defined in Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and an "outside director" as defined by section 162(m) of the Code.
Grants. Grants to employees (including officers and directors) and
consultants of the Company ("Grantees") under the Equity Compensation Plan
may consist of (i) options intended to qualify as ISOs within the meaning of
section 422 of the Code, (ii) NQSOs, (iii) restricted stock, (iv) stock
appreciation rights ("SARs") or (v) other awards that are valued in whole or
in part by reference to, or are otherwise based on, the Company's Common
Stock.
Eligibility for Participation. Grants may be made to any full-time
employee (including officers and directors) and consultants of the Company.
As of May 8, 1996, 290 employees were eligible for Grants under the Equity
Compensation Plan. During any calendar year, no Grantee may receive Grants
for more than 570,000 shares of Common Stock. As of May 8, 1996, no Grants
had been made under the Equity Compensation Plan.
Options. The option price of any ISO granted under the Equity
Compensation Plan will not be less than the fair market value of the
underlying shares of Common Stock on the date of grant; provided, however,
that if an ISO is granted to a Grantee who then owns, directly or indirectly,
shares posessing more than ten percent of the total combined voting power of
all classes of Stock of the Company, then the option price will be at least
110% of the fair market value of the underlying shares of Common Stock on the
date of grant. The option price of an NQSO is determined by the Committee in
its sole discretion and may be greater than, equal to or less than the fair
market value of the underlying shares of Common Stock on the date of grant.
The Committee may determine the term of each option; provided, however,
that the exercise period may not exceed ten years from the date of grant or
five years from the date of grant of an ISO if the Grantee on the date of
grant owns, directly or indirectly, shares possessing more than ten percent
of the total combined voting power of all classes of Stock of the Company. A
Grantee may pay the option price (i) in cash, (ii) with the approval of the
Committee, by delivering shares of Common Stock owned by the Grantee
(including Common Stock acquired in connection with the exercise of a stock
option, subject to such restrictions as the Committee deems appropriate) and
having a fair market value on the date of exercise equal to the option price
or (iii) by a combination of the foregoing.
If a Grantee ceases to serve as an employee, director or consultant of the
Company or its subsidiaries for any reason other than disability, death or
termination for cause, the Grantee's Stock Options will terminate 90 days
following the date on which he or she ceases to serve. If the Grantee's
service ceases due to the Grantee's death or disability, the Grantee's Stock
Options will terminate one year following the date on which he or she ceases
to serve due to such death or disability. If the Grantee's service ceases due
to termination by the Company for cause, the Grantee's Stock Options will
terminate immediately. However, in each case described above, the Committee
may specify a different termination date with respect to a Grantee, but in no
event later than the date of expiration of the option term.
Restricted Stock. The Committee may make Grants of restricted stock.
Shares may be issued for cash or other consideration, as the Committee
determines. The number of shares of Common Stock granted to each Grantee
shall be determined by the Committee. Grants of restricted stock will be made
subject to such restrictions and conditions as the Committee may determine in
its sole discretion, including restrictions on transferability (the
"Restriction Period"). During the Restriction Period, if any, a Grantee will
have the right to vote the shares subject to the Grant and the right to
receive any regular cash dividends paid thereon, unless the Committee
determines otherwise. If a Grantee's employment or service for the Company
terminates, or in the event of the occurrence of certain other events
determined by the Committee, the Grant will terminate with respect to all
shares as to which the restrictions have not lapsed and those shares must be
returned to the Company.
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<PAGE>
Stock Appreciation Rights. The Committee may grant SARs alone or in tandem
with any Stock Option. The base amount of an SAR will be the greater of (i)
the exercise price of the related stock option, if any, or (ii) the fair
market value of a share of Common Stock on the date of grant of the SAR,
unless the Committee determines otherwise. Upon exercise of an SAR, a Grantee
will receive the amount by which the fair market value of the Common Stock on
the date of exercise exceeds the base amount of the SAR. A Grantee may elect
to have such appreciation paid in cash or in shares of Common Stock of the
Company, subject to Committee approval.
Stock-Based Awards. The Committee may, subject to limitations under
applicable law, grant to any Grantee other than a non-employee director,
awards of Common Stock or cash equal to the value of shares of Common Stock
as a bonus, subject to such conditions and restrictions, if any, as the
Committee may determine in its sole discretion.
Conditions of Grants. Unless the Committee determines otherwise, all
Grants under the Equity Compensation Plan will be contingent upon the Grantee
entering a voting trust agreement with respect to any shares issued pursuant
to such Grant, in the form and manner prescribed by the Committee. No shares
of Common Stock will be issued in connection with any Grant under the Equity
Compensation Plan unless the Grantee participates in such voting trust or the
Committee determines otherwise.
Amendment and Termination of the Equity Compensation Plan. The Board may
amend or terminate the Equity Compensation Plan at any time; provided,
however, that, the Board must obtain shareholder approval of any amendments
to the Equity Compensation Plan that (i) increase the aggregate number of
shares of Common Stock for which Grants may be made hereunder, (ii) decrease
the minimum exercise price specified by the Equity Compensation Plan in
respect of ISOs, (iii) change the class of employees eligible to receive ISOs
under the Equity Compensation Plan, (iv) increase the individual limit of
shares of Common Stock for which Grants of options may be made to any single
individual under the Equity Compensation Plan or (v) make any amendment that
requires shareholder approval pursuant to Rule 16b-3 of the Exchange Act or
162(m) of the Code. If approved by the shareholders, the Equity Compensation
Plan will become effective on the date the Company's Common Stock is first
registered with the Securities and Exchange Commission pursuant to the
Exchange Act and will terminate in May 2006, unless terminated earlier by the
Board or extended by the Board with approval of the shareholders.
Adjustment Provisions. If there is any change in the number or kind of
shares of Common Stock outstanding by reason of a stock dividend,
recapitalization, stock split or combination or exchange of such shares, or
merger, reorganization or consolidation in which the Company is the surviving
corporation, or reclassification or other change in the par value of the
Common Stock or by reason of any other extraordinary or unusual event
affecting the outstanding Common Stock as a class, the Committee may make
adjustment to reflect any increase or decrease in the number or kind of
issued shares of Common Stock.
Change of Control of the Company. Upon a change of control of the Company
(i) the Company will provide each Grantee with outstanding Grants written
notice of such change of control, (ii) all outstanding stock options and SARs
will automatically accelerate and become fully exercisable and (iii) the
restrictions and conditions on all outstanding restricted stock and
stock-based awards will immediately lapse. In addition, upon a change of
control where the Company is not the surviving corporation, all outstanding
stock options and SARs must be assumed or replaced with comparable options or
rights by the surviving corporation; provided, however, that the Committee
may (i) require that Grantees surrender their outstanding stock options and
SARs in exchange for a payment by the Company, in cash or Common Stock as
determined by the Committee, in an amount equal to the amount by which the
then fair market value of the shares of Common Stock subject to the Grantee's
outstanding stock options or SARs exceeds the option purchase price of the
stock options or base amount of the SARs, as the case may be, and (ii)
terminate any or all outstanding stock options and SARs at such time as the
Committee deems appropriate.
1996 NON-EMPLOYEE DIRECTORS PLAN
The ICT Group, Inc. 1996 Non-Employee Directors Plan (the "Directors Plan")
was adopted by the Board in May 1996, contingent upon the completion of this
offering. The Directors Plan provides for formula grants of NQSOs to members
of the Board of Directors who are not employees of the Company ("Non-Employee
Directors").
43
<PAGE>
General. Subject to adjustment in certain circumstances as discussed
below, the Directors Plan authorizes up to 30,000 shares of common stock of
the Company for issuance pursuant to the terms of the Plan. If and to the
extent Grants under the Directors Plan expire or are terminated for any
reason without being exercised, or the shares of Common Stock subject to a
Grant are forfeited, the shares of Common Stock subject to such Grants again
will be available for future Grants under the Directors Plan.
Eligibility for Participation. Each Non-Employee Director who owns less
than 10% of the outstanding stock of the Company is eligible to receive NQSOs
under the Directors Plan. Upon the completion of this offering, one
Non-Employee Director will be entitled to receive such options. No grants
have been made under the Directors Plan to date, but Mr. Somers will receive
a grant of an NQSO to purchase 1,000 shares of Common Stock upon the
completion of this offering.
Formula Grants. Pursuant to the Directors Plan, each Non-Employee Director
who first becomes a member of the Board after the effective date of the
Directors Plan will receive an NQSO to purchase 1,000 shares of Common Stock
on the date he or she becomes a member of the Board. Such NQSOs will be 100%
vested and immediately exercisable on the date of grant. Thereafter, on each
date that the Company holds its annual meeting of shareholders, each
Non-Employee Director in office immediately after the annual election of
directors (other than Non-Employee Directors first elected at such meeting)
will receive an NQSO to purchase 1,000 shares of Common Stock. The exercise
price of all options granted pursuant to the Directors Plan must be equal to
the fair market value of a share of Common Stock on the date of grant and the
term of each such option will be ten years. Options granted annually to
Non-Employee Directors pursuant to the Directors Plan shall become
exercisable with respect to 100% of the shares on the first anniversary of
the date of grant.
If a Non-Employee Director ceases to serve as a Non-Employee Director of
the Company or its subsidiaries for any reason other than becoming an
employee of the Company, disability, death or termination for cause, the
Non-Employee Director's NQSOs will terminate 90 days following the date on
which he or she ceases to serve. If a Non-Employee Director's service ceases
due to death or disability, the Non-Employee Director's NQSOs will terminate
one year following the date on which he or she ceases to serve due to such
death or disability. If a Non-Employee Director's service ceases due to
termination by the Company for cause, the Non-Employee Director's NQSOs will
terminate immediately.
Amendment and Termination of the Directors Plan. The Board may amend or
terminate the Directors Plan at any time provided, however, that the formula
provisions of the Directors Plan may not be amended more than once every six
months, other than to comport with changes in the Code, the Employee
Retirement Income Security Act, or the rules thereunder. If approved by the
shareholders, the Directors Plan will become effective on the date the
Company's Common Stock is first registered with the Securities and Exchange
Commission pursuant to the Exchange Act and will terminate in May 2006,
unless terminated earlier by the Board or extended by the Board with approval
of the shareholders.
Adjustment Provisions. If there is any change in the number or kind of
shares of Common Stock outstanding by reason of a stock dividend,
recapitalization, stock split or combination or exchange of such shares, or
merger, reorganization or consolidation in which the Company is the surviving
corporation, or reclassification or other change in the par value of the
Common Stock or by reason of any other extraordinary or unusual event
affecting the outstanding Common Stock as a class, the Committee may make
adjustment to reflect any increase or decrease in the number or kind of
issued shares of Common Stock.
Change of Control of the Company. Upon a change of control of the Company
(i) the Company will provide each Non-Employee Director with outstanding
NQSOs written notice of such change of control and (ii) all outstanding NQSOs
will automatically accelerate and become fully exercisable.
44
<PAGE>
CERTAIN TRANSACTIONS
Voting Trust Agreement. John J. Brennan, Donald P. Brennan and the Company
have entered into a Voting Trust Agreement that terminates December 3, 2080
(the "Voting Trust Agreement"), with John J. Brennan and Donald P. Brennan as
voting trustees. John J. Brennan and Donald P. Brennan contributed 4,284,000
shares and 4,018,752 shares, respectively, to the voting trust. All acts of
the voting trustees under the Voting Trust Agreement must be by unanimous
consent, although the agreement provides that the voting trustees will be
present for purposes of constituting a quorum at any meeting of the
shareholders, regardless of whether the shares subject to the Voting Trust
Agreement are to be voted at the meeting. Upon the death, incompetence or
resignation of John J. Brennan as a voting trustee, Donald P. Brennan shall
have the right to (i) be the sole voting trustee if he becomes actively
involved in the Company, which shall include, up to December 31, 1999,
becoming Chairman and appointing a President and Chief Executive Officer, and
thereafter holding the position of President and Chief Executive Officer, or
(ii) appoint a successor trustee if he does not become, or ceases to be,
actively involved in the Company. Upon the death, incompetence or resignation
of Donald P. Brennan as a voting trustee, John J. Brennan shall have the
right to be the sole voting trustee.
Shareholders' Agreement. John J. Brennan, Donald P. Brennan and the
Company have entered into a Shareholders' Agreement that covers the shares
included under the Voting Trust Agreement and any other shares that they may
own (the "Shareholders' Agreement"). The Shareholders' Agreement prohibits
the transfer of shares owned by John J. Brennan and Donald P. Brennan,
without the consent of the other, except (i) pursuant to a public offering,
(ii) to certain family members and trusts therefor who agree to be bound by
the Shareholders' Agreement, (iii) to the other party or the Company pursuant
to rights of first refusal and (iv) to a third party if the first refusal
rights have not been exercised.
Voting Agreements. Each of the Company's employee optionholders has
entered into a ten-year voting agreement (the "Voting Agreements") with the
Company and John J. Brennan, the Chairman, President and Chief Executive
Officer, pursuant to which each has agreed to vote all shares of Common Stock
received by such individuals upon the exercise of options in the manner
directed by Mr. Brennan. The Voting Agreements are binding on each of the
optionholders' successors in interest. Mr. Brennan is required to release
shares covered by the Voting Agreements if a shareholder intends to sell
shares in the public market and completes the sale within 90 days of the
release. Shares sold in the public market will thereafter not be subject to
the Voting Agreements.
Guaranties by John J. Brennan and Donald P. Brennan. In April 1996, the
Company entered into an amended and restated loan agreement (the "Amended and
Restated Loan Agreement") whereby the lender (the "Bank") (i) made available a
$15,000,000 line of credit and a $3,500,000 equipment line of credit, (ii)
advanced a $1.5 million short-term loan and (iii) revised the terms of two
term loans previously advanced in the principal amounts of $1,350,000 and
$1,000,000. John J. Brennan and Donald P. Brennan (collectively, the
"Brennans") issued personal, unconditional guaranties to the Bank under which
each jointly and severally guaranteed the repayment of the loans issued under
the Amended and Restated Loan Agreement (the "Amended and Restated
Guarantee"). The Amended and Restated Guarantee superseded and replaced
entirely a guarantee agreement entered into between the Brennans and the Bank
in connection with a loan agreement entered into between the Company and the
Bank in September 1992. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" and
"Use of Proceeds."
Loan to the Company by Donald P. Brennan. In March 1987, Donald P. Brennan
loaned $100,000 to the Company at an interest rate of 12% per annum and was
issued a promissory note (the "Brennan Note"). Principal repayments on the
Brennan Note have been restricted by various loan agreements entered into by
the Company. Under the terms of an Amended and Restated Subordination
Agreement entered into in April 1996 in connection with the Amended and
Restated Loan Agreement, the Company may make principal payments of up to
$10,000 per month, in aggregate, on the Brennan Note and the Passage East
Partnership Note described below. As of the date of this Prospectus, the
outstanding principal balance of the Brennan Note remained $100,000. The
Company believes that the terms of this loan are no less favorable to the
Company than those which it could have received from unaffiliated parties.
45
<PAGE>
Loan to the Company by Passage East Partnership. In April 1987, Passage
East Partnership, a New York general partnership in which the Brennans are
the sole general partners, loaned $300,000 to the Com-
pany at an interest rate of 12% per annum. The loan to the Company is
evidenced by a promissory note executed in favor of Passage East Partnership
(the "Passage East Partnership Note"). Like the Brennan Note, principal
repayments on the Passage East Partnership Note are prohibited under the
terms of various loan documents. However, from time to time, the Company's
lenders have allowed principal repayments to Passage East Partnership. The
Company made principal repayments of $30,000 in 1991, $20,000 in 1993,
$50,000 in 1994 and $90,000 in 1996. As of the date of this Prospectus, the
outstanding principal balance of the Passage East Partnership Note was
$110,000. The Company believes that the terms of this loan are no less
favorable to the Company than those which it could have received from
unaffiliated parties.
Loan to Shareholders. In April 1996, pursuant to the Amended and Restated
Loan Agreement, the Bank advanced a line of credit to the Company in the
principal amount of $1,500,000, with interest to accrue at the Bank's base
rate of interest which was 8.25% at April 30, 1996. The Company, in turn,
loaned $1,500,000 to the Brennans to satisfy their estimated income tax
liability for the quarterly periods ending December 31, 1995, March 30, 1996
and June 30, 1996. The loan to the Brennans is evidenced by a promissory note
executed by the Brennans (the "Shareholders' Note"), which does not bear
interest, and is payable in full on or before November 30, 1996. Pursuant to
the Amended and Restated Loan Agreement, the Shareholders' Note has been
assigned to the Bank.
46
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of June 1, 1996, and as
adjusted to reflect the sale by the Company of 2,411,552 shares of Common
Stock offered hereby, by (i) each person known to the Company to own
beneficially more than 5% of the outstanding shares of Common Stock; (ii)
each director of the Company; (iii) each Named Executive Officer; (iv) all
executive officers, directors and director nominees of the Company as a
group; and (v) each Selling Shareholder. Unless otherwise indicated below, to
the knowledge of the Company, all persons listed below have sole voting and
investment power with respect to their shares.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Number of Owned
Prior to Offering(1) Shares Offered After Offering(1)
------------------------ -------------- ------------------------
Executive Officers, Directors
and Director Nominee Number Percent Number Percent
--------------------------------- ----------- --------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
John J. Brennan(2)(3) ........... 9,383,202 93.1% -- 9,294,754 74.4%
Donald P. Brennan(2) ............ 8,302,752 92.3 -- 8,302,752 72.2
Bernard Somers .................. -- -- -- -- --
John L. Magee(4) ................ 360,000 3.8 54,000 306,000 2.6
John D. Campbell(4) ............. 157,500 1.7 9,000 148,500 1.3
Maurice J. Kerins(4) ............ 157,500 1.7 -- 157,500 1.4
Robert F. Small(4) .............. 135,000 1.5 20,250 114,750 *
Carl E. Smith(4) ................ 27,000 * -- 27,000 *
All executive officers, directors and
director nominees as a group (8
persons)(3) .................... 9,383,202 93.1 83,250 9,294,754 74.4
Other Selling Shareholders
Dean J. Kilpatrick .............. 23,400 * 3,375 20,025 *
Christopher J. Ungarino ......... 12,150 * 1,823 10,327 *
</TABLE>
- ------
* Less than 1%.
(1) The number of shares of Common Stock deemed outstanding prior to this
offering consists of 9,000,000 shares of Common Stock outstanding as of
June 1, 1996. In addition, shares underlying options to purchase Common
Stock that are exercisable as of June 1, 1996 or within 60 days
thereafter, are deemed outstanding and to be beneficially owned by the
persons holding such options for purposes of computing such persons'
percentage ownership, but are not treated as outstanding for the purpose
of computing the percentage ownership of any other person. The number of
shares deemed outstanding after this offering includes an additional
2,411,552 shares of Common Stock that are being offered for sale by the
Company in this offering and an additional 88,448 shares to be issued upon
the exercise by Selling Shareholders of certain options in connection with
this offering.
(2) Includes 8,302,752 shares over which John J. Brennan and Donald P.
Brennan share voting and dispositive power pursuant to the Voting Trust
Agreement, as voting trustees, and the Shareholders' Agreement, of which
John J. Brennan contributed 4,284,000 shares and Donald P. Brennan
contributed 4,018,752 shares to the voting trust. John J. Brennan and
Donald P. Brennan have granted the Underwriters a 30-day option to
purchase up to 375,000 additional shares of Common Stock owned by them
solely to cover over-allotments, if any. To the extent the Underwriters'
over-allotment option is exercised, each of John J. Brennan and Donald P.
Brennan will sell one-half of the total number of shares sold pursuant to
such over-allotment option, in which case, upon the exercise of the option
in full, the number of shares and percentage of Common Stock beneficially
owned by John J. Brennan and Donald P. Brennan will be 8,919,754 (71.4%)
and 7,927,752 (68.9%), respectively. The address of these shareholders is
800 Town Center Drive, Langhorne, PA 19047. See "Certain Transactions --
Voting Trust Agreement" and "-- Shareholders' Agreement."
(3) Includes 1,080,450 shares (992,002 after this offering) of Common Stock
issuable pursuant to exercisable stock options over which John J. Brennan
exercises voting control pursuant to the Voting Agreements and the terms
of the Equity Incentive Plan.
(4) Consists of shares of Common Stock issuable pursuant to stock options
exercisable upon the completion of this offering. Except for shares sold
by Selling Shareholders, voting control over these shares is held by John
J. Brennan pursuant to the terms of the Voting Agreements.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 40,000,000 shares
of Common Stock, par value $.01 per share, and 5,000,000 shares Preferred
Stock, par value $.01 per share. As of the date of this Prospectus, the
Company had 4,500,000 shares of Series A Common Stock, 4,500,000 shares of
Series B Common Stock and no shares of Preferred Stock outstanding. The
Company's capital stock upon the completion of this offering is described
below.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held
of record on all matters submitted to a vote of shareholders. If dividends
are declared, whether payable in cash, property or securities of the Company,
all holders of Common Stock are entitled to share equally in such dividends.
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, after payment has been made to the holders of
shares of Preferred Stock, if any, for the full amount to which they are
entitled, the holders of the shares of Common Stock are entitled to share
equally in the assets available for distribution.
All currently outstanding shares of Common Stock are, and upon issuance as
set forth herein, the shares of Common Stock being sold by the Company will
be, duly authorized, validly issued, fully paid and non- assessable.
PREFERRED STOCK
The Board of Directors is authorized, without further action by the
shareholders, to issue up to 5,000,000 shares of Preferred Stock in one or
more series and to establish the designations, preferences, qualifications,
privileges, limitations, restrictions, options, conversion rights and other
special or relative rights of any series of Preferred Stock. The issuance of
shares of Preferred Stock could adversely affect the voting power and other
rights of holders of Common Shares. Because the terms of the Preferred Stock
may be fixed by Board of Directors of the Company without shareholder action,
the Preferred Stock could be issued quickly with terms designed to defeat a
proposed takeover of the Company, or to make the removal of management of the
Company more difficult. The authority to issue Preferred Stock or rights to
purchase such stock could be used to discourage a change in control of the
Company. Management of the Company is not aware of any such threatened
transaction to obtain control of the Company, and the Board of Directors has
no current plans to designate and issue any additional shares of Preferred
Stock.
CERTAIN PROVISIONS THAT MAY HAVE AN ANTI-TAKEOVER EFFECT
Provisions of the Company's Restated Articles of Incorporation (the
"Articles") and Bylaws may have an anti-takeover effect and may delay, defer
or prevent a tender offer or takeover attempt not approved by the Board of
Directors, including those made at a premium over the prevailing market price
of the Common Stock held by shareholders.
The Articles provide for a classified Board of Directors consisting of
three classes as nearly equal in size as practicable. Each class holds office
until the third annual meeting for election of directors following the
election of such class, except that the initial terms of the three classes
expire in 1997, 1998 and 1999, respectively. Any director may be removed for
cause only upon the vote of the holders of the shares of Common Stock then
entitled to vote.
Additionally, the authority of the Board to issue Preferred
Stock and establish certain rights, preferences, privileges, limitations and
other special rights without any further vote or action by the shareholders
of the Company could have the effect of impeding or discouraging the
acquisition of control of the Company in a transaction not approved by the
Board of Directors.
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<PAGE>
The Articles and the Bylaws further provide that (i) shareholders may act
only at an annual or special meeting, and (ii) special meetings may be called
only by the Chairman of the Board, the President or a majority of the Board
of Directors.
The Company's Bylaws establish advance notice procedures with regard to
the nomination, other than by or at the direction of the Board of Directors
or a committee thereof, of candidates for election as directors. These
procedures provide that the notice of proposed shareholder nominations of
candidates must be timely given in writing to the Secretary of the Company
prior to the meeting at which directors are to be elected.
These provisions are intended to encourage persons considering an
acquisition or takeover of the Company to negotiate with the Board of
Directors rather than pursue non-negotiated takeover attempts, even though
such takeover might be desired by a majority of the shareholders. These
provisions may also reduce the likelihood of a change in the management or
voting control of the Company without the consent of the then incumbent Board
of Directors.
Subchapter F of Chapter 25 of the PBCL, which is applicable to the
Company, may have an anti-takeover effect and may delay, defer or prevent a
tender offer or takeover attempt that a shareholder might consider in his or
her best interest, including those attempts that might result in a premium
over the market price for the shares held by shareholders. In general,
Subchapter F of Chapter 25 of the PBCL delays for five years and imposes
conditions upon "business combinations" between an "interested shareholder"
and the Company. The term "business combination" is defined broadly to
include various merger, consolidation, division, exchange or sale
transactions, including transactions utilizing the Company's assets for
purchase price amortization or refinancing purposes. An "interested
shareholder," in general, would be a beneficial owner of shares entitling
that person to cast at least 20% of the votes that all shareholders would be
entitled to cast in an election of directors of the Company. However, since
each of Messrs. Brennan was a beneficial owner of shares entitled to greater
than 20% of such votes prior to the date when the Company elected to be
governed by such subchapter, neither would be deemed an interested
shareholder.
The foregoing description does not purport to be complete.
LIMITATION OF LIABILITY; INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Articles provide that, pursuant to and to the extent
permitted by Pennsylvania law, the Company's directors shall not be
personally liable for monetary damages for breach of any duty owed to the
Company and its shareholders. This provision does not eliminate the duty of
care, and, in appropriate circumstances, equitable remedies such as an
injunction or other forms of non-monetary relief would remain available under
Pennsylvania law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Company, for
acts or omissions not in good faith or involving knowing violations of law,
or for actions resulting in improper personal benefit to the director. The
provision also does not affect a director's responsibilities under any other
law, such as the federal securities laws or state or federal environmental
laws. The Company's Bylaws provide that the Company shall indemnify its
officers and directors to the fullest extent permitted by Pennsylvania law,
including some instances in which indemnification is otherwise discretionary
under Pennsylvania law.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock will be American
Stock Transfer & Trust Company.
49
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the Common
Stock of the Company. Sales of substantial amounts of shares of the Company's
Common Stock in the public market following this offering could adversely
affect the market price of the Common Stock, making it more difficult for the
Company to sell equity securities in the future at a time and price which it
deems appropriate.
Upon the completion of this offering, assuming no exercise of outstanding
options other than options to purchase an aggregate of 88,448 shares of
Common Stock to be exercised in connection with this offering (all of which
shares are being offered and sold hereby), the Company will have outstanding
11,500,000 shares of Common Stock. Of these shares, the 2,500,000 shares of
Common Stock sold in this offering will be freely tradeable without
restriction or registration under the Securities Act. The remaining 9,000,000
shares of Common Stock outstanding as of the date of this Prospectus are
"restricted securities" as defined by Rule 144.
In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares for at least two years (or one year if the SEC's
proposed amendments to Rule 144 become effective), including an "affiliate,"
as that term is defined in the Securities Act, is entitled to sell within any
three-month period a number of shares that does not exceed the greater of one
percent of the then outstanding shares of Common Stock (approximately 115,000
shares after the completion of this offering), or the average weekly trading
volume during the four calendar weeks preceding filing of notice of such
sale, subject to certain requirements concerning availability of public
information, manner of sale and notice of sale.
In addition, affiliates must comply with the restrictions and requirements
of Rule 144, other than the two-year holding period requirements, in order to
sell shares of Common Stock which are not restricted securities. Under Rule
144(k), a person who is not an affiliate and has not been an affiliate for at
least three months prior to the sale and who has beneficially owned
restricted shares for at least three years may resell such shares without
compliance with the foregoing requirements.
Although an aggregate of 9,000,000 shares of Common Stock will be eligible
for public sale upon the completion of this offering, all of the Company's
current shareholders have agreed not to sell or otherwise dispose of any such
shares for a period of 180 days after the date of this Prospectus without the
prior written consent of Robertson, Stephens & Company.
Upon the completion of this offering, there will be 872,302 and 159,300
shares of Common Stock subject to outstanding options under the 1987
Stock Option Plan and units under the Equity Incentive Plan, respectively, and
90,000 shares of Common Stock subject to a stock option granted outside of the
1987 Stock Option Plan. Substantially all of the outstanding options and units
will be exercisable upon the completion of this offering. However, pursuant to
the Underwriting Agreement, the Company has agreed not to file, at any time
prior to the date 180 days from the date of this Prospectus, a registration
statement under the Securities Act covering (i) 1,121,602 shares of Common
Stock reserved for issuance under the Company's 1987 Stock Option Plan, Equity
Incentive Plan and a stock option granted outside of the 1987 Stock Option
Plan, (excluding 88,448 shares of Common Stock underlying options to be
exercised by the Selling Shareholders in connection with this offering) and
(ii) 1,150,000 shares of Common Stock reserved for future issuance under the
Company's 1996 Equity Compensation Plan and 1996 Non-Employee Directors Plan.
The Company intends to file a Form S-8 registration statement covering a
portion of such shares of Common Stock within one year from the date of this
Prospectus. The shares registered under such registration statement will be
available for resale in the open market upon the exercise of vested options,
subject to Rule 144 volume limitations applicable to affiliates.
50
<PAGE>
UNDERWRITING
The Underwriters named below (the "Underwriters"), acting through their
representatives, Robertson, Stephens & Company LLC and Smith Barney Inc. (the
"Representatives"), have severally agreed, subject to the terms and
conditions of the Underwriting Agreement, to purchase from the Company and
the Selling Shareholders the numbers of shares of Common Stock set forth
opposite their respective names below. The Underwriters are committed to
purchase and pay for all such shares if any are purchased.
Number of
Underwriter Shares
----------------------------------- -----------
Robertson, Stephens & Company LLC. .
Smith Barney Inc. .................
-----------
Total ........................... 2,500,000
===========
The Representatives have advised the Company and the Selling Shareholders
that the Underwriters propose to offer the shares of Common Stock to the
public at the initial public offering price set forth on the cover page of
this Prospectus, and to certain dealers at such price less a concession not
in excess of $ per share. The Underwriters may allow, and such dealers may
re-allow, a concession not in excess of $ per share to certain other
dealers. After the initial public offering, the public offering price,
concessions and reallowances to dealers may be reduced by the
Representatives. No such reduction shall change the amount of proceeds to be
received by the Company as set forth on the cover of this Prospectus.
John J. Brennan and Donald P. Brennan have granted to the Underwriters an
option, exercisable not later than 30 days from the date of this Prospectus,
to purchase up to 375,000 additional shares of Common Stock at the initial
public offering price less the underwriting discounts and commissions set
forth on the cover page of this Prospectus. To the extent that the
Underwriters exercise such option, each of the Underwriters will have a firm
commitment to purchase approximately the same percentage thereof that the
number of shares of Common Stock to be purchased by it shown in the above
table bears to the total shares of Common Stock listed in such table, and
Messrs. Brennan will be obligated, pursuant to such option, to sell such
shares to the Underwriters. The Underwriters may exercise such option only to
cover over-allotments made in connection with the sale of Common Stock
offered hereby. If purchased, the Underwriters will offer such additional
shares on the same terms as those on which the 2,500,000 shares are being
offered.
The Company, the Selling Shareholders and, if the Underwriters'
over-allotment option is exercised, Messrs. Brennan, on the one hand, and the
Underwriters on the other hand, have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
The Company, together with its directors, executive officers and all of
the Selling Shareholders, who hold in aggregate all of the Company's
presently outstanding Common Stock, have agreed not to offer, sell or
otherwise dispose of any shares of Common Stock and any securities
convertible or exchangeable for shares of Common Stock beneficially owned by
them or any such securities hereafter acquired by them for a period of 180
days after the date of this Prospectus without the prior written consent of
Robertson, Stephens & Company. See "Shares Eligible for Future Sale."
The Representatives have advised the Company and the Selling Shareholders
that the Underwriters do not intend to confirm sales to any accounts over
which they exercise discretionary authority.
Prior to this offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
Common Stock will be determined by negotiations between the Company and the
Representatives. Among the factors to be considered in such negotiations will
be the prevailing market conditions, the results of operations of the Company
in recent periods, the market capitalizations and stages of development of
other companies which the Company and the Representatives believe to be
comparable to the Company, estimates of the business potential of the
Company, the present state of the Company's development and other factors
deemed relevant.
51
<PAGE>
LEGAL MATTERS
The Common Stock being offered hereby is being passed upon for the Company
by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania. Certain legal
matters in connection with this offering will be passed upon for the
Underwriters by Cooley Godward Castro Huddleson & Tatum, San Francisco,
California.
EXPERTS
The financial statements of the Company as of December 31, 1994 and 1995
and for each of the three years in the period ended December 31, 1995
included in this Prospectus and in the Registration Statement have been
audited by Arthur Andersen LLP, independent public accountants, as indicated
in their report with respect thereto, and are included herein in reliance
upon the authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Commission in Washington, D.C., a
Registration Statement on Form S-1 under the Securities Act, with respect to
the securities offered hereby. This Prospectus, which constitutes part of the
Registration Statement, omits certain of the information contained in the
Registration Statement and the exhibits and schedules thereto on file with
the Commission pursuant to the Securities Act and the rules and the
regulations of the Commission thereunder. Statements contained in this
Prospectus as to the contents of any contract or other document referred to
are not necessarily complete and in each instance reference is made to the
copy of such contract or other document filed as an exhibit to the
Registration Statement, and each such statement is qualified in all respects
by such reference. The Registration Statement can be inspected and copied at
the public reference facilities maintained by the Commission at Judiciary
Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: Seven World Trade Center, New
York, New York 10048; and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60621. Copies of such material can be obtained at prescribed rates.
In addition, such materials also may be inspected and copied at the offices
of the Nasdaq National Market, 1735 K Street, N.W., Washington, D.C. 20006.
52
<PAGE>
ICT GROUP, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
--------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ......... F-2
CONSOLIDATED BALANCE SHEETS ...................... F-3
CONSOLIDATED STATEMENTS OF INCOME ................ F-4
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY .. F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS ............ F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ....... F-7
F-1
<PAGE>
After the common stock split and the change in the authorized number of
common shares are effected, as described in Note 2 to the Consolidated
Financial Statements, we will render the following report.
ARTHUR ANDERSEN LLP
April 26, 1996
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ICT Group, Inc.:
We have audited the accompanying consolidated balance sheets of ICT Group,
Inc. (a Pennsylvania corporation) and Subsidiary as of December 31, 1994 and
1995, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 financial position of ICT Group, Inc. and
Subsidiary as of December 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
Philadelphia, Pa.
F-2
<PAGE>
ICT GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31, 1996
-------------------------------- ------------------------------
Pro Forma
1994 1995 Actual (Note 3)
-------------- -------------- ------------- -------------
(unaudited)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash ..................................................... $ 10,630 $ 447,206 $ 3,398 $ 3,398
Accounts receivable, net of allowance for doubtful
accounts of $600,691, $211,773 and $252,258 ............ 6,598,519 8,980,632 10,730,177 10,730,177
Receivable from related party ............................ 185,929 132,977 -- --
Grant receivable ......................................... 449,397 537,049 647,046 647,046
Prepaid expenses and other ............................... 231,338 333,933 640,661 640,661
-------------- -------------- ------------- -------------
Total current assets ................................ 7,475,813 10,431,797 12,021,282 12,021,282
-------------- -------------- ------------- -------------
PROPERTY AND EQUIPMENT:
Communications and computer equipment .................... 7,966,175 11,265,657 12,372,074 12,372,074
Furniture and fixtures ................................... 948,048 1,751,077 2,213,803 2,213,803
Leasehold improvements ................................... 418,173 884,645 1,049,948 1,049,948
-------------- -------------- ------------- -------------
9,332,396 13,901,379 15,635,825 15,635,825
Less-Accumulated depreciation and amortization ........... (5,286,827) (7,038,754) (7,574,977) (7,574,977)
-------------- -------------- ------------- -------------
Net property and equipment .......................... 4,045,569 6,862,625 8,060,848 8,060,848
-------------- -------------- ------------- -------------
OTHER ASSETS ............................................... 522,862 1,186,321 1,335,588 1,335,588
-------------- -------------- ------------- -------------
$12,044,244 $18,480,743 $21,417,718 $21,417,718
============== ============== ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Borrowings on lines of credit ............................ $ 3,591,157 $ 6,201,152 $ 6,853,441 $ 6,853,441
Current portion of long-term debt ........................ 405,000 705,000 705,000 705,000
Current portion of capitalized lease obligations ......... 665,158 748,366 821,624 821,624
Current portion of subordinated notes due to related
parties................................................. -- 180,000 120,000 120,000
Accounts payable ......................................... 1,889,504 1,732,505 3,137,494 3,137,494
Accrued expenses ......................................... 1,386,774 2,044,500 2,408,307 2,408,307
Payable to related party ................................. -- -- 69,278 69,278
Deferred revenues ........................................ -- 421,209 389,707 389,707
Deferred income taxes .................................... -- -- -- 144,000
S corporation distribution payable to shareholders ....... -- -- -- 2,450,000
-------------- -------------- ------------- -------------
Total current liabilities ........................... 7,937,593 12,032,732 14,504,851 17,098,851
-------------- -------------- ------------- -------------
LONG-TERM DEBT ............................................. 641,250 761,250 585,000 585,000
-------------- -------------- ------------- -------------
CAPITALIZED LEASE OBLIGATIONS .............................. 806,982 1,631,623 1,811,364 1,811,364
-------------- -------------- ------------- -------------
SUBORDINATED NOTES DUE TO RELATED PARTIES .................. 300,000 120,000 120,000 120,000
-------------- -------------- ------------- -------------
DEFERRED INCOME TAXES ...................................... -- -- -- 1,042,000
-------------- -------------- ------------- -------------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY ............... 88,386 92,104 102,227 102,227
-------------- -------------- ------------- -------------
COMMITMENTS AND CONTINGENCIES (Note 11)
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000,000 shares
authorized, none issued ............................... -- -- -- --
Common stock, $.01 par value, 40,000,000 shares
authorized, 9,000,000 shares issued and outstanding at
December 31, 1994 and 1995 ............................ 90,000 90,000 -- --
Class A common stock (voting), $.01 par value, 10,000,000
shares authorized, 4,500,000 shares issued and
outstanding at March 31, 1996 ......................... -- -- 45,000 45,000
Class B common stock (non-voting), $.01 par value,
10,000,000 shares authorized, 4,500,000 shares issued
and outstanding at March 31, 1996 ..................... -- -- 45,000 45,000
Additional paid-in capital ............................... 310,000 310,000 426,215 652,884
Deferred compensation .................................... -- -- (108,950) (108,950)
Retained earnings ........................................ 1,868,853 3,438,912 3,862,669 --
Cumulative translation adjustment ........................ 1,180 4,122 24,342 24,342
-------------- -------------- ------------- -------------
Total shareholders' equity .......................... 2,270,033 3,843,034 4,294,276 658,276
-------------- -------------- ------------- -------------
$12,044,244 $18,480,743 $21,417,718 $21,417,718
============== ============== ============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
ICT GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
------------------------------------------------- -----------------------------
1993 1994 1995 1995 1996
-------------- -------------- -------------- ------------ -------------
(unaudited)
<S> <C> <C> <C> <C> <C>
NET REVENUES ....................... $22,271,041 $34,123,378 $52,115,819 $9,293,555 $16,219,586
-------------- -------------- -------------- ------------ -------------
OPERATING EXPENSES:
Cost of services ................. 12,746,644 19,593,123 28,638,687 5,210,173 8,767,130
Selling, general and
administrative ................. 8,629,644 13,121,458 21,073,590 3,857,633 6,795,367
-------------- -------------- -------------- ------------ -------------
21,376,288 32,714,581 49,712,277 9,067,806 15,562,497
-------------- -------------- -------------- ------------ -------------
Operating income ............ 894,753 1,408,797 2,403,542 225,749 657,089
INTEREST EXPENSE ................... 325,319 510,586 833,483 164,198 233,332
-------------- -------------- -------------- ------------ -------------
NET INCOME ......................... $ 569,434 $ 898,211 $ 1,570,059 $ 61,551 $ 423,757
============== ============== ============== ============ =============
PRO FORMA DATA (UNAUDITED) (Note 3):
Historical net income ............ $ 569,434 $ 898,211 $ 1,570,059 $ 61,551 $ 423,757
Pro forma provision for income
taxes ......................... 263,079 405,991 667,275 26,142 170,011
-------------- -------------- -------------- ------------ -------------
Pro forma net income ............. $ 306,355 $ 492,220 $ 902,784 $ 35,409 $ 253,746
============== ============== ============== ============ =============
Pro forma net income per share ... $ .03 $ .05 $ .09 $ -- $ .03
============== ============== ============== ============ =============
Shares used in computing pro
forma net income per share ..... 9,616,008 9,616,008 9,696,746 9,696,746 9,696,746
============== ============== ============== ============ =============
Supplemental pro forma net income
per share ...................... $ .13 $ .04
============== =============
Shares used in computing
supplemental pro forma net
income per share ............... 10,732,625 10,732,625
============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
ICT GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
-----------------------------------------------------------------------
No designation Class A Class B
------------------------ --------------------- ---------------------
Shares Amount Shares Amount Shares Amount
------------ -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
DECEMBER 31, 1992 ....... 9,000,000 $ 90,000 -- $ -- -- $ --
Net income ............. -- -- -- -- -- --
------------ -------- --------- -------- --------- --------
BALANCE,
DECEMBER 31, 1993 ....... 9,000,000 90,000 -- -- -- --
Currency translation
adjustment .......... -- -- -- -- -- --
Net income ............ -- -- -- -- -- --
------------ -------- --------- -------- --------- --------
BALANCE,
DECEMBER 31, 1994 ...... 9,000,000 90,000 -- -- -- --
Currency translation
adjustment .......... -- -- -- -- -- --
Net income ............ -- -- -- -- -- --
------------ -------- --------- -------- --------- --------
BALANCE,
DECEMBER 31, 1995 ...... 9,000,000 90,000 -- -- -- --
Deferred compensation
related to grants of
stock options
(unaudited) ......... -- -- -- -- -- --
Amortization of deferred
compensation
(unaudited) ......... -- -- -- -- -- --
Currency translation
adjustment
(unaudited) -- -- -- -- -- --
Issuance of Class A and
Class B common stock
in exchange for all
outstanding shares of
common stock
(unaudited) ......... (9,000,0000) (90,000) 4,500,000 45,000 4,500,000 45,000
Net income (unaudited) -- -- -- -- -- --
------------ -------- ---------- -------- --------- --------
BALANCE, MARCH 31,
1996 (unaudited) ....... -- $ -- 4,500,000 $45,000 4,500,000 $45,000
============ ======== ========== ======== ========= ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Additional Deferred Cumulative Total
Paid-in Compen- Retained Translation Shareholders'
Capital sation Earnings Adjustment Equity
---------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE,
DECEMBER 31, 1992 ....... $310,000 $ -- $ 401,208 $ -- $ 801,208
Net income ............. -- -- 569,434 -- 569,434
---------- ---------- ---------- ----------- -------------
BALANCE,
DECEMBER 31, 1993 ....... 310,000 -- 970,642 -- 1,370,642
Currency translation
adjustment .......... -- -- -- 1,180 1,180
Net income ............ -- -- 898,211 -- 898,211
---------- ---------- ---------- ----------- -------------
BALANCE,
DECEMBER 31, 1994 ...... 310,000 -- 1,868,853 1,180 2,270,033
Currency translation
adjustment .......... -- -- -- 2,942 2,942
Net income ............ -- -- 1,570,059 -- 1,570,059
---------- ---------- ---------- ----------- -------------
BALANCE,
DECEMBER 31, 1995 ...... 310,000 -- 3,438,912 4,122 3,843,034
Deferred compensation
related to grants of
stock options
(unaudited) ......... 116,215 (116,215) -- -- --
Amortization of deferred
compensation
(unaudited) ......... -- 7,265 -- -- 7,265
Currency translation
adjustment
(unaudited) -- -- -- 20,220 20,220
Issuance of Class A and
Class B common stock
in exchange for all
outstanding shares of
common stock
(unaudited) ......... -- -- -- -- --
Net income (unaudited) -- -- 423,757 -- 423,757
---------- ---------- ---------- ----------- -------------
BALANCE, MARCH 31,
1996 (unaudited) ....... $426,215 $(108,950) $3,862,669 $24,342 $4,294,276
========== ========== ========== =========== =============
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
ICT GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31, Three Months Ended March 31,
-------------------------------------------- ----------------------------
1993 1994 1995 1995 1996
----------- ------------- ------------- ----------- -------------
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................. $ 569,434 $ 898,211 $ 1,570,059 $ 61,551 $ 423,757
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities-- ...............
Minority interest in subsidiary's
earnings ............................ -- 17,307 3,718 (20,105) 10,123
Depreciation and amortization ........ 798,429 1,242,951 1,877,133 354,582 556,450
(Increase) decrease in-- .............
Accounts receivable ................ (529,974) (2,482,347) (2,349,113) (771,344) (1,749,545)
Prepaid expenses and other ......... (67,719) (25,309) (135,595) (337,634) (306,728)
Receivable from related party ...... -- (185,929) 52,952 9,463 132,977
Grant receivable ................... -- (449,397) (87,652) (85,283) (109,997)
Other assets ....................... (25,008) (61,646) 33,319 (161,634) (156,494)
Increase (decrease) in-- .............
Accounts payable ................... (141,466) 1,001,254 (50,128) (127,726) 1,298,118
Accrued expenses ................... (75,413) 957,919 (246,795) 828,733 477,943
Accounts payable to related party .. -- -- -- 69,278
Deferred revenue ................... -- -- 421,209 224,242 (31,502)
----------- ------------- ------------- ----------- -------------
Net cash provided by (used in)
operating activities .......... 528,283 913,014 1,089,107 (25,155) 614,380
----------- ------------- ------------- ----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ..... (686,854) (960,700) (2,372,873) (692,226) (1,259,380)
Payments for business acquisitions ...... -- (486,168) (468,487) -- --
Proceeds from repayment of note
receivable from customer ............. 90,000 47,000 -- -- --
----------- ------------- ------------- ----------- -------------
Net cash used in investing
activities .................... (596,854) (1,399,868) (2,841,360) (692,226) (1,259,380)
----------- ------------- ------------- ----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on lines of credit ....... 775,000 616,157 2,609,995 1,175,200 652,289
Proceeds from long-term debt ............ -- 1,350,000 1,000,000 -- --
Proceeds from minority owner of joint
venture ............................... -- 71,079 -- -- --
Payments on long-term debt .............. (300,000) (928,750) (580,000) (101,250) (176,250)
Payments on capitalized lease
obligations ........................... (326,972) (598,968) (807,109) (246,233) (222,067)
Payments on subordinated notes .......... (20,000) (50,000) -- -- (60,000)
Payments of deferred financing costs .... (14,888) (35,344) (36,999) -- (13,000)
----------- ------------- ------------- ----------- -------------
Net cash provided by financing
activities .................... 113,140 424,174 2,185,887 827,717 180,972
----------- ------------- ------------- ----------- -------------
EFFECT OF FOREIGN EXCHANGE RATE CHANGES
ON CASH ................................. -- 1,180 2,942 (1,277) 20,220
----------- ------------- ------------- ----------- -------------
NET INCREASE (DECREASE) IN CASH ........... 44,569 (61,500) 436,576 109,059 (443,808)
CASH, BEGINNING OF PERIOD ................. 27,561 72,130 10,630 10,630 447,206
----------- ------------- ------------- ----------- -------------
CASH, END OF PERIOD ....................... $ 72,130 $ 10,630 $ 447,206 $ 119,689 $ 3,398
=========== ============= ============= =========== =============
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
ICT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
1. BACKGROUND:
ICT Group, Inc. was incorporated in Pennsylvania on March 20, 1987.
Eurotel Marketing Limited ("Eurotel"), a 60%-owned joint venture, was
incorporated in Dublin, Ireland in July 1994 (see Note 4). ICT Group, Inc.
and Eurotel (collectively the "Company") provide multilingual marketing,
management, and information research services for selected industries,
including insurance and financial services, publishing, telecommunications,
consumer products and services, pharmaceuticals, health care services and
computer software and hardware.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INTERIM FINANCIAL STATEMENTS
The financial statements as of March 31, 1996 and for the three months
ended March 31, 1995 and 1996 are unaudited and, in the opinion of management
of the Company, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the results for those
interim periods. The results of operations for the three months ended March
31, 1996 are not necessarily indicative of the results to be expected for the
full year.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of ICT Group,
Inc. and Eurotel. All material intercompany balances and transactions have
been eliminated. Pursuant to Statement of Financial Accounting Standards
("SFAS") No. 52, substantially all assets and liabilities of Eurotel are
translated at the period-end currency exchange rate and revenues and
expenses are translated at an average currency exchange rate for the period.
The resulting translation adjustment is accumulated in a separate component
of shareholders' equity.
USE OF 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 and
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.
REVENUE RECOGNITION
The Company recognizes revenues on programs as services are performed,
generally based on hours incurred. Amounts collected from customers prior to
the performance of services are recorded as deferred revenues.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation and amortization
are provided over the estimated useful lives of the applicable assets using
the straight-line method. The lives used are as follows:
Communications and computer equipment .... 5 years
Furniture and fixtures ................... 5 - 7 years
Leasehold improvements ................... Lease term
Depreciation expense was $880,907, $1,184,683, $1,750,921, $343,082 and
$536,223 for the years ended December 31, 1993, 1994 and 1995 and the three
months ended March 31, 1995 and 1996, respectively. Repairs and maintenance
are charged to expense as incurred. Additions and betterments are
capitalized. Gains or losses on the disposition of property and equipment are
charged to operations.
F-7
<PAGE>
ICT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Information as of March 31, 1996 and for the three months
ended March 31, 1995 and 1996 is unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: - (Continued)
Equipment under capital leases included in property and equipment is
$1,925,472 and $2,911,846, net of accumulated depreciation of $883,764 and
$1,612,348, as of December 31, 1994 and 1995, respectively.
OTHER ASSETS
<TABLE>
<CAPTION>
December 31,
---------------------------
1994 1995
----------- ------------
<S> <C> <C>
Deposits ...................................................... $287,565 $ 308,582
Goodwill, net of accumulated amortization of $36,648 and $63,463
(see Note 5) ................................................. 122,723 833,051
Other ......................................................... 112,574 44,688
----------- ------------
$522,862 $1,186,321
=========== ============
</TABLE>
Goodwill is amortized over 15 years on a straight-line basis. The Company
evaluates the realizability of goodwill based on estimates of undiscounted
future cash flows over the remaining useful life of the assets acquired. If
the amount of such estimated undiscounted future cash flows is less than the
net book value of the assets acquired, the assets are written down to the
amount of the estimated discounted cash flows.
ACCRUED EXPENSES
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1994 1995
------------- ------------
<S> <C> <C>
Payroll and related benefits . $ 655,659 $ 946,640
Telecommunications expense .. 449,315 407,879
Other ....................... 281,800 689,981
------------- ------------
$1,386,774 $2,044,500
============= ============
</TABLE>
INCOME TAXES
The Company is an S Corporation for federal and certain state income tax
reporting purposes and, accordingly, income is passed through to the
shareholders and taxed at the individual level. The Company operates in
certain states that do not recognize S Corporation status and, therefore, is
subject to corporate income tax in those states. The Company reports certain
income and expense items for income tax purposes on a basis different from
that reflected in the accompanying financial statements. The principal
differences relate to the use of the cash method of accounting and
accelerated depreciation for tax purposes (see Note 3).
Pro forma income taxes are accounted for under SFAS No. 109, "Accounting
for Income Taxes," which requires an asset and liability approach for the
accounting and financial reporting of income taxes (see Note 3).
SUPPLEMENTAL CASH FLOW INFORMATION
For the years ended December 31, 1993, 1994 and 1995 and the three months
ended March 31, 1995 and 1996, the Company paid interest of $333,273,
$498,846, $848,810, $168,610 and $224,976, respectively. Capital lease
obligations of $531,498, $1,299,212 and $1,714,958 were incurred on equipment
leases entered into in 1993, 1994 and 1995, respectively, and $188,884 and
$475,066 for the three months ended March 31, 1995 and 1996, respectively.
RECAPITALIZATION
Immediately prior to or upon the effective date of the Company's initial
public offering ("Offering") contemplated by this Prospectus, the Company
will effect a nine-for-one stock split in the form of a stock dividend,
reclassify its Class A common stock and Class B common stock as common stock,
authorize 5,000,000 shares of undesignated preferred stock and increase its
authorized common stock to 40,000,000 shares. All references in the
accompanying financial statements to the number of common shares and
per-share amounts have been retroactively restated to reflect the stock
split.
F-8
<PAGE>
ICT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Information as of March 31, 1996 and for the three months
ended March 31, 1995 and 1996 is unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: - (Continued)
MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK
The Company is dependent on several large customers for a significant
portion of its net revenues. In 1993, 1994 and 1995, one customer accounted
for approximately 43%, 41% and 43% of net revenues, respectively. In 1993 and
1994, a different customer accounted for approximately 13% and 11% of net
revenues, respectively. In 1993, 1994 and 1995, net revenues from customers
within the insurance industry accounted for 58.5%, 58.1% and 46.2% of total
net revenues, respectively, and customers within the financial services
industry accounted for 18.5%, 14.1% and 22.3% of total net revenues,
respectively. The loss of one or more of the Company's major customers or a
downturn in the insurance or financial services industries could have a
material adverse effect on the Company's business.
Concentration of credit risk is limited to trade receivables and is
subject to the financial condition of certain major customers. The Company
does not require collateral from its customers.
NEW ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board has issued SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company is required to adopt
this standard for the year ending December 31, 1996. The Company has elected
to adopt the disclosure requirement of this pronouncement. The adoption of
this pronouncement will have no impact on the Company's financial position or
results of operations.
3. PRO FORMA INFORMATION (UNAUDITED):
PRO FORMA BALANCE SHEET
The pro forma balance sheet of the Company as of March 31, 1996 reflects
(1) the net deferred income tax liability which will be recorded by the
Company as a result of the termination of its S Corporation status shortly
before the effective date of the Offering (estimated at $1,186,000 as of
March 31, 1996) and (2) a distribution payable to the shareholders of the
Company of all taxed but undistributed S Corporation earnings (estimated at
$2,450,000 as of March 31, 1996). The deferred income tax liability will
represent the tax effect of the cumulative differences between the financial
reporting and income tax bases of certain assets and liabilities as of the
termination of S Corporation status, and will be recorded as additional
income tax expense in the quarter in which the Offering is completed. The
actual deferred income tax liability recorded will be adjusted to reflect the
effect of operations of the Company for the period from April 1, 1996 through
the termination of its S Corporation status. The actual amount distributed
will also be adjusted to reflect the taxable income during that period, and
any distributions made to the shareholders during that time period.
The significant items comprising the Company's pro forma net deferred
income tax liability as of March 31, 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Current deferred income tax liabilities:
Accruals and reserves not currently deductible for
tax ........................................... $ 169,000
Cash basis of accounting ........................ (313,000)
-------------
(144,000)
-------------
Non-current deferred income tax liabilities:
Depreciation methods ............................ (100,000)
Cash basis of accounting ........................ (942,000)
-------------
(1,042,000)
-------------
Net deferred income tax liability .......... $(1,186,000)
=============
</TABLE>
F-9
<PAGE>
ICT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Information as of March 31, 1996 and for the three months
ended March 31, 1995 and 1996 is unaudited)
3. PRO FORMA INFORMATION (UNAUDITED): - (Continued)
PRO FORMA INCOME STATEMENT
Shortly before the effective date of the Offering, the Company will
terminate its status as an S Corporation and will be subject to federal and
state income taxes thereafter. Accordingly, for informational purposes, the
accompanying statements of income for the year ended December 31, 1995 and
the three months ended March 31, 1996 include an unaudited pro forma
adjustment for the income taxes which would have been recorded if the Company
had not been an S Corporation, based on the tax laws in effect during the
respective periods.
The differences between the federal statutory income tax rate and the pro
forma income tax rate for the year ended December 31, 1995 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Federal statutory tax rate ................ 34.0%
State income taxes, net of federal benefit . 6.4
Expenses not deductibe for tax purposes ... 2.1
-------
42.5%
=======
</TABLE>
PRO FORMA NET INCOME PER SHARE
Pro forma net income per share was calculated by dividing pro forma net
income by the weighted average number of shares of common stock outstanding
for the respective periods, adjusted for the dilutive effect of common stock
equivalents, which consist of stock options, using the treasury stock method.
Pursuant to the requirements of the Securities and Exchange Commission,
common stock equivalents issued by the Company during the 12 months
immediately preceding the Offering have been included in the calculation of
the shares used in computing pro forma net income per share as if they were
outstanding for all periods presented (using the treasury stock method and an
estimated Offering price of $13.00 per share).
SUPPLEMENTAL PRO FORMA NET INCOME PER SHARE
Supplemental pro forma net income per share is based on the weighted
average number of shares of common stock and common stock equivalents used in
the calculation of pro forma net income per share plus the number of shares
that would be required to be sold to fund the distribution to the
shareholders of the Company of previously taxed but undistributed earnings
(estimated at $2,450,000 as of March 31, 1996) and to repay the borrowing's
on the lines of credit, the term debt due to the bank, capitalized lease
obligations and the subordinated notes due to related parties ($11,016,429 in
the aggregate as of March 31, 1996). Pro forma net income is increased by
$496,673 and $139,043 for the year ended December 31, 1995 and the three
months ended March 31, 1996, respectively, for the elimination of interest
expense, net of tax, on the line of credit and term debt.
4. EUROTEL:
In July 1994, the Company entered into an agreement with a subsidiary of
R.R. Donnelley & Sons Company ("Donnelley") to form Eurotel, which provides
telephone marketing and information services in Europe. The Company invested
$106,619 for a 60% ownership interest. Eurotel had net revenues of $244,456
and $1,885,028 and net income of $43,268 and $2,342 in 1994 and 1995,
respectively. The minority interest in the earnings of Eurotel of $17,307 in
1994 and $937 in 1995 are included in selling, general and administrative
expenses on the accompanying statements of operations. As a result of billing
arrangements for certain customers, the Company has either a receivable due
from or a payable due to Donnelley.
F-10
<PAGE>
ICT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Information as of March 31, 1996 and for the three months
ended March 31, 1995 and 1996 is unaudited)
4. EUROTEL: - (Continued)
Eurotel is reimbursed by the Irish Industrial Development Authority
("IDA") for certain capital expenditures and operating expenses. The Company
records a grant receivable for qualified expenditures made, but not yet
reimbursed. Grants for employment, training costs and rent are recorded as a
reduction in the corresponding expense and grants for capital expenditures
are recorded as a reduction in the carrying amount of the related property
and equipment. For the years ended December 31, 1994 and 1995 and the three
months ended March 31, 1995 and 1996, the Company recorded $145,170,
$260,013, $81,614 and $57,530, respectively, as expense reductions. The
Company is required to maintain certain employment levels specified under the
grants. If the Company fails to maintain these levels, a portion of the grant
would be payable to the IDA for that portion of the employment targets not
maintained.
In January 1996, the Company entered into a memorandum of understanding
for the purchase of Donnelley's 40% interest in Eurotel. The purchase price
will be equal to the book value of Donnelley's minority interest at closing,
which was $102,227 as of March 31, 1996.
5. ACQUISITIONS:
In the first quarter of 1994, the Company acquired substantially all the
fixed assets and customer lists of two telemarketing operations. Total
consideration paid in connection with these acquisitions was $486,168,
including transaction costs. Each of the acquisitions was accounted for using
the purchase method of accounting. The excess of the purchase price over the
fair value of the assets acquired (goodwill) was approximately $131,000.
On May 1, 1995, the Company acquired the fixed assets and assumed certain
liabilities of the Smartline division of Nationar for $638,207, including
transaction costs. The acquisition was accounted for using the purchase
method of accounting. The total purchase price exceeded the fair value of the
net assets acquired by $750,228, which has been recorded as goodwill. At
December 31, 1995, accrued expenses included $169,720 of the purchase price
which was paid in January 1996. If the acquisition of the Smartline division
had occurred as of January 1, 1994, the Company's net revenues in 1994 and
1995 would have been approximately $40,866,000 and $54,375,000, respectively,
and the effect on pro forma net income and pro forma net income per share
would have been immaterial.
6. DEBT:
<TABLE>
<CAPTION>
December 31,
---------------------------
1994 1995
----------- ------------
<S> <C> <C>
Term loan due to bank, interest at prime plus 0.5%, principal payments
of $25,000 per month through September 1998 ......................... $ -- $ 825,000
Term loan due to bank, interest at prime plus 0.5%, principal payments
of $33,750 per month through July 1997 .............................. 1,046,250 641,250
----------- ------------
1,046,250 1,466,250
Less- Current portion ................................................. (405,000) (705,000)
----------- ------------
$ 641,250 $ 761,250
=========== ============
Future maturities of long-term debt are as follows at December 31, 1995:
1996 ................................................................. $ 705,000
1997 ................................................................. 536,250
1998 ................................................................. 225,000
------------
$1,466,250
============
</TABLE>
F-11
<PAGE>
ICT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Information as of March 31, 1996 and for the three months
ended March 31, 1995 and 1996 is unaudited)
6. DEBT: - (Continued)
As of December 31, 1995, the Company was a party to loan agreements (the
"Agreements") with a bank which provided for a line of credit and two term
loans.
The line bears interest at the bank's prime rate plus 0.5% (9.0% at
December 31, 1995) and expires on June 30, 1996. The Company incurred
interest expense of $161,624, $267,314 and $472,632 at average interest rates
of 7.0%, 8.0% and 9.3% for the years ended December 31, 1993, 1994 and 1995,
respectively. The highest outstanding borrowing during 1995 was $7,256,188.
At December 31, 1994 and 1995, the Company had borrowed $3,354,157 and
$5,581,188 under the line of credit, respectively. Borrowings under the line
of credit are limited to 80% of eligible accounts receivable, as defined, and
at December 31, 1995, there was 815,000 available under the line.
The term loans and the line of credit are cross-collateralized and
cross-defaulted. The Company may, at any time, fix the interest rate on the
term loans at the bank's current fixed rate. If the fixed rate option is
selected, any principal prepayments could be subject to penalties, as
defined.
Borrowings under the Agreements are secured by substantially all of the
Company's assets and the outstanding common stock of the Company. In
addition, the borrowings have been guaranteed by the shareholders. Under the
more restrictive covenants of the Agreement, the Company is required to
maintain certain financial ratios and a specified level of net worth, as
defined, and payments of dividends, repurchases of stock, and repayments of
the subordinated notes are limited (see Note 8).
In April 1996, the Company entered into an Amended and Restated Loan
Agreement with its bank, which provides for a $15.0 million line of credit, a
$3.5 million equipment line of credit and a $1.5 million short-term loan.
Borrowings on the line of credit are limited to 80% of eligible accounts
receivable, as defined. The line bears interest at the bank's base rate, as
defined, and expires on June 30, 1997. The equipment line of credit is to be
used to finance 90% of the cost of equipment purchases. Individual borrowings
must be at least $200,000 and, once drawn, become, at the option of the bank,
three- to five-year term loans due in equal monthly installments. Borrowings
under the equipment line bear interest at either the bank's base rate or a
fixed rate set at the U.S. Treasuries Reference Rate plus 2.75%, at the
option of the Company. If the fixed rate option is selected, any principal
prepayments could be subject to penalties, as defined. The $1.5 million loan
bears interest at the bank's base rate and is due on November 30, 1996. The
proceeds from the loan were advanced by the Company to its shareholders in
April 1996, in order to allow the shareholders to pay their 1995 and
estimated 1996 income tax liabilities on the Company's taxable income.
In 1994, Eurotel entered into loan agreements with a local bank that
provided for a term loan of IRpounds sterling 325,000 and a line of credit of
IRpounds sterling 200,000, both of which expired in September 1995. At
December 31, 1994, Eurotel had no borrowings on the term loan and had
borrowed approximately $237,000 on the line of credit. Interest on the line
of credit is based upon the bank's prime rate. In December 1995, Eurotel
entered into a new line of credit for IRpounds sterling 525,000. The Company
had borrowed $619,964 as of December 31, 1995 on the line. Bank borrowings
are guaranteed by the shareholders of Eurotel based upon their respective
ownership interests.
F-12
<PAGE>
ICT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Information as of March 31, 1996 and for the three months
ended March 31, 1995 and 1996 is unaudited)
7. CAPITALIZED LEASE OBLIGATIONS:
The Company leases certain equipment under capitalized leases. The
Company's weighted average interest rate was 10.0% for the year ended
December 31, 1995. Future minimum lease payments as of December 31, 1995 are
as follows:
1996 ................................... $ 962,420
1997 .................................... 748,485
1998 .................................... 505,607
1999 .................................... 427,816
2000 .................................... 240,370
------------
Total minimum lease payments ............ 2,884,698
Less- Amount representing interest ...... (504,709)
------------
Present value of minimum lease payments .. 2,379,989
Less- Current portion ................... (748,366)
------------
$1,631,623
============
8. SUBORDINATED NOTES:
Two notes totaling $300,000 at December 31, 1995 are due to a shareholder
of the Company and a partnership in which the Company's two major
shareholders are partners. The notes bear interest at 12%. All repayments are
subject to bank approval (see Note 6). At December 31, 1995, the Company has
both the ability and the intent of repaying $180,000 of the notes and,
therefore, that amount has been classified as a current liability.
9. PROFIT SHARING PLAN:
The Company maintains a trusteed profit sharing plan (Section 401(k) for
all qualified employees, as defined. The Company matches six percent of the
employee's contribution, however, it may also make additional contributions
to the plan based upon profit levels and other factors. No such additional
contributions were made in 1993, 1994 or 1995. Employees are fully vested in
their contributions, while full vesting for the Company's contributions
occurs upon death, disability, retirement or completion of five years of
service. In 1993, 1994 and 1995, the Company's contribution was $71,996,
$125,966 and $174,585, respectively. The plan's trustees are the management
of the Company.
10. EQUITY PLANS:
The Company has a stock option plan and an equity incentive plan which
provide for the granting of options and the award of units to purchase Common
Stock. As of March 31, 1996, 1,800,000 shares of common stock were reserved
for issuance under these plans, of which 679,950 shares were available for
future grants.
STOCK OPTION PLAN
The Company has a stock option plan that reserves up to 1,800,000 shares
of Common Stock for issuance in connection with the exercise of incentive and
nonqualified stock options. The options to be granted and the option prices
are established by the Board of Directors or a committee composed of two or
more of its members. All stock options are granted at prices not less than
fair market value as determined by the Board or the committee, and are based
on independent third party appraisals. Incentive and nonqualified stock
options are exercisable for periods not to exceed ten years and ten years and
six months, respectively, from the date of grant.
F-13
<PAGE>
ICT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Information as of March 31, 1996 and for the three months
ended March 31, 1995 and 1996 is unaudited)
10. EQUITY PLANS: - (Continued)
In April 1987, the Company issued outside the plan an option to purchase
90,000 shares at an exercise price of $.04 per share. This option vests upon
a change in control of the Company, as defined, or upon an initial public
offering of the Company's Common Stock. Upon the closing of the Offering
contemplated herein, the option will vest, resulting in compensation expense
of approximately $1,166,000 (based on an estimated offering price of $13.00
per share).
Information with respect to all outstanding options is as follows:
<TABLE>
<CAPTION>
Options Outstanding
--------------------------------------------
Aggregate Price
Shares Price Per Share
----------- ----------- ---------------
<S> <C> <C> <C>
Outstanding, December 31, 1992, 1993 and 1994 . 855,000 $ 38,140 $ .04 - $.06
Granted (January 1995) ..................... 146,250 149,013 $1.02
----------- ----------- ---------------
Outstanding, December 31, 1995 ............... 1,001,250 187,153 $ .04 - $1.02
Granted (January 1996) ..................... 49,500 77,935 $1.57
----------- ----------- ---------------
Outstanding, March 31, 1996 .................. 1,050,750 $265,088 $ .04 - $1.57
=========== =========== ===============
</TABLE>
At March 31, 1996, there were outstanding presently exercisable options to
purchase an aggregate of 833,400 shares at exercise prices ranging from $.04
- - $1.57 per share, with an aggregate exercise price of $109,602.
In January 1996, the Company issued options to employees and recorded
deferred compensation for the difference between the deemed value per share
for accounting purposes and the exercise price per share. The deferred
compensation will be amortized over the four-year vesting period.
EQUITY INCENTIVE PLAN
In December 1995, the Company adopted an Equity Incentive Plan which
provides for the issuance of up to 270,000 Equity Incentive Units ("Units").
Upon vesting, each Unit allows the holder the right to purchase one share of
Common Stock at a specified price. Units vest only upon a change in control
of the Company, as defined, or upon an initial public offering of the
Company's Common Stock. Units are exercisable for a period not to exceed ten
years from the date of grant. In December 1995, the Company awarded 159,300
Units with a purchase price of $1.02 per Unit. Upon the closing of the
Offering contemplated herein, the Units will vest, resulting in compensation
expense of approximately $1,909,000 (based on an estimated offering price of
$13.00 per share).
EXTENSION OF OPTION TERMS; EXPECTED COMPENSATION EXPENSE
In connection with the Offering, the Company will extend the exercise
period for options to purchase an aggregate of 555,750 shares to 2001 and
2002, resulting in compensation expense of approximately $7,200,000 (based on
an estimated offering price of $13.00 per share). In addition, as described
above, the Units and the option to purchase 90,000 shares will vest upon the
closing of this Offering. These transactions in the aggregate will result in
approximately $10,275,000 of compensation expense which will be recorded in
the quarter in which the Offering is completed. To the extent the offering
price is higher or lower than $13.00 per share, the amount of compensation
expense will be adjusted.
F-14
<PAGE>
ICT GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Information as of March 31, 1996 and for the three months
ended March 31, 1995 and 1996 is unaudited)
11. COMMITMENTS AND CONTINGENCIES:
The Company leases facilities and certain equipment under operating leases.
Rent expense was $1,229,000 in 1993, $1,744,872 in 1994, and $2,529,856 in
1995. Future minimum rentals for all operating leases are as follows:
1996 .............................................. $2,173,773
1997 .............................................. 1,648,535
1998 .............................................. 1,269,675
1999 .............................................. 1,134,668
2000 .............................................. 783,160
The Company enters into agreements with its telephone long distance
carriers ranging from one to three years, which provide for, among other
things, annual minimum purchases and termination penalties. The annual
minimum purchases under such agreements total $3,450,000 in the aggregate.
From time to time, the Company is involved in certain legal actions
arising in the ordinary course of business. In the Company's opinion, the
outcome of such actions will not have a material adverse effect on the
Company's financial position, results of operations or liquidity.
The Company has renewable employment agreements with six key executives
with terms ranging from one to three years. The agreements provide for, among
other things, severance payments ranging from six months to three years.
F-15
<PAGE>
LOGO
ICT Group
<PAGE>
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table shows all expenses of the issuance and distribution of
the securities offered hereby, other than underwriting discounts and
commissions:*
Securities and Exchange Commission filing fee ........ $ 12,849
National Association of Securities Dealers, Inc. filing
fee ................................................ 4,226
Nasdaq listing fee ................................... 46,750
Transfer agent's and registrar's fees ................ 5,000
Printing expenses .................................... 125,000
Legal fees ........................................... 200,000
Accounting fees and expenses ......................... 230,000
Blue sky filing fees and expenses (including counsel
fees) .............................................. 15,000
Miscellaneous expenses ............................... 111,175
---------
Total .............................................. $750,000
=========
- ------
*The Securities and Exchange Commission filing fee, National Association of
Securities Dealers, Inc. filing fee and Nasdaq listing fee are exact. All
other amounts are estimates. All of the above expenses will be paid by the
Company.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Underwriting Agreement, filed as Exhibit 1 hereto, provides that each
of the Underwriters will indemnify the directors and officers of the Company
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended (the "Act").
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Not applicable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
1 Form of Underwriting Agreement.
3.1 Form of Articles of Incorporation.
3.2 Bylaws.
5* Opinion of Morgan, Lewis & Bockius LLP regarding legality of securities being registered.
10.1** ICT Group, Inc. 1987 Stock Option Plan, as amended.
10.2+ ICT Group, Inc. Equity Incentive Plan.
10.3 ICT Group, Inc. 1996 Equity Compensation Plan.
10.4 ICT Group, Inc. 1996 Non-Employee Directors Plan.
10.5 Employment Agreement between John J. Brennan and the Company, dated May 8, 1996.
10.6 Employment Agreement between Carl E. Smith and the Company, dated October 3, 1994, as amended.
10.7+ Employment Agreement between John L. Magee and the Company, dated April 1, 1987.
10.8+ Employment Agreement between John D. Campbell and the Company, dated October 1, 1987.
10.9+ Employment Agreement between Maurice J. Kerins and the Company, dated April 1, 1987.
10.10+ Employment Agreement between Robert F. Small and the Company, dated April 1, 1987.
II-1
<PAGE>
10.11+ Voting Trust Agreement among John J. Brennan, Donald P. Brennan and the Company, dated February
2, 1996.
10.12+ Shareholders Agreement among John J. Brennan, Donald P. Brennan and the Company, dated February
2, 1996.
10.13+ Form of Voting Agreement between the Company and certain option holders.
10.14+ Amended and Restated Loan Agreement between the Company and First Valley Bank, dated April 11, 1996.
10.15+ 12% Promissory Note issued to Donald P. Brennan, dated March 31, 1987.
10.16+ 12% Promissory Note issued Passage East Partnership, dated April 9, 1987.
10.17 Amendment No. 1 to Voting Trust Agreement among John J. Brennan, Donald P. Brennan and the Company,
dated May 9, 1996.
11.1+ Net Income Per Share Calculation.
23.1 Consent of Arthur Andersen LLP.
23.2* Consent of Morgan, Lewis & Bockius LLP (included in its opinion filed as Exhibit 5 hereto).
23.3 Consent of Bernard Somers
24+ Powers of Attorney (included as part of the signature page hereof).
</TABLE>
- ------
* To be filed by amendment
+ Previously filed
** Portion of exhibit filed herewith
(b) Financial Statement Schedules:
Schedule II -- Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS.
A. The undersigned Company hereby undertakes to provide to the Underwriter
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
B. Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the company
pursuant to its Articles of Incorporation, its Bylaws, the Underwriting
Agreement, or otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Company will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
C. The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and this offering as such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 2 to Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Langhorne,
Pennsylvania, on June 3, 1996.
ICT Group, Inc
By: /s/ Carl E. Smith
---------------------------------
Carl E. Smith
Senior Vice President,
Finance and Administration,
Chief Financial Officer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
---------------------- ---------------------------------------- ----------------
<S> <C> <C>
John J. Brennan*
- ----------------------- Chairman, President
John J. Brennan Chief Executive Officer and Director
(principal executive officer)
Donald P. Brennan*
- ----------------------- Director
Donald P. Brennan
/s/ Carl E. Smith
- ----------------------- Senior Vice President, Finance June 3, 1996
Carl E. Smith and Administration, Chief
Financial Officer (principal
financial and accounting officer)
and Secretary
*By: /s/ Carl E. Smith
--------------------- June 3, 1996
Attorney-in-fact
</TABLE>
II-3
<PAGE>
After the common stock split and the change in the authorized number of
common shares are effected, as described in Note 2 to the Consolidated
Financial Statements, we will render the following report.
ARTHUR ANDERSEN LLP
April 26, 1996
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To ICT Group, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of ICT Group, Inc. and Subsidiary
included in this Registration Statement and have issued our report thereon
dated ------ ------ , 1996. Our audit was made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The schedule
listed in Item 15(b) of the Registration Statement is presented for purposes
of complying with the Securities and Exchange Commission's rules and is not
part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
Philadelphia, Pa.,
S-1
<PAGE>
ICT GROUP, INC. AND SUBSIDIARY
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Balance
Beginning of Charged to Balance,
Description Year Expense Deductions End of Year
--------------------------------- -------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
Allowances for doubtful accounts:
1993 ....................... $361,776 $395,865 $(296,430) $461,211
1994 ....................... 461,211 336,621 (197,141) 600,691
1995 ....................... 600,691 547,166 (936,084)(a) 211,773
</TABLE>
- ------
(a) Includes $554,051 of write-offs related to a service no longer offered by
the Company.
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page No.
- ------ ------------ ---------
<S> <C> <C>
1 Form of Underwriting Agreement.
3.1 Form of Articles of Incorporation.
3.2 Bylaws.
5* Opinion of Morgan, Lewis & Bockius LLP regarding legality of securities being registered.
10.1** ICT Group, Inc. 1987 Stock Option Plan.
10.2+ ICT Group, Inc. Equity Incentive Plan.
10.3 ICT Group, Inc. 1996 Equity Compensation Plan.
10.4 ICT Group, Inc. 1996 Non-Employee Directors Plan.
10.5 Employment Agreement between John J. Brennan and the Company, dated
May 8, 1996.
10.6 Employment Agreement between Carl E. Smith and the Company, dated October 3, 1994,
as amended.
10.7+ Employment Agreement between John L. Magee and the Company, dated April 1, 1987.
10.8+ Employment Agreement between John D. Campbell and the Company, dated October 1, 1987.
10.9+ Employment Agreement between Maurice J. Kerins and the Company, dated April 1, 1987.
10.10+ Employment Agreement between Robert F. Small and the Company, dated April 1, 1987.
10.11+ Voting Trust Agreement among John J. Brennan, Donald P. Brennan and the Company, dated
February 2, 1996.
10.12+ Shareholders Agreement among John J. Brennan, Donald P. Brennan and the Company, dated
February 2, 1996.
10.13+ Form of Voting Agreement between the Company and certain option holders.
10.14+ Amended and Restated Loan Agreement between the Company and First Valley Bank, dated
April 11, 1996.
10.15+ 12% Promissory Note issued to Donald P. Brennan, dated March 31, 1987.
10.16+ 12% Promissory Note issued Passage East Partnership, dated April 9, 1987.
10.17 Amendment No. 1 to Voting Trust Agreement among John J. Brennan, Donald P. Brennan
and the Company, dated May 9, 1996.
11.1+ Net Income Per Share Calculation.
23.1 Consent of Arthur Andersen LLP.
23.2* Consent of Morgan, Lewis & Bockius LLP (included in its opinion filed as Exhibit 5
hereto).
23.3 Consent of Bernard Somers
24+ Powers of Attorney (included as part of the signature page hereof).
</TABLE>
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* To be filed by amendment
+ Previously filed
** Portion of exhibit filed herewith
<PAGE>
2,500,000 Shares1
ICT GROUP, INC.
Common Stock
UNDERWRITING AGREEMENT
____________, 1996
ROBERTSON, STEPHENS & COMPANY LLC
SMITH BARNEY INC.
As Representatives of the several Underwriters
c/o Robertson, Stephens & Company LLC
555 California Street
Suite 2600
San Francisco, California 94104
Ladies/Gentlemen:
ICT Group, Inc., a Pennsylvania corporation (the "Company"), and
certain shareholders of the Company named in Schedule B hereto (hereafter called
the "Selling Shareholders") address you as the Representatives of each of the
persons, firms and corporations listed in Schedule A hereto (herein collectively
called the "Underwriters") and hereby confirm their respective agreements with
the several Underwriters as follows:
1. Description of Shares. The Company proposes to issue and sell
2,411,552 shares of its authorized and unissued Common Stock, par value $0.01,
to the several Underwriters. The Selling Shareholders, acting severally and not
jointly, propose to sell an aggregate of 88,448 shares of the Company's
authorized and outstanding Common Stock, par value $0.01, to the several
Underwriters. The 2,411,552 shares of Common Stock, par value $0.01, of the
Company to be sold by the Company are hereinafter called the "Company Shares"
and the 88,448 shares of Common Stock, par value $0.01, to be sold by the
Selling Shareholders are hereinafter called the "Selling Shareholder Shares."
The Company Shares and the Selling Shareholder Shares are hereinafter
collectively referred to as the "Firm Shares." Certain Selling Shareholders also
propose to grant, severally and not jointly, to the Underwriters an option to
purchase up to 375,000 additional shares of the Company's Common Stock, par
value $0.01, (the "Option Shares"), as provided in Section 7 hereof. As used in
this Agreement, the term "Shares" shall include the Firm Shares and the Option
Shares. All shares of Common Stock, par value $0.01, of the Company to be
outstanding after giving effect to the sales contemplated hereby, including the
Shares, are hereinafter referred to as "Common Stock."
2. Representations, Warranties and Agreements of the Company and the
Selling Shareholders.
(a) The Company represents and warrants to and agrees with
each Underwriter and each Selling Shareholder that:
(i) A registration statement on Form S-1 (File No.
333-4150) with respect to the Shares, including a prospectus subject to
completion, has been prepared by the Company in conformity with the
- --------
1 Plus an option to purchase up to 375,000 additional shares from
certain shareholders of the Company to cover over-allotments.
1.
<PAGE>
requirements of the Securities Act of 1933, as amended (the "Act"), and the
applicable rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under the Act and has
been filed with the Commission; such amendments to such registration
statement, such amended prospectuses subject to completion and such
abbreviated registration statements pursuant to Rule 462(b) of the Rules and
Regulations as may have been required prior to the date hereof have been
similarly prepared and filed with the Commission; and the Company will file
such additional amendments to such registration statement, such amended
prospectuses subject to completion and such abbreviated registration
statements as may hereafter be required. Copies of such registration statement
and amendments, of each related prospectus subject to completion (the
"Preliminary Prospectuses") and of any abbreviated registration statement
pursuant to Rule 462(b) of the Rules and Regulations have been delivered to
you.
If the registration statement relating to the Shares has been declared
effective under the Act by the Commission, the Company will prepare and promptly
file with the Commission the information omitted from the registration statement
pursuant to Rule 430A(a) or, if Robertson, Stephens & Company LLC, on behalf of
the several Underwriters, shall agree to the utilization of Rule 434 of the
Rules and Regulations, the information required to be included in any term sheet
filed pursuant to Rule 434(b) or (c), as applicable, of the Rules and
Regulations pursuant to subparagraph (1), (4) or (7) of Rule 424(b) of the Rules
and Regulations or as part of a post-effective amendment to the registration
statement (including a final form of prospectus). If the registration statement
relating to the Shares has not been declared effective under the Act by the
Commission, the Company will prepare and promptly file an amendment to the
registration statement, including a final form of prospectus, or, if Robertson,
Stephens & Company LLC, on behalf of the several Underwriters, shall agree to
the utilization of Rule 434 of the Rules and Regulations, the information
required to be included in any term sheet filed pursuant to Rule 434(b) or (c),
as applicable, of the Rules and Regulations. The term "Registration Statement"
as used in this Agreement shall mean such registration statement, including
financial statements, schedules and exhibits, in the form in which it became or
becomes, as the case may be, effective (including, if the Company omitted
information from the registration statement pursuant to Rule 430A(a) or files a
term sheet pursuant to Rule 434 of the Rules and Regulations, the information
deemed to be a part of the registration statement at the time it became
effective pursuant to Rule 430A(b) or Rule 434(d) of the Rules and Regulations)
and, in the event of any amendment thereto or the filing of any abbreviated
registration statement pursuant to Rule 462(b) of the Rules and Regulations
relating thereto after the effective date of such registration statement, shall
also mean (from and after the effectiveness of such amendment or the filing of
such abbreviated registration statement) such registration statement as so
amended, together with any such abbreviated registration statement. The term
"Prospectus" as used in this Agreement shall mean the prospectus relating to the
Shares as included in such Registration Statement at the time it becomes
effective (including, if the Company omitted information from the Registration
Statement pursuant to Rule 430A(a) of the Rules and Regulations, the information
deemed to be a part of the Registration Statement at the time it became
effective pursuant to Rule 430A(b) of the Rules and Regulations); provided,
however, that if in reliance on Rule 434 of the Rules and Regulations and with
the consent of Robertson, Stephens & Company LLC, on behalf of the several
Underwriters, the Company shall have provided to the Underwriters a term sheet
pursuant to Rule 434(b) or (c), as applicable, prior to the time that a
confirmation is sent or given for purposes of Section 2(10)(a) of the Act, the
term "Prospectus" shall mean the "prospectus subject to completion" (as defined
in Rule 434(g) of the Rules and Regulations) last provided to the Underwriters
by the Company and circulated by the Underwriters to all prospective purchasers
of the Shares (including the information deemed to be a part of the Registration
Statement at the time it became effective pursuant to Rule 434(d) of the Rules
and Regulations). Notwithstanding the foregoing, if any revised prospectus shall
be provided to the Underwriters by the Company for use in connection with the
offering of the Shares that differs from the prospectus referred to in the
immediately preceding sentence (whether or not such revised prospectus is
required to be filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations), the term "Prospectus" shall refer to such revised prospectus
from and after the time it is first provided to the Underwriters for such use.
If in reliance on Rule 434 of the Rules and Regulations and with the consent of
Robertson, Stephens & Company LLC, on behalf of the several Underwriters, the
Company shall have provided to the Underwriters a term sheet pursuant to Rule
434(b) or (c), as applicable, prior to the time that a confirmation is sent or
given for purposes of Section 2(10)(a) of the Act, the Prospectus and the term
sheet, together, will not be materially different from the prospectus in the
Registration Statement.
2.
<PAGE>
(ii) The Commission has not issued any order preventing
or suspending the use of any Preliminary Prospectus or instituted proceedings
for that purpose, and each such Preliminary Prospectus has conformed in all
material respects to the requirements of the Act and the Rules and Regulations
and, as of its date, has not included any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; and
at the time the Registration Statement became or becomes, as the case may be,
effective and at all times subsequent thereto up to and on the Closing Date
(hereinafter defined) and on any later date on which Option Shares are to be
purchased, (i) the Registration Statement and the Prospectus, and any amendments
or supplements thereto, contained and will contain all material information
required to be included therein by the Act and the Rules and Regulations and
will in all material respects conform to the requirements of the Act and the
Rules and Regulations, (ii) the Registration Statement, and any amendments or
supplements thereto, did not and will not include any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (iii) the
Prospectus, and any amendments or supplements thereto, did not and will not
include any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that none of the
representations and warranties contained in this subparagraph (b) shall apply to
information contained in or omitted from the Registration Statement or
Prospectus, or any amendment or supplement thereto, in reliance upon, and in
conformity with, written information relating to any Underwriter furnished to
the Company by such Underwriter specifically for use in the preparation thereof.
(iii) Each of the Company and its subsidiaries has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation with full power and
authority (corporate and other) to own, lease and operate its properties and
conduct its business as described in the Prospectus; the Company owns all of the
outstanding capital stock of its subsidiaries free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest; each of the
Company and its subsidiaries is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the ownership
or leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified or be in good
standing would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise; no proceeding has been
instituted in any such jurisdiction, revoking, limiting or curtailing, or
seeking to revoke, limit or curtail, such power and authority or qualification;
each of the Company and its subsidiaries is in possession of and operating in
compliance with all authorizations, licenses, certificates, consents, orders and
permits from state, federal and other regulatory authorities which are material
to the conduct of its business, all of which are valid and in full force and
effect; neither the Company nor any of its subsidiaries is in violation of its
respective charter or bylaws or in default in the performance or observance of
any material obligation, agreement, covenant or condition contained in any
material bond, debenture, note or other evidence of indebtedness, or in any
material lease, contract, indenture, mortgage, deed of trust, loan agreement,
joint venture or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which it or any of its subsidiaries or their
respective properties may be bound; and neither the Company nor any of its
subsidiaries is in material violation of any law, order, rule, regulation, writ,
injunction, judgment or decree of any court, government or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or over their respective properties of which it has knowledge. The
Company does not own or control, directly or indirectly, any corporation,
association or other entity other than Eurotel Marketing Limited and ICT/Canada
Marketing, Inc. (each, a "Subsidiary" and collectively, the "Subsidiaries").
(iv) The Company has full legal right, power and
authority to enter into this Agreement and perform the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by the
Company and is a valid and binding agreement on the part of the Company,
enforceable in accordance with its terms, except as rights to indemnification
hereunder may be limited by applicable law and except as the enforcement hereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting creditors' rights generally or by
general equitable principles; the performance of this Agreement and the
consummation of the transactions herein contemplated will not result in a
material breach or violation of any of the terms and provisions of, or
constitute a default under, (i) any bond, debenture, note or
3.
<PAGE>
other evidence of indebtedness, or under any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which it or any of its subsidiaries or their respective properties may be
bound, (ii) the charter or bylaws of the Company or any of its subsidiaries or
(iii) any law, order, rule, regulation, writ, injunction, judgment or decree
of any court, government or governmental agency or body, domestic or foreign,
having jurisdiction over the Company or any of its subsidiaries or over their
respective properties. No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or over their respective properties is required for the execution
and delivery of this Agreement and the consummation by the Company or any of
its subsidiaries of the transactions herein contemplated, except such as may
be required under the Act or under state or other securities or Blue Sky laws,
all of which requirements have been satisfied in all material respects.
(v) There is not any pending or, to the best of the
Company's knowledge, threatened action, suit, claim or proceeding against the
Company, any of its subsidiaries or any of their respective officers or any of
their respective properties, assets or rights before any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or over their respective officers or
properties or otherwise which (i) might result in any material adverse change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise or might materially and adversely affect their properties, assets or
rights, (ii) might prevent consummation of the transactions contemplated hereby
or (iii) is required to be disclosed in the Registration Statement or Prospectus
and is not so disclosed; and there are no agreements, contracts, leases or
documents of the Company or any of its subsidiaries of a character required to
be described or referred to in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement by the Act or the Rules and
Regulations which have not been accurately described in all material respects in
the Registration Statement or Prospectus or filed as exhibits to the
Registration Statement.
(vi) All outstanding shares of capital stock of the
Company (including the Selling Shareholder Shares) have been duly authorized and
validly issued and are fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, were not issued in
violation of or subject to any preemptive rights or other rights to subscribe
for or purchase securities, and the authorized and outstanding capital stock of
the Company is as set forth in the Prospectus under the caption "Capitalization"
and conforms in all material respects to the statements relating thereto
contained in the Registration Statement and the Prospectus (and such statements
correctly state the substance of the instruments defining the capitalization of
the Company); the Company Shares have been duly authorized for issuance and sale
to the Underwriters pursuant to this Agreement and, when issued and delivered by
the Company against payment therefor in accordance with the terms of this
Agreement, will be duly and validly issued and fully paid and nonassessable, and
will be sold free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest; and no preemptive right, co-sale right,
registration right, right of first refusal or other similar right of
shareholders exists with respect to any of the Company Shares or the issuance
and sale thereof other than those that have been expressly waived prior to the
date hereof and those that will automatically expire upon and will not apply to
the consummation of the transactions contemplated on the Closing Date. No
further approval or authorization of any shareholder, the Board of Directors of
the Company or others is required for the issuance and sale or transfer of the
Shares except as may be required under the Act, or under state or other
securities or Blue Sky laws. All issued and outstanding shares of capital stock
of each subsidiary of the Company have been duly authorized and validly issued
and are fully paid and nonassessable, and were not issued in violation of or
subject to any preemptive right, or other rights to subscribe for or purchase
shares and are owned by the Company free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest. Except as disclosed in the
Prospectus and the financial statements of the Company, and the related notes
thereto, included in the Prospectus, neither the Company nor any subsidiary has
outstanding any options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations. The description
of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
4.
<PAGE>
set forth in the Prospectus accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights.
(vii) Arthur Andersen LLP, which has examined the
consolidated financial statements of the Company, together with the related
schedules and notes, as of December 31, 1995 and 1994 and for each ofthe years
in the three (3) years ended December 31, 1995 filed with the Commission as a
part of the Registration Statement, which are included in the Prospectus, are
independent accountants within the meaning of the Act and the Rules and
Regulations; the audited consolidated financial statements of the Company,
together with the related schedules and notes, and the unaudited consolidated
financial information, forming part of the Registration Statement and
Prospectus, fairly present the financial position and the results of operations
of the Company and its subsidiaries at the respective dates and for the
respective periods to which they apply; and all audited consolidated financial
statements of the Company, together with the related schedules and notes, and
the unaudited consolidated financial information, filed with the Commission as
part of the Registration Statement, have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved except as may be otherwise stated therein. The selected and
summary financial and statistical data included in the Registration Statement
present fairly the information shown therein and have been compiled on a basis
consistent with the audited financial statements presented therein. No other
financial statements or schedules are required to be included in the
Registration Statement.
(viii) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been (i) any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise, (ii) any transaction that is material
to the Company and its subsidiaries considered as one enterprise, except
transactions entered into in the ordinary course of business, (iii) any
obligation, direct or contingent, that is material to the Company and its
subsidiaries considered as one enterprise, incurred by the Company or its
subsidiaries, except obligations incurred in the ordinary course of business,
(iv) any change in the capital stock or outstanding indebtedness of the Company
or any of its subsidiaries that is material to the Company and its subsidiaries
considered as one enterprise, (v) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company or any of its
subsidiaries or (vi) any loss or damage (whether or not insured) to the property
of the Company or any of its subsidiaries which has been sustained or will have
been sustained which has a material adverse effect on the condition (financial
or otherwise), earnings, operations, business or business prospects of the
Company and its subsidiaries considered as one enterprise.
(ix) Except as set forth in the Registration Statement
and Prospectus, (i) each of the Company and its subsidiaries has good and
marketable title to all properties and assets described in the Registration
Statement and Prospectus as owned by it, free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest, other than such as
would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise, (ii) the agreements to which
the Company or any of its subsidiaries is a party described in the Registration
Statement and Prospectus are valid agreements, enforceable by the Company and
its subsidiaries (as applicable), except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles and, to the best of the Company's knowledge, the
other contracting party or parties thereto are not in material breach or
material default under any of such agreements and (iii) each of the Company and
its subsidiaries has valid and enforceable leases for all properties described
in the Registration Statement and Prospectus as leased by it, except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles. Except as set
forth in the Registration Statement and Prospectus, the Company owns or leases
all such properties as are necessary to its operations as now conducted or as
proposed to be conducted.
(x) The Company and its subsidiaries have timely filed
all necessary federal, state and foreign income and franchise tax returns and
have paid all taxes shown thereon as due, and there is no tax deficiency that
has been or, to the best of the Company's knowledge, might be asserted against
the Company or any
5.
<PAGE>
of its subsidiaries that might have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company and its subsidiaries considered as one enterprise; and all tax
liabilities are adequately provided for on the books of the Company and its
subsidiaries.
(xi) The Company and its subsidiaries maintain insurance
with insurers of recognized financial responsibility of the types and in the
amounts generally deemed adequate for their respective businesses and consistent
with insurance coverage maintained by similar companies in similar businesses,
including, but not limited to, insurance covering real and personal property
owned or leased by the Company or its subsidiaries against theft, damage,
destruction, acts of vandalism and all other risks customarily insured against,
all of which insurance is in full force and effect; neither the Company nor any
such subsidiary has been refused any insurance coverage sought or applied for;
and neither the Company nor any such subsidiary has any reason to believe that
it will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not materially and
adversely affect the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries considered as
one enterprise.
(xii) To the best of Company's knowledge, no labor
disturbance by the employees of the Company or any of its subsidiaries exists or
is imminent; and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers, that might be
expected to result in a material adverse change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise. No collective bargaining
agreement exists with any of the Company's employees and, to the best of the
Company's knowledge, no such agreement is imminent.
(xiii) Each of the Company and its subsidiaries owns or
possesses adequate rights to use all patents, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names and copyrights that
are necessary to conduct its businesses as described in the Registration
Statement and Prospectus; the expiration of any patents, patent rights, trade
secrets, trademarks, service marks, trade names or copyrights would not have a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise; the Company has not received any notice of, and
has no knowledge of, any infringement of or conflict with asserted rights of the
Company by others with respect to any patent, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names or copyrights; and the
Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of others with respect to any
patent, patent rights, inventions, trade secrets, know-how, trademarks, service
marks, trade names or copyrights which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, might have a material
adverse effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries considered as
one enterprise.
(xiv) The Common Stock has been approved for quotation
on the Nasdaq National Market, subject to official notice of issuance.
(xv) The Company has been advised concerning the
Investment Company Act of 1940, as amended (the "1940 Act"), and the rules and
regulations thereunder, and has in the past conducted, and intends in the future
to conduct, its affairs in such a manner as to ensure that it will not become an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the 1940 Act and such rules and regulations.
(xvi) The Company has not distributed and will not
distribute prior to the later of (i) the Closing Date, or any date on which
Option Shares are to be purchased, as the case may be, and (ii) completion of
the distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than any Preliminary Prospectuses, the
Prospectus, the Registration Statement and other materials, if any, permitted by
the Act.
6.
<PAGE>
(xvii) Neither the Company nor any of its subsidiaries
has at any time during the last five (5) years (i) made any unlawful
contribution to any candidate for foreign office or failed to disclose fully any
contribution in violation of law or (ii) made any payment to any federal or
state governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or permitted by the
laws of the United States or any jurisdiction thereof.
(xviii) The Company has not taken and will not take,
directly or indirectly, any actiondesigned to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the sale or resale of the Shares.
(xix) Each officer and director of the Company, each
Selling Shareholder and each beneficial owner of Common Stock has agreed in
writing that such person will not, for a period of 180 days from the date that
the Registration Statement is declared effective by the Commission (the "Lock-up
Period"), offer to sell, contract to sell, or otherwise sell, dispose of, loan,
pledge or grant any rights with respect to (collectively, a "Disposition") any
shares of Common Stock, any options or warrants to purchase any shares of Common
Stock or any securities convertible into or exchangeable for shares of Common
Stock (collectively, "Securities") now owned or hereafter acquired directly by
such person or with respect to which such person has or hereafter acquires the
power of disposition, otherwise than (i) as a bona fide gift or gifts, provided
the donee or donees thereof agree in writing to be bound by this restriction,
(ii) as a distribution to partners or shareholders of such person, provided that
the distributees thereof agree in writing to be bound by the terms of this
restriction or (iii) with the prior written consent of Robertson, Stephens &
Company LLC. The foregoing restriction has been expressly agreed to preclude the
holder of the Securities from engaging in any hedging or other transaction that
is designed to or reasonably expected to lead to or result in a Disposition of
Securities during the Lock-up Period, even if such Securities would be disposed
of by someone other than such holder. Such prohibited hedging or other
transactions would include, without limitation, any short sale (whether or not
against the box) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from
Securities. Furthermore, such person has also agreed and consented to the entry
of stop transfer instructions with the Company's transfer agent against the
transfer of the Securities held by such person except in compliance with this
restriction. The Company has provided to counsel for the Underwriters a complete
and accurate list of all securityholders of the Company and the number and type
of securities held by each securityholder. The Company has provided to counsel
for the Underwriters true, accurate and complete copies of all of the agreements
pursuant to which its officers, directors and shareholders have agreed to such
or similar restrictions (the "Lock-up Agreements") presently in effect or
effected hereby. The Company hereby represents and warrants that it will not
release any of its officers, directors or other shareholders from any Lock-up
Agreements currently existing or hereafter effected without the prior written
consent of Robertson, Stephens & Company LLC.
(xx) Except as set forth in the Registration Statement
and Prospectus, (i) the Company is in compliance with all rules, laws and
regulations relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment ("Environmental Laws")
that are applicable to its business, (ii) the Company has received no notice
from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the Registration
Statement and the Prospectus, (iii) the Company will not be required to make
future material capital expenditures to comply with Environmental Laws and (iv)
no property that is owned, leased or occupied by the Company has been designated
as a superfund site pursuant to the Comprehensive Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. ss. 9601, et seq.), or otherwise
designated as a contaminated site under applicable state or local law.
(xxi) The Company and each of its subsidiaries maintain
a system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization
7.
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and (iv) the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with respect to
any differences.
(xxii) There are no outstanding loans, advances (except
normal advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by the Company to or for the benefit of any of the
officers or directors of the Company or any of the members of the families of
any of them, except as disclosed in the Registration Statement and the
Prospectus.
(xxiii) The Company has complied with all provisions of
Section 517.075, Florida Statutes relating to doing business with the Government
of Cuba or with any person or affiliate located in Cuba.
(b) Each Selling Shareholder, severally and not
jointly, represents and warrants to and
agrees with each Underwriter and the Company
that:
(i) Such Selling Shareholder now has and on the Closing
Date, and on any later date on which Option Shares are purchased, will have
valid marketable title to the Shares to be sold by such Selling Shareholder,
free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest other than pursuant to this Agreement; and upon delivery of
such Shares hereunder and payment of the purchase price as herein contemplated,
each of the Underwriters will obtain valid marketable title to the Shares
purchased by it from such Selling Shareholder, free and clear of any pledge,
lien, security interest pertaining to such Selling Shareholder or such Selling
Shareholder's property, encumbrance, claim or equitable interest, including any
liability for estate or inheritance taxes, or any liability to or claims of any
creditor, devisee, legatee or beneficiary of such Selling Shareholder.
(ii) Such Selling Shareholder has duly authorized (if
applicable), executed and delivered, in the form heretofore furnished to the
Representatives, an irrevocable Power of Attorney (the "Power of Attorney")
appointing ___________ and ___________ as attorneys-in-fact (collectively, the
"Attorneys" and individually, an "Attorney") and a Letter of Transmittal and
Custody Agreement (the "Custody Agreement") with ______________________________,
as custodian (the "Custodian"); each of the Power of Attorney and the Custody
Agreement constitutes a valid and binding agreement on the part of such Selling
Shareholder, enforceable in accordance with its terms, except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles; and each of such Selling
Shareholder's Attorneys, acting alone, is authorized to execute and deliver this
Agreement and the certificate referred to in Section 6(h) hereof on behalf of
such Selling Shareholder, to determine the purchase price to be paid by the
several Underwriters to such Selling Shareholder as provided in Section 3
hereof, to authorize the delivery of the Selling Shareholder Shares and the
Option Shares to be sold by such Selling Shareholder under this Agreement and to
duly endorse (in blank or otherwise) the certificate or certificates
representing such Shares or a stock power or powers with respect thereto, to
accept payment therefor, and otherwise to act on behalf of such Selling
Shareholder in connection with this Agreement.
(iii) All consents, approvals, authorizations and orders
required for the execution and delivery by such Selling Shareholder of the Power
of Attorney and the Custody Agreement, the execution and delivery by or on
behalf of such Selling Shareholder of this Agreement and the sale and delivery
of the Selling Shareholder Shares and the Option Shares to be sold by such
Selling Shareholder under this Agreement (other than, at the time of the
execution hereof (if the Registration Statement has not yet been declared
effective by the Commission), the issuance of the order of the Commission
declaring the Registration Statement effective and such consents, approvals,
authorizations or orders as may be necessary under state or other securities or
Blue Sky laws) have been obtained and are in full force and effect; such Selling
Shareholder, if other than a natural person, has been duly organized and is
validly existing in good standing under the laws of the jurisdiction of its
organization as the type of entity that it purports to be; and such Selling
Shareholder has full legal right, power and authority to enter into and perform
its obligations under this Agreement and such Power of Attorney and Custody
Agreement, and to sell, assign, transfer and deliver the Shares to be sold by
such Selling Shareholder under this Agreement.
8.
<PAGE>
(iv) Such Selling Shareholder will not, during the
Lock-up Period, effect the Disposition of any Securities now owned or hereafter
acquired directly by such Selling Shareholder or with respect to which such
Selling Shareholder has or hereafter acquires the power of disposition,
otherwise than (i) as a bona fide gift or gifts, provided the donee or donees
thereof agree in writing to be bound by this restriction, (ii) as a distribution
to partners or shareholders of such Selling Shareholder, provided that the
distributees thereof agree in writing to be bound by the terms of this
restriction or (iii) with the prior written consent of Robertson, Stephens &
Company LLC. The foregoing restriction is expressly agreed to preclude the
holder of the Securities from engaging in any hedging or other transaction that
is designed to or reasonably expected to lead to or result in a Disposition of
Securities during the Lock-up Period, even if such Securities would be disposed
of by someone other than the Selling Shareholder. Such prohibited hedging or
other transactions would include, without limitation, any short sale (whether or
not against the box) or any purchase, sale or grant of any right (including,
without limitation, any put or call option) with respect to any Securities or
with respect to any security (other than a broad-based market basket or index)
that includes, relates to or derives any significant part of its value from
Securities. Such Selling Shareholder also agrees and consents to the entry of
stop transfer instructions with the Company's transfer agent against the
transfer of the securities held by such Selling Shareholder except in compliance
with this restriction.
(v) Certificates in negotiable form for all Shares to be
sold by such Selling Shareholder under this Agreement, together with a stock
power or powers duly endorsed in blank by such Selling Shareholder, have been
placed in custody with the Custodian for the purpose of effecting delivery
hereunder.
(vi) This Agreement has been duly authorized by each
Selling Shareholder that is not anatural person and has been duly executed and
delivered by or on behalf of such Selling Shareholder and is a valid and binding
agreement of such Selling Shareholder, enforceable in accordance with its terms,
except as rights to indemnification hereunder may be limited by applicable law
and except as the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles; and the
performance of this Agreement and the consummation of the transactions herein
contemplated will not result in a breach or violation of any of the terms and
provisions of or constitute a default under any bond, debenture, note or other
evidence of indebtedness, or under any lease, contract, indenture, mortgage,
deed of trust, loan agreement, joint venture or other agreement or instrument to
which such Selling Shareholder is a party or by which such Selling Shareholder,
or any Selling Shareholder Shares or any Option Shares to be sold by such
Selling Shareholder hereunder, may be bound or, to the best of such Selling
Shareholders' knowledge, result in any violation of any law, order, rule,
regulation, writ, injunction, judgment or decree of any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over such
Selling Shareholder or over the properties of such Selling Shareholder, or, if
such Selling Shareholder is other than a natural person, result in any violation
of any provisions of the charter, bylaws or other organizational documents of
such Selling Shareholder.
(vii) Such Selling Shareholder has not taken and will
not take, directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Shares.
(viii) Such Selling Shareholder has not distributed and
will not distribute any prospectus or other offering material in connection with
the offering and sale of the Shares.
(ix) All information furnished by or on behalf of such
Selling Shareholder relating to such Selling Shareholder, the Selling
Shareholder Shares and the Option Shares that is contained in the
representations and warranties of such Selling Shareholder in such Selling
Shareholder's Power of Attorney or set forth in the Registration Statement or
the Prospectus is, and at the time the Registration Statement became or becomes,
as the case may be, effective and at all times subsequent thereto up to and on
the Closing Date, and on any later date on which Option Shares are to be
purchased, was or will be, true, correct and complete, and does not, and at the
time the Registration Statement became or becomes, as the case may be, effective
and at all times subsequent thereto up to and on the Closing Date (hereinafter
defined), and on any later date on which Option
9.
<PAGE>
Shares are to be purchased, will not, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make such information not misleading.
(x) Such Selling Shareholder will review the Prospectus
and will comply with all agreements and satisfy all conditions on its part to be
complied with or satisfied pursuant to this Agreement on or prior to the Closing
Date, or any later date on which Option Shares are to be purchased, as the case
may be, and will advise one of its Attorneys and Robertson, Stephens & Company
LLC prior to the Closing Date or such later date on which Option Shares are to
be purchased, as the case may be, if any statement to be made on behalf of such
Selling Shareholder in the certificate contemplated by Section 6(h) would be
inaccurate if made as of the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be.
(xi) Such Selling Shareholder does not have, or has
waived prior to the date hereof, any preemptive right, co-sale right or right of
first refusal or other similar right to purchase any of the Shares that are to
be sold by the Company or any of the other Selling Shareholders to the
Underwriters pursuant to this Agreement; such Selling Shareholder does not have,
or has waived prior to the date hereof, any registration right or other similar
right to participate in the offering made by the Prospectus, other than such
rights of participation as have been satisfied by the participation of such
Selling Shareholder in the transactions to which this Agreement relates in
accordance with the terms of this Agreement; and such Selling Shareholder does
not own any warrants, options or similar rights to acquire, and does not have
any right or arrangement to acquire, any capital stock, rights, warrants,
options or other securities from the Company, other than those described in the
Registration Statement and the Prospectus.
(xii) Such Selling Shareholder is not aware that any of
the representations and warranties of the Company set forth in Section 2(a)
above is untrue or inaccurate in any material respect.
3. Purchase, Sale and Delivery of Firm Shares. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company and the Selling Shareholders
agree, severally and not jointly, to sell to the Underwriters, and each
Underwriter agrees, severally and not jointly, to purchase from the Company and
the Selling Shareholders, respectively, at a purchase price of $_____ per share,
the respective number of Company Shares and Selling Shareholder Shares set forth
opposite the names of the Company and the Selling Shareholders in Schedule B
hereto. The obligation of each Underwriter to the Company and to each Selling
Shareholder shall be to purchase from the Company or such Selling Shareholder
that number of Company Shares or Selling Shareholder Shares, as the case may be,
which (as nearly as practicable, as determined by you) is in the same proportion
to the number of Company Shares or Selling Shareholder Shares, as the case may
be, set forth opposite the name of the Company or such Selling Shareholder in
Schedule B hereto as the number of Firm Shares which is set forth opposite the
name of such Underwriter in Schedule A hereto (subject to adjustment as provided
in Section 10) is to the total number of Firm Shares to be purchased by all the
Underwriters under this Agreement.
The certificates in negotiable form for the Selling Shareholder Shares
have been placed in custody (for delivery under this Agreement) under the
Custody Agreement. Each Selling Shareholder agrees that the certificates for the
Selling Shareholder Shares of such Selling Shareholder so held in custody are
subject to the interests of the Underwriters hereunder, that the arrangements
made by such Selling Shareholder for such custody, including the Power of
Attorney, are to that extent irrevocable and that the obligations of such
Selling Shareholder hereunder shall not be terminated by the act of such Selling
Shareholder or by operation of law, whether by the death or incapacity of such
Selling Shareholder or the occurrence of any other event, except as specifically
provided herein or in the Custody Agreement. If any Selling Shareholder should
die or be incapacitated, or if any other such event should occur, before the
delivery of the certificates for the Selling Shareholder Shares hereunder, the
Selling Shareholder Shares to be sold by such Selling Shareholder shall, except
as specifically provided herein or in the Custody Agreement, be delivered by the
Custodian in accordance with the terms and conditions of this Agreement as if
such death, incapacity or other event had not occurred, regardless of whether
the Custodian shall have received notice of such death or other event.
10.
<PAGE>
Delivery of definitive certificates for the Firm Shares to be purchased
by the Underwriters pursuant to this Section 3 shall be made against payment of
the purchase price therefor by the several Underwriters by certified or official
bank check or checks drawn in next-day funds, payable to the order of the
Company with regard to the Shares being purchased from the Company, and to the
order of the Custodian for the respective accounts of the Selling Shareholders
with regard to the Shares being purchased from such Selling Shareholders (and
the Company and such Selling Shareholders agree not to deposit and to cause the
Custodian not to deposit any such check in the bank on which it is drawn, and
not to take any other action with the purpose or effect of receiving immediately
available funds, until the business day following the date of its delivery to
the Company or the Custodian, as the case may be, and, in the event of any
breach of the foregoing, the Company or the Selling Shareholders, as the case
maybe, shall reimburse the Underwriters for the interest lost and any other
expenses borne by them by reason of such breach), at the offices of Morgan,
Lewis & Bockius LLP, 2000 One Logan Square, Philadelphia, PA 19103- 6993 (or at
such other place as may be agreed upon among the Representatives and the Company
and the Attorneys), at 7:00 A.M., San Francisco time (a) on the third (3rd) full
business day following the first day that Shares are traded, (b) if this
Agreement is executed and delivered after 1:30 P.M., San Francisco time, the
fourth (4th) full business day following the day that this Agreement is executed
and delivered or (c) at such other time and date not later than seven (7) full
business days following the first day that Shares are traded as the
Representatives and the Company and the Attorneys may determine (or at such time
and date to which payment and delivery shall have been postponed pursuant to
Section 10 hereof), such time and date of payment and delivery being herein
called the "Closing Date;" provided, however, that if the Company has not made
available to the Representatives copies of the Prospectus within the time
provided in Section 4(d) hereof, the Representatives may, in their sole
discretion, postpone the Closing Date until no later than two (2) full business
days following delivery of copies of the Prospectus to the Representatives. The
certificates for the Firm Shares to be so delivered will be made available toyou
at such office or such other location including, without limitation, in New York
City, as you may reasonably request for checking at least one (1) full business
day prior to the Closing Date and will be in such names and denominations as you
may request, such request to be made at least two (2) full business days prior
to the Closing Date. If the Representatives so elect, delivery of the Firm
Shares may be made by credit through full fast transfer to the accounts at The
Depository Trust Company designated by the Representatives.
It is understood that you, individually, and not as the Representatives
of the several Underwriters, may (but shall not be obligated to) make payment of
the purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by you prior to the Closing Date for the
Firm Shares to be purchased by such Underwriter or Underwriters. Any such
payment by you shall not relieve any such Underwriter or Underwriters of any of
its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to make an initial public offering (as such term is
described in Section 11 hereof) of the Firm Shares at an initial public offering
price of $_____ per share. After the initial public offering, the several
Underwriters may, in their discretion, vary the public offering price.
The information set forth in the last paragraph on the front cover page
(insofar as such information relates to the Underwriters), on the inside front
cover concerning stabilization and over-allotment by the Underwriters, and under
the [second] and [sixth] paragraphs under the caption "Underwriting" in any
Preliminary Prospectus and in the Prospectus constitutes the only information
furnished by the Underwriters to the Company for inclusion in any Preliminary
Prospectus, the Prospectus or the Registration Statement, and you, on behalf of
the respective Underwriters, represent and warrant to the Company and the
Selling Shareholders that the statements made therein donot include any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
4. Further Agreements of the Company. The Company agrees with the
several Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the time
and date that this Agreement is executed and delivered by the parties
11.
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hereto, to become effective as promptly as possible; the Company will use its
best efforts to cause any abbreviated registration statement pursuant to Rule
462(b) of the Rules and Regulations as may be required subsequent to the date
the Registration Statement is declared effective to become effective as
promptly as possible; the Company will notify you, promptly after it shall
receive notice thereof, of the time when the Registration Statement, any
subsequent amendment to the Registration Statement or any abbreviated
registration statement has become effective or any supplement to the
Prospectus has been filed; if the Company omitted information from the
Registration Statement at the time it was originally declared effective in
reliance upon Rule 430A(a) of the Rules and Regulations, the Company will
provide evidence satisfactory to you that the Prospectus contains such
information and has been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules and
Regulations or as part of a post-effective amendment to such Registration
Statement as originally declared effective which is declared effective by the
Commission; if the Company files a term sheet pursuant to Rule 434 of the
Rules and Regulations, the Company will provide evidence satisfactory to you
that the Prospectus and term sheet meeting the requirements of Rule 434(b) or
(c), as applicable, of the Rules and Regulations, have been filed, within the
time period prescribed, with the Commission pursuant to subparagraph (7) of
Rule 424(b) of the Rules and Regulations; if for any reason the filing of the
final form of Prospectus is required under Rule 424(b)(3) of the Rules and
Regulations, it will provide evidence satisfactory to you that the Prospectus
contains such information and has been filed with the Commission within the
time period prescribed; it will notify you promptly of any request by the
Commission for the amending or supplementing of the Registration Statement or
the Prospectus or for additional information; promptly upon your request, it
will prepare and file with the Commission any amendments or supplements to the
Registration Statement or Prospectus which, in the opinion of counsel for the
several Underwriters ("Underwriters' Counsel"), may be necessary or advisable
in connection with the distribution of the Shares by the Underwriters; it will
promptly prepare and file with the Commission, and promptly notify you of the
filing of, any amendments or supplements to the Registration Statement or
Prospectus that may be necessary to correct any statements or omissions, if,
at any time when a prospectus relating to the Shares is required to be
delivered under the Act, any event shall have occurred as a result of which
the Prospectus or any other prospectus relating to the Shares as then in
effect would include any untrue statement of a material fact or omit to state
a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; in case any
Underwriter is required to deliver a prospectus nine (9) months or more after
the effective date of the Registration Statement in connection with the sale
of the Shares, it will prepare promptly upon request, but at the expense of
such Underwriter, such amendment or amendments to the Registration Statement
and such prospectus or prospectuses as may be necessary to permit compliance
with the requirements of Section 10(a)(3) of the Act; and it will file no
amendment or supplement to the Registration Statement or Prospectus, which
shall not previously have been submitted to you a reasonable time prior to the
proposed filing thereof or to which you shall reasonably object in writing,
subject, however, to compliance with the Act and the Rules and Regulations and
the provisions of this Agreement.
(b) The Company will advise you, promptly after it shall
receive notice or obtain knowledge, of the issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or of the
initiation or threat of any proceeding for that purpose; and it will promptly
use its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued.
(c) The Company will use its best efforts to qualify the
Shares for offering and sale under the securities laws of such jurisdictions as
you may designate and to continue such qualifications in effect for so long as
may be required for purposes of the distribution of the Shares, except that the
Company shall not be required in connection therewith or as a condition thereof
to qualify as a foreign corporation or to execute a general consent to service
of process in any jurisdiction in which it is not otherwise required to be so
qualified or to so execute a general consent to service of process. In each
jurisdiction in which the Shares shall have been qualified as above provided,
the Company will make and file such statements and reports in each year as are
or may be required by the laws of such jurisdiction.
(d) The Company will furnish to you, as soon as available,
and, in the case of the Prospectus and any term sheet or abbreviated term sheet
under Rule 434, in no event later than the first (1st) full business day
12.
<PAGE>
following the first day that Shares are traded, copies of the Registration
Statement (three of which will be signed and which will include all exhibits),
each Preliminary Prospectus, the Prospectus and any amendments or supplements to
such documents, including any prospectus prepared to permit compliance with
Section 10(a)(3) of the Act, all in such quantities as you may from time to time
reasonably request. Notwithstanding the foregoing, if Robertson, Stephens &
Company LLC, on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the Company shall provide
to you copies of a Preliminary Prospectus updated in all respects through the
date specified by you in such quantities as you may from time to time reasonably
request.
(e) The Company will make generally available to its
shareholders as soon as practicable, but in any event not later than the
forty-fifth (45th) day following the end of the fiscal quarter first occurring
after the first anniversary of the effective date of the Registration Statement,
an earnings statement (which will be in reasonabledetail but need not be
audited) complying with the provisions of Section 11(a) of the Act and covering
a twelve (12) month period beginning after the effective date of the
Registration Statement.
(f) During a period of five (5) years after the date hereof,
the Company will furnish to its shareholders as soon as practicable after the
end of each respective period, annual reports (including financial statements
audited by independent certified public accountants) and unaudited quarterly
reports of operations for each of the first three quarters of the fiscal year,
and will furnish to you and the other several Underwriters hereunder, upon
request (i) concurrently with furnishing such reports to its shareholders,
statements of operations of the Company for each of the first three (3) quarters
in the form furnished to the Company's shareholders, (ii) concurrently with
furnishing to its shareholders, a balance sheet of the Company as of the end of
such fiscal year, together with statements of operations, of shareholders'
equity, and of cash flows of the Company for such fiscal year, accompanied by a
copy of the certificate or report thereon of independent certified public
accountants, (iii) as soon as they are available, copies of all reports
(financial or other) mailed to shareholders, (iv) as soon as they are available,
copies of all reports and financial statements furnished to or filed with the
Commission, any securities exchange or the National Association of Securities
Dealers, Inc. ("NASD"), (v) every material press release and every material news
item or article in respect of the Company or its affairs that was generally
released to shareholders or prepared by the Company or any of its subsidiaries
and (vi) any additional information of a public nature concerning the Company or
its subsidiaries or its business which you may reasonably request. During such
five (5) year period, if the Company shall have active subsidiaries, the
foregoing financial statements shall be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and
shall be accompanied by similar financial statements for any significant
subsidiary which is not so consolidated.
(g) The Company will apply the net proceeds from the sale of
the Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for its Common Stock.
(i) The Company will file Form SR in conformity with the
requirements of the Act and the Rules and Regulations.
(j) If the transactions contemplated hereby are not
consummated by reason of any failure, refusal or inability on the part of the
Company or any Selling Shareholder to perform any agreement on their respective
parts to be performed hereunder or to fulfill any condition of the Underwriters'
obligations hereunder, or if the Company shall terminate this Agreement pursuant
to Section 11(a) hereof, or if the Underwriters shall terminate this Agreement
pursuant to Section 11(b)(i), the Company will reimburse the several
Underwriters for all out-of-pocket expenses (including fees and disbursements of
Underwriters' Counsel) incurred by the Underwriters in investigating or
preparing to market or marketing the Shares.
13.
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(k) If at any time during the ninety (90) day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which, in your
opinion, the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
after written notice from you advising the Company to the effect set forth
above, forthwith prepare, consult with you concerning the substance of and
disseminate a press release or other public statement, reasonably satisfactory
to you, responding to or commenting on such rumor, publication or event.
(l) During the Lock-up Period, the Company will not, without
the prior written consent of Robertson Stephens & Company LLC, effect the
Disposition of, directly or indirectly, any Securities other than the sale of
the Company Shares hereunder and the Company's issuance of options or Common
Stock under the Company's presently authorized option and incentive stock plans
(the "Option Plans").
(m) During a period of one hundred eighty (180) days from the
effective date of the Registration Statement, the Company will not file a
registration statement registering shares under the Option Plans or other
employee benefit plans.
5. Expenses.
(a) The Company and the Selling Shareholders agree with each
Underwriter that:
(i) The Company and the Selling Shareholders will pay
and bear all costs and expenses in connection with the preparation, printing and
filing of the Registration Statement (including financial statements, schedules
and exhibits), Preliminary Prospectuses and the Prospectus and any amendments or
supplements thereto; the printing of this Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreement, the Preliminary Blue Sky Memorandum
and any Supplemental Blue Sky Memorandum, the Underwriters' Questionnaire and
Power of Attorney, and any instruments related to any of the foregoing; the
issuance and delivery of the Shares hereunder to the several Underwriters,
including transfer taxes, if any, the cost of all certificates representing the
Shares and transfer agents' and registrars' fees; the fees and disbursements of
counsel for the Company; all fees and other charges of the Company's independent
certified public accountants; the cost of furnishing to the several Underwriters
copies of the Registration Statement (including appropriate exhibits),
Preliminary Prospectus and the Prospectus, and any amendments or supplements to
any of the foregoing; NASD filing fees and the cost of qualifying the Shares
under the laws of such jurisdictions as you may designate (including filing fees
and fees and disbursements of Underwriters' Counsel in connection with such NASD
filings and Blue Sky qualifications); and all other expenses directly incurred
by the Company and the Selling Shareholders in connection with the performance
of their obligations hereunder. Any additional expenses incurred as a result of
the sale of the Shares by the Selling Shareholders will be borne collectively by
the Company and the Selling Shareholders. The provisions of this Section 5(a)(i)
are intended to relieve the Underwriters from the payment of the expenses and
costs which the Selling Shareholders and the Company hereby agree to pay, but
shall not affect any agreement which the Selling Shareholders and the Company
may make, or may have made, for the sharing of any of such expenses and costs.
Such agreements shall not impair the obligations of the Company and the Selling
Shareholders hereunder to the several Underwriters.
(ii) In addition to its other obligations under Section
8(a) hereof, the Company agrees that, as an interim measure during the pendency
of any claim, action, investigation, inquiry or other proceeding described in
Section 8(a) hereof, it will reimburse the Underwriters on a monthly basis for
all reasonable legal or other expenses incurred in connection with investigating
or defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Company's obligation to reimburse the Underwriters for
such expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, the Underwriters
shall promptly return such payment to the Company together with interest,
compounded daily, determined on the basis of the prime rate (or other commercial
lending rate for borrowers of the highest credit standing) listed from time to
time in The Wall Street
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Journal that represents the base rate on corporate loans posted by a
substantial majority of the nation's thirty (30) largest banks (the "Prime
Rate"). Any such interim reimbursement payments that are not made to the
Underwriters within thirty (30) days of a request for reimbursement shall bear
interest at the Prime Rate from the date of such request.
(iii) In addition to their other obligations under
Section 8(b) hereof, each Selling Shareholder agrees that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding described in Section 8(b) hereof relating to such Selling
Shareholder, it will reimburse the Underwriters on a monthly basis for all
reasonable legal or other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of such Selling Shareholder's obligation to reimburse the
Underwriters for such expenses and the possibility that such payments might
later be held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, the Underwriters shall promptly return such payment to the Selling
Shareholders, together with interest, compounded daily, determined on the basis
of the Prime Rate. Any such interim reimbursement payments that are not made to
the Underwriters within thirty (30) days of a request for reimbursement shall
bear interest at the Prime Rate from the date of such request.
(b) In addition to their other obligations under Section
8(c) hereof, the Underwriters severally and not jointly agree hat, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding described in Section 8(c) hereof, they will reimburse the
Company and each Selling Shareholder on a monthly basis for all reasonable legal
or other expenses incurred in connection with investigating or defending any
such claim, action, investigation, inquiry or other proceeding, notwithstanding
the absence of a judicial determination as to the propriety and enforceability
of the Underwriters' obligation to reimburse the Company and each such Selling
Shareholder for such expenses and the possibility that such payments might later
be held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, the Company and each such Selling Shareholder shall promptly return
such payment to the Underwriters together with interest, compounded daily,
determined on the basis of the Prime Rate. Any such interim reimbursement
payments that are not made to the Company and each such Selling Shareholder
within thirty (30) days of a request for reimbursement shall bear interest at
the Prime Rate from the date of such request.
(c) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in Sections
5(a)(ii), 5(a)(iii) and 5(b) hereof, including the amounts of any requested
reimbursement payments, the method of determining such amounts and the basis on
which such amounts shall be apportioned among the reimbursing parties, shall be
settled by arbitration conducted under the provisions of the Constitution and
Rules of the Board of Governors of the New York Stock Exchange, Inc. or pursuant
to the Code of Arbitration Procedure of the NASD. Any such arbitration must be
commenced by service of a written demand for arbitration or a written notice of
intention to arbitrate, therein electing the arbitration tribunal. In the event
the party demanding arbitration does not make such designation of an arbitration
tribunal in such demand or notice, then the party responding to said demand or
notice is authorized to do so. Any such arbitration will be limited to the
operation of the interim reimbursement provisions contained in Sections
5(a)(ii), 5(a)(iii) and 5(b) hereof and will not resolve the ultimate propriety
or enforceability of the obligation to indemnify for expenses that is created by
the provisions of Sections 8(a), 8(b) and 8(c) hereof or the obligation to
contribute to expenses that is created by the provisions of Section 8(e) hereof.
6. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Shares as provided herein shall
be subject to the accuracy, as of the date hereof and the Closing Date and any
later date on which Option Shares are to be purchased, as the case may be, of
the representations and warranties of the Company and the Selling Shareholders
herein, to the performance by the Company and the Selling Shareholders of their
respective obligations hereunder and to the following additional conditions:
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(a) The Registration Statement shall have become
effective not later than 2:00 P.M., San Francisco time, on the date following
the date of this Agreement, or such later date as shall be consented to
inwriting by you; and no stop order suspending the effectiveness thereof shall
have been issued and no proceedings for that purpose shall have been initiated
or, to the knowledge of the Company, any Selling Shareholder or any Underwriter,
threatened by the Commission, and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to the satisfaction of Underwriters'
Counsel.
(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issue, sale and delivery of the
Shares, shall have been reasonably satisfactory to Underwriters' Counsel, and
such counsel shall have been furnished with such papers and information as they
may reasonably have requested to enable them to pass upon the matters referred
to in this Section.
(c) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date, or any later date on which ption Shares
are to be purchased, as the case may be, there shall not have been any change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise from that set forth in the Registration Statement or Prospectus,
which, in your sole judgment, is material and adverse and that makes it, in your
sole judgment, impracticable or inadvisable to proceed with the public offering
of the Shares as contemplated by the Prospectus.
(d) You shall have received on the Closing Date and on
any later date on which Option Shares are to be purchased, as the case may be,
the following opinion of counsel for the Company and the Selling Shareholders,
dated the Closing Date or such later date on which Option Shares are to be
purchased addressed to the Underwriters and with reproduced copies or signed
counterparts thereof for each of the Underwriters, to the effect that:
(i) The Company and each of the Subsidiaries has
been duly incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation;
(ii) The Company and each Subsidiary has the
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus;
(iii) The Company and each Subsidiary is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction, if any, in which the ownership or leasing of its properties
or the conduct of its business requires such qualification, except where the
failure to be so qualified or be in good standing would not have a material
adverse effect on the condition (financial or otherwise), earnings, operations
or business of the Company and its subsidiaries considered as one enterprise. To
such counsel's knowledge, the Company does not own or control, directly or
indirectly, any corporation, association or other entity other than Eurotel
Marketing Limited and ICT/Canada Marketing, Inc.
(iv) The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein, the issued and outstanding
shares of capital stock of the Company (including the Selling Shareholder
Shares) have been duly and validly issued and are fully paid and nonassessable,
and, to such counsel's knowledge, will not have been issued in violation of or
subject to any preemptive right, co-sale right, registration right, right of
first refusal or other similar right;
(v) All issued and outstanding shares of capital
stock of each Subsidiary have been duly authorized and validly issued and are
fully paid and nonassessable, and, to such counsel's knowledge, have not been
issued in violation of or subject to any preemptive right, co-sale right,
registration right, right of first refusal or other similar right and are owned
by the Company free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest;
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(vi) The Firm Shares to be issued by the Company
pursuant to the terms of this Agreement have been duly authorized and, upon
issuance and delivery against payment therefor in accordance with the terms
hereof, will be duly and validly issued and fully paid and nonassessable, and
will not have been issued in violation of or subject to any preemptive right,
co-sale right, registration right, right of first refusal or other similar
right;
(vii) The Company has the corporate power and
authority to enter into this Agreement and to issue, sell and deliver to the
Underwriters the Shares to be issued and sold by it hereunder;
(viii) This Agreement has been duly authorized
by all necessary corporate action on the part of the Company and has been duly
executed and delivered by the Company and, assuming due authorization, execution
and delivery by you, is a valid and binding agreement of the Company,
enforceable in accordance with its terms, except insofar as indemnification
provisions may be limited by applicable law and except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally or by general equitable
principles;
(ix) The Registration Statement has become
effective under the Act and, to such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending or
threatened under the Act;
(x) The Registration Statement and the
Prospectus, and each amendment or supplement thereto (other than the financial
statements, including supporting schedules, and financial data derived
therefrom, as to which such counsel need express no opinion), as of the
effective date of the Registration Statement, complied as to form in all
material respects with the requirements of the Act and the applicable Rules and
Regulations;
(xi) The information in the Prospectus under the
caption "Description of Capital Stock," to the extent that it constitutes
matters of law or legal conclusions, has been reviewed by such counsel and is a
fair summary of such matters and conclusions; and the forms of certificates
evidencing the Common Stock and filed as exhibits to the Registration Statement
comply with Pennsylvania law;
(xii) The description in the Registration
Statement and the Prospectus of the charter and bylaws of the Company and of
statutes are accurate and fairly present the information required to be
presented by the Act and the applicable Rules and Regulations;
(xiii) To such counsel's knowledge, there are no
agreements, contracts, leases or documents to which the Company is a party of a
character required to be described or referred to in the Registration Statement
or Prospectus or to be filed as an exhibit to the Registration Statement that
are not described or referred to therein or filed as required;
(xiv) The performance of this Agreement and the
consummation of the transactions herein contemplated (other than performance of
the Company's indemnification obligations hereunder, concerning which no opinion
need be expressed) will not (a) result in any violation of the Company's charter
or bylaws or (b) to such counsel's knowledge, result in a material breach or
violation of any of the terms and provisions of, or constitute a default under,
any bond, debenture, note or other evidence of indebtedness, or any lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument known to such counsel to which the Company is a
party or by which its properties are bound, or any applicable statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any order,
writ or decree of any court, government or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries, or over any of their
properties or operations;
(xv) No consent, approval, authorization or
order of or qualification with any court, government or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries, or
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over any of their properties or operations is necessary in connection with the
consummation by the Company of the transactions herein contemplated, except
such as have been obtained under the Act or such as may be required under
state or other securities or Blue Sky laws in connection with the purchase and
the distribution of the Shares by the Underwriters;
(xvi) To such counsel's knowledge, there are no
legal or governmental proceedings pending or threatened against the Company or
any of its subsidiaries of a character required to be disclosed in the
Registration Statement or the Prospectus by the Act or the Rules and
Regulations, other than those described therein;
(xvii) To such counsel's knowledge, neither the
Company nor any of its subsidiaries is presently (a) in material violation of
its respective charter or bylaws or (b) in material breach of any applicable
statute, rule or regulation known to such counsel or, to such counsel's
knowledge, any order, writ or decree of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries, or over any of
their properties or operations;
(xviii) To such counsel's knowledge, except as
set forth in the Registration Statement and Prospectus, no holders of Common
Stock or other securities of the Company have registration rights with respect
to securities of the Company and, except as set forth in the Registration
Statement and Prospectus, all holders of securities of the Company having rights
known to such counsel to registration of such shares of Common Stock or other
securities, because of the filing of the Registration Statement by the Company
have, with respect to the offering contemplated thereby, waived such rights or
such rights have expired by reason of lapse of time following notification of
the Company's intent to file the Registration Statement or have included
securities in the Registration Statement pursuant to the exercise of and in full
satisfaction of such rights;
(xix) Each Selling Shareholder that is not a
natural person has full right, power and authority to enter into and to perform
its obligations under the Power of Attorney and Custody Agreement to be executed
and delivered by it in connection with the transactions contemplated herein; the
Power of Attorney and Custody Agreement of each Selling Shareholder that is not
a natural person has been duly authorized by such Selling Shareholder; the Power
of Attorney and Custody Agreement of each Selling Shareholder has been duly
executed and delivered by or on behalf of such Selling Shareholder; and the
Power of Attorney and Custody Agreement of each Selling Shareholder constitutes
the valid and binding agreement of such Selling Shareholder, enforceable in
accordance with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles;
(xx) Each of the Selling Shareholders has full
right, power and authority to enter into and to perform its obligations under
this Agreement and to sell, transfer, assign and deliver the Shares to be sold
by such Selling Shareholder hereunder;
(xxi) This Agreement has been duly authorized by
each Selling Shareholder that is not a natural person and has been duly executed
and delivered by or on behalf of each Selling Shareholder; and
(xxii) Upon the delivery of and payment for the
Shares as contemplated in this Agreement, each of the Underwriters will receive
valid marketable title to the Shares purchased by it from such Selling
Shareholder, free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest. In rendering such opinion, such counsel may assume
that the Underwriters are without notice of any defect in the title of the
Shares being purchased from the Selling Shareholders.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters were
discussed, and although they have not verified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such
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counsel which leads them to believe that, at the time the Registration
Statement became effective and at all times subsequent thereto up to and on
the Closing Date and on any later date on which Option Shares are to be
purchased, the Registration Statement and any amendment or supplement thereto
(other than the financial statements, including supporting schedules, and
other financial and statistical information derived therefrom, as to which
such counsel need express no comment) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or at the
Closing Date or any later date on which the Option Shares are to be purchased,
as the case may be, the Registration Statement, the Prospectus and any
amendment or supplement thereto (except as aforesaid) contained any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
Counsel rendering the foregoing opinion may rely as to questions of law
not involving the laws of the United States or the State of Pennsylvania upon
opinions of local counsel, and as to questions of fact upon representations or
certificates of officers of the Company, the Selling Shareholders or officers of
the Selling Shareholders (when the Selling Shareholder is not a natural person),
and of government officials, in which case their opinion is to state that they
are so relying and that they have no knowledge of any material misstatement or
inaccuracy in any such opinion, representation or certificate. Copies of any
opinion, representation or certificate so relied upon shall be delivered to you,
as Representatives of the Underwriters, and to Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, an
opinion of Cooley Godward Castro Huddleson & Tatum, in form and substance
satisfactory to you, with respect to the sufficiency of all such corporate
proceedings and other legal matters relating to this Agreement and the
transactions contemplated hereby as you may reasonably require, and the Company
shall have furnished to such counsel such documents as they may have requested
for the purpose of enabling them to pass upon such matters.
(f) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, a
letter from Arthur Andersen LLP addressed to the Underwriters, dated the Closing
Date or such later date on which Option Shares are to be purchased, as the case
may be, confirming that they are independent certified public accountants with
respect to the Company within the meaning of the Act and the applicable
published Rules and Regulations and based upon the procedures described in such
letter delivered to you concurrently with the execution of this Agreement
(herein called the "Original Letter"), but carried out to a date not more than
five (5) business days prior to the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, (i) confirming, to the
extent true, that the statements and conclusions set forth in the Original
Letter are accurate as of the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be, and (ii) setting forth any
revisions and additions to the statements and conclusions set forth in the
Original Letter that are necessary to reflect any changes in the facts described
in the Original Letter since the date of such letter, or to reflect the
availability of more recent financial statements, data or information. The
letter shall not disclose any change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise from that set forth in the
Registration Statement or Prospectus, which, in your sole judgment, is material
and adverse and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated by
the Prospectus. The Original Letter from Arthur Andersen LLP shall be addressed
to or for the use of the Underwriters in form and substance satisfactory to the
Underwriters and shall (i) represent, to the extent true, that they are
independent certified public accountants with respect to the Company within the
meaning of the Act and the applicable published Rules and Regulations, (ii) set
forth their opinion with respect to their examination of the consolidated
balance sheet of the Company as of December 31, 1995 and related consolidated
statements of operations, shareholders' equity, and cash flows for the twelve
(12) months ended December 31, 1995, (iii) state that Arthur Andersen LLP has
performed the procedures set out in Statement on Auditing Standards No. 71 ("SAS
71") for a review of interim financial information and providing the report of
Arthur Andersen LLP as described in SAS 71 on the financial statements for each
of the quarters in the five-quarter period ended March 31, 1996 (the "Quarterly
Financial Statements"), (iv) state that in the course of such review, nothing
came to their attention that leads them to believe that any material
modifications need to be made to any of the Quarterly Financial
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Statements in order for them to be in compliance with generally accepted
accounting principles consistently applied across the periods presented and
(v) address other matters agreed upon by Arthur Andersen LLP and you. In
addition, you shall have received from Arthur Andersen LLP a letter addressed
to the Company and made available to you for the use of the Underwriters
stating that their review of the Company's system of internal accounting
controls, to the extent they deemed necessary in establishing the scope of
their examination of the Company's consolidated financial statements as of
December 31, 1995, did not disclose any weaknesses in internal controls that
they considered to be material weaknesses.
(g) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, a
certificate of the Company, dated the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, signed by the Chief
Executive Officer and Chief Financial Officer of the Company, to the effect
that, and you shall be satisfied that:
(i) The representations and warranties of the Company in
this Agreement are true and correct, as if made on and as of the Closing Date or
any later date on which Option Shares are to be purchased, as the case may be,
and the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the Closing
Date or any later date on which Option Shares are to be purchased, as the case
may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act;
(iii) When the Registration Statement became effective
and at all times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained all material information required to be included therein by
the Act and the Rules and Regulations and in all material respects conformed to
the requirements of the Act and the Rules and Regulations, the Registration
Statement, and any amendment or supplement thereto, did not and does not include
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, the Prospectus, and any amendment or supplement thereto, did not and
does not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and, since the
effective date of the Registration Statement, there has occurred no event
required to be set forth in an amended or supplemented Prospectus which has not
been so set forth; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been (a) any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise, (b) any transaction that is material
to the Company and its subsidiaries considered as one enterprise, except
transactions entered into in the ordinary course of business, (c) any
obligation, direct or contingent, that is material to the Company and its
subsidiaries considered as one enterprise, incurred by the Company or its
subsidiaries, except obligations incurred in the ordinary course of business,
(d) any change in the capital stock or outstanding indebtedness of the Company
or any of its subsidiaries that is material to the Company and its subsidiaries
considered as one enterprise, (e) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company or any of its
subsidiaries or (f) any loss or damage (whether or not insured) to the property
of the Company or any of its subsidiaries which has been sustained or will have
been sustained which has a material adverse effect on the condition (financial
or otherwise), earnings, operations, business or business prospects of the
Company and its subsidiaries considered as one enterprise.
(h) You shall be satisfied that, and you shall have
received a certificate, dated the Closing Date, or any later date on which
Option Shares are to be purchased, as the case may be, from the Attorneys for
each Selling Shareholder to the effect that, as of the Closing Date, or any
later date on which Option Shares are to be purchased, as the case may be, they
have not been informed that:
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(i) The representations and warranties made by
such Selling Shareholder herein are not true or correct in any material respect
on the Closing Date or on any later date on which Option Shares are to be
purchased, as the case may be; or
(ii) Such Selling Shareholder has not complied
with any obligation or satisfied any condition which is required to be performed
or satisfied on the part of such Selling Shareholder at or prior to the Closing
Date or any later date on which Option Shares are to be purchased, as the case
may be.
(i) The Company shall have obtained and delivered to you an
agreement from each officer and director of the Company, each Selling
Shareholder and each beneficial owner of shares of Common Stock in writing prior
to the date hereof that such person will not, during the Lock-up Period, effect
the Disposition of any Securities now owned or hereafter acquired directly by
such person or with respect to which such person has or hereafter acquires the
power of disposition, otherwise than (i) as a bona fide gift or gifts, provided
the donee or donees thereof agree in writing to be bound by this restriction,
(ii) as a distribution to partners or shareholders of such person, provided that
the distributees thereof agree in writing to be bound by the terms of this
restriction, or (iii) with the prior written consent of Robertson, Stephens &
Company LLC. The foregoing restriction shall have been expressly agreed to
preclude the holder of the Securities from engaging in any hedging or other
transaction which is designed to or reasonably expected to lead to or result in
a Disposition of Securities during the Lock-up Period, even if such Securities
would be disposed of by someone other than the such holder. Such prohibited
hedging or other transactions would include, without limitation, any short sale
(whether or not against the box) or any purchase, sale or grant of any right
(including, without limitation, any put or call option) with respect to any
Securities or with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of
its value from Securities. Furthermore, such person will have also agreed and
consented to the entry of stop transfer instructions with the Company's transfer
agent against the transfer of the Securities held by such person except in
compliance with this restriction.
(j) The Company and the Selling Shareholders shall have
furnished to you such further certificates and documents as you shall reasonably
request (including certificates of officers of the Company, the Selling
Shareholders or officers of the Selling Shareholders (when the Selling
Shareholder is not a natural person)) as to the accuracy of the representations
and warranties of the Company and the Selling Shareholders herein, as to the
performance by the Company and the Selling Shareholders of their respective
obligations hereunder and as to the other conditions concurrent and precedent to
the obligations of the Underwriters hereunder.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to Underwriters' Counsel. The Company and the Selling Shareholders will furnish
you with such number of conformed copies of such opinions, certificates, letters
and documents as you shall reasonably request.
7. Option Shares.
(a) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, certain Selling Shareholders identified on Schedule B hereto hereby grant
to the several Underwriters, for the purpose of covering over-allotments in
connection with the distribution and sale of the Firm Shares only, a
nontransferable option to purchase up to an aggregate of 375,000 Option Shares
at the purchase price per share for the Firm Shares set forth in Section 3
hereof. Such option may be exercised by the Representatives on behalf of the
several Underwriters on one (1) or more occasions in whole or in part during the
period of thirty (30) days after the date on which the Firm Shares are initially
offered to the public, by giving written notice to the Company and [John J.
Brennan], as representative of such Selling Shareholders ("Brennan"). The number
of Option Shares to be purchased by each Underwriter upon the exercise of such
option shall be the same proportion of the total number of Option Shares to be
purchased by the several Underwriters pursuant to the exercise of such option as
the number of Firm Shares purchased by such Underwriter (set forth in Schedule A
hereto) bears to the total number of Firm Shares purchased by the several
Underwriters (set forth in Schedule A hereto), adjusted by the Representatives
in such manner as to avoid fractional shares. The
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number of Option Shares to be purchased from each Selling Shareholder pursuant
to this Section 7 shall be that number of Option Shares which (as nearly as
practicable, as determined by you) is in the same proportion to the total
number of Option Shares offered by such Selling Shareholders set forth
opposite the name of such Selling Shareholder in Schedule B hereto is to the
total number of Option Shares offered hereby.
The certificates in negotiable form for the Option Shares have been
placed in custody (for delivery under this Agreement) under the Custody
Agreement. Each Selling Shareholder who has granted the option hereunder agrees
that the certificates for the Option Shares of such Selling Shareholder so held
in custody are subject to the interests of the Underwriters hereunder, that the
arrangements made by such Selling Shareholder for such custody, including the
Power of Attorney, are to that extent irrevocable and that the obligations of
such Selling Shareholder hereunder shall not be terminated by the act of such
Selling Shareholder or by operation of law, whether by the death or incapacity
of such Selling Shareholder or the occurrence of any other event, except as
specifically provided herein or in the Custody Agreement. If any Selling
Shareholder should die or be incapacitated, or if any other such event should
occur, before the delivery of the certificates for the Option Shares hereunder,
the Option Shares to be sold by such Selling Shareholder shall, except as
specifically provided herein or in the Custody Agreement, be delivered by the
Custodian in accordance with the terms and conditions of this Agreement as if
such death, incapacity or other event had not occurred, regardless of whether
the Custodian shall have received notice of such death or other event.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the option
granted by this Section 7 shall be made against payment of the purchase price
therefor by the several Underwriters by certified or official bank check or
checks drawn in next-day funds, payable to the order of the Custodian for the
accounts of the Selling Shareholders (and such Selling Shareholders agree not to
deposit any such check in the bank on which it is drawn, and not to take any
other action with the purpose or effect of receiving immediately available
funds, until the business day following the date of its delivery to the
Custodian). In the event of any breach of the foregoing, the Selling
Shareholders shall reimburse the Underwriters for the interest lost and any
other expenses borne by them by reason of such breach. Such delivery and payment
shall take place at the offices of Morgan, Lewis & Bockius LLP, 2000 One Logan
Square, Philadelphia, PA 19103- 6993 or at such other place as may be agreed
upon among the Representatives and Brennan (i) on the Closing Date, if written
notice of the exercise of such option is received by the Company and Brennan at
least two (2) full business days prior to the Closing Date, or (ii) on a date
which shall not be later than the third (3rd) full business day following the
date the Company and Brennan receive written notice of the exercise of such
option, if such notice is received by the Company and Brennan less than two (2)
full business days prior to the Closing Date.
The certificates for the Option Shares to be so delivered will be made
available to you at such office or such other location including, without
limitation, in New York City, as you may reasonably request for checking at
least one (1) full business day prior to the date of payment and delivery and
will be in such names and denominations as you may request, such request to be
made at least two (2) full business days prior to such date of payment and
delivery. If the Representatives so elect, delivery of the Option Shares may be
made by credit through full fast transfer to the accounts at The Depository
Trust Company designated by the Representatives.
It is understood that you, individually, and not as the Representatives
of the several Underwriters, may (but shall not be obligated to) make payment of
the purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by you prior to the date of payment and
delivery for the Option Shares to be purchased by such Underwriter or
Underwriters. Any such payment by you shall not relieve any such Underwriter or
Underwriters of any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in Section 7(a)
hereof, the obligations of the several Underwriters to purchase such Option
Shares will be subject (as of the date hereof and as of the date of payment and
delivery for such Option Shares) to the accuracy of and compliance with the
representations, warranties and agreements of the Company and the Selling
Shareholders herein, to the accuracy of the statements of the Company, the
Selling Shareholders and officers of the Company made pursuant to the provisions
hereof, to the performance by the Company and the Selling Shareholders of their
respective obligations hereunder, to the
22.
<PAGE>
conditions set forth in Section 6 hereof, and to the condition that all
proceedings taken at or prior to the payment date in connection with the sale
and transfer of such Option Shares shall be satisfactory in form and substance
to you and to Underwriters' Counsel, and you shall have been furnished with
all such documents, certificates and opinions as you may request in order to
evidence the accuracy and completeness of any of the representations,
warranties or statements, the performance of any of the covenants or
agreements of the Company [and the Selling Shareholders] or the satisfaction
of any of the conditions herein contained.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmle ss each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject (including, without
limitation, in its capacity as an Underwriter or as a "qualified independent
underwriter" within the meaning of Schedule E of the Bylaws of the NASD),
under the Act, the Exchange Act or otherwise, specifically including, but not
limited to, losses, claims, damages or liabilities (or actions in respect
thereof) arising out of or based upon (i) any breach of any representation,
warranty, agreement or covenant of the Company herein contained, (ii) any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(iii) any untrue statement or alleged untrue statement of any material fact
contained in any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and agrees to reimburse each Underwriter for any legal
or other expenses reasonably incurred by it in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, such Preliminary
Prospectus or the Prospectus, or any such amendment or supplement thereto, in
reliance upon, and in conformity with, written information relating to any
Underwriter furnished to the Company by such Underwriter, directly or through
you, specifically for use in the preparation thereof and, provided further,
that the indemnity agreement provided in this Section 8(a) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any losses, claims, damages, liabilities or actions
based upon any untrue statement or alleged untrue statement of material fact
or omission or alleged omission to state therein a material fact purchased
Shares, if a copy of the Prospectus in which such untrue statement or alleged
untrue statement or omission or alleged omission was corrected had not been
sent or given to such person within the time required by the Act and the Rules
and Regulations, unless such failure is the result of noncompliance by the
Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(a) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each person,
if any, who controls any Underwriter within the meaning of the Act or the
Exchange Act. This indemnity agreement shall be in addition to any liabilities
which the Company may otherwise have.
(b) Each Selling Shareholder, severally and not jointly,
agrees to indemnify and hold harmless each Underwriter against any losses,
claims, damages or liabilities, joint or several, to which such Underwriter
may become subject (including, without limitation, in its capacity as an
Underwriter or as a "qualified independent underwriter" within the meaning of
Schedule E or the Bylaws of the NASD) under the Act, the Exchange Act or
otherwise, specifically including, but not limited to, losses, claims, damages
or liabilities (or actions in respect thereof) arising out of or based upon
(i) any breach of any representation, warranty, agreement or covenant of such
Selling Shareholder herein contained, (ii) any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement
or any amendment or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or (iii) any untrue statement or
alleged untrue statement of any material fact contained in any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, in the case of subparagraphs (ii) and (iii) of
this Section 8(b) to the
23.
<PAGE>
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company or such
Underwriter by such Selling Shareholder, directly or through such Selling
Shareholder's representatives, specifically for use in the preparation
thereof, and agrees to reimburse each Underwriter for any legal or other
expenses reasonably incurred by it in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement provided in this Section 8(b) with
respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any losses, claims, damages,
liabilities or actions based upon any untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state therein
a material fact purchased Shares, if a copy of the Prospectus in which such
untrue statement or alleged untrue statement or omission or alleged omission
was corrected had not been sent or given to such person within the time
required by the Act and the Rules and Regulations, unless such failure is the
result of noncompliance by the Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(b) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each person,
if any, who controls any Underwriter within the meaning of the Act or the
Exchange Act. This indemnity agreement shall be in addition to any liabilities
which such Selling Shareholder may otherwise have.
(c) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company and each Selling Shareholder against
any losses, claims, damages or liabilities, joint or several, to which the
Company or such Selling Shareholder may become subject under the Act or
otherwise, specifically including, but not limited to, losses, claims, damages
or liabilities (or actions in respect thereof) arising out of or based upon
(i) any breach of any representation, warranty, agreement or covenant of such
Underwriter herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any untrue statement or alleged
untrue statement of any material fact contained in any Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in the case of subparagraphs (ii) and (iii) of this
Section 8(c) to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company by such Underwriter, directly or through you, specifically for use in
the preparation thereof, and agrees to reimburse the Company and each such
Selling Shareholder for any legal or other expenses reasonably incurred by the
Company and each such Selling Shareholder in connection with investigating or
defending any such loss, claim, damage, liability or action.
The indemnity agreement in this Section 8(c) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each officer
of the Company who signed the Registration Statement and each director of the
Company, each Selling Shareholder and each person, if any, who controls the
Company or any Selling Shareholder within the meaning of the Act or the
Exchange Act. This indemnity agreement shall be in addition to any liabilities
which each Underwriter may otherwise have.
(d) Promptly after receipt by an indemnified party under
this Section 8 of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section 8, notify the indemnifying party in
writing of the commencement thereof but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise than under this Section 8. In case any such
action is brought against any indemnified party, and it notified the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it shall elect by
written notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party; provided,
however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties that are different from
24.
<PAGE>
or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assume
such legal defenses and to otherwise participate in the defense of such action
on behalf of such indemnified party or parties. Upon receipt of notice from
the indemnifying party to such indemnified party of the indemnifying party's
election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for the
expenses of more than one separate counsel (together with appropriate local
counsel) approved by the indemnifying party representing all the indemnified
parties under Section 8(a), 8(b) or 8(c) hereof who are parties to such
action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action or (iii)
the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. In no event shall
any indemnifying party be liable in respect of any amounts paid in settlement
of any action unless the indemnifying party shall have approved the terms of
such settlement; provided that such consent shall not be unreasonably
withheld. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnification could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on all claims that are the subject matter
of such proceeding.
(e) In order to provide for just and equitable contribution
in any action in which a claim for indemnification is made pursuant to this
Section 8 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification
may not be enforced in such case notwithstanding the fact that this Section 8
provides for indemnification in such case, all the parties hereto shall
contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (after contribution from others) in such proportion so
that, except as set forth in Section 8(f) hereof, the Underwriters severally
and not jointly are responsible pro rata for the portion represented by the
percentage that the underwriting discount bears to the initial public offering
price, and the Company and the Selling Shareholders are responsible for the
remaining portion, provided, however, that (i) no Underwriter shall be
required to contribute any amount in excess of the amount by which the
underwriting discount applicable to the Shares purchased by such Underwriter
exceeds the amount of damages which such Underwriter has otherwise required to
pay and (ii) no person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation. The
contribution agreement in this Section 8(e) shall extend upon the same terms
and conditions to, and shall inure to the benefit of, each person, if any, who
controls any Underwriter, the Company or any Selling Shareholder within the
meaning of the Act or the Exchange Act and each officer of the Company who
signed the Registration Statement and each director of the Company.
(f) The liability of each Selling Shareholder under the
representations, warranties and agreements contained herein and under the
indemnity agreements contained in the provisions of this Section 8 shall be
limited to an amount equal to the initial public offering price of the Selling
Shareholder Shares sold by such Selling Shareholder to the Underwriters minus
the amount of the underwriting discount paid thereon to the Underwriters by
such Selling Shareholder. The Company and such Selling Shareholders may agree,
as among themselves and without limiting the rights of the Underwriters under
this Agreement, as to the respective amounts of such liability for which they
each shall be responsible.
(g) The parties to this Agreement hereby acknowledge that
they are sophisticated business persons who were represented by counsel during
the negotiations regarding the provisions hereof including, without
limitation, the provisions of this Section 8, and are fully informed regarding
said provisions. They further acknowledge that the provisions of this Section
8 fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and Prospectus as required by
the Act and the Exchange Act.
25.
<PAGE>
9. Representations, Warranties, Covenants and Agreements to Survive
Delivery. All representations, warranties, covenants and agreements of the
Company, the Selling Shareholders and the Underwriters herein or in
certificates delivered pursuant hereto, and the indemnity and contribution
agreements contained in Section 8 hereof shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter within the meaning of
the Act or the Exchange Act, or by or on behalf of the Company or any Selling
Shareholder, or any of their officers, directors or controlling persons within
the meaning of the Act or the Exchange Act, and shall survive the delivery of
the Shares to the several Underwriters hereunder or termination of this
Agreement.
10. Substitution of Underwriters. If any Underwriter or Underwriters
shall fail to take up and pay for the number of Firm Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such Firm
Shares in accordance with the terms hereof, and if the aggregate number of
Firm Shares that such defaulting Underwriter or Underwriters so agreed but
failed to purchase does not exceed 10% of the Firm Shares, the remaining
Underwriters shall be obligated, severally in proportion to their respective
commitments hereunder, to take up and pay for the Firm Shares of such
defaulting Underwriter or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate
number of Firm Shares that such defaulting Underwriter or Underwriters agreed
but failed to take up and pay for exceeds 10% of the Firm Shares, the
remaining Underwriters shall have the right, but shall not be obligated, to
take up and pay for (in such proportions as may be agreed upon among them) the
Firm Shares that the defaulting Underwriter or Underwriters so agreed but
failed to purchase. If such remaining Underwriters do not, at the Closing
Date, take up and pay for the Firm Shares that the defaulting Underwriter or
Underwriters so agreed but failed to purchase, the Closing Date shall be
postponed for twenty-four (24) hours to allow the several Underwriters the
privilege of substituting within twenty-four (24) hours (including
non-business hours) another underwriter or underwriters (which may include any
nondefaulting Underwriter) satisfactory to the Company. If no such underwriter
or underwriters shall have been substituted as aforesaid by such postponed
Closing Date, the Closing Date may, at the option of the Company, be postponed
for a further twenty-four (24) hours, if necessary, to allow the Company the
privilege of finding another underwriter or underwriters, satisfactory to you,
to purchase the Firm Shares that the defaulting Underwriter or Underwriters so
agreed but failed to purchase. If it shall be arranged for the remaining
Underwriters or substituted underwriter or underwriters to take up the Firm
Shares of the defaulting Underwriter or Underwriters as provided in this
Section 10, (i) the Company shall have the right to postpone the time of
delivery for a period of not more than seven (7) full business days, in order
to effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and
the Company agrees promptly to file any amendments to the Registration
Statement, supplements to the Prospectus or other such documents that may
thereby be made necessary, and (ii) the respective number of Firm Shares to be
purchased by the remaining Underwriters and substituted underwriter or
underwriters shall be taken as the basis of their underwriting obligation. If
the remaining Underwriters shall not take up and pay for all such Firm Shares
so agreed to be purchased by the defaulting Underwriter or Underwriters or
substitute another underwriter or underwriters as aforesaid and the Company
shall not find or shall not elect to seek another underwriter or underwriters
for such Firm Shares as aforesaid, then this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 10, neither the Company nor any Selling
Shareholder shall be liable to any Underwriter (except as provided in Sections
5 and 8 hereof) nor shall any Underwriter (other than an Underwriter who shall
have failed, otherwise than for some reason permitted under this Agreement, to
purchase the number of Firm Shares agreed by such Underwriter to be purchased
hereunder, which Underwriter shall remain liable to the Company, the Selling
Shareholders and the other Underwriters for damages, if any, resulting from
such default) be liable to the Company or any Selling Shareholder (except to
the extent provided in Sections 5 and 8 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 10.
26.
<PAGE>
11. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective at the earlier of
(i) 6:30 A.M., San Francisco time, on the first full business day following
the effective date of the Registration Statement or (ii) the time of the
initial public offering of any of the Shares by the Underwriters after the
Registration Statement becomes effective. The time of the initial public
offering shall mean the time of the release by you, for publication, of the
first newspaper advertisement relating to the Shares, or the time at which the
Shares are first generally offered by the Underwriters to the public by
letter, telephone, telegram or telecopy, whichever shall first occur. By
giving notice as set forth in Section 12 before the time this Agreement
becomes effective, you, as Representatives of the several Underwriters, or the
Company, may prevent this Agreement from becoming effective without liability
of any party to any other party, except as provided in Sections 4(j), 5 and 8
hereof.
(b) You, as Representatives of the several Underwriters,
shall have the right to terminate this Agreement by giving notice as
hereinafter specified at any time on or prior to the Closing Date or on or
prior to any later date on which Option Shares are to be purchased, as the
case may be, (i) if the Company or any Selling Shareholder shall have failed,
refused or been unable to perform any agreement on its part to be performed,
or because any other condition of the Underwriters' obligations hereunder
required to be fulfilled is not fulfilled, including, without limitation, any
change in the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries considered
as one enterprise from that set forth in the Registration Statement or
Prospectus, which, in your sole judgment, is material and adverse, or (ii) if
additional material governmental restrictions, not in force and effect on the
date hereof, shall have been imposed upon trading in securities generally or
minimum or maximum prices shall have been generally established on the New
York Stock Exchange or on the American Stock Exchange or in the over the
counter market by the NASD, or trading in securities generally shall have been
suspended on either such exchange or in the over the counter market by the
NASD, or if a banking moratorium shall have been declared by federal, New York
or California authorities, or (iii) if the Company shall have sustained a loss
by strike, fire, flood, earthquake, accident or other calamity of such
character as to interfere materially with the conduct of the business and
operations of the Company regardless of whether or not such loss shall have
been insured, or (iv) if there shall have been a material adverse change in
the general political or economic conditions or financial markets as in your
reasonable judgment makes it inadvisable or impracticable to proceed with the
offering, sale and delivery of the Shares, or (v) if there shall have been an
outbreak or escalation of hostilities or of any other insurrection or armed
conflict or the declaration by the United States of a national emergency
which, in the reasonable opinion of the Representatives, makes it
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Prospectus. In the event of termination pursuant to
subparagraph (i) above, the Company shall remain obligated to pay costs and
expenses pursuant to Sections 4(j), 5 and 8 hereof. Any termination pursuant
to any of subparagraphs (ii) through (v) above shall be without liability of
any party to any other party except as provided in Sections 5 and 8 hereof.
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 11, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case confirmed
by letter. If the Company shall elect to prevent this Agreement from becoming
effective, the Company shall promptly notify you by telephone, telecopy or
telegram, in each case, confirmed by letter.
12. Notices. All notices or communications hereunder, except as
herein otherwise specifically provided, shall be in writing and if sent to you
shall be mailed, delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter) to you c/o Robertson, Stephens & Company
LLC, 555 California Street, Suite 2600, San Francisco, California 94104,
telecopier number (415) 781-0278, Attention: General Counsel; if sent to the
Company, such notice shall be mailed, delivered, telegraphed (and confirmed by
letter) or telecopied (and confirmed by letter) to ICT Group, Inc., 800 Town
Center Drive, Langhorne, PA 19047, telecopier number (215) 757-4538,
Attention: Chief Executive Officer; if sent to one or more of the Selling
Shareholders, such notice shall be sent mailed, delivered, telegraphed (and
confirmed by letter) or telecopied (and confirmed by letter) to [NAME OF
ATTORNEY-IN-FACT FOR SELLING SHAREHOLDERS], as Attorney-in-Fact for the
Selling Shareholders, at ICT Group, Inc., 800 Town Center Drive, Langhorne, PA
19047, telecopier number (215) 757-4538.
27.
<PAGE>
13. Parties. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters and the Company and the Selling
Shareholders and their respective executors, administrators, successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any person or entity, other than the parties hereto and
their respective executors, administrators, successors and assigns, and the
controlling persons within the meaning of the Act or the Exchange Act,
officers and directors referred to in Section 8 hereof, any legal or equitable
right, remedy or claim in respect of this Agreement or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of the parties
hereto and their respective executors, administrators, successors and assigns
and said controlling persons and said officers and directors, and for the
benefit of no other person or entity. No purchaser of any of the Shares from
any Underwriter shall be construed a successor or assign by reason merely of
such purchase.
In all dealings with the Company and the Selling Shareholders under
this Agreement, you shall act on behalf of each of the several Underwriters,
and the Company and the Selling Shareholders shall be entitled to act and rely
upon any statement, request, notice or agreement made or given by you jointly
or by Robertson, Stephens & Company LLC on behalf of you.
14. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California.
15. Counterparts. This Agreement may be signed in several
counterparts, each of which will constitute an original.
28.
<PAGE>
If the foregoing correctly sets forth the understanding among the
Company, the Selling Shareholders and the several Underwriters, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among the Company, the Selling
Shareholders and the several Underwriters.
Very truly yours,
ICT Group, Inc.
By:
--------------------------------------
SELLING SHAREHOLDERS
By:
--------------------------------------
Attorney-in-Fact for the Selling Shareholders
named in Schedule B hereto
ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN:
ROBERTSON, STEPHENS & COMPANY LLC
SMITH BARNEY INC.
On their behalf and on behalf of each of the
several Underwriters named in Schedule A
hereto.
By: ROBERTSON, STEPHENS & COMPANY LLC
By: ROBERTSON, STEPHENS & COMPANY, INC.
By:
-----------------------------------
Authorized Signatory
29.
<PAGE>
SCHEDULE A
Number of Firm
Shares To Be
Underwriters Purchased
------------ --------------
Robertson, Stephens & Company LLC....................
Smith Barney Inc. ...................................
----------------
Total....................................... 2,500,000
================
<PAGE>
SCHEDULE B
Number of
Company Shares
Company To Be Purchased
------- ---------------
ICT Group, Inc. 2,411,552
----------------
Total............................................... 2,411,552
================
Number of Selling Number of
Shareholder Shares Option Shares
Name of Selling Shareholder To Be Purchased To Be Offered
--------------------------- ------------------ --------------
John J. Brennan 0 187,500
Donald P. Brennan 0 187,500
John L. Magee 54,000 0
John D. Campbell 9,000 0
Robert F. Small 20,250 0
Dean J. Kilpatrick 3,375 0
Christopher J. Ungarino 1,823 0
---------- ----------
Total............................ 88,448 375,000
========== ==========
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ICT GROUP, INC.
1. The name of the corporation is ICT Group, Inc.
2. The address of this corporation's current registered office
in this Commonwealth is (the Department is hereby authorized
to correct the following information to conform to the
records of the Department): 800 Town Center Drive,
Langhorne, Pennsylvania, 19047, Bucks County.
3. The corporation was incorporated under the provisions of the Business
Corporation Law, Act of May 5, 1933, as amended, and shall have
unlimited power to engage in and to do all lawful acts concerning any
or all lawful business for which corporations may be incorporated under
the Business Corporation Law, including, without limitation, providing
telemarketing and call center teleservices.
4. The date of incorporation is March 20, 1987.
5 The aggregate number of shares which the corporation shall have
authority to issue is Forty Five Million (45,000,000) of which Forty
Million (40,000,000) shares of the par value of $.01 per share shall be
Common Stock and Five Million (5,000,000) shares of the par value of
$.01 per share shall be Preferred Stock. The Board of Directors may
authorize the issuance from time to time of Preferred Stock in one or
more series and with designations, preferences, qualifications,
limitations, restrictions and special or relative rights (which may
differ with respect to each series) as the Board may fix by resolution.
Without limiting the foregoing, the Board of Directors is authorized to
fix with respect to each series:
(a) the number of shares which shall constitute the
series and the name of the series;
(b) the rate and times at which, and the preferences and
conditions under which, dividends shall be payable on
shares of the series, and the status of such
dividends as cumulative or non-cumulative and as
participating or non-participating;
(c) the prices, times and terms, if any, at or upon
which shares of the series shall be subject to
redemption;
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(d) the rights, if any, of holders of shares of the
series to convert such shares into, or to exchange
such shares for, shares of any other class of stock
of the corporation;
(e) the rights and preferences, if any, of the holders
of shares of the series upon any liquidation,
dissolution or winding up of the affairs of, or
upon any distribution of the assets of, the
corporation;
(f) the limitations, if any, applicable while such series
is outstanding, on the payment of dividends or making
of distributions on, or the acquisition of, the
common stock of any other class of stock which does
not rank senior to the shares of the series; and
(g) the voting rights, if any, to be provided for
shares of the series.
6. Subchapters E (Sections 2541-2548), G (2561-2568), H (2571- 2576) and
Section 2538 of Subchapter D, all of Chapter 25 of the Business
Corporation Law of 1988, as amended, shall not be applicable to the
corporation.
7. Subchapter F (Section 2551-2556) of Chapter 25 of the
Business Corporation Law of 1988, as amended, shall be
applicable to the corporation.
8. The term of the corporation's existence is perpetual.
9. Any action required or permitted to be taken by the
shareholders of the corporation at any annual or special
meeting of shareholders of the corporation must be effected
at a duly called annual or special meeting of shareholders
any may not be taken or effected by a written consent of
shareholders in lieu thereof. Special meetings of the
shareholders may be called only by the Chairman of the Board
of Directors, the President or a majority of the Board of
Directors of the corporation, and the business to be
conducted at any special meeting of shareholders shall be
limited to the business set forth in the notice of the
meeting.
10. The directors shall be divided into three classes, Class I, Class II
and Class III with respect to their terms of office. All classes shall
be as nearly equal in number as reasonably possible. Subject to such
limitations, when the number of Directors is changed, any newly-created
directorship or any decrease in directorships shall be apportioned
among the classes by action of the Board of
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Directors. The terms of office of one class shall expire each year.
11. The shareholders of the corporation shall not have the right
to cumulate their votes for the election of directors of the
corporation.
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AMENDED AND RESTATED BYLAWS
OF
ICT GROUP, INC.
(a Pennsylvania Registered Corporation)
ARTICLE I
Offices and Fiscal Year
Section 1.01. Registered Office.--The registered office of the
corporation in the Commonwealth of Pennsylvania shall be at 800 Town Center
Drive, Langhorne, Bucks County, until otherwise established by an amendment of
the articles of incorporation (the "articles") or by the board of directors
and a record of such change is filed with the Department of State in the
manner provided by law.
Section 1.02. Other Offices.--The corporation may also have offices
at such other places within or without the Commonwealth of Pennsylvania as the
board of directors may from time to time appoint or the business of the
corporation may require.
Section 1.03. Fiscal Year.--The fiscal year of the corporation shall
begin on the first day of January in each year.
ARTICLE II
Notice - Waivers - Meetings Generally
Section 2.01. Manner of Giving Notice.
(a) General Rule.--Whenever written notice is required to be given to
any person under the provisions of the Pennsylvania Business Corporation Law
or by the articles or these bylaws, it may be given to the person either
personally or by sending a copy thereof by first class or express mail,
postage prepaid, or by telegram (with messenger service specified), telex or
TWX (with answerback received) or courier service, charges prepaid, or by
facsimile transmission, to the address (or to the telex, TWX, facsimile or
telephone number) of the person appearing on the books of the corporation or,
in the case of directors, supplied by the director to the corporation for the
purpose of notice. If the notice is sent
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by mail, telegraph or courier service, it shall be deemed to have been given to
the person entitled thereto when deposited in the United States mail or with a
telegraph office or courier service for delivery to that person or, in the case
of telex or TWX, when dispatched or, in the case of facsimile transmission, when
received. A notice of meeting shall specify the place, day and hour of the
meeting and any other information required by any other provision of the
Pennsylvania Business Corporation Law, the articles or these bylaws.
(b) Bulk Mail.--If the corporation has more than 30 shareholders,
notice of any regular or special meeting of the shareholders, or any other
notice required by the Pennsylvania Business Corporation Law or by the
articles or these bylaws to be given to all shareholders or to all holders of
a class or series of shares, may be given by any class of postpaid mail if the
notice is deposited in the United States mail at least 20 days prior to the
day named for the meeting or any corporate or shareholder action specified in
the notice.
(c) Adjourned Shareholder Meetings.--When a meeting of shareholders
is adjourned, it shall not be necessary to give any notice of the adjourned
meeting or of the business to be transacted at an adjourned meeting, other
than by announcement at the meeting at which the adjournment is taken, unless
the board fixes a new record date for the adjourned meeting in which event
notice shall be given in accordance with Section 2.03.
Section 2.02. Notice of Meetings of Board of Directors.--Notice of a
regular meeting of the board of directors need not be given. Notice of every
special meeting of the board of directors shall be given to each director by
telephone or in writing at least 24 hours (in the case of notice by telephone,
telex, TWX or facsimile transmission) or 48 hours (in the case of notice by
telegraph, courier service or express mail) or five days (in the case of
notice by first class mail) before the time at which the meeting is to be
held. Every such notice shall state the time and place of the meeting. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the board need be specified in a notice of the meeting.
Section 2.03. Notice of Meetings of Shareholders.
(a) General Rule.--Except as otherwise provided in Section 2.01(b),
written notice of every meeting of the shareholders shall be given by, or at
the direction of, the secretary or other authorized person to each shareholder
of record entitled to vote at the meeting at least (1) ten days prior to the
day named for a meeting (and, in case of a meeting called to consider a
merger, consolidation, share exchange or division, to each shareholder of
record not entitled to vote at the meeting) called to consider a fundamental
change under 15 Pa.C.S. Chapter 19 or (2) five days prior to the day named for
the meeting in any other case. If the secretary neglects or refuses to give
notice of a meeting, the person or persons calling the meeting may do so. In
the case of a special meeting of shareholders, the notice shall specify the
general nature of the business to be transacted.
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(b) Notice of Action by Shareholders on Bylaws.--In the case of a
meeting of shareholders that has as one of its purposes action on the bylaws,
written notice shall be given to each shareholder that the purpose, or one of
the purposes, of the meeting is to consider the adoption, amendment or repeal
of the bylaws. There shall be included in, or enclosed with, the notice a copy
of the proposed amendment or a summary of the changes to be effected thereby.
(c) Notice of Action by Shareholders on Fundamental Change.--In the
case of a meeting of the shareholders that has as one of its purposes action
with respect to any fundamental change under 15 Pa.C.S. Chapter 19, each
shareholder shall be given, together with written notice of the meeting, a
copy or summary of the amendment or plan to be considered at the meeting in
compliance with the provisions of Chapter 19.
(d) Notice of Action by Shareholders Giving Rise to Dissenters
Rights.--In the case of a meeting of the shareholders that has as one of its
purposes action that would give rise to dissenters rights under the provisions
of 15 Pa.C.S. Subchapter 15D, each shareholder shall be given, together with
written notice of the meeting:
(1) a statement that the shareholders have a right to
dissent and obtain payment of the fair value of their shares by
complying with the provisions of Subchapter 15D (relating to
dissenters rights); and
(2) a copy of Subchapter 15D.
Section 2.04. Waiver of Notice.
(a) Written Waiver.--Whenever any written notice is required to be
given under the provisions of the Pennsylvania Business Corporation Law, the
articles or these bylaws, a waiver thereof in writing, signed by the person or
persons entitled to the notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of the notice. Neither the
business to be transacted at, nor the purpose of, a meeting need be specified
in the waiver of notice of the meeting.
(b) Waiver by Attendance.--Attendance of a person at any meeting
shall constitute a waiver of notice of the meeting except where a person
attends a meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting was not
lawfully called or convened.
Section 2.05. Modification of Proposal Contained in Notice.--Whenever
the language of a proposed resolution is included in a written notice of a
meeting required to be given under the provisions of the Pennsylvania Business
Corporation Law or the articles or these bylaws, the meeting considering the
resolution may without further notice adopt it with such clarifying or other
amendments as do not enlarge its original purpose.
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Section 2.06. Exception to Requirement of Notice.
(a) General Rule.--Whenever any notice or communication is required
to be given to any person under the provisions of the Pennsylvania Business
Corporation Law or by the articles or these bylaws or by the terms of any
agreement or other instrument or as a condition precedent to taking any
corporate action and communication with that person is then unlawful, the
giving of the notice or communication to that person shall not be required.
(b) Shareholders Without Forwarding Addresses.--Notice or other
communications need not be sent to any shareholder with whom the corporation
has been unable to communicate for more than 24 consecutive months because
communications to the shareholder are returned unclaimed or the shareholder
has otherwise failed to provide the corporation with a current address.
Whenever the shareholder provides the corporation with a current address, the
corporation shall commence sending notices and other communications to the
shareholder in the same manner as to other shareholders.
Section 2.07. Use of Conference Telephone and Similar Equipment.--Any
director may participate in any meeting of the board of directors, and the
board of directors may provide by resolution with respect to a specific
meeting or with respect to a class of meetings that one or more persons may
participate in a meeting of the shareholders of the corporation, by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other. Participation in a
meeting pursuant to this section shall constitute presence in person at the
meeting.
ARTICLE III
Shareholders
Section 3.01. Place of Meeting.--All meetings of the shareholders of
the corporation shall be held at the registered office of the corporation
unless another place is designated by the board of directors in the notice of
a meeting.
Section 3.02. Annual Meeting.--The board of directors may fix and
designate the date and time of the annual meeting of the shareholders, but if
no such date and time is fixed and designated by the board, the meeting for
any calendar year shall be held on the last Thursday of March in such year, if
not a legal holiday under the laws of Pennsylvania, and, if a legal holiday,
then on the next succeeding business day, not a Saturday, at 10:00 o'clock
A.M., and at said meeting the shareholders then entitled to vote shall elect
directors and shall transact such other business as may properly be brought
before the meeting. If the annual meeting shall not have been called and held
within six months after the designated time, any shareholder may call the
meeting at any time thereafter.
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Section 3.03. Special Meetings.--Special meetings of the shareholders
may be called at any time by the Chairman, the President or by resolution of
the board of directors, any of which may fix the date, time and place of the
meeting. If the board does not fix the date, time or place of the meeting, it
shall be the duty of the secretary to do so. A date fixed by the secretary
shall not be more than 60 days after the date of the adoption of the
resolution of the board calling the special meeting.
Section 3.04. Quorum and Adjournment.
(a) General Rule.--A meeting of shareholders of the corporation duly
called shall not be organized for the transaction of business unless a quorum
is present. The presence of shareholders entitled to cast at least a majority
of the votes that all shareholders are entitled to cast on a particular matter
to be acted upon at the meeting shall constitute a quorum for the purposes of
consideration and action on the matter. Shares of the corporation owned,
directly or indirectly, by it and controlled, directly or indirectly, by the
board of directors of this corporation, as such, shall not be counted in
determining the total number of outstanding shares for quorum purposes at any
given time.
(b) Withdrawal of a Quorum.--The shareholders present at a duly
organized meeting can continue to do business until adjournment
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
(c) Adjournments Generally.--Any regular or special meeting of the
shareholders, including one at which directors are to be elected and one which
cannot be organized because a quorum has not attended, may be adjourned for
such period and to such place as the shareholders present and entitled to vote
shall direct.
(d) Electing Directors at Adjourned Meeting.--Those shareholders
entitled to vote who attend a meeting called for the election of directors
that has been previously adjourned for lack of a quorum, although less than a
quorum as fixed in this section, shall nevertheless constitute a quorum for
the purpose of electing directors.
(e) Other Action in Absence of Quorum.-- Those shareholders entitled
to vote who attend a meeting of shareholders that has been previously
adjourned for one or more periods aggregating at least 15 days because of an
absence of a quorum, although less than a quorum as fixed in this section,
shall nevertheless constitute a quorum for the purpose of acting upon any
matter set forth in the notice of the meeting if the notice states that those
shareholders who attend the adjourned meeting shall nevertheless constitute a
quorum for the purpose of acting upon the matter.
Section 3.05. Action by Shareholders.--Except as otherwise provided
in the Pennsylvania Business Corporation Law or the articles or these bylaws,
whenever any corporate action is to be taken by vote of the shareholders of
the corporation, it shall be authorized upon receiving the affirmative vote of
a majority of the votes cast by all
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shareholders entitled to vote thereon and, if any shareholders are entitled to
vote thereon as a class, upon receiving the affirmative vote of a majority of
the votes cast by the shareholders entitled to vote as a class.
Section 3.06. Organization.--At every meeting of the shareholders,
the chairman of the board, if there be one, or, in the case of vacancy in
office or absence of the chairman of the board, one of the following persons
present in the order stated: the vice chairman of the board, if there be one,
the president, the vice presidents in their order of rank and seniority, or a
person chosen by vote of the shareholders present, shall act as chairman of
the meeting. The secretary or, in the absence of the secretary, an assistant
secretary, or, in the absence of both the secretary and assistant secretaries,
a person appointed by the chairman of the meeting, shall act as secretary of
the meeting.
Section 3.07. Voting Rights of Shareholders.--Unless otherwise
provided in the articles, every shareholder of the corporation shall be
entitled to one vote for every share standing in the name of the shareholder
on the books of the corporation.
Section 3.08. Voting and Other Action by Proxy.
(a) General Rule.--
(1) Every shareholder entitled to vote at a meeting of
shareholders may authorize another person to act for the shareholder
by proxy.
(2) The presence of, or vote or other action at a meeting of
shareholders by a proxy of a shareholder shall constitute the
presence of, or vote or action by the shareholder.
(3) Where two or more proxies of a shareholder are present,
the corporation shall, unless otherwise expressly provided in the
proxy, accept as the vote of all shares represented thereby the vote
cast by a majority of them and, if a majority of the proxies cannot
agree whether the shares represented shall be voted or upon the
manner of voting the shares, the voting of the shares shall be
divided equally among those persons.
(b) Execution and Filing.--Every proxy shall be executed in writing
by the shareholder or by the duly authorized attorney-in-fact of the
shareholder and filed with the secretary of the corporation. A telegram,
telex, cablegram, datagram or similar transmission from a shareholder or
attorney-in-fact, or a photographic, facsimile or similar reproduction of a
writing executed by a shareholder or attorney-in-fact:
(1) may be treated as properly executed for purposes of this
subsection; and
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(2) shall be so treated if it sets forth a confidential and
unique identification number or other mark furnished by the
corporation to the shareholder for the purposes of a particular
meeting or transaction.
(c) Revocation.--A proxy, unless coupled with an interest, shall be
revocable at will, notwithstanding any other agreement or any provision in the
proxy to the contrary, but the revocation of a proxy shall not be effective
until written notice thereof has been given to the secretary of the
corporation. An unrevoked proxy shall not be valid after three years from the
date of its execution unless a longer time is expressly provided therein. A
proxy shall not be revoked by the death or incapacity of the maker unless,
before the vote is counted or the authority is exercised, written notice of
the death or incapacity is given to the secretary of the corporation.
(d) Expenses.--The corporation shall pay the reasonable expenses of
solicitation of votes, proxies or consents of shareholders by or on behalf of
the board of directors or its nominees for election to the board, including
solicitation by professional proxy solicitors and otherwise.
Section 3.09. Voting by Fiduciaries and Pledgees.--Shares of the
corporation standing in the name of a trustee or other fiduciary and shares
held by an assignee for the benefit of creditors or by a receiver may be voted
by the trustee, fiduciary, assignee or receiver. A shareholder whose shares
are pledged shall be entitled to vote the shares until the shares have been
transferred into the name of the pledgee, or a nominee of the pledgee, but
nothing in this section shall affect the validity of a proxy given to a
pledgee or nominee.
Section 3.10. Voting by Joint Holders of Shares.
(a) General Rule.--Where shares of the corporation are held jointly
or as tenants in common by two or more persons, as fiduciaries or otherwise:
(1) if only one or more of such persons is present in person
or by proxy, all of the shares standing in the names of such persons
shall be deemed to be represented for the purpose of determining a
quorum and the corporation shall accept as the vote of all the shares
the vote cast by a joint owner or a majority of them; and
(2) if the persons are equally divided upon whether the
shares held by them shall be voted or upon the manner of voting the
shares, the voting of the shares shall be divided equally among the
persons without prejudice to the rights of the joint owners or the
beneficial owners thereof among themselves.
(b) Exception.--If there has been filed with the secretary of the
corporation a copy, certified by an attorney at law to be correct, of the
relevant portions of the agreement under which the shares are held or the
instrument by which the trust or estate was created or the order of court
appointing them or of an order of court directing the voting of the shares,
the
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persons specified as having such voting power in the document latest in date of
operative effect so filed, and only those persons, shall be entitled to vote the
shares but only in accordance therewith.
Section 3.11. Voting by Corporations.
(a) Voting by Corporate Shareholders.--Any corporation that is a
shareholder of this corporation may vote at meetings of shareholders of this
corporation by any of its officers or agents, or by proxy appointed by any
officer or agent, unless some other person, by resolution of the board of
directors of the other corporation or a provision of its articles or bylaws, a
copy of which resolution or provision certified to be correct by one of its
officers has been filed with the secretary of this corporation, is appointed
its general or special proxy in which case that person shall be entitled to
vote the shares.
(b) Controlled Shares.--Shares of this corporation owned, directly or
indirectly, by it and controlled, directly or indirectly, by the board of
directors of this corporation, as such, shall not be voted at any meeting and
shall not be counted in determining the total number of outstanding shares for
voting purposes at any given time.
Section 3.12. Determination of Shareholders of Record.
(a) Fixing Record Date.--The board of directors may fix a time prior
to the date of any meeting of shareholders as a record date for the
determination of the shareholders entitled to notice of, or to vote at, the
meeting, which time, except in the case of an adjourned meeting, shall be not
more than 90 days prior to the date of the meeting of shareholders. Only
shareholders of record on the date fixed shall be so entitled notwithstanding
any transfer of shares on the books of the corporation after any record date
fixed as provided in this subsection. The board of directors may similarly fix
a record date for the determination of shareholders of record for any other
purpose. When a determination of shareholders of record has been made as
provided in this section for purposes of a meeting, the determination shall
apply to any adjournment thereof unless the board fixes a new record date for
the adjourned meeting.
(b) Determination When a Record Date is Not Fixed.--If a record date
is not fixed:
(1) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the
close of business on the day next preceding the day on which notice
is given.
(2) The record date for determining shareholders for any
other purpose shall be at the close of business on the day on which
the board of directors adopts the resolution relating thereto.
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(c) Certification by Nominee.--The board of directors may adopt a
procedure whereby a shareholder of the corporation may certify in writing to
the corporation that all or a portion of the shares registered in the name of
the shareholder are held for the account of a specified person or persons.
Upon receipt by the corporation of a certification complying with the
procedure, the persons specified in the certification shall be deemed, for the
purposes set forth in the certification, to be the holders of record of the
number of shares specified in place of the shareholder making the
certification.
Section 3.13. Voting Lists.
(a) General Rule.--The officer or agent having charge of the transfer
books for shares of the corporation shall make a complete list of the
shareholders entitled to vote at any meeting of shareholders, arranged in
alphabetical order, with the address of and the number of shares held by each.
The list shall be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any shareholder during the whole
time of the meeting for the purposes thereof except that, if the corporation
has 5,000 or more shareholders, in lieu of the making of the list the
corporation may make the information therein available at the meeting by any
other means.
(b) Effect of List.--Failure to comply with the requirements of this
section shall not affect the validity of any action taken at a meeting prior
to a demand at the meeting by any shareholder entitled to vote thereat to
examine the list. The original share register or transfer book, or a duplicate
thereof kept in the Commonwealth of Pennsylvania, shall be prima facie
evidence as to who are the shareholders entitled to examine the list or share
register or transfer book or to vote at any meeting of shareholders.
Section 3.14. Judges of Election.
(a) Appointment.--In advance of any meeting of shareholders of the
corporation, the board of directors may appoint judges of election, who need
not be shareholders, to act at the meeting or any adjournment thereof. If
judges of election are not so appointed, the presiding officer of the meeting
may, and on the request of any shareholder shall, appoint judges of election
at the meeting. The number of judges shall be one or three. A person who is a
candidate for an office to be filled at the meeting shall not act as a judge.
(b) Vacancies.--In case any person appointed as a judge fails to
appear or fails or refuses to act, the vacancy may be filled by appointment
made by the board of directors in advance of the convening of the meeting or
at the meeting by the presiding officer thereof.
(c) Duties.--The judges of election shall determine the number of
shares outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, and the authenticity, validity and effect
of proxies, receive votes or ballots, hear and determine all challenges and
questions in any way arising in connection with nominations by shareholders or
the right to vote, count and tabulate all votes, determine the result and do
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such acts as may be proper to conduct the election or vote with fairness to
all shareholders. The judges of election shall perform their duties
impartially, in good faith, to the best of their ability and as expeditiously
as is practical. If there are three judges of election, the decision, act or
certificate of a majority shall be effective in all respects as the decision,
act or certificate of all.
(d) Report.--On request of the presiding officer of the meeting or of
any shareholder, the judges shall make a report in writing of any challenge or
question or matter determined by them, and execute a certificate of any fact
found by them. Any report or certificate made by them shall be prima facie
evidence of the facts stated therein.
Section 3.15. Minors as Security Holders.--The corporation may treat
a minor who holds shares or obligations of the corporation as having capacity
to receive and to empower others to receive dividends, interest, principal and
other payments or distributions, to vote or express consent or dissent and to
make elections and exercise rights relating to such shares or obligations
unless, in the case of payments or distributions on shares, the corporate
officer responsible for maintaining the list of shareholders or the transfer
agent of the corporation or, in the case of payments or distributions on
obligations, the treasurer or paying officer or agent has received written
notice that the holder is a minor.
Section 3.16. Notifications of Nominations.--Subject to the rights of
holders of any class or series of preferred shares, nominations for the
election of directors may be made or proposed by or at the direction of the
board of directors or a proxy committee appointed by the board of directors,
or by any shareholder entitled to vote in the election of directors generally.
However, any such shareholder may nominate one or more persons for election as
directors at a meeting only if such shareholder has given timely notice in
proper written form of intent to make such nomination or nominations. To be
timely, a shareholder's notice must be received by the Secretary of the
corporation not less than 70 days nor more than 90 days prior to the first
anniversary of the previous year's annual meeting (or, in the case of a
special meeting, not earlier than the 90th day before such meeting and not
later than the later of (i) the 70th day prior to such meeting and (ii) the
10th day following the day on which notice of the meeting was mailed or public
announcement of the date of such meeting was made, whichever first occurs). To
be in proper written form, a shareholder's notice to the Secretary of the
corporation shall set forth:
(i) the name and address of the shareholder who intends
to make the nominations and of the person or persons to be nominated;
(ii) a representation that the shareholder is a holder of
record of shares of the corporation entitled to vote at such meeting
and, if applicable, intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice;
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(iii) a description of all arrangements or understandings
between the shareholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder;
(iv) such other information regarding each nominee to be
proposed by such shareholder as would be required to be included in a
proxy statement filed pursuant to the proxy rules of the Securities
and Exchange Commission had the nominee been nominated, or intended
to be nominated by the board of directors; and
(v) if applicable, the consent of each nominee to serve
as director of the corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination
of any person not made in compliance with the foregoing procedures.
ARTICLE IV
Board of Directors
Section 4.01. Powers; Personal Liability.
(a) General Rule.--Unless otherwise provided by statute, all powers
vested by law in the corporation shall be exercised by or under the authority
of, and the business and affairs of the corporation shall be managed under the
direction of, the board of directors.
(b) Personal Liability of Directors.--
(1) A director shall not be personally liable, as such, for
monetary damages (including, without limitation, any judgment, amount
paid in settlement, penalty, punitive damages or expense of any
nature (including, without limitation, attorneys' fees and
disbursements)) for any action taken, or any failure to take any
action, unless:
(i) the director has breached or failed to perform
the duties of his or her office under Subchapter 17B of the
Pennsylvania Business Corporation Law or any successor
provision; and
(ii) the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness.
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(2) The provisions of paragraph (1) shall not apply to the
responsibility or liability of a director pursuant to any criminal
statute, or the liability of a director for the payment of taxes
pursuant to local, State or Federal law.
(The provisions of this subsection (b) were first adopted by the shareholders
of the corporation on May 8, 1996.)
(c) Notation of Dissent.--A director of the corporation who is
present at a meeting of the board of directors, or of a committee of the
board, at which action on any corporate matter is taken on which the director
is generally competent to act, shall be presumed to have assented to the
action taken unless his or her dissent is entered in the minutes of the
meeting or unless the director files his or her written dissent to the action
with the secretary of the meeting before the adjournment thereof or transmits
the dissent in writing to the secretary of the corporation immediately after
the adjournment of the meeting. The right to dissent shall not apply to a
director who voted in favor of the action. Nothing in this section shall bar a
director from asserting that minutes of the meeting incorrectly omitted his or
her dissent if, promptly upon receipt of a copy of such minutes, the director
notifies the secretary, in writing, of the asserted omission or inaccuracy.
Section 4.02. Qualifications and Selection of Directors.
(a) Qualifications.--Each director of the corporation shall be a
natural person of full age who need not be a resident of the Commonwealth of
Pennsylvania or a shareholder of the corporation.
(b) Election of Directors.--In elections for directors, voting need
not be by ballot, unless required by vote of the shareholders before the
voting for the election of directors begins. The candidates receiving the
highest number of votes from each class or group of classes, if any, entitled
to elect directors separately up to the number of directors to be elected by
the class or group of classes shall be elected. If at any meeting of
shareholders, directors of more than one class are to be elected, each class
of directors shall be elected in a separate election.
Section 4.03. Number and Term of Office.
(a) Number.--The board of directors shall consist of such number of
directors, not less than three nor more than nine, as may be determined from
time to time by resolution of the board of directors.
(b) Term of Office.--Each director shall hold office until the
expiration of the term for which he or she was selected and until a successor
has been selected and qualified or until his or her earlier death, resignation
or removal. A decrease in the number of directors shall not have the effect of
shortening the term of any incumbent director.
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(c) Resignation.--Any director may resign at any time upon written
notice to the corporation. The resignation shall be effective upon receipt
thereof by the corporation or at such subsequent time as shall be specified in
the notice of resignation.
(d) Classified Board of Directors.--The directors shall be classified
in respect of the time for which they shall severally hold office as follows:
(1) Each class shall be as nearly equal in number as
possible.
(2) The term of office of at least one class shall expire in
each year.
(3) The members of each class shall be elected for a period
of three years.
Section 4.04. Vacancies.
(a) General Rule.--Vacancies in the board of directors, including
vacancies resulting from an increase in the number of directors, may be filled
by a majority vote of the remaining members of the board though less than a
quorum, or by a sole remaining director, and each person so selected shall be
a director to serve until the next selection of the class for which such
director has been chosen, and until a successor has been selected and
qualified or until his or her earlier death, resignation or removal.
(b) Action by Resigned Directors.--When one or more directors resign
from the board effective at a future date, the directors then in office,
including those who have so resigned, shall have power by the applicable vote
to fill the vacancies, the vote thereon to take effect when the resignations
become effective.
Section 4.05. Removal of Directors.
(a) Removal by the Shareholders.--The entire board of directors, or
any class of the board, or any individual director may be removed from office
by vote of the shareholders entitled to vote thereon only for cause. In case
the board or a class of the board or any one or more directors are so removed,
new directors may be elected at the same meeting. The repeal of a provision of
the articles or bylaws prohibiting, or the addition of a provision to the
articles or bylaws permitting, the removal by the shareholders of the board, a
class of the board or a director without assigning any cause shall not apply
to any incumbent director during the balance of the term for which the
director was selected.
(b) Removal by the Board.--The board of directors may declare vacant
the office of a director who has been judicially declared of unsound mind or
who has been convicted of an offense punishable by imprisonment for a term of
more than one year or if, within 60 days after notice of his or her selection,
the director does not accept the office either in writing or by attending a
meeting of the board of directors.
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Section 4.06. Place of Meetings.--Meetings of the board of directors
may be held at such place within or without the Commonwealth of Pennsylvania
as the board of directors may from time to time appoint or as may be
designated in the notice of the meeting.
Section 4.07. Organization of Meetings.--At every meeting of the
board of directors, the chairman of the board, if there be one, or, in the
case of a vacancy in the office or absence of the chairman of the board, one
of the following officers present in the order stated: the vice chairman of
the board, if there be one, the president, the vice presidents in their order
of rank and seniority, or a person chosen by a majority of the directors
present, shall act as chairman of the meeting. The secretary or, in the
absence of the secretary, an assistant secretary, or, in the absence of the
secretary and the assistant secretaries, any person appointed by the chairman
of the meeting, shall act as secretary of the meeting.
Section 4.08. Regular Meetings.--Regular meetings of the board of
directors shall be held at such time and place as shall be designated from
time to time by resolution of the board of directors.
Section 4.09. Special Meetings.--Special meetings of the board of
directors shall be held whenever called by the chairman or by two or more of
the directors.
Section 4.10. Quorum of and Action by Directors.
(a) General Rule.--A majority of the directors in office of the
corporation shall be necessary to constitute a quorum for the transaction of
business and the acts of a majority of the directors present and voting at a
meeting at which a quorum is present shall be the acts of the board of
directors.
(b) Action by Written Consent.--Any action required or permitted to
be taken at a meeting of the directors may be taken without a meeting if,
prior or subsequent to the action, a consent or consents thereto by all of the
directors in office is filed with the secretary of the corporation.
Section 4.11. Executive and Other Committees.
(a) Establishment and Powers.--The board of directors may, by
resolution adopted by a majority of the directors in office, establish one or
more committees to consist of one or more directors of the corporation. Any
committee, to the extent provided in the resolution of the board of directors,
shall have and may exercise all of the powers and authority of the board of
directors except that a committee shall not have any power or authority as to
the following:
(1) The submission to shareholders of any action requiring
approval of shareholders under the Pennsylvania Business Corporation
Law.
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(2) The creation or filling of vacancies in the board of
directors.
(3) The adoption, amendment or repeal of these bylaws.
(4) The amendment or repeal of any resolution of the board
that by its terms is amendable or repealable only by the board.
(5) Action on matters committed by a resolution of the board
of directors to another committee of the board.
(b) Alternate Committee Members.--The board may designate one or more
directors as alternate members of any committee who may replace any absent or
disqualified member at any meeting of the committee or for the purposes of any
written action by the committee. In the absence or disqualification of a
member and alternate member or members of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or
not constituting a quorum, may unanimously appoint another director to act at
the meeting in the place of the absent or disqualified member.
(c) Term.--Each committee of the board shall serve at the pleasure of
the board.
(d) Committee Procedures.--The term "board of directors" or "board,"
when used in any provision of these bylaws relating to the organization or
procedures of or the manner of taking action by the board of directors, shall
be construed to include and refer to any executive or other committee of the
board.
Section 4.12. Compensation.--The board of directors shall have the
authority to fix the compensation of directors for their services as directors
and a director may be a salaried officer of the corporation.
ARTICLE V
Officers
Section 5.01. Officers Generally.
(a) Number, Qualifications and Designation.--The officers of the
corporation shall be a president, one or more vice presidents, a secretary, a
treasurer, and such other officers as may be elected in accordance with the
provisions of Section 5.03. Officers may but need not be directors or
shareholders of the corporation. The president and secretary shall be natural
persons of full age. The treasurer may be a corporation, but if a natural
person shall be of full age. The board of directors may elect from among the
members of the board a chairman
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of the board and a vice chairman of the board who shall be officers of the
corporation. Any number of offices may be held by the same person.
(b) Bonding.--The corporation may secure the fidelity of any or all
of its officers by bond or otherwise.
(c) Standard of Care.--In lieu of the standards of conduct otherwise
provided by law, officers of the corporation shall be subject to the same
standards of conduct, including standards of care and loyalty and rights of
justifiable reliance, as shall at the time be applicable to directors of the
corporation. An officer of the corporation shall not be personally liable, as
such, to the corporation or its shareholders for monetary damages (including,
without limitation, any judgment, amount paid in settlement, penalty, punitive
damages or expense of any nature (including, without limitation, attorneys'
fees and disbursements)) for any action taken, or any failure to take any
action, unless the officer has breached or failed to perform the duties of his
or her office under the articles of incorporation, these bylaws, or the
applicable provisions of law and the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness. The provisions of this
subsection shall not apply to the responsibility or liability of an officer
pursuant to any criminal statute or for the payment of taxes pursuant to
local, state or federal law.
Section 5.02. Election, Term of Office and Resignations.
(a) Election and Term of Office.--The officers of the corporation,
except those elected by delegated authority pursuant to Section 5.03, shall be
elected annually by the board of directors, and each such officer shall hold
office for a term of one year and until a successor has been selected and
qualified or until his or her earlier death, resignation or removal.
(b) Resignations.--Any officer may resign at any time upon written
notice to the corporation. The resignation shall be effective upon receipt
thereof by the corporation or at such subsequent time as may be specified in
the notice of resignation.
Section 5.03. Subordinate Officers, Committees and Agents.--The board
of directors may from time to time elect such other officers and appoint such
committees, employees or other agents as the business of the corporation may
require, including one or more assistant secretaries, and one or more
assistant treasurers, each of whom shall hold office for such period, have
such authority, and perform such duties as are provided in these bylaws, or as
the board of directors may from time to time determine. The board of directors
may delegate to any officer or committee the power to elect subordinate
officers and to retain or appoint employees or other agents, or committees
thereof, and to prescribe the authority and duties of such subordinate
officers, committees, employees or other agents.
Section 5.04. Removal of Officers and Agents.--Any officer or agent
of the corporation may be removed by the board of directors with or without
cause. The removal
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shall be without prejudice to the contract rights, if any, of any person so
removed. Election or appointment of an officer or agent shall not of itself
create contract rights.
Section 5.05. Vacancies.--A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause, may be filled by
the board of directors or by the officer or committee to which the power to
fill such office has been delegated pursuant to Section 5.03, as the case may
be, and if the office is one for which these bylaws prescribe a term, shall be
filled for the unexpired portion of the term.
Section 5.06. Authority.
(a) General Rule.--All officers of the corporation, as between
themselves and the corporation, shall have such authority and perform such
duties in the management of the corporation as may be provided by or pursuant
to resolutions or orders of the board of directors or, in the absence of
controlling provisions in the resolutions or orders of the board of directors,
as may be determined by or pursuant to these bylaws.
(b) Chief Executive Officer.--The chairman of the board or the
president, as designated from time to time by the board of directors, shall be
the chief executive officer of the corporation.
Section 5.07. The Chairman and Vice Chairman of the Board.--The
chairman of the board or in the absence of the chairman, the vice chairman of
the board, shall preside at all meetings of the shareholders and of the board
of directors, and shall perform such other duties as may from time to time be
requested by the board of directors.
Section 5.08. The President.--The president shall have general
supervision over the business and operations of the corporation, subject
however, to the control of the board of directors and, if the chairman of the
board is the chief executive officer of the corporation, the chairman of the
board. The president shall sign, execute, and acknowledge, in the name of the
corporation, deeds, mortgages, bonds, contracts or other instruments,
authorized by the board of directors, except in cases where the signing and
execution thereof shall be expressly delegated by the board of directors, or
by these bylaws, to some other officer or agent of the corporation; and, in
general, shall perform all duties incident to the office of president and such
other duties as from time to time may be assigned by the board of directors
and, if the chairman of the board is the chief executive officer of the
corporation, the chairman of the board.
Section 5.09. The Vice Presidents.--The vice presidents shall perform
the duties of the president in the absence of the president and such other
duties as may from time to time be assigned to them by the board of directors
or the president.
Section 5.10. The Secretary.--The secretary or an assistant secretary
shall attend all meetings of the shareholders and of the board of directors
and all committees thereof and
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shall record all the votes of the shareholders and of the directors and the
minutes of the meetings of the shareholders and of the board of directors and of
committees of the board in a book or books to be kept for that purpose; shall
see that notices are given and records and reports properly kept and filed by
the corporation as required by law; shall be the custodian of the seal of the
corporation and see that it is affixed to all documents to be executed on behalf
of the corporation under its seal; and, in general, shall perform all duties
incident to the office of secretary, and such other duties as may from time to
time be assigned by the board of directors or the president.
Section 5.11. The Treasurer.--The treasurer or an assistant treasurer
shall have or provide for the custody of the funds or other property of the
corporation; shall collect and receive or provide for the collection and
receipt of moneys earned by or in any manner due to or received by the
corporation; shall deposit all funds in his or her custody as treasurer in
such banks or other places of deposit as the board of directors may from time
to time designate; shall, whenever so required by the board of directors,
render an account showing all transactions as treasurer, and the financial
condition of the corporation; and, in general, shall discharge such other
duties as may from time to time be assigned by the board of directors or the
president.
Section 5.12. Salaries.--The salaries of the officers elected by the
board of directors shall be fixed from time to time by the board of directors
or by such officer as may be designated by resolution of the board. The
salaries or other compensation of any other officers, employees and other
agents shall be fixed from time to time by the officer or committee to which
the power to elect such officers or to retain or appoint such employees or
other agents has been delegated pursuant to Section 5.03. No officer shall be
prevented from receiving such salary or other compensation by reason of the
fact that the officer is also a director of the corporation.
ARTICLE VI
Certificates of Stock, Transfer, Etc.
Section 6.01. Share Certificates.
(a) Form of Certificates.--Certificates for shares of the corporation
shall be in such form as approved by the board of directors or by officers of
the corporation designated by the board of directors, and shall state that the
corporation is incorporated under the laws of the Commonwealth of
Pennsylvania, the name of the person to whom issued, and the number and class
of shares and the designation of the series (if any) that the certificate
represents. If the corporation is authorized to issue shares of more than one
class or series, certificates for shares of the corporation shall set forth
upon the face or back of the certificate (or shall state on the face or back
of the certificate that the corporation will furnish to any shareholder upon
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request and without charge), a full or summary statement of the designations,
voting rights, preferences, limitations and special rights of the shares of
each class or series authorized to be issued so far as they have been fixed
and determined and the authority of the board of directors to fix and
determine the designations, voting rights, preferences, limitations and
special rights of the classes and series of shares of the corporation.
(b) Share Register.--The share register or transfer books and blank
share certificates shall be kept by the secretary or by any transfer agent or
registrar designated by the board of directors for that purpose.
Section 6.02. Issuance.--The share certificates of the corporation
shall be numbered and registered in the share register or transfer books of
the corporation as they are issued. They shall be executed in such manner as
the board of directors shall determine. In case any officer, transfer agent or
registrar who has signed or authenticated, or whose facsimile signature or
authentication has been placed upon, any share certificate shall have ceased
to be such officer, transfer agent or registrar because of death, resignation
or otherwise, before the certificate is issued, the certificate may be issued
with the same effect as if the officer, transfer agent or registrar had not
ceased to be such at the date of its issue. The provisions of this Section
6.02 shall be subject to any inconsistent or contrary agreement in effect at
the time between the corporation and any transfer agent or registrar.
Section 6.03. Transfer.--Transfers of shares shall be made on the
share register or transfer books of the corporation upon surrender of the
certificate therefor, endorsed by the person named in the certificate or by an
attorney lawfully constituted in writing. No transfer shall be made
inconsistent with the provisions of the Uniform Commercial Code, 13 Pa.C.S.
sections 8101 et seq., and its amendments and supplements.
Section 6.04. Record Holder of Shares.--The corporation shall be
entitled to treat the person in whose name any share or shares of the
corporation stand on the books of the corporation as the absolute owner
thereof, and shall not be bound to recognize any equitable or other claim to,
or interest in, such share or shares on the part of any other person.
Section 6.05. Lost, Destroyed or Mutilated Certificates.--The holder
of any shares of the corporation shall immediately notify the corporation of
any loss, destruction or mutilation of the certificate therefor, and the board
of directors may, in its discretion, cause a new certificate or certificates
to be issued to such holder, in case of mutilation of the certificate, upon
the surrender of the mutilated certificate or, in case of loss or destruction
of the certificate, upon satisfactory proof of such loss or destruction and,
if the board of directors shall so determine, the deposit of a bond in such
form and in such sum, and with such surety or sureties, as it may direct.
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ARTICLE VII
Indemnification of Directors, Officers and
Other Authorized Representatives
(The provisions of this Article VII
were first adopted by the shareholders
of the corporation on May 8, 1996)
Section 7.01. Scope of Indemnification.
(a) General Rule.--The corporation shall indemnify an indemnified
representative against any liability incurred in connection with any
proceeding in which the indemnified representative may be involved as a party
or otherwise by reason of the fact that such person is or was serving in an
indemnified capacity, including, without limitation, liabilities resulting
from any actual or alleged breach or neglect of duty, error, misstatement or
misleading statement, negligence, gross negligence or act giving rise to
strict or products liability, except:
(1) where such indemnification is expressly prohibited by
applicable law;
(2) where the conduct of the indemnified representative has
been finally determined pursuant to Section 7.06 or otherwise:
(i) to constitute willful misconduct or
recklessness within the meaning of 15 Pa.C.S. ss. 1746(b) or
any superseding provision of law sufficient in the
circumstances to bar indemnification against liabilities
arising from the conduct; or
(ii) to be based upon or attributable to the
receipt by the indemnified representative from the
corporation of a personal benefit to which the indemnified
representative is not legally entitled; or
(3) to the extent such indemnification has been finally
determined in a final adjudication pursuant to Section 7.06 to be
otherwise unlawful.
(b) Partial Payment.--If an indemnified representative is entitled to
indemnification in respect of a portion, but not all, of any liabilities to
which such person may be subject, the corporation shall indemnify such
indemnified representative to the maximum extent for such portion of the
liabilities.
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(c) Presumption.--The termination of a proceeding by judgment, order,
settlement or conviction or upon a plea of nolo contendere or its equivalent
shall not of itself create a presumption that the indemnified representative
is not entitled to indemnification.
(d) Definitions.--For purposes of this Article:
(1) "indemnified capacity" means any and all past, present
and future service by an indemnified representative in one or more
capacities as a director, officer, employee or agent of the
corporation, or, at the request of the corporation, as a director,
officer, employee, agent, fiduciary or trustee of another
corporation, partnership, joint venture, trust, employee benefit plan
or other entity or enterprise;
(2) "indemnified representative" means any and all directors
and officers of the corporation and any other person designated as an
indemnified representative by the board of directors of the
corporation (which may, but need not, include any person serving at
the request of the corporation, as a director, officer, employee,
agent, fiduciary or trustee of another corporation, partnership,
joint venture, trust, employee benefit plan or other entity or
enterprise);
(3) "liability" means any damage, judgment, amount paid in
settlement, fine, penalty, punitive damages, excise tax assessed with
respect to an employee benefit plan, or cost or expense of any nature
(including, without limitation, attorneys' fees and disbursements);
and
(4) "proceeding" means any threatened, pending or completed
action, suit, appeal or other proceeding of any nature, whether
civil, criminal, administrative or investigative, whether formal or
informal, and whether brought by or in the right of the corporation,
a class of its security holders or otherwise.
Section 7.02. Proceedings Initiated by Indemnified Representatives.--
Notwithstanding any other provision of this Article, the corporation shall not
indemnify under this Article an indemnified representative for any liability
incurred in a proceeding initiated (which shall not be deemed to include
counter claims or affirmative defenses) or participated in as an intervenor or
amicus curiae by the person seeking indemnification unless such initiation of
or participation in the proceeding is authorized, either before or after its
commencement, by the affirmative vote of a majority of the directors in
office. This section does not apply to reimbursement of expenses incurred in
successfully prosecuting or defending an arbitration under Section 7.06 or
otherwise successfully prosecuting or defending the rights of an indemnified
representative granted by or pursuant to this Article.
Section 7.03. Advancing Expenses.--The corporation shall pay the
expenses (including attorneys' fees and disbursements) incurred in good faith
by an indemnified representative in advance of the final disposition of a
proceeding described in Section 7.01 or the initiation of or participation in
which is authorized pursuant to Section 7.02 upon receipt
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of an undertaking by or on behalf of the indemnified representative to repay the
amount if it is ultimately determined pursuant to Section 7.06 that such person
is not entitled to be indemnified by the corporation pursuant to this Article.
The financial ability of an indemnified representative to repay an advance shall
not be a prerequisite to the making of such advance.
Section 7.04. Securing of Indemnification Obligations.--To further
effect, satisfy or secure the indemnification obligations provided herein or
otherwise, the corporation may maintain insurance, obtain a letter of credit,
act as self-insurer, create a reserve, trust, escrow, cash collateral or other
fund or account, enter into indemnification agreements, pledge or grant a
security interest in any assets or properties of the corporation, or use any
other mechanism or arrangement whatsoever in such amounts, at such costs, and
upon such other terms and conditions as the board of directors shall deem
appropriate. Absent fraud, the determination of the board of directors with
respect to such amounts, costs, terms and conditions shall be conclusive
against all security holders, officers and directors and shall not be subject
to voidability.
Section 7.05. Payment of Indemnification.--An indemnified
representative shall be entitled to indemnification within 30 days after a
written request for indemnification has been delivered to the secretary of the
corporation.
Section 7.06. Arbitration.
(a) General Rule.--Any dispute related to the right to
indemnification, contribution or advancement of expenses as provided under
this Article, except with respect to indemnification for liabilities arising
under the Securities Act of 1933 that the corporation has undertaken to submit
to a court for adjudication, shall be decided only by arbitration in the
metropolitan area in which the principal executive offices of the corporation
are located at the time, in accordance with the commercial arbitration rules
then in effect of the American Arbitration Association, before a panel of
three arbitrators, one of whom shall be selected by the corporation, the
second of whom shall be selected by the indemnified representative and the
third of whom shall be selected by the other two arbitrators. In the absence
of the American Arbitration Association, or if for any reason arbitration
under the arbitration rules of the American Arbitration Association cannot be
initiated, and if one of the parties fails or refuses to select an arbitrator
or the arbitrators selected by the corporation and the indemnified
representative cannot agree on the selection of the third arbitrator within 30
days after such time as the corporation and the indemnified representative
have each been notified of the selection of the other's arbitrator, the
necessary arbitrator or arbitrators shall be selected by the presiding judge
of the court of general jurisdiction in such metropolitan area.
(b) Qualifications of Arbitrators.--Each arbitrator selected as
provided herein is required to be or have been a director or executive officer
of a corporation whose shares of common stock were listed during at least one
year of such service on the New York Stock
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Exchange or the American Stock Exchange or quoted on the National Association of
Securities Dealers Automated Quotations System.
(c) Burden of Proof.--The party or parties challenging the right of
an indemnified representative to the benefits of this Article shall have the
burden of proof.
(d) Expenses.--The corporation shall reimburse an indemnified
representative for the expenses (including attorneys' fees and disbursements)
incurred in successfully prosecuting or defending such arbitration.
(e) Effect.--Any award entered by the arbitrators shall be final,
binding and nonappealable and judgment may be entered thereon by any party in
accordance with applicable law in any court of competent jurisdiction, except
that the corporation shall be entitled to interpose as a defense in any such
judicial enforcement proceeding any prior final judicial determination adverse
to the indemnified representative under Section 7.01(a)(2) in a proceeding not
directly involving indemnification under this Article. This arbitration
provision shall be specifically enforceable.
Section 7.07. Contribution.--If the indemnification provided for in
this Article or otherwise is unavailable for any reason in respect of any
liability or portion thereof, the corporation shall contribute to the
liabilities to which the indemnified representative may be subject in such
proportion as is appropriate to reflect the intent of this Article or
otherwise.
Section 7.08. Mandatory Indemnification of Directors, Officers,
etc.--To the extent that an authorized representative of the corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 1741 or 1742 of the Pennsylvania Business
Corporation Law or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees and
disbursements) actually and reasonably incurred by such person in connection
therewith.
Section 7.09. Contract Rights; Amendment or Repeal.-- All rights
under this Article shall be deemed a contract between the corporation and the
indemnified representative pursuant to which the corporation and each
indemnified representative intend to be legally bound. Any repeal, amendment
or modification hereof shall be prospective only and shall not affect any
rights or obligations then existing.
Section 7.10. Scope of Article.--The rights granted by this Article
shall not be deemed exclusive of any other rights to which those seeking
indemnification, contribution or advancement of expenses may be entitled under
any statute, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in an indemnified capacity and as to action in
any other capacity. The indemnification, contribution and advancement of
expenses provided by or granted pursuant to this Article shall continue as to
a person who has ceased to be an indemnified representative in respect of
matters arising prior to such time, and shall
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inure to the benefit of the heirs, executors, administrators and personal
representatives of such a person.
Section 7.11. Reliance on Provisions.--Each person who shall act as
an indemnified representative of the corporation shall be deemed to be doing
so in reliance upon the rights of indemnification, contribution and
advancement of expenses provided by this Article.
Section 7.12. Interpretation.--The provisions of this Article are
intended to constitute bylaws authorized by 15 Pa.C.S. sections 1746.
ARTICLE VIII
Miscellaneous
Section 8.01. Corporate Seal.--The corporation shall have a corporate
seal in the form of a circle containing the name of the corporation, the year
of incorporation and such other details as may be approved by the board of
directors. The affixation of the corporate seal shall not be necessary to the
valid execution, assignment or endorsement by the corporation of any
instrument or other document.
Section 8.02. Checks.--All checks, notes, bills of exchange or other
similar orders in writing shall be signed by such one or more officers or
employees of the corporation as the board of directors may from time to time
designate.
Section 8.03. Contracts.
(a) General Rule.--Except as otherwise provided in the
Pennsylvania Business Corporation Law in the case of transactions that require
action by the shareholders, the board of directors may authorize any officer
or agent to enter into any contract or to execute or deliver any instrument on
behalf of the corporation, and such authority may be general or confined to
specific instances.
(b) Statutory Form of Execution of Instruments.--Any note,
mortgage, evidence of indebtedness, contract or other document, or any
assignment or endorsement thereof, executed or entered into between the
corporation and any other person, when signed by one or more officers or
agents having actual or apparent authority to sign it, or by the president or
vice president and secretary or assistant secretary or treasurer or assistant
treasurer of the corporation, shall be held to have been properly executed for
and in behalf of the corporation, without prejudice to the rights of the
corporation against any person who shall have executed the instrument in
excess of his or her actual authority.
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Section 8.04. Interested Directors or Officers; Quorum.
(a) General Rule.--A contract or transaction between the corporation
and one or more of its directors or officers or between the corporation and
another corporation, partnership, joint venture, trust or other enterprise in
which one or more of its directors or officers are directors or officers or
have a financial or other interest, shall not be void or voidable solely for
that reason, or solely because the director or officer is present at or
participates in the meeting of the board of directors that authorizes the
contract or transaction, or solely because his, her or their votes are counted
for that purpose, if:
(1) the material facts as to the relationship or interest
and as to the contract or transaction are disclosed or are known to
the board of directors and the board authorizes the contract or
transaction by the affirmative votes of a majority of the
disinterested directors even though the disinterested directors are
less than a quorum;
(2) the material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are
known to the shareholders entitled to vote thereon and the contract
or transaction is specifically approved in good faith by vote of
those shareholders; or
(3) the contract or transaction is fair as to the
corporation as of the time it is authorized, approved or ratified by
the board of directors or the shareholders.
(b) Quorum.--Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board which
authorizes a contract or transaction specified in subsection (a).
Section 8.05. Deposits.--All funds of the corporation shall be
deposited from time to time to the credit of the corporation in such banks,
trust companies or other depositaries as the board of directors may approve or
designate, and all such funds shall be withdrawn only upon checks signed by
such one or more officers or employees of the corporation as the board of
directors shall from time to time designate.
Section 8.06. Corporate Records.
(a) Required Records.--The corporation shall keep complete and
accurate books and records of account, minutes of the proceedings of the
incorporators, shareholders and directors and a share register giving the
names and addresses of all shareholders and the number and class of shares
held by each. The share register shall be kept at either the registered office
of the corporation in the Commonwealth of Pennsylvania or at its principal
place of business wherever situated or at the office of its registrar or
transfer agent. Any books, minutes or other records may be in written form or
any other form capable of being converted into written form within a
reasonable time.
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(b) Right of Inspection.--Every shareholder shall, upon written
verified demand stating the purpose thereof, have a right to examine, in
person or by agent or attorney, during the usual hours for business for any
proper purpose, the share register, books and records of account, and records
of the proceedings of the incorporators, shareholders and directors and to
make copies or extracts therefrom. A proper purpose shall mean a purpose
reasonably related to the interest of the person as a shareholder. In every
instance where an attorney or other agent is the person who seeks the right of
inspection, the demand shall be accompanied by a verified power of attorney or
other writing that authorizes the attorney or other agent to so act on behalf
of the shareholder. The demand shall be directed to the corporation at its
registered office in the Commonwealth of Pennsylvania or at its principal
place of business wherever situated.
Section 8.07. Amendment of Bylaws.--These bylaws may be amended or
repealed, or new bylaws may be adopted, either (i) by vote of the shareholders
at any duly organized annual or special meeting of shareholders, or (ii) with
respect to those matters that are not by statute committed expressly to the
shareholders and regardless of whether the shareholders have previously
adopted or approved the bylaw being amended or repealed, by vote of a majority
of the board of directors of the corporation in office at any regular or
special meeting of directors. Any change in these bylaws shall take effect
when adopted unless otherwise provided in the resolution effecting the change.
See Section 2.03(b) (relating to notice of action by shareholders on bylaws).
* * *
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AMENDMENT 1996-1
TO THE ICT GROUP, INC.
1987 STOCK OPTION PLAN
1. The first clause of the first sentence of Section 6(b) of
the Plan is amended to read, in its entirety, as follows:
Each Option Document shall state the price at which Option
Shares may be purchased (the "Option Price"), which may be
less than, equal to, or greater than the fair market value of
the Common Stock on the date the Option is granted as
determined by the Committee;
2. The first clause of the first sentence of Section 6(d) of
the Plan is amended to read, in its entirety, as follows:
No option shall be exercisable after the first to occur of the
following (except to the extent the Committee may otherwise
provide in the Option Document) but in no event beyond the
expiration of the option term:
3. This Amendment 1996-1 shall be effective as of May 8, 1996.
<PAGE>
ICT GROUP, INC.
1996 EQUITY COMPENSATION PLAN
The purpose of the ICT Group, Inc. 1996 Equity Compensation Plan (the
"Plan") is to provide (i) designated officers (including officers who are also
directors) and other employees of ICT Group, Inc. (the "Company") and its
subsidiaries, and (ii) independent contractors and consultants who perform
valuable services for the Company or its subsidiaries, with the opportunity to
receive grants of incentive stock options, nonqualified stock options, stock
appreciation rights, restricted stock or other awards that are valued in whole
or part by reference to, or are otherwise based on, the common stock of the
Company (hereinafter collectively referred to as "Grants"). The Company believes
that the Plan will cause the participants to contribute materially to the growth
of the Company, thereby benefitting the Company's shareholders and will align
the economic interests of the participants with those of the shareholders.
1. Administration
The Plan shall be administered and interpreted by a committee (the
"Committee"), which shall consist of two or more persons appointed by the Board
of Directors of the Company (the "Board"), all of whom shall be "disinterested
persons" as defined under Rule 16b-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and "outside directors" as defined under section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and related
Treasury regulations.
The Committee shall have the sole authority to (i) determine the
individuals to whom grants shall be made under the Plan, (ii) determine the
type, size and terms of the grants to be made to each such individual, (iii)
determine the time when the grants will be made and the duration of any
applicable exercise or restriction period, including the criteria for vesting
and the acceleration of vesting and (iv) deal with any other matters arising
under the Plan.
The Committee shall have full power and authority to administer and
interpret the Plan, to make factual determinations and to adopt or amend such
rules, regulations, agreements and instruments for implementing the Plan and for
the conduct of its business as it deems necessary or advisable, in its sole
discretion. The Committee's interpretations of the Plan and all determinations
made by the Committee pursuant to the powers vested in it hereunder shall be
conclusive and binding on all persons having any interests in the Plan or in any
awards granted hereunder. All powers of the Committee shall be executed in its
sole discretion, in the best interest of the Company and in keeping with the
objectives of the Plan and need not be uniform as to similarly situated
individuals.
<PAGE>
2. Grants
All Grants shall be subject to the terms and conditions set forth
herein and to those other terms and conditions consistent with this Plan as the
Committee deems appropriate and as are specified in writing by the Committee to
the individual (the "Grant Letter"). The Committee shall approve the form and
provisions of each Grant Letter to an individual. Grants under a particular
Section of the Plan need not be uniform as among the grantees.
3. Shares Subject to the Plan
(a) Subject to the adjustment specified below, the aggregate number of
shares of common stock of the Company (the "Company Stock") that may be issued
under the Plan is 1,120,000 shares. Notwithstanding anything in the Plan to the
contrary, the maximum aggregate number of shares of Company Stock that shall be
subject to Grants made under the Plan to any one individual during any calendar
year shall be 570,000 shares. The shares may be authorized but unissued shares
of Company Stock or reacquired shares of Company Stock, including shares
purchased by the Company on the open market for purposes of the Plan. If and to
the extent options granted under the Plan terminate, expire, or are cancelled,
forfeited, exchanged or surrendered without having been exercised or if any
shares of restricted stock are forfeited, the shares subject to such Grants
shall again be available for purposes of the Plan.
(b) If there is any change in the number or kind of shares of Company
Stock outstanding by reason of a stock dividend, a recapitalization, stock
split, or combination or exchange of shares, or merger, reorganization or
consolidation in which the Company is the surviving corporation,
reclassification or change in par value or by reason of any other extraordinary
or unusual events affecting the outstanding Company Stock as a class without the
Company's receipt of consideration, or if the value of outstanding shares of
Company Stock is substantially reduced due to the Company's payment of an
extraordinary dividend or distribution, the maximum number of shares of Company
Stock available for Grants, the maximum number of shares of Company Stock that
may be subject to Grants to any one individual under the Plan in any calendar
year, the number of shares covered by outstanding Grants, and the price per
share or the applicable market value of such Grants shall be proportionately
adjusted by the Committee to reflect any increase or decrease in the number or
kind of issued shares of Company Stock to preclude the enlargement or dilution
of rights and benefits under such Grants; provided, however, that any fractional
shares resulting from such adjustment shall be eliminated. For purposes of this
Section 3(b), "shares of Company Stock" and "shares" include referenced shares
with respect to stock appreciation rights or other stock-based awards. The
adjustments determined by the Committee shall be final, binding and conclusive.
Notwithstanding the foregoing, no adjustment shall be authorized or made
pursuant to this Section to the extent that such authority or adjustment would
cause any incentive stock option to fail to comply with section 422 of the Code.
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4. Eligibility for Participation
All employees of the Company and its subsidiaries (within the meaning
of section 424(f) of the Code) ("Employees") including Employees who are
officers or members of the Board shall be eligible to participate in the Plan.
Any independent contractors or consultants who perform valuable services (other
than consulting services in connection with a capital transaction) for the
Company or any of its subsidiaries ("Consultants") shall be eligible to
participate in the Plan, but shall not be eligible to receive incentive stock
options. The Committee shall select the Employees and Consultants to receive
Grants and determine the number of shares of Company Stock subject to a
particular Grant in such manner as the Committee determines. (Employees and
Consultants who receive Grants under this Plan shall hereinafter be referred to
as "Grantees".)
Nothing contained in this Plan shall be construed to (i) limit the
right of the Committee to make Grants under this Plan in connection with the
acquisition, by purchase, lease, merger, consolidation or otherwise, of the
business or assets of any corporation, firm or association, including options
granted to employees thereof who become Employees of the Company, or for other
proper corporate purpose, or (ii) limit the right of the Company to grant stock
options or make other awards outside of this Plan.
5. Granting of Options
(a) Number of Shares. The Committee, in its sole discretion, shall
determine the number of shares of Company Stock that will be subject to each
Grant of stock options to any Employee or Consultant.
(b) Type of Option and Purchase Price. The Committee may grant options
intended to qualify as "incentive stock options" within the meaning of section
422 of the Code ("Incentive Stock Options") or options which are not intended to
so qualify ("Nonqualified Stock Options") or any combination of Incentive Stock
Options and Nonqualified Stock Options (hereinafter collectively the "Stock
Options"), all in accordance with the terms and conditions set forth herein.
The purchase price of Company Stock subject to a Stock Option shall be
determined by the Committee and may be equal to, greater than, or less than the
Fair Market Value (as defined below) of a share of such Stock on the date such
Stock Option is granted; provided, however, that the purchase price of Company
Stock subject to an Incentive Stock Option shall be equal to, or greater than,
the Fair Market Value of a share of such Stock on the date such Stock Option is
granted.
If the Company Stock is traded in a public market, then the Fair Market
Value per share shall be, if the principal trading market for the Company Stock
is a national securities exchange or the Nasdaq National Market, the last
reported sale price thereof on the relevant date or (if there were no trades on
that date) the latest preceding date upon which a sale was reported, or, if the
Company Stock is not principally traded on such exchange or market, the mean
between the last reported "bid" and "asked" prices thereof on the relevant date,
as reported on NASDAQ or, if not so reported, as reported by the National Daily
Quotation Bureau, Inc. or as reported in a customary financial reporting
service, as applicable and as the Committee determines. If the Company Stock is
not traded in a public market or subject to reported transactions or "bid" or
"ask" quotations as set forth above, the Fair Market Value per share shall be as
determined by the Committee.
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(c) Option Term. The Committee shall determine the term of each Stock
Option. The term of any Stock Option shall not exceed ten years from the date of
grant.
(d) Exercisability of Options. Stock Options shall become exercisable
in accordance with the terms and conditions determined by the Committee, in its
sole discretion, and specified in the Grant Letter. The Committee, in its sole
discretion, may accelerate the exercisability of any or all outstanding Stock
Option, at any time for any reason.
(e) Manner of Exercise. A Grantee may exercise a Stock Option which has
become exercisable, in whole or in part, by delivering a notice of exercise to
the Committee with accompanying payment of the purchase price in accordance with
Subsection (g) below. Such notice may instruct the Company to deliver shares of
Company Stock due upon the exercise of the Stock Option to any registered broker
or dealer designated by the Committee ("Designated Broker") in lieu of delivery
to the Grantee. Such instructions must designate the account into which the
shares are to be deposited. The Grantee may tender a notice of exercise, which
has been properly executed by the Grantee and the aforementioned delivery
instructions to any Designated Broker.
(f) Termination of Employment, Disability or Death.
(i) In the event that a Grantee ceases to be an Employee or
Consultant, as the case may be, of the Company for any reason other than a
"disability," death, or "termination for cause," any Stock Option which is
otherwise exercisable by the Grantee shall terminate unless exercised within 90
days of the date on which the Grantee ceases to be an Employee or Consultant of
the Company (or within such other period of time as may be specified in the
Grant Letter), but in any event no later than the date of expiration of the
option term. Any of the Grantee's Stock Options which are not otherwise
exercisable as of the date on which the Grantee ceases to be an Employee or
Consultant of the Company shall terminate as of such date.
(ii) In the event the Grantee ceases to be an Employee or
Consultant of the Company on account of a "termination for cause" by the
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Company, any Stock Option held by the Grantee shall terminate as of the date
the Grantee ceases to be an Employee or Consultant of the Company.
(iii) In the event the Grantee ceases to be an Employee or
Consultant of the Company because the Grantee is "disabled", any Stock Option
which is otherwise exercisable by the Grantee shall terminate unless exercised
within one year of the date on which the Grantee ceases to be an Employee or
Consultant of the Company (or within such other period of time as may be
specified in the Grant Letter), but in any event no later than the date of
expiration of the option term. Any of the Grantee's Stock Options which are not
otherwise exercisable as of the date on which the Grantee ceases to be an
Employee or Consultant shall terminate as of such date.
(iv) In the event of the death of the Grantee while the
Grantee is an Employee or Consultant of the Company or within not more than 90
days of the date on which the Grantee ceases to be an Employee or Consultant of
the Company on account of a termination of employment specified in Section
5(f)(i) of the Plan (or within such other period of time as may be specified in
the Grant Letter), any Stock Option which is otherwise exercisable by the
Grantee shall terminate unless exercised within one year of the date on which
the Grantee ceases to be an Employee or Consultant of the Company (or within
such other period of time as may be specified in the Grant Letter), but in any
event no later than the date of expiration of the option term. Any of the
Grantee's Stock Options which are not otherwise exercisable as of the date on
which the Grantee ceases to be an Employee or Consultant shall terminate as of
such date.
(v) For purposes of this Section 5(f), the term "Company"
shall include the Company's subsidiaries (within the meaning of section 424(f)
of the Code) and the following terms shall be defined as follows: (A)
"disability" shall mean a Grantee's becoming disabled within the meaning of
section 22(e)(3) of the Code and (B) "termination for cause" shall mean, except
to the extent otherwise provided in a Grantee's Grant Letter, a finding by the
Committee, after full consideration of the facts presented on behalf of both the
Company and the Grantee, that the Grantee has breached his or her employment or
service contract with the Company, or has been engaged in disloyalty to the
Company, including, without limitation, fraud, embezzlement, theft, commission
of a felony or proven dishonesty in the course of his or her employment or
service, or has disclosed trade secrets or confidential information of the
Company. In such event, in addition to the immediate termination of the Stock
Option, the Grantee shall automatically forfeit all option shares for any
exercised portion of a Stock Option for which the Company has not yet delivered
the share certificates upon refund by the Company of the purchase price.
(g) Satisfaction of Purchase Price. The Grantee shall pay the purchase
price specified in the Grant Letter in (i) cash, (ii) with the approval of the
Committee, by delivering shares of Company Stock owned by the Grantee (including
Company Stock acquired in connection with the exercise of a Stock Option,
subject to such restrictions as the Committee deems appropriate) and having a
Fair Market Value on the date of exercise equal to the purchase price or (iii)
through any combination of (i) and (ii). The Grantee shall pay the purchase
price and the amount of withholding tax due, if any, at the time of exercise.
Shares of Company Stock shall not be issued upon exercise of a Stock Option
until the purchase price is fully paid and any required withholding is made.
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(h) Rule 16b-3 Restrictions. Unless a Grantee who is an "insider," as
defined under Section 16 of the Exchange Act, could otherwise transfer Company
Stock issued pursuant to a Stock Option without incurring liability under
Section 16(b) of the Exchange Act, at least six months must elapse from the date
of acquisition of a Stock Option by such a Grantee to the date of disposition of
the Company Stock issued upon exercise of such option.
(i) Limits on Incentive Stock Options. Each Incentive Stock Option
shall provide that, to the extent that the aggregate Fair Market Value of the
Company Stock on the date of the grant with respect to which Incentive Stock
Options are exercisable for the first time by a Grantee during any calendar year
under the Plan or any other stock option plan of the Company exceeds $100,000,
then such option as to the excess shall be treated as a Nonqualified Stock
Option. An Incentive Stock Option shall not be granted to any participant who is
not an Employee of the Company or any "subsidiary" (within the meaning of
section 424(f) of the Code). An Incentive Stock Option shall not be granted to
any Employee who, at the time of grant, owns stock possessing more than 10
percent of the total combined voting power of all classes of stock of the
Company or any "parent" or "subsidiary" of the Company (within the meaning of
section 424(f) of the Code), unless the purchase price per share is not less
than 110% of the Fair Market Value of Company Stock on the date of grant and the
option exercise period is not more than five years from the date of grant.
6. Restricted Stock Grants
The Committee may issue or transfer shares of Company Stock to any
Employee or Consultant under a Grant (a "Restricted Stock Grant"), upon such
terms as the Committee deems appropriate. The following provisions are
applicable to Restricted Stock Grants:
(a) General Requirements. Shares of Company Stock issued pursuant to
Restricted Stock Grants may be issued for cash consideration or for no cash
consideration, at the sole discretion of the Committee. The Committee shall
establish conditions under which restrictions on the transfer of shares of
Company Stock shall lapse over a period of time or according to such other
criteria as the Committee deems appropriate (including such performance goals as
the Committee may establish). The period of years during which the Restricted
Stock Grant will remain subject to restrictions will be designated in the Grant
Letter as the "Restriction Period."
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<PAGE>
(b) Number of Shares. The Committee shall grant to each Grantee a
number of shares of Company Stock pursuant to a Restricted Stock Grant in such
manner as the Committee determines.
(c) Termination of Employment or Services. If the Grantee's employment
or service with the Company and its subsidiaries terminates during a period
designated in the Grant Letter as the Restriction Period, or if other specified
conditions are not met, the Restricted Stock Grant shall terminate as to all
shares covered by the Grant as to which restrictions on transfer have not lapsed
and any such shares of Company Stock must be immediately returned to the
Company. The Committee may, however, provide for complete or partial exceptions
to this requirement as it deems equitable.
(d) Restrictions on Transfer and Legend on Stock Certificate. During
the Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of Company Stock to which such Restriction
Period applies except to a Successor Grantee under Section 9. The Committee, at
its sole discretion, may determine that the Company not issue certificates for
any shares subject to a Restricted Stock Grant or that the Company retain
possession of certificates for any shares issued pursuant to a Restricted Stock
Grant, until all restrictions on such shares have lapsed. Each certificate for a
share issued under a Restricted Stock Grant shall contain a legend giving
appropriate notice of the applicable restrictions in the Grant. The Grantee
shall be entitled to receive a stock certificate or certificates, or have the
legend removed from the stock certificate or certificates covering any of the
shares subject to restrictions, as applicable, when all restrictions on such
shares have lapsed.
(e) Right to Vote and to Receive Dividends. During the Restriction
Period, unless the Committee determines otherwise, the Grantee shall have the
right to vote, subject to the terms of Section 17, any shares subject to the
Restricted Stock Grant and the right to receive any dividends paid on such
shares, subject to such restrictions as the Committee deems appropriate.
(f) Lapse of Restrictions. All restrictions imposed under the
Restricted Stock Grant shall lapse upon the expiration of the applicable
Restriction Period and the satisfaction of any conditions imposed by the
Committee. The Committee may determine, as to any or all Restricted Stock
Grants, that all the restrictions shall lapse without regard to any Restriction
Period.
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<PAGE>
7. Stock Appreciation Rights
(a) General Requirements. The Committee may grant stock appreciation
rights ("SARs") to any Employee or Consultant, separately or in tandem with any
Stock Option (for all or a portion of the applicable Stock Option). With respect
to tandem SARs, such SARs may be granted either at the time the Stock Option is
granted or at any time thereafter while the Stock Option remains outstanding;
provided, however, that in the case of an Incentive Stock Option, such rights
may be granted only at the time of the Grant of such Stock Option. Unless the
Committee determines otherwise, the base amount of each SAR shall be equal to
the per share purchase price of the related Stock Option, if any, or if there is
not related Stock Option, the Fair Market Value of a share of Company Stock as
of the date of Grant of such SAR.
(b) Stock Options Terminate. Upon the exercise of a Stock Option, the
SARs relating to the Company Stock covered by such Stock Option, if any, shall
terminate. Upon the exercise of SARs, the related Stock Option, if any, shall
terminate to the extent of an equal number of shares of Company Stock.
(c) Value of SARs. Upon a Grantee's exercise of some or all of the
Grantee's SARs, the Grantee shall receive in settlement of such SARs an amount
equal to the value of the stock appreciation for the number of SARs exercised,
payable in cash, Company Stock or a combination thereof. The stock appreciation
for an SAR is the amount by which (i) the Fair Market Value of the underlying
Company Stock on the date of exercise of such SAR exceeds (ii) the base amount
of the SAR as described in subsection (a).
(d) Form of Payment. At the time of such exercise, the Grantee shall
have the right to elect the portion of the amount to be received that shall
consist of cash and the portion that shall consist of Common Stock, which for
purposes of calculating the number of shares of Company Stock to be received,
shall be valued at their Fair Market Value on the date of exercise of such SARs.
The Committee shall have the right to disapprove a Grantee's election to receive
cash in full or partial settlement of the SARs exercised and to require that
shares of Company Stock be delivered in lieu of cash. If shares of Company Stock
are to be received upon exercise of an SAR, cash shall be delivered in lieu of
any fractional share.
(e) Certain Restrictions. An SAR is exercisable during the period
specified by the Committee in the Grant Letter, provided that a tandem SAR is
only exercisable during the period when the Stock Option to which it is related
is also exercisable. No SAR may be exercised for cash by an officer or director
of the Company subject to Section 16 of the Exchange Act, in whole or in part,
except in accordance with Rule 16b-3 under the Exchange Act.
8. Stock-Based Awards.
The Committee is authorized, subject to limitations under
applicable law, to grant to any Employee or Consultant awards of Company Stock
or cash awards valued in whole or in part by reference to, or otherwise based
on, Company Stock. Such awards may be made subject to such conditions and
restrictions, if any, as the Committee may determine in its sole discretion,
including the achievement of such corporate or individual performance goals as
the Committee may establish.
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9. Transferability of Grants
Only the Grantee or his or her authorized representative may exercise
rights under a Grant. Such persons may not transfer those rights except by will
or by the laws of descent and distribution or, with respect to Grants other than
Incentive Stock Options, if permitted by Rule 16b-3 under the Exchange Act and
if permitted in any specific case by the Committee in its sole discretion,
pursuant to a qualified domestic relations order as defined under the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended or
the regulations thereunder. When a Grantee dies, the representative or other
person entitled to succeed to the rights of the Grantee ("Successor Grantee")
may exercise such rights. A Successor Grantee must furnish proof satisfactory to
the Company of his or her right to receive the Grant under the Grantee's will or
under the applicable laws of descent and distribution.
10. Change of Control of the Company
As used herein, a "Change of Control" shall be deemed to have occurred
if:
(a) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 40% or more of the voting power of the then outstanding securities
of the Company;
(b) The stockholders of the Company approve an agreement providing for
(i) the merger or consolidation of the Company with another corporation where
the stockholders of the Company, immediately prior to the merger or
consolidation, would not beneficially own, immediately after the merger or
consolidation, shares entitling such stockholders to 30% or more of all votes
(without consideration of the rights of any class of stock to elect directors by
a separate class vote) to which all stockholders of the surviving corporation
would be entitled in the election of directors or where the members of the
Board, immediately prior to the merger or consolidation, would not, immediately
after the merger or consolidation, constitute a majority of the Board of the
surviving corporation or (ii) the sale or other disposition of all or
substantially all the assets of the Company, or a liquidation, dissolution or
statutory exchange of the Company;
(c) Any person has commenced, or announced an intention to commence, a
tender offer or exchange offer for 40% or more of the voting power of the then
outstanding securities of the Company; or
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(d) During any period of two consecutive calendar years there is a
change of 25% or more in the composition of the Board in office at the beginning
of the period except for changes approved by at least two-thirds of the
directors then in office who were directors at the beginning of the period.
11. Consequences of a Change of Control
(a) Upon a Change of Control (i) the Company shall provide each Grantee
with outstanding Grants written notice of such Change of Control, (ii) all
outstanding Stock Options and SARs shall automatically accelerate and become
fully exercisable, (iii) the restrictions and conditions on all outstanding
Restricted Stock and any stock-based awards made pursuant to Section 8 shall
immediately lapse.
(b) In addition, upon a Change of Control described in Section 10(b)(i)
where the Company is not the surviving corporation (or survives only as a
subsidiary of another corporation), all outstanding Stock Options and SARs shall
be assumed or replaced with comparable options or rights by the surviving
corporation.
(c) Notwithstanding the foregoing, in the event of a Change of Control,
the Committee may take either or both of the following actions: (i) require that
Grantees surrender their outstanding Stock Options and SARs in exchange for a
payment by the Company, in cash or Company Stock as determined by the Committee,
in an amount equal to the amount by which the then Fair Market Value of the
shares of Company Stock subject to the Grantee's outstanding Stock Options or
SARs exceeds the option purchase price of the Stock Options or base amount of
the SARs, as the case may be or (ii) terminate any or all outstanding Stock
Options or SARs at such time as the Committee deems appropriate. Any such
surrender shall take place as of the date of the Change of Control or such other
date as the Committee may specify, and, in the case of a Stock Option or SAR
held by a Grantee who is subject to Section 16(b) of the Exchange Act, any such
surrender or payment shall be made on such date as the Committee shall determine
consistent with Rule 16b-3 under the Exchange Act. The Committee shall not have
the right to take the actions described in this Subsection (c) if such right
would make the applicable Change of Control ineligible for pooling of interest
accounting treatment under APB No. 16 or make such Change of Control ineligible
for desired tax treatment with respect to such Change of Control and, but for
this provision, the Change of Control would otherwise qualify for and the
Company intends to use such treatment.
12. Amendment and Termination of the Plan
(a) Amendment. The Board may amend or terminate the Plan at any time;
provided, however, that any amendment that increases the aggregate number (or
individual limit for any single Grantee) of shares of Company Stock that may be
issued under the Plan (other than by operation of Section 3(b)), or modifies the
requirements as to eligibility for participation in the Plan, shall be subject
to approval by the shareholders of the Company and provided, further, that the
Board shall not amend the Plan without shareholder approval if such approval is
required by Rule 16b-3 of the Exchange Act or Section 162(m) of the Code.
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(b) Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date unless
terminated earlier by the Board or unless extended by the Board with the
approval of the shareholders.
(c) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the
Committee acts under Section 20(b) hereof. The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Grant. Whether or not the Plan has terminated, an outstanding Grant may be
terminated or amended under Section 20(b) hereof or may be amended by agreement
of the Company and the Grantee consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
13. Funding of the Plan
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under this Plan. In no event shall
interest be paid or accrued on any Grant, including unpaid installments of
Grants.
14. Rights of Participants
Nothing in this Plan shall entitle any Employee, Consultant or other
person to any claim or right to be granted a Grant under this Plan. Neither this
Plan nor any action taken hereunder shall be construed as giving any individual
any rights to be retained by, or in the employ or service of the Company or any
other employment rights.
15. No Fractional Shares
No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan or any Grant. The Committee shall determine whether cash,
other awards or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto shall
be forfeited or otherwise eliminated.
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<PAGE>
16. Withholding of Taxes
(a) Grantees may make an election to satisfy the Company income tax
withholding obligation with respect to a Stock Option, SAR, Restricted Stock
Grant or other award by having shares withheld up to an amount that does not
exceed the Grantee's maximum marginal tax rate for federal (including FICA),
state and local tax liabilities. Such election must be in the form and manner
prescribed by the Committee and is subject to the prior approval of the
Committee. If the Grantee is a director or officer (within the meaning of Rule
16a-1(f) promulgated under the Exchange Act), if required under Rule 16b-3, such
election must be irrevocable and must be made six months prior to the date on
which the Stock Option is exercised or all the restrictions lapse with respect
to such shares.
(b) The Company shall have the right to deduct from all Grants paid in
cash, or from other wages paid to an employee of the Company, any federal, state
or local taxes required by law to be withheld with respect to such cash awards
and, in the case of Grants paid in Company Stock, the Grantee or other person
receiving such shares shall be required to pay to the Company the amount of any
such taxes which the Company is required to withhold with respect to such Grants
or the Company shall have the right to deduct from other wages paid to the
employee by the Company the amount of any withholding due with respect to such
Grants.
17. Voting Trust; Conditions and Requirements for Issuance of Shares
Unless the Committee determines otherwise, all Grants hereunder shall
be contingent upon the Grantee entering a voting trust agreement with respect to
shares issued pursuant to such Grant, if any, in the form and manner prescribed
by the Committee, and no shares of Company Stock shall be issued in connection
with any Grant hereunder unless the Grantee participates in such voting trust.
No Company Stock shall be issued in connection with any Grant hereunder
unless and until all legal requirements applicable to the issuance of such
Company Stock have been complied with to the satisfaction of the Committee. The
Committee shall have the right to condition any Grant made to any Grantee
hereunder on such Grantee's undertaking in writing to comply with such
restrictions on his or her subsequent disposition of such shares of Company
Stock as the Committee shall deem necessary or advisable as a result of any
applicable law, regulation or official interpretation thereof and certificates
representing such shares may be legended to reflect any such restrictions.
Certificates representing shares of Company Stock issued under the Plan will be
subject to such stop-transfer orders and other restrictions as may be applicable
under such laws, regulations and other obligations of the Company, including any
requirement that a legend or legends be placed thereon.
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<PAGE>
18. Headings
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
19. Effective Date of the Plan.
Subject to the approval of the Company's shareholders, this Plan shall
be effective as of the date the Company's common stock is initially registered
with the Securities Exchange Commission pursuant to Section 12(g) of the
Exchange Act.
20. Miscellaneous
(a) Substitute Grants. The Committee may make a Grant to an employee of
another corporation who becomes an Employee by reason of a corporate merger,
consolidation, acquisition of stock or property, reorganization or liquidation
involving the Company or any of its subsidiaries in substitution for a stock
option or restricted stock grant made by such corporation ("Substituted Stock
Incentives"). The terms and conditions of the substitute grant may vary from the
terms and conditions required by the Plan and from those of the Substituted
Stock Incentives. The Committee shall prescribe the provisions of the substitute
grants.
(b) Compliance with Law. The Plan, the exercise of Stock Options and
the obligations of the Company to issue or transfer shares of Company Stock
under Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. With respect to persons
subject to Section 16 of the Exchange Act, it is the intent of the Company that
the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act. The Committee
may revoke any Grant if it is contrary to law or modify a Grant to bring it into
compliance with any valid and mandatory government regulation. The Committee may
also adopt rules regarding the withholding of taxes on payments to Grantees. The
Committee may, in its sole discretion, agree to limit its authority under this
Section.
(c) Ownership of Stock. Except as otherwise provided by the Committee,
a Grantee or Successor Grantee shall have no rights as a shareholder with
respect to any shares of Company Stock covered by a Grant until the shares are
issued to the Grantee or Successor Grantee on the stock transfer records of the
Company.
(d) Governing Law. The validity, construction, interpretation and
effect of the Plan and Grant Letters issued under the Plan shall exclusively be
governed by and determined in accordance with the law of the Commonwealth of
Pennsylvania.
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<PAGE>
ICT GROUP, INC.
1996 NON-EMPLOYEE DIRECTORS PLAN
The purpose of the ICT Group, Inc. 1996 Non-Employee Directors Plan
(the "Plan") is to provide non-employee members of the Board of Directors
("Non-employee Directors") of ICT Group, Inc. (the "Company") and its
subsidiaries (within the meaning of section 424(f) of the Code), with the
opportunity to receive grants of nonqualified stock options ("Options"). The
Company believes that the Plan will cause the participants to contribute
materially to the growth of the Company, thereby benefitting the Company's
shareholders, and will align the economic interests of the participants with
those of the shareholders.
1. Administration. The provisions of this Plan are intended to operate
automatically and not require administration. To the extent that any
administrative determinations are required, any determinations with respect to
the provisions of this Plan shall be made by the members of the Board who are
not eligible to receive options under this Plan (the "Committee"), but in no
event shall such determinations affect the eligibility of Optionees, the
determination of the Exercise Price, the timing of the Options or the number of
shares subject to Options granted hereunder. If at any time there are not
sufficient shares available under the Plan to permit an automatic grant as
described in this Plan, the Option shall be reduced pro rata (to zero, if
necessary) so as not to exceed the number of shares then available under the
Plan.
2. Shares Subject to the Plan
(a) Subject to the adjustment specified below, the aggregate number of
shares of common stock of the Company ("Company Stock") that may be issued under
the Plan is 30,000 shares. The shares may be authorized but unissued shares of
Company Stock or reacquired shares of Company Stock, including shares purchased
by the Company on the open market for purposes of the Plan. If and to the extent
Options granted under the Plan terminate, expire, or are cancelled, forfeited,
exchanged or surrendered without having been exercised, the shares subject to
such Options shall again be available for purposes of the Plan.
(b) If there is any change in the number or kind of shares of Company
Stock outstanding (i) by reason of a stock dividend, spin off, recapitalization,
stock split, or combination or exchange of shares, (ii) by reason of a merger,
reorganization or consolidation in which the Company is the surviving
corporation, (iii) by reason of a reclassification or change in par value, or
(iv) by reason of any other extraordinary or unusual event affecting the
outstanding Company Stock as a class without the
<PAGE>
Company's receipt of consideration, or if the value of outstanding shares of
Company Stock is substantially reduced as a result of a spinoff or the
Company's payment of an extraordinary dividend or distribution, the maximum
number of shares of Company Stock available for Options, the number of shares
covered by outstanding Options, the kind of shares issued under the Plan, and
the price per share or the applicable market value of such Options shall be
proportionately adjusted to reflect any increase or decrease in the number or
kind of issued shares of Company Stock to preclude the enlargement or dilution
of rights and benefits under such Options; provided, however, that any
fractional shares resulting from such adjustment shall be eliminated.
3. Eligibility for Participation
(a) All Non-Employee Directors shall participate in the
Plan. Non-Employee Directors who have received options under
this plan are hereinafter referred to as "Optionees."
4. Formula Option Grants to Non-Employee Directors
(a) A Non-Employee Director shall be entitled to receive options which
are not intended to qualify as incentive stock options within the meaning of
section 422 of the Code ("Nonqualified Stock Options") in accordance with this
Section 4.
(b) Initial Grant. Each Non-Employee Director who first becomes a
member of the Board after the effective date of this Plan (as specified in
Section 19) shall receive a grant of a Nonqualified Stock Option to purchase
1,000 shares of Company Stock on the date as of which he or she first becomes a
member of the Board. Options granted pursuant to this Subsection (a) shall be
fully exercisable as of the date of grant.
(c) Annual Grants. On each date that the Company holds its annual
meeting of shareholders, commencing with the annual meeting next following the
effective date of this Plan, each Non- Employee Director who is in office
immediately after the annual election of directors (other than a director who is
first elected to the Board at such meeting) shall receive a grant of a
Nonqualified Stock Option to purchase 1,000 shares of Company Stock. The date of
grant of each such annual Grant shall be the date of the annual meeting of the
Company's shareholders. Options granted pursuant to this Subsection (b) shall be
fully exercisable as of the first anniversary of the date of grant.
(d) Exercise Price. The Exercise Price per share of Company Stock
subject to an Option granted under this Section 4 shall be equal to the Fair
Market Value of a share of Company Stock on the date of grant.
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<PAGE>
If the Company Stock is traded in a public market, then the
Fair Market Value per share shall be determined as follows: (i) if the principal
trading market for the Company Stock is a national securities exchange or the
National Market segment of the Nasdaq Stock Market, the last reported sale price
thereof on the relevant date or (if there were no trades on that date) the
latest preceding date upon which a sale was reported, or (ii) if the Company
Stock is not principally traded on such exchange or market, the mean between the
last reported "bid" and "asked" prices of Company Stock on the relevant date, as
reported on Nasdaq or, if not so reported, as reported by the National Daily
Quotation Bureau, Inc. or as reported in a customary financial reporting
service, as applicable.
(e) Option Term and Exercisability. The term of each Option granted
pursuant to this Section 4 shall be ten years.
(f) Payment of Exercise Price.
(i) The Exercise Price for an Option granted under this Plan
shall be paid in cash. The Optionee shall pay the Exercise Price and the amount
of any withholding tax due at the time of exercise. Shares of Company Stock
shall not be issued upon exercise of an Option until the Exercise Price is fully
paid and any required withholding is made.
(ii) A Optionee may exercise an Option granted under this Plan
by delivering a notice of exercise as described below, with accompanying payment
of the Exercise Price in accordance with Subsection (i) above. The notice of
exercise may instruct the Company to deliver shares of Company Stock due upon
the exercise of the Option to the designated registered broker or dealer in lieu
of delivery to the Optionee. Such instructions shall designate the account into
which the shares are to be deposited.
5. Termination of Employment, Disability or Death.
(a) Except as provided below, an Option may only be exercised while the
Optionee is a Non-Employee Director. In the event that a Optionee ceases to be a
Non-Employee Director for any reason other than a "disability", death, or
"termination for cause", any Option which is otherwise exercisable by the
Optionee shall terminate unless exercised within 90 days of the date on which
the Optionee ceases to be a member of the Board, but in any event no later than
the date of expiration of the Option term. Any of the Optionee's Options that
are not otherwise exercisable as of the date on which the Optionee ceases to be
a Non-Employee Director shall terminate as of such date.
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<PAGE>
(b) In the event the Optionee ceases to be a Non-Employee Director on
account of a "termination for cause" by the Company, any Option held by the
Optionee shall terminate as of the date the Optionee ceases to be a Non-Employee
Director.
(c) In the event the Optionee ceases to be a Non-Employee Director
because the Optionee is "disabled", any Option which is otherwise exercisable by
the Optionee shall terminate unless exercised within one year after the date on
which the Optionee ceases to be a Non-Employee Director, but in any event no
later than the date of expiration of the Option term. Any of the Optionee's
Options which are not otherwise exercisable as of the date on which the Optionee
ceases to be a Non-Employee Director shall terminate as of such date.
(d) If the Optionee dies while a Non-Employee Director or within 90
days after the date on which the Optionee ceases to be a Non-Employee Director
on account of a termination as specified in Section 5(a) above, any Option that
is otherwise exercisable by the Optionee shall terminate unless exercised within
one year after the date on which the Optionee ceases to be a Non-Employee
Director, but in any event no later than the date of expiration of the Option
term. Any of the Optionee's Options that are not otherwise exercisable as of the
date on which the Optionee ceases to be a Non-Employee Director shall terminate
as of such date.
(e) For purposes of this Section 5:
(A) The term "Company" shall mean the Company and its
subsidiaries within the meaning of section 424(f) of the Code.
(B) "Disability" shall mean a Optionee's becoming disabled
within the meaning of section 22(e)(3) of the Code.
(C) "Termination for cause" shall mean the date the Optionee's
directorship is terminated, if the directorship is terminated on
account of (a) a any act of fraud, intentional misrepresentation,
embezzlement or theft, (b) commission of a felony, or (c) disclosure of
trade secrets or confidential information of the Company. In the event
a Optionee's employment is terminated for cause, in addition to the
immediate termination of all Options, the Optionee shall automatically
forfeit all Option shares for any exercised portion of an Option for
which the Company has not yet delivered the share certificates, upon
refund by the Company of the Exercise Price paid by the Optionee for
such shares.
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<PAGE>
6. Withholding of Taxes
(a) Required Withholding. All Options under the Plan shall be subject
to applicable federal (including FICA), state and local tax withholding
requirements. The Company shall have the right to deduct from all Options paid
in cash, or from other wages paid to the Optionee, any federal, state or local
taxes required by law to be withheld with respect to such Options. In the case
of Options and other Options paid in Company Stock, the Company may require the
Optionee or other person receiving such shares to pay to the Company the amount
of any such taxes that the Company is required to withhold with respect to such
Options, or the Company may deduct from other wages paid by the Company the
amount of any withholding taxes due with respect to such Options.
(b) Election to Withhold Shares. A Optionee may elect to satisfy the
Company's income tax withholding obligation with respect to an Option, paid in
Company Stock by having shares withheld up to an amount that does not exceed the
Optionee's maximum marginal tax rate for federal (including FICA), state and
local tax liabilities.
7. Transferability of Options
(a) Only the Optionee or his or her authorized representative may
exercise rights under an Option. Such persons may not transfer those rights
except by will or by the laws of descent and distribution. When a Optionee dies,
the representative or other person entitled to succeed to the rights of the
Optionee ("Successor Optionee") may exercise such rights. A Successor Optionee
must furnish proof satisfactory to the Company of his or her right to receive
the Option under the Optionee's will or under the applicable laws of descent and
distribution.
8. Change of Control of the Company
As used herein, a "Change of Control" shall be deemed to have occurred
if:
(a) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the voting power of the then outstanding securities
of the Company;
(b) The shareholders of the Company approve (or, if shareholder
approval is not required, the Board approves) an agreement providing for (i) the
merger or consolidation of the
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<PAGE>
Company with another corporation where the shareholders of the Company,
immediately prior to the merger or consolidation, will not beneficially own,
immediately after the merger or consolidation, shares entitling such
shareholders to 20% or more of all votes to which all shareholders of the
surviving corporation would be entitled in the election of directors (without
consideration of the rights of any class of stock to elect directors by a
separate class vote), or where the members of the Board, immediately prior to
the merger or consolidation, would not, immediately after the merger or
consolidation, constitute a majority of the board of directors of the
surviving corporation, (ii) the sale or other disposition of all or
substantially all of the assets of the Company, or (iii) a liquidation,
dissolution or statutory exchange of the Company;
(c) Any person has commenced a tender offer or exchange offer for 20%
or more of the voting power of the then outstanding shares of the Company; or
(d) At least a majority of the Board does not consist of individuals
who were elected, or nominated for election, by the directors in office at the
time of such election or nomination.
9. Consequences of a Change of Control
(a) Upon a Change of Control (i) the Company shall provide each
Optionee with outstanding Options written notice of such Change of Control, (ii)
all outstanding Options shall automatically accelerate and become fully
exercisable.
(b) In addition, upon a Change of Control described in Section 12(b)(i)
where the Company is not the surviving corporation (or survives only as a
subsidiary of another corporation), all outstanding Options shall be assumed by,
or replaced with comparable options or rights by, the surviving corporation.
10. Amendment and Termination of the Plan
(a) Amendment. The Board may amend or terminate the Plan at any time;
provided, however,that notwithstanding any other provision of the Plan, if
necessary to comply with Rule 16b-3, this Plan may not be amended more
frequently than once every six months, except for amendments necessary to
conform the Plan to changes in the provisions of or the regulations relating to
applicable laws, including the Code.
11. Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date unless
terminated earlier by the Board or unless extended by the Board with the
approval of the shareholders.
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<PAGE>
12. Termination and Amendment of Outstanding Options. A termination or
amendment of the Plan that occurs after a Option has been granted shall not
materially impair the rights of a Optionee unless the Optionee consents or
unless the amendment is made under Section 21(b).
13. Governing Document. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
14. Funding of the Plan
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Options under this Plan. In no event shall
interest be paid or accrued on any Grant, including unpaid installments of
Options.
15. Rights of Participants
Neither this Plan nor any action taken hereunder shall be construed
as giving any individual any rights to be retained as a director of the Company
or any other employment rights.
16. No Fractional Shares
No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan or any Option.
17. Requirements for Issuance of Shares
No Company Stock shall be issued or transferred in connection with any
Option hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with. Certificates
representing shares of Company Stock issued under the Plan will be subject to
such stop-transfer orders and other restrictions as may be applicable under such
laws, regulations and other obligations of the Company, including any
requirement that a legend or legends be placed thereon.
18. Headings
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
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<PAGE>
19. Effective Date of the Plan.
Subject to the approval of the Company's shareholders, this Plan shall
be effective on ____________, 1996.
20. Miscellaneous
(a) Compliance with Law. The Plan, the exercise of Options and the
obligations of the Company to issue or transfer shares of Company Stock under
Options shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. With respect to persons
subject to Section 16 of the Exchange Act, it is the intent of the Company that
the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act.
(b) Ownership of Stock. A Optionee or Successor Optionee shall have no
rights as a shareholder with respect to any shares of Company Stock covered by
an Option until the shares are issued or transferred to the Optionee or
Successor Optionee on the stock transfer records of the Company.
(c) Governing Law. The validity, construction,
interpretation and effect of the Plan and Option grants issued
under the Plan shall exclusively be governed by and determined in
accordance with the law of the Commonwealth of Pennsylvania.
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<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of May 8, 1996, by and between ICT
GROUP, INC., a Pennsylvania corporation (hereinafter called "Company"), and JOHN
J. BRENNAN, an individual (hereinafter called "Employee").
W I T N E S S E T H
Company wishes to continue to employ Employee and Employee
wishes to continue in the employ of Company on the terms and conditions
contained in this Agreement.
NOW, THEREFORE, in consideration of the facts, mutual promises
and covenants contained herein and intending to be legally bound hereby, Company
and Employee agree as follows:
1. Employment. Company hereby continues to employ Employee as
President and Chief Executive Officer, and Employee hereby accepts continued
employment by Company, for the period of time and upon the terms, conditions and
restrictions contained in this Agreement.
2. Duties and Responsibilities.
(a) Employee agrees to assume such duties and
responsibilities normally associated with the position indicated above, and as
may be assigned to Employee by the Board of Directors of the Company from time
to time.
(b) During his employment with the Company, Employee
may not engage in any business which would detract from his responsibilities to
the Company.
3. Term. This Agreement and Employee's employment hereunder
shall be for a term of three (3) years, commencing on April 1, 1996 and ending
on March 31, 1999,
<PAGE>
unless sooner terminated as hereinafter provided. This
Agreement shall be reviewed automatically for successive three (3) year periods,
unless either party gives written notice to the other, in accordance with
Paragraph 15(c), at least one hundred eighty (180) days prior to the expiration
of the original or applicable successive term.
4. Compensation and Benefits
(a) For all of the services rendered by Employee to
Company, Employee shall receive a minimum gross annual base salary in the amount
specified on Attachment A hereto, less taxes and other deductions required by
law, payable in reasonable periodic installments in accordance with Company's
regular payroll practices in effect from time to time. Employee's base salary
shall be reviewed by Company's Board of Directors annually and may be increased
(but not decreased) by the Board of Directors in its sole discretion.
(b) In addition to Employee's base salary, Company
shall pay Employee minimum bonuses in accordance with the bonus programs
specified on Attachment A hereto. These bonus programs may be modified by
Company's Board of Directors and additional bonus programs may be implemented,
provided that any such modifications or additional programs (individually or
collectively) shall not result in a reduction in the bonuses, on an annual
basis, which Employee shall receive below those to which Employee is entitled in
accordance with Attachment A hereto. In addition, Employee shall be eligible to
participate in any stock option plans developed for management.
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<PAGE>
(c) Throughout the term of this Agreement, Employee
shall be eligible to participate in the insurance and other benefit plans and
programs specified on Attachment A hereto. In addition, Employee shall be
eligible to participate in all other insurance and other benefit plans and
programs as may be offered by Company to its employees, subject to their
respective eligibility requirements, and other terms, conditions and
restrictions.
(d) The Company will continue, through December 31,
1999, to pay Employee additional compensation in an amount sufficient for
Employee: (i) to pay the premiums relating to the insurance policies issued in
1995 on either his life or the life of Patricia Brennan, wife of Donald Brennan;
and (ii) to pay all applicable taxes on such additional compensation.
(e) Employee shall accrue vacation pay at a rate of
2 1/2 days per full-month of employment.
(f) Employee will not receive any remuneration or
any other benefit from any client or any other company or individual in
connection with any transaction in which Company is involved, directly or
indirectly, without the prior permission of the Company's Board of Directors.
Nor will Employee assign or give any part of the compensation which he receives
from Company to any other employee, agent or representative of Company, to any
client or any of its employees, agents or representatives, or to any other
person or entity involved, directly or indirectly, with Company, without the
prior permission of the Company's Board of Directors.
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<PAGE>
5. Expenses. Company will reimburse Employee for all
reasonable expenses incurred by Employee in connection with the performance of
Employee's duties hereunder upon receipt of vouchers therefor satisfactory to
Company and in accordance with Company's regular reimbursement procedures and
practices in effect from time to time.
6. Company Obligations Upon Termination By Company Not For
"Willful Misconduct", By Employee for "Good Reason," or By Employee For Other
Than "Good Reason:"
(a) If Employee is terminated by Company pursuant to
Paragraph 10 or Employee terminates his employment for "Good Reason" pursuant to
Paragraph 11(i), Company shall fulfill all of its obligations under this
Agreement (including, but not limited to, with regard to salary, bonuses and
benefits) through the later of the following time periods: (i) the expiration of
the then current term of this Agreement (or the successive term of this
Agreement, if within one hundred eighty (180) days of the expiration of the then
current term and no notice of termination of this Agreement has been provided as
set forth in Paragraph 3); or (ii) twenty-four (24) months from the date of
termination.
(b) If Employee terminates his employment for other
than "Good Reason" pursuant to Paragraph 11(ii), Company shall fulfill all of
its obligations under the Agreement (including, but not limited to, with regard
to salary, bonuses and benefits) through the expiration of Employee's
obligations under Paragraph 13(a) and (d) below.
(c) Employee shall have no obligation to make
efforts to obtain replacement income (through employment or other sources)
during the period in which
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<PAGE>
Employee receives post-termination payments or benefits from Company and there
shall be no offset for replacement income (through employment or other
sources) derived.
(d) Bonuses for purposes of subparagraphs 6(a) and
6(b) above shall be no less than the combined average of the bonuses for the
preceding two years.
7. Inability. If Employee is unable to perform the essential
functions of his job, with or without reasonable accommodations, for whatever
reason, for a period of thirteen (13) consecutive weeks or for a cumulative
period of nineteen (19) weeks during any twelve (12) month period, Company shall
have the right to terminate Employee's employment pursuant to Paragraph 10 of
this Agreement, in which event Employee shall be eligible for payments and
benefits pursuant to Paragraph 6(a) of this Agreement.
8. Death. If Employee dies, Company shall have no further
obligations or liabilities to Employee's estate or legal representative or
otherwise after the date of his death, except as follows: Employee's estate
shall be entitled to receive: (i) all monies owed in terms of salary, bonuses
and otherwise, (ii) a lump sum payment in an amount equal to nine (9) months'
salary, and (iii) a prorated payment of any bonuses earned for the period prior
to Employee's death.
9. Discharge for "Willful Misconduct". Company may discharge
Employee at any time without prior notice for "Willful Misconduct," which is
defined as fraud, misappropriation, embezzlement, self-dealing or conviction of
a crime of moral turpitude. In the event Company terminates Employee's
employment for "Willful Misconduct," Company shall have no further obligations
or liabilities to Employee after the
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<PAGE>
date of his termination. The termination of Employee's employment with Company
pursuant to this Paragraph shall not release Employee from Employee's
obligations and restrictions under Paragraphs 12 and 13 of this Agreement.
10. Discharge Not for "Willful Misconduct". Notwithstanding
any other provision of this Agreement, Company may discharge Employee at any
time for reasons other than "Willful Misconduct" by providing Employee with
thirty (30) days' written notice, which notice Company may waive, in whole or in
part, in its sole discretion, by paying Employee for such thirty (30) days. Upon
termination of Employee pursuant to this Paragraph, whether during the then
current term of this Agreement, upon expiration of its then current term or
subsequent to its expiration, Company shall be obligated to provide Employee
with post- termination payments and benefits in accordance with Paragraph 6(a)
of this Agreement. The termination of Employee's employment with Company
pursuant to this Paragraph shall not release Employee from Employee's
obligations and restrictions under Paragraphs 12 and 13 of this Agreement.
11. Termination by Employee. Employee may terminate his
employment under this Agreement at any time by providing Company with thirty
(30) days' written notice, which notice Company may waive, in whole or in part,
in its sole discretion, by paying Employee for such thirty (30) days. In such
event:
(i) Termination By Employee For "Good Reason":
Upon Termination of Employee For "Good
Reason," whether during the then current
term of this Agreement, upon expiration of
its
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<PAGE>
then current term or subsequent to its
expiration, Company shall be obligated to
provide Employee with post-termination
payments and benefits in accordance with
Paragraph 6(a) of this Agreement. "Good
Reason" is defined as: (i) a reduction in
Employee's salary or benefits; (ii) a
substantial change in Employee's duties
and responsibilities which change would
reduce Employee's stature, importance and
dignity within Company; or (iii) a "Change
of Control." For purposes of this
Agreement, a "Change of Control" shall
occur if John J. Brennan and Donald
Brennan, and their children and
grandchildren, no longer collectively own,
directly or indirectly, interests
representing more than fifty percent (50%)
of the combined voting power of the
Company (or a successor entity).
(ii) Termination by Employee For Other Than "Good
Reason:" In the event that Employee
terminates his employment for other than
"Good Reason," whether during the then
current term of this Agreement, upon
expiration of its then current term or
subsequent to its expiration, Company shall
be obligated to provide Employee with
post-termination payments and benefits in
accordance with Paragraph 6(b) of this
Agreement.
-7-
<PAGE>
The termination of Employee's employment with Company pursuant to this Paragraph
shall not release Employee from Employee's obligations and restrictions under
Paragraphs 12 and 13 of this Agreement.
12. Company Property.
(a) All advertising, sales, manufacturers' and other
materials or articles or information, including without limitation, data
processing reports, client sales analyses, invoices, price lists or information,
samples, or any other materials or data of any kind furnished to Employee by
Company or developed by Employee on behalf of Company or at Company's direction
or for Company's use or otherwise in connection with Employee's employment
hereunder, are and shall remain the sole and confidential property of Company.
(b) Immediately upon termination of Employee's
employment, whether by Employee or Company, whether during the then current term
of this Agreement, upon expiration of its then current term or subsequent to its
expiration, Employee shall deliver to Company all Company property (for example,
keys and credit cards) and all documents, books, records, lists, computer
programs and other documents relating to Company's business, regardless of where
or by whom said writings were kept or prepared, retaining no copies.
(c) In the event Employee receives notice from
Company that his employment is or will be terminated or Employee provides
Company with notice of his intent to resign, within ten (10) days of receiving
or providing such notice, and thereafter as may be requested by Company,
Employee shall provide Company with a list of all clients and
-8-
<PAGE>
potential clients with whom he is working and/or negotiating and a summary of
the status of each matter with which he is involved, directly or indirectly.
13. Restrictive Covenants, Trade Secrets, Etc.
(a) For a period of one (1) year after the
termination of his employment with Company, for any reason whatsoever, whether
during the then current term of this Agreement, upon expiration of its then
current term or subsequent to its expiration, whether by Employee or Company,
Employee shall not, for his own benefit or for the benefit of any third party,
directly or indirectly, in any capacity, participate in any of the following
activities: (i) hire or do any business with any employee of Company or
otherwise induce or attempt to influence any employee of Company to terminate
his or her employment with Company; (ii) divert, solicit, or do any business
with any current, former (within two (2) years of the date of termination), or
potential (engaged in discussion with Company as of the date of termination)
client of Company; or (iii) cause or attempt to cause any current, former, or
potential client to refrain from doing business with Company. In light of the
fact that the clients of Company will be engaged in operations worldwide and
Company will be contacting potential customers for its clients throughout the
world, the restrictions set forth in this Paragraph 13(a) shall apply worldwide.
The prohibitions set forth in this Paragraph 13(a) shall not apply to Donald
Brennan or any child or grandchild of Donald Brennan or John J. Brennan.
(b) During his employment and for a period of two
(2) years thereafter, Employee shall not use for his personal benefit, or
disclose, communicate or
-9-
<PAGE>
divulge to, or use for the direct or indirect benefit of any person, firm,
association or company other than Company, any material referred to in
Paragraph 12 above or any information regarding the business methods, business
policies, procedures, techniques, research or development projects or results,
trade secrets, or other knowledge or processes of or developed by Company or
any names and addresses of clients or customers or any data on or relating to
past, present or prospective clients or customers or any other confidential
information relating to or dealing with the business operations or activities
of Company, made known to Employee or learned or acquired by Employee while in
the employ of Company.
(c) Any and all writings, inventions, improvements,
processes, procedures and/or techniques which Employee may make, conceive,
discover or develop, either solely or jointly with any other person or persons,
at any time during his employment with the Company, whether during working hours
or at any other time and whether at the request or upon the suggestion of
Company or otherwise, which relate to or are useful in connection with any
business now or hereafter carried on or contemplated by Company, including
developments or expansions of its present fields of operations, shall be the
sole and exclusive property of Company. Employee shall make full disclosure to
Company of all such writings, inventions, improvements, processes, procedures
and techniques, and shall do everything necessary or desirable to vest the
absolute title thereto in Company. Employee shall write and prepare all
specifications and procedures regarding such inventions, improvements,
processes, procedures and techniques and otherwise aid and assist Company so
that Company can prepare and present applications for copyright or Letters
Patent therefor
-10-
<PAGE>
and can secure such copyright or Letters Patent wherever possible, as well as
reissues, renewals, and extensions thereof, and can obtain the record title to
such copyright or patents so that Company shall be the sole and absolute owner
thereof in all countries in which it may desire to have copyright or patent
protection. Employee shall not be entitled to any additional or special
compensation or reimbursement regarding any and all such writings, inventions,
improvements, processes, procedures and techniques, except that Company shall
reimburse Employee for any expenses which Employee may incur in vesting
absolute title thereto in Company.
(d) For a period of one (1) year after the
termination of his employment with Company, for any reason whatsoever, whether
during the then current term of this Agreement, upon its expiration or
subsequent to its expiration, whether by Employee or Company, Employee shall not
engage in or be financially interested in any business which is engaged in the
business of telemarketing in any country in which the Company has an active
operation.
(e) Employee acknowledges that the restrictions
contained in the foregoing subparagraphs (a), (b), (c) and (d), in view of the
nature of the business in which Company is engaged, are reasonable and necessary
in order to protect the legitimate interests of Company, and that any violation
thereof would result in irreparable injuries to Company, and Employee therefore
acknowledges that, in the event of his violation of any of these restrictions,
Company shall be entitled to obtain from any court of competent jurisdiction
preliminary and permanent injunctive relief as well as damages and an equitable
accounting of
-11-
<PAGE>
all earnings, profits and other benefits arising from such violation, which
rights shall be cumulative and in addition to any other rights or remedies to
which Company may be entitled.
(f) Employee agrees that if any or any portion of
the foregoing covenants or the application thereof, is construed to be invalid
or unenforceable, the remainder of such covenant or covenants shall not be
affected and the remaining covenant or covenants shall then be given full force
and effect without regard to the invalid or unenforceable portion(s). If the
covenant is held to be unenforceable because of the area covered, the duration
thereof or the scope thereof, Employee agrees that the court making such
determination shall have the power to reduce the area and/or the duration and/or
scope thereof, and the covenant shall then be enforceable in its reduced form.
(g) If Employee violates any of the restrictions
contained in the foregoing subparagraph (a), (b) or (d), the restrictive period
shall not run in favor of Employee from the time of the commencement of any
violation until such time as the violation shall be cured by Employee to the
satisfaction of Company.
14. Prior Agreements. Employee represents to Company that: (a)
there are no restrictions, agreements or understandings whatsoever to which
Employee is a party which would prevent or make unlawful his execution of this
Agreement or his employment hereunder; (b) there are no agreements, restrictions
or understandings whatsoever to which Employee is a party which place any
limitations as to the companies or individuals with whom he may do business; (c)
his execution of this Agreement and his employment hereunder shall not
constitute a breach of any contract, agreement or understanding, oral or
written, to
-12-
<PAGE>
which he is a party and by which he is bound; and (d) he is free and able to
execute this Agreement and to enter into employment by Company.
15. Miscellaneous.
(a) Waiver. The waiver by Company of a breach of any
provision of this Agreement by Employee shall not operate or be construed as a
waiver of any subsequent breach by Employee. No waiver shall be valid unless in
writing and signed by Chairman of the Board.
(b) Controlling Law. This Agreement and all
questions relating to validity, interpretation, performance and enforcement
(including, without limitation, provisions concerning limitations of actions),
shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania, and without the aid of any canon, custom or rule
of law requiring construction against the draftsman.
(c) Notices. All notices, requests, demands and
other communications required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given, made and received only when
delivered (personally, by courier service such as Federal Express, or by other
messenger) or when deposited in the United States mails, registered or certified
mail, postage prepaid, return receipt requested, addressed in the case of
Company, to the Chairman of the Board, at its principal place of business, and
in the case of Employee, to1513 Harvest Drive, Yardley, Pennsylvania 19067.
-13-
<PAGE>
(d) Binding Nature of Agreement. This Agreement
shall be binding upon and inure to the benefit of Company and its successors and
assigns and shall be binding upon Employee his heirs and legal representatives.
(e) Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original as against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument.
(f) Provisions Separable. The provisions of this
Agreement are independent of and separable from each other, and no provision
shall be affected or rendered invalid or unenforceable by virtue of the fact
that for any reason any other or others of them may be invalid or unenforceable
in whole or in part.
(g) Entire Agreement. This Agreement contains the
entire understanding between the parties hereto with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written.
The express terms hereof control and supersede any course of performance and/or
usage of the trade inconsistent with any of the terms hereof. This Agreement may
not be modified or amended other than by an agreement in writing and signed by
the Company's Chairman of the Board.
(h) Paragraph Headings. The paragraph headings in
this Agreement are for convenience only; they form no part of this Agreement and
shall not affect its interpretation.
-14-
<PAGE>
(i) Survival. The covenants contained in Paragraphs
12 and 13 shall survive the expiration of this Agreement and the termination of
Employee's employment.
(j) Number of Days. In computing the number of days
for purposes of this Agreement, all days shall be counted, including Saturdays,
Sundays and Holidays; provided, however, that if the final day of any time
period falls on a Saturday, Sunday or Holiday on which federal banks are or may
elect to be closed, then the final day shall be deemed to be the next day which
is not a Saturday, Sunday or such Holiday.
(k) Consolidation Merger. Nothing in this Agreement
shall preclude Company from consolidating or merging into or with, or
transferring all or substantially all of its assets to, another entity which
assumes this Agreement and all obligations and undertakings of Company
hereunder. Under such a consolidation, merger or transfer of assets and
assumption, the term "the Company," as used herein, shall mean such other entity
and this Agreement shall continue in full force and effect.
(l) Ownership of Stock or Stock Options. Except as
expressly provided for in this Agreement, nothing in this Agreement shall
affect, change, diminish or eliminate any rights which Employee currently has,
previously had or subsequently may have with regard to stocks, stock options or
other ownership interests pursuant to other agreements, plans or trusts.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement in Langhorne, Pennsylvania on the date first above written.
ICT GROUP, INC.
By: /s/ Carl E. Smith /s/ John J. Brennan
--------------------------- -----------------------
Chief Financal Officer John J. Brennan
Date: May 8, 1996 Date: May 8, 1996
----------- -----------
-16-
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of October 3, 1994, by and between ICT GROUP,
INC., a Pennsylvania corporation (hereinafter called "Company"), and Carl E.
Smith, an individual (hereinafter called "Employee").
WITNESSETH
Company wishes to employ Employee and Employee wishes to enter into
the employ of Company on the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the facts, mutual promises and
covenants, contained herein and intending to be legally bound hereby, Company
and Employee agree as follows:
1. Employment. Company hereby employs Employee as Senior Vice
President of Finance and Administration and Chief Financial Officer and Employee
hereby accepts employment by Company for the period of time and upon the
terms, conditions and restrictions contained in this Agreement.
2. Duties and Responsibilities.
(a) Employee agrees to assume such duties and responsibilities
normally associated with the position indicated above, and as may be assigned
to Employee by the President of the Company from time to time. Employee shall
perform any other duties reasonably required by Company and, if requested by
Company, shall serve as an officer or director of Company without additional
compensation.
(b) Throughout the term of this Agreement, Employee shall devote his
entire working time, energy, skill and best efforts to the performance of his
duties hereunder in a manner which will faithfully and diligently further the
business and interest of Company. During the term of this Agreement, Employee
may not, directly or indirectly, do any work for any other company
3. Term. This Agreement shall be for a term of one year, commencing on
October 3, 1994 and ending on October 2, 1995 unless sooner terminated as
hereinafter provided.
<PAGE>
4. Compensation
(a) For all of the service rendered by Employee to Company, Employee
shall receive a gross annual salary of $100,000.00 per year, less taxes and
other deductions required by law, payable in reasonable periodic installments
in accordance with Company's regular payroll practices in effect from time
to time. Employee's base salary shall be reviewed by Company's Board of
Directors annually and may be adjusted by the Board of Directors in its sole
discretion
(b) In addition to Employee's base salary, Company may pay Employee
from time to time such bonuses or other additional compensation as Company may
determine in its soles discretion.
(c) Throughout the term, of this Agreement, Employee shall be
eligible to participate in Company's insurance and other benefit plans and
programs subject to their terms, conditions and restrictions. Nothing herein
shall preclude Company from modifying or terminating any insurance or other
benefit plan or program.
(d) Employee shall accrue vacation pay at a rate of 1.5 days per
full-month of employment
(e) Employee will not receive any remuneration or any other benefit
from any client or any other company or individual in connection with any
transaction in which Company is involved, directly or indirectly. Nor will
Employee assign or give any part of the compensation which he receives from
Company to any other employee, agent or representative of Company, to any
client or any of its employees, agents or representatives, or to any other
person or entity involved, directly or indirectly, with Company.
5. Expenses. Company will reimburse Employee for all reasonable
expenses incurred by Employee in connection with the performance of Employee's
duties hereunder upon receipt of vouchers therefor satisfactory to Company and
in accordance with Company's regular reimbursement procedures and practices
in effect from time to time.
6. Post-Termination Payments.
(a) If Employee is terminated by Company pursuant to Paragraph 10
hereof, Company shall pay to Employee a monthly severance payment in an amount
equal to Employee's monthly salary at the time of termination for six months.
(b) Employee shall make reasonable efforts to obtain replacement
income (through employment and other sources) during the period in which
Employee receives post-termination payments from Company.
<PAGE>
(c) Company's obligation to make post-termination payments pursuant to
Paragraph 6(a) shall be offset by any compensation earned by Employee, as an
employee, consultant, independent contractor or otherwise, during the period in
which Employee receives such post-termination payments.
(d) Company's obligations under Paragraph 6(a) shall cease in the
event Employee fails to make reasonable efforts to obtain replacement income
or in the event Employee breaches any of the restrictions or obligations set
forth in Paragraphs 12 and 13 of this Agreement
7. Disability. If Employee is unable to perform his duties hereunder
due to partial or total disability or incapacity resulting from a mental or
physical illness, injury or any other cause for a period of thirteen (13)
consecutive weeks or for a cumulative period of nineteen (19) weeks during any
twelve-month period, Company shall have the right to terminate this Agreement
due to Employee's disability or incapacity, in which event Company shall have
no further obligations or liabilities hereunder after the date of such
termination. The termination of Employee's employment with Company pursuant to
this Paragraph shall not release Employee from Employee's obligations and
restrictions under Paragraphs 12 and 13 of this Agreement.
8. Death. If Employee dies, Company shall have no further obligations
or liabilities to Employee's estate or legal representative or otherwise after
the date of his death
9. Discharge for Cause. Company may discharge Employee at any time
for "Cause", which shall include, but not be limited to; willful misconduct,
fraud, misappropriation, malfeasance, misfeasance, nonfeasance, embezzlement,
gross negligence, self-dealing, dishonesty, misrepresentation, conviction of a
crime of moral turpitude, or material violation by Employee of any Company
policy or provision of this Agreement. In the event Company terminates
Employee's employment for Cause, Company shall have no further obligations or
liabilities to Employee after the date of such discharge. The termination of
Employee's employment with Company pursuant to this Paragraph shall not
release Employee from Employee's obligations and restrictions under Paragraphs
12 and 13 of this Agreement.
10. Discharge Not for Cause. Notwithstanding any other provision of
this Agreement, Company may discharge Employee at any time without cause by
providing Employee with 30 days written notice, which notice Company may
waive, in whole or in part, in its sole discretion, by paying Employee for
such 30 days. Upon termination of Employee pursuant to this Paragraph, Company
shall be obligated to provide Employee with post-termination payments in
accordance with Paragraph 6, but shall have no further
<PAGE>
obligations or liabilities to Employee after the date of his termination. The
termination of Employee's employment with Company pursuant to this paragraph
shall not release Employee from Employee's obligations and restrictions under
Paragraphs 12 and 13 of this Agreement.
11. Termination by Employee. Employee may terminate his employment
under this Agreement at any time by providing Company with 30 days written
notice, which notice Company may waive, in whole or in part, in its sole
discretion, by paying Employee for such 30 days, Company shall have no further
obligations or liabilities to Employee after the date of his termination. The
termination of Employee's employment with Company pursuant to this Paragraph
shall not release Employee from Employee's obligations and restrictions under
Paragraphs 12 and 13 or this Agreement.
12. Company Property.
(a) All advertising, sales, manufacturers' and other materials or
articles or information, including without limitation data processing reports,
client sales analyses, invoices, price lists or information, samples or any
other materials or data of any kind furnished to Employee by Company or
developed by Employee on behalf of Company or at Company's direction or for
Company's use or otherwise in connection with Employee's employment hereunder,
are and shall remain the sole and confidential property of Company.
(b) Immediately upon termination of Employee's employment, whether by
Employee or Company, whether during the term of this Agreement, upon its
expiration or subsequent to its expiration, Employee shall deliver to Company,
all Company property (for example, keys and credit cards) and all documents,
books, records, lists and other documents relating to Company's business,
regardless of where or by whom said writings were kept or prepared, retaining
no copies.
(c) In the event Employee receives notice from Company that his
employment is or will be terminated or Employee provides Company with notice
of his intent to resign, within five (5) days of receiving or providing such
notice, and thereafter as may be requested by Company, Employee shall
provide Company with a list of all clients and potential clients with whom he
is working and/or negotiating and a summary of the status of each matter with
which he is involved, directly or indirectly.
13. Restrictive Covenants, Trade Secrets, Etc.
(A) For a period of one (1) year after the termination of his
employment with Company, for any reason whatsoever, whether during the term of
this Agreement, upon its expiration or subsequent to it expiration, whether by
Employee or Company, Employee shall not for his own benefit or for the benefit
of any third party,
<PAGE>
directly or indirectly, in any capacity, participate in any of the following
activities: (i) hire or do any business with any employee of Company or
otherwise induce or attempt to influence any employee of Company to terminate
his or her employment with Company, (ii) divert, solicit, or do any business
with any current, former (within two (2) years of the date of termination), or
potential (engaged in discussion with Company as of the date of termination)
client of Company; or (iii) cause or attempt to cause any current, former, or
potential client to refrain from doing business with Company. In light of the
fact that the clients of Company will be engaged in operations nationwide and
Company will be contacting potential customers for its clients throughout the
entire United States, the restrictions set forth in this Paragraph 13(a) shall
apply throughout the entire United States.
(b) During the term of this Agreement and at all times thereafter,
Employee shall not use for his personal benefit, or disclose, communicate or
divulge to, or use for the direct or indirect benefit of any person, firm,
association or company other than Company, any material referred to in
Paragraph 12 above or any information regarding the business methods, business
policies, procedures, techniques, research or development projects or results,
trade secrets, or other knowledge or processes of or developed by Company or
any names and addresses of clients or customers or any data on or relating to
past, present or prospective clients or customers or any other confidential
information relating to or dealing with the business operations or activities
of Company, made known to Employee or learned or acquired by Employee while in
the employ of Company.
(c) Any and all writing, inventions, improvements, processes,
procedures and/or techniques which Employee may make, conceive, discover or
develop, either solely or jointly with any other person or persons, at any
time during the term of this Agreement, whether during working hours or at
any other time and whether at the request or upon the suggestion of Company or
otherwise, which relate to or are useful in connection with any business now or
hereafter carried on or contemplated by Company, including developments or
expansions of its present fields of operations, shall be the sole and
exclusive property of Company. Employee shall make full disclosure to Company
of all such writings, inventions, improvements, processes, procedures and
techniques, and shall do everything necessary or desirable to vest the
absolute title thereto in Company. Employee shall write and prepare all
specifications and procedures regarding such inventions improvements,
processes, procedures and techniques and other aid and assist Company so that
Company can prepare and present applications for copyright or Letters Patent
therefor and can secure such copyright or Letters Patent wherever possible,
as well
<PAGE>
as reissues, renewals, and extensions thereof, and can obtain the record title
to such copyright or patents so that Company shall be the sole and absolute
owner thereof in all countries in which it may desire to have copyright or
patent protection. Employee shall not be entitled to any additional or special
compensation or reimbursement regarding any and all such writings, inventions,
improvements, processes, procedures and techniques, except that Company shall
reimburse Employee for any expenses which Employee may incur in vesting
absolute title thereto in Company.
(d) Employee acknowledges that the restrictions contained in the
foregoing subparagraphs (a), (b), and (c), in view of the nature of the
business in which Company is engaged, are reasonable and necessary in order
to protect the legitimate interests of Company, and that any violation thereof
would result in irreparable injuries to Company, and Employee therefore
acknowledges that, in the event of his violation of any of these restrictions,
Company shall be entitled to obtain from any court of competent jurisdiction
preliminary and permanent injunctive relief as well as damages and an
equitable accounting of all earnings, profits and other benefits arising from
such violation, which rights shall be cumulative and in addition to any
other rights or remedies to which Company may be entitled.
(e) Employee agrees that if any or any portion of the foregoing
covenants or the application thereof, is construed to be invalid or
unenforceable, the remainder of such covenant or covenants shall not be
affected and the remaining covenant or covenants shall then be given full force
and effect without regard to the invalid or unenforceable portion(s). If the
covenant is held to be unenforceable because of the area covered, the duration
thereof or the scope thereof, Employee agrees that the court making such
determination shall have the power to reduce the area and/or the duration
and/or scope thereof, and the covenant shall then be enforceable in its
reduced form.
(f) If Employee violates any of the restrictions contained in the
foregoing subparagraph (a), the restrictive period shall not run in favor of
Employee from the time of the commencement of any violation until such time as
the violation shall be cured by Employee to the satisfaction of Company.
14. Prior Agreements. Employee represents to Company (a) that there
are no restrictions, agreements or understandings whatsoever to which
Employee is a party which would prevent or make unlawful his execution of
this Agreement or his employment hereunder; (b) there are no agreements,
restrictions or understandings whatsoever to which Employee is a party which
place any limitations as to the companies or individuals with whom he may ado
business; (c) that his execution of this Agreement
<PAGE>
and his employment hereunder shall not constitute a breach of any contract,
agreement or understanding, oral or written, to which he is a party and by which
he is bound; and (d) that he is free and able to execute this Agreement and to
enter into employment by Company.
15. Miscellaneous.
(a) Waiver. The waiver by Company of a breach of any provision of
this Agreement by Employee shall not operate or be construed as a waiver of
any subsequent breach by Employee. No waiver shall be valid unless in writing
and signed by Company's President.
(b) Controlling Law. This Agreement and all questions relating to
validity, interpretation, performance and enforcement (including, without
limitation, provisions concerning limitations of actions), shall be governed
by and construed in accordance with the laws of the Commonwealth of
Pennsylvania, and without the aid of any canon, custom or rule of law
requiring construction against the draftsman.
(c) Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received only when delivered
(personally, by courier service such as Federal Express, or by other
messenger) or when deposited in the United States mails, registered or
certified mail, postage prepaid, return receipt requested, addressed in the
case of Company, to its President at its principal place of business, and in
case of Employee, to his home address.
(d) Binding Nature of Agreement. This Agreement shall be binding upon
and inure to the benefit of Company and its successors and assigns and shall
be binding upon Employee, his heirs and legal representatives.
(e) Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument.
(f) Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be
affected or rendered invalid or unenforceable by virtue of the fact that for
any reason any other or others of them may be invalid or unenforceable in
whole or in part.
(g) Entire Agreement. This Agreement contains the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or
written. The express terms hereof control and
<PAGE>
supersede any course of performance and/or usage of the trade inconsistent with
any of the terms hereof. This Agreement may not be modified or amended other
than by an agreement in writing and signed by the Company's President.
(h)Paragraph Headings. The paragraph headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
(i) Survival. The covenants contained in Paragraphs 12 and 13 shall
survive the expiration of this Agreement and the termination of Employee's
employment.
(j) Number of Days. In computing the number of days for purposes of
this Agreement, all days shall be counted, including Saturdays, Sundays and
holidays; provided, however, that if the final day of any time period falls on
a Saturday, Sunday or holiday on which federal banks are or may elect to be
closed, then the final day shall be deemed to be the next day which is not a
Saturday, Sunday or such holiday.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement in Langhorne, Pennsylvania on the date first above written.
ICT GROUP, INC.
By: /s/ John J. Brennan /s/ Carl E. Smith
----------------------------- ------------------------------------
John J. Brennan Employee
10/3/94 10/3/94
----------------------------- ------------------------------------
Date Date
<PAGE>
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
THIS AMENDMENT is made as of the first day of October, 1995, between
ICT GROUP, INC., a Pennsylvania corporation with its principal offices at 800
Town Center Drive, Langhorne, Pennsylvania 19047 (the "Company") and CARL E.
SMITH, an individual residing at 2075 Canterbury Lane, Jamison, Pennsylvania
18929 (the "Employee").
BACKGROUND
The Company and the Employee are parties to an Employment
Agreement, dated October 3, 1994 (the "Agreement"). Terms are used herein as
defined in the Agreement unless otherwise defined herein. The parties hereto
desire to amend the Agreement to the extent specified herein.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein and in the Agreement, the parties hereto, each
intending to be legally bound hereby, agree as follows:
1. Section 3 of the Agreement is hereby amended in its
entirety to read as follows:
Term. This Agreement shall be for a term of one
(1) year, commencing on October 3, 1994 and ending October 2, 1995, unless
sooner terminated as hereinafter provided. Unless either party elects to
terminate this Agreement at the end of the original or any renewal term by
giving the other party notice of such election at least ninety (90) days before
the expiration of the then current term, this Agreement shall be deemed to have
been renewed for an additional term of one (1) year commencing on the day after
the expiration of the current term.
2. The Agreement shall continue in full force and effect, and
shall not be changed by this Amendment except to the extent contemplated hereby.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto duly
executed this Agreement as of the date first written above.
/s/ Carl E. Smith
--------------------------
CARL E. SMITH
ICT GROUP, INC.
By: /s/ John J. Brennan
--------------------------
Name: John J. Brennan
Title: President
<PAGE>
AMENDMENT NO. 1 TO
VOTING TRUST AGREEMENT
AMENDMENT NO. 1 TO VOTING TRUST AGREEMENT (the "Amendment") made at
Langhorne, Pennsylvania as of May 9, 1996, among ICT Group Inc., a Pennsylvania
corporation (hereinafter called the "Company") and John J. Brennan ("JBrennan")
and Donald P. Brennan ("DBrennan") and any other shareholders of the Company who
now or hereafter become parties hereto (hereinafter called the "Shareholders"),
with JBrennan and DBrennan in such persons' capacity as voting trustees
hereunder, together with any successor trustees (hereinafter being collectively
called the "Trustees").
W I T N E S S E T H:
WHEREAS, the Company, JBrennan and DBrennan are parties to a Voting
Trust Agreement dated February 2, 1996 (the "Voting Trust Agreement"); and
WHEREAS, the Company has filed a Registration Statement with the
Securities and Exchange Commission covering shares to be issued in an initial
public offering (the "Public Offering"); and
WHEREAS, the managing underwriters for the Public Offering have
required that the Voting Trust Agreement be amended in order to facilitate the
Public Offering; and
WHEREAS, the Company, JBrennan and DBrennan believe that it is in their
respective best interests to facilitate the Public Offering by entering into
this Amendment to the Voting Trust Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and agreements contained in this Amendment, the parties hereto,
intending to be legally bound, agree as follows:
1. Presence at Shareholders' Meetings. JBrennan and DBrennan,
in their personal capacities and as the Shareholders and Trustees under the
Voting Trust Agreement, agree with the Company that notwithstanding any contrary
provision of the Voting Trust Agreement, the Trustees, in their capacity as a
shareholder of the Company with respect to the Shares, will be present for the
express purpose of constituting a quorum under Section 1756 of the Pennsylvania
Business Corporation Law of 1988, as amended (or any successor provision), at
any meeting of shareholders of the Company, and any adjournment thereof, that is
held after the completion of the Public Offering, whether or not any vote is
<PAGE>
cast with respect to the Shares on any particular matter to be acted upon at the
meeting.
2. Defined Terms. Any capitalized term not otherwise defined
in this Amendment shall have the meaning of such term in the Voting Trust
Agreement.
3. Miscellaneous.
(a) Binding Nature of Amendment; No Assignment.
This Amendment shall be binding upon and inure to the benefit of the parties
hereto, including future holders of voting trust certificates, and their
respective heirs, personal representatives, successors and assigns. No party may
sell, assign, transfer or encumber such party's rights or obligations under this
Amendment, without the prior written consent of the other parties hereto, except
to the extent expressly permitted in this Amendment, the Voting Trust Agreement
or the Shareholders' Agreement.
(b) Provisions Separable. The provisions of this
Amendment are independent of and separable from each other, and no provision
shall be affected or rendered invalid or unenforceable by virtue of the fact
that for any reason any other or others of them may be invalid or unenforceable
in whole or in part.
(c) Entire Agreement. This Amendment and the
Voting Trust Agreement contain the entire understanding between the parties
hereto with respect to the subject matter hereof, and supersede all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written, except as herein or therein provided. The
express terms hereof control and supersede any course of performance and/or
usage of the trade inconsistent with any of the terms hereof. This Amendment may
not be modified or amended other than by an agreement in writing.
(d) Paragraph Headings. The paragraph headings
in this Amendment are for convenience only; they form no part of this agreement
and shall not affect its interpretation.
2
<PAGE>
IN WITNESS WHEREOF the Company and the Trustees have signed
and sealed this Agreement, and the Shareholders have signed and sealed this
Agreement.
Attest: ICT GROUP, INC.
/s/ Carl E. Smith By: /s/ John J. Brennan
- -------------------------- -----------------------------
Carl E. Smith, Secretary John J. Brennan
President
Witness:
/s/ Jean Stargell /s/ John J. Brennan
- -------------------------- ----------------------------- (SEAL)
John J. Brennan, Trustee
/s/ Helele Mitchell /s/ Donald P. Brennan
- -------------------------- ----------------------------- (SEAL)
Donald P. Brennan, Trustee
Witness: Owner:
/s/ Jean Stargell /s/ John J. Brennan
- -------------------------- ----------------------------- (SEAL)
John J. Brennan
/s/ Helele Mitchell /s/ Donald P. Brennan
- -------------------------- ----------------------------- (SEAL)
Donald P. Brennan
3
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
S-1 Registration Statement.
ARTHUR ANDERSEN LLP
Philadelphia, PA
June 3, 1996
<PAGE>
Exhibit 23.3
CONSENT OF PERSON TO BECOME DIRECTOR
ICT Group, Inc.:
I hereby consent to being named in the Registration Statement on Form
S-1 of ICT Group, Inc. as a person who will become a director of ICT Group, Inc.
upon completion of the initial public offering of the common stock of ICT Group,
Inc.
/s/ Bernard Somers
---------------------------
BERNARD SOMERS
Dublin, Ireland
May 31, 1996
