<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-21055
TELETECH HOLDINGS, INC.
-----------------------
(Exact name of registrant as specified in its charter)
DELAWARE 84-1291044
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1700 LINCOLN STREET, SUITE 1400
DENVER, COLORADO 80203
(Address of principal (Zip Code)
executive office)
(303) 894-4000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock April 30, 1999
Common Stock, par value $.01 per share 61,056,760
<PAGE>
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
- ----------------------------------
<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets--December 31, 1998 and March 31, 1999 3
Condensed consolidated statements of income--Three months ended March 31,
1999 and 1998 5
Condensed consolidated statements of cash flows--Three months ended
March 31, 1999 and 1998 6
Notes to condensed consolidated financial statements--March 31, 1999 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk 13
PART II . OTHER INFORMATION
- -------------------------------
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
- ----------
</TABLE>
2
<PAGE>
Item 1.
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
ASSETS 1998 1999
------ ------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8,796 $ 13,747
Short-term investments 37,082 36,230
Accounts receivable, net of allowance for doubtful
accounts of $2,900 and $3,167, respectively 68,830 75,423
Prepaids and other assets 2,811 3,479
Deferred tax asset 3,855 3,621
--------- --------
Total current assets 121,374 132,500
--------- --------
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $38,432 and
$43,790, respectively 77,546 86,233
--------- --------
OTHER ASSETS:
Long-term accounts receivable 4,274 6,575
Goodwill, net of amortization of $1,599 and $1,923, respectively 15,022 20,010
Contract acquisition cost, net of amortization of zero and $251,
respectively 10,900 10,649
Other assets 1,794 1,973
--------- --------
Total assets $230,910 $257,940
--------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated
balance sheets.
3
<PAGE>
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1999
------------------------------------ ------------ -----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 7,989 $ 12,833
Bank overdraft 778 434
Accounts payable 11,814 9,166
Accrued employee compensation 18,134 20,400
Accrued income taxes 4,191 2,341
Other accrued expenses 11,520 11,586
Customer advances, deposits and deferred income 3,803 2,933
------------ -----------
Total current liabilities 58,229 59,693
DEFERRED TAX LIABILITIES 835 1,037
LONG-TERM DEBT, net of current portion:
Capital lease obligations 4,208 3,845
Line of credit -- 20,000
Other debt 2,145 1,148
------------ -----------
Total liabilities 65,417 85,723
------------ -----------
STOCKHOLDERS' EQUITY:
Common stock; $.01 par value; 150,000,000 shares
authorized; 60,769,724 and 61,056,760 shares, respectively,
issued and outstanding 606 609
Additional paid-in capital 111,080 112,872
Accumulated other comprehensive income (1,610) (1,492)
Retained earnings 55,417 60,228
------------ -----------
Total stockholders' equity 165,493 172,217
------------ -----------
Total liabilities and stockholders' equity $230,910 $257,940
------------ -----------
------------ -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
balance sheets.
4
<PAGE>
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1998 1999
---------- ---------
<S> <C> <C>
REVENUES $80,244 $110,638
---------- ---------
OPERATING EXPENSES:
Costs of services 51,856 74,368
Selling, general and administrative
Expenses 21,262 28,404
---------- ---------
Total operating expenses 73,118 102,772
---------- ---------
INCOME FROM OPERATIONS 7,126 7,866
OTHER INCOME (EXPENSE):
Interest expense (302) (416)
Interest income 889 554
Equity in income of affiliate 14 --
Other (94) 65
---------- ---------
507 203
---------- ---------
INCOME BEFORE INCOME TAXES 7,633 8,069
Provision for income taxes 3,081 3,258
---------- ---------
NET INCOME $ 4,552 $ 4,811
---------- ---------
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 59,423 60,770
---------- ---------
Diluted 61,666 62,450
---------- ---------
NET INCOME PER SHARE
Basic $ .08 $ .08
---------- ---------
Diluted $ .07 $ .08
---------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated
balance sheets.
5
<PAGE>
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1998 1999
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,552 $ 4,811
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,858 6,307
Allowance for doubtful accounts 155 192
Deferred income taxes (4) 235
Equity in income of affiliate (14) --
Deferred compensation expense 32 --
Changes in assets and liabilities:
Accounts receivable (2,855) (5,783)
Prepaids and other assets 217 (2,246)
Accounts payable and accrued expenses 4,434 (2,309)
Customer advances, deposits and deferred income (429) (1,254)
---------- ---------
Net cash provided by (used in) operating activities 9,946 (47)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (9,533) (13,440)
Purchase of Intellisystems (2,000) --
Purchase of Pamet River, net of $339 cash acquired -- (1,462)
Purchase of Smart Call -- (2,650)
Changes in accounts payable and accrued liabilities related to
investing activities (781) (55)
Decrease in short-term investments 2,646 852
---------- ---------
Net cash used in investing activities (9,668) (16,755)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in bank overdraft $(1,094) $ (344)
Net increase in short-term borrowings 2,191 25,000
Payments on long-term debt and capital leases (1,365) (2,001)
Proceeds from exercise of stock options 413 41
---------- ---------
Net cash provided by financing activities 145 22,696
---------- ---------
Effect of exchange rate changes on cash 133 (943)
---------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 556 4,951
CASH AND CASH EQUIVALENTS, beginning of period 7,338 8,796
---------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 7,894 $13,747
---------- ---------
---------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated
balance sheets.
6
<PAGE>
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE (1)--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. The condensed consolidated financial
statements reflect all adjustments (consisting of only normal recurring
accruals) which, in the opinion of management, are necessary to present
fairly the financial position, results of operations and cash flows of
TeleTech Holdings, Inc. and subsidiaries as of March 31, 1999 and 1998 and
for the periods then ended. Operating results for the three months ended
March 31, 1999 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1999.
The unaudited condensed consolidated financial statements should be read
in conjunction with the consolidated and combined financial statements and
footnotes thereto included in the Company's Form 10-K for the year ended
December 31, 1998.
NOTE (2)--SEGMENT INFORMATION AND CUSTOMER CONCENTRATIONS
The Company classified its business activities into four fundamental
areas: outsourced operations in the United States, facilities management
operations, international outsourced operations, and technology services and
consulting. These areas are separately managed and each has significant
differences in capital requirements and cost structures. Outsourced,
facilities management and international outsourced operations are reportable
business segments with their respective financial performance detailed
herein. Technology services and consulting is included in corporate
activities as it is not a material business segment. Also included in
corporate activities are general corporate expenses and overall operational
management expenses. Assets of corporate activities include unallocated cash,
short-term investments and deferred income taxes. There are no significant
transactions between the reported segments for the periods presented.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
(in thousands) 1998 1999
---------- ---------
<S> <C> <C>
REVENUES:
Outsourced $ 43,930 $ 62,914
Facilities Management 17,328 23,666
International Outsourced 17,349 18,137
Corporate Activities 1,637 5,921
---------- ---------
Total $ 80,244 $110,638
---------- ---------
---------- ---------
OPERATING INCOME (LOSS):
Outsourced $ 8,772 $ 12,329
Facilities Management 2,099 3,072
International Outsourced 1,284 601
Corporate Activities (5,029) (8,136)
---------- ---------
Total $ 7,126 $ 7,866
---------- ---------
---------- ---------
</TABLE>
7
<PAGE>
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 - CONTINUED
<TABLE>
<CAPTION>
BALANCE AS OF
-------------
DECEMBER 31 MARCH 31,
(in thousands) 1998 1999
----------- ---------
<S> <C> <C>
ASSETS:
Outsourced Assets $101,105 $114,944
Facilities Management Assets 18,121 20,229
International Outsourced Assets 50,764 54,727
Corporate Activities Assets 45,898 68,040
----------- ---------
Total $230,910 $257,940
----------- ---------
----------- ---------
GOODWILL:
International Outsourced Goodwill, Net $ 6,803 $ 9,106
Corporate Activities Goodwill, Net 8,219 10,904
----------- ---------
Total $ 15,022 $ 20,010
----------- ---------
----------- ---------
</TABLE>
The following geographic data include revenues based on the location the
services are provided (in thousands).
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1998 1999
----------- ---------
<S> <C> <C>
REVENUES:
United States $ 62,545 $ 87,592
Australia 9,190 10,719
Canada 6,254 8,920
Rest of world 2,255 3,407
----------- ---------
Total $ 80,244 $110,638
----------- ---------
----------- ---------
</TABLE>
NOTE (3)--SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION AND NONCASH INVESTING
AND FINANCING ACTIVITIES (IN THOUSANDS):
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1999
------------ -------------
<S> <C> <C>
Cash paid for interest $ 301 $ 416
Cash paid for income taxes $ 375 $ 5,108
Noncash investing and financing activities:
Stock issued in purchase of Intellisystems $ 3,389 $ --
Stock issued in purchase of Pamet River, Inc. $ -- $ 1,753
</TABLE>
NOTE (4)--ACQUISITIONS
On March 18, 1999, the Company acquired 100% of the common stock of
Pamet River, Inc. ("Pamet") for approximately $1,821,000 in cash and 285,711
shares of common stock in the Company. Pamet is a global marketing company
offering end-to-end marketing solutions by leveraging Internet and database
technologies. The transaction has been accounted for as a purchase and
goodwill will be amortized using the straight-line
8
<PAGE>
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 - CONTINUED
method over 20 years. The operations of Pamet for all periods prior to the
acquisition are immaterial to the results of the Company and, accordingly, no
pro forma financial information has been presented.
On March 31, 1999, the Company acquired 100% of the common stock of
Smart Call S.A. ("Smart Call") for approximately $2,350,000 in cash including
costs related to the acquisition. Smart Call is based in Buenos Aires,
Argentina and provides a wide range of customer management solutions to Latin
American and multinational companies. The transaction has been accounted for
as a purchase and goodwill will be amortized using the straight-line method
over 20 years. The operations of Smart Call for all periods prior to the
acquisition are immaterial to the results of the Company and, accordingly, no
pro forma financial information has been presented.
As a part of the Smart Call acquisition, the Company paid $300,000,
including costs associated with the transaction, for the option to acquire
Connect S.A. ("Connect"), a sister company with additional customer service
and systems integration capabilities. The option has been accounted for as an
other asset. TeleTech may be required to purchase Connect for $4.3 million to
$4.8 million in total consideration if Connect achieves certain operating
objectives.
NOTE (5)--COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130"). The purpose of SFAS 130 is to report a measure of all changes
in equity that result from recognized transactions and other economic events
of the period other than transactions with owners in their capacity as
owners. The only item of other comprehensive income reported by the Company
is the cumulative translation adjustment.
The Company's comprehensive income for the three months ended March 31,
1998 and 1999 was as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1999
------------ -------------
<S> <C> <C>
Net income for the period $ 4,552 $ 4,811
Change in cumulative translation adjustment 278 118
------------ -------------
Comprehensive income $ 4,830 $ 4,929
------------ -------------
------------ -------------
</TABLE>
9
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
INTRODUCTION
Management's discussion and analysis of financial condition and results
of operations in this Form 10-Q should be read in conjunction with the risk
factors included in the Company's Form 10-K for the year ended December 31,
1998. Specifically, the Company has experienced, and in the future could
experience, quarterly variations in revenues and earnings as a result of a
variety of factors, many of which are outside the Company's control,
including: the timing of new contracts; the timing of new product or service
offerings or modifications in client strategies; the expiration or
termination of existing contracts; the timing of increased expenses incurred
to obtain and support new business; and the seasonal pattern of certain of
the businesses serviced by the Company. In addition, the Company has
concentrated its marketing efforts towards obtaining larger, more complex,
strategic customer care programs. As a result, the time required to negotiate
and execute an agreement with the client has increased. This may lead to
short-term delays in the anticipated start-up of new client programs and in
the Company achieving full capacity utilization.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED
MARCH 31, 1998
Revenues increased $30.4 million or 38% to $110.6 million for the three
months ended March 31, 1999 from $80.2 million for the three months ended
March 31, 1998. The increase resulted primarily from $12.3 million in
revenues from new clients and $25.4 million in increased revenue from
existing clients. These increases were offset in part by contract expirations
and other client reductions. Revenues for the three months ended March 31,
1999 include approximately $23.7 million from facilities management contracts
as compared with $17.3 million for the three months ended March 31, 1998.
Costs of services increased $22.5 million, or 43%, to $74.4 million for
the three months ended March 31, 1999 from $51.9 million for the three months
ended March 31, 1998. Costs of services as a percentage of revenues increased
from 64.6% for the three months ended March 31, 1998 to 67.2% for the three
months ended March 31, 1999. The increase in the costs of services as a
percentage of revenues is a result of higher costs of services as a
percentage of revenues associated with the Company's Latin American
operations and unused capacity in several of the Company's domestic and
foreign customer interaction centers. Operations in Latin America were
negatively impacted by economic conditions.
Selling, general and administrative expenses increased $7.1 million, or
34% to $28.4 million for the three months ended March 31, 1999 from $21.3
million for the three months ended March 31, 1998. Selling, general and
administrative expenses as a percentage of revenues decreased from 26.5% for
the three months ended March 31, 1998 to 25.7% for the three months ended
March 31, 1999 primarily as a result of revenue increases in certain large
client programs which have increased revenues without a proportionate
increase in selling, general and administrative expenses. Expense reductions
were offset by Y2K expenditures totaling approximately $500,000 during the
first quarter 1999.
As a result of the foregoing factors, income from operations increased
$740,000 or 10%, to $7.9 million for the three months ended March 31, 1999
from $7.1 million for the three months ended March 31, 1998. Operating income
as a percentage of revenues decreased from 8.9% for the three months ended
March 31, 1998 to 7.1% for the three months ended March 31, 1999.
Other income totaled $203,000 for the three months ended March 31, 1999
compared with $507,000
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 -- CONTINUED
during the three months ended March 31, 1998. This is primarily related to
decreased investment income of $335,000 resulting from the decrease in cash
investments from $67.6 million at March 31, 1998 to $36.2 million at March
31, 1999.
As a result of the foregoing factors, net income increased $259,000 or
5.7%, to $4.8 million for the three months ended March 31, 1999 from $4.6
million for the three months ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1999 the Company had cash and cash equivalents of $13.7
million and short-term investments of $36.2 million. Cash used by operating
activities was $47,000 for the three months ended March 31, 1999, which
primarily resulted from increased accounts receivable during the period.
Cash used in investing activities was $16.8 million for the three months
ended March 31, 1999 resulting primarily from $13.4 million in capital
expenditures, $1.5 million toward the purchase of Pamet River and $2.7
million toward the purchase of Smart Call (see Note 4 accompanying the
condensed financial statements), offset in part by a decrease of $852,000 in
short term investments.
Cash provided by financing activities was $22.7 million resulting from
the increase in borrowings of $25.0 million offset in part by pay downs of
capital leases and other debt.
The Company has a $50.0 million unsecured revolving line of credit with
a syndicate of five banks. The Company also has the option to secure at any
time up to $25.0 million of the line with available cash investments. The
Company has two interest rate options: an offshore rate option or a bank base
rate option. The Company will pay interest at a spread of 50 to 150 basis
points over the applicable offshore or bank base rate, depending upon the
Company's leverage. Interest on the secured portion is based on the
applicable rate plus 22.5 basis points. Borrowings under this agreement
totaled $25.0 million at March 31, 1999 of which $15.0 million was secured at
the Company's option with temporary short term investments disclosed on the
balance sheet. Interest rates under these borrowings averaged 5.5% at March
31, 1999. Under this line of credit, the Company has agreed to maintain
certain financial ratios and capital expenditure limits. The Company is in
compliance with all covenants of this agreement as of March 31, 1999.
The Company currently expects total capital expenditures in 1999 to be
approximately $50 to $65 million of which $13.4 million was expended in the
first three months. The Company believes that existing cash on hand and
available borrowings under the line of credit together with cash from
operations will be sufficient to finance the Company's operations, planned
capital expenditures and anticipated growth through 1999.
POTENTIAL YEAR 2000 PROBLEMS
The Year 2000 problem results from date-sensitive computer programs
being written using two digits, rather than four digits, to define the
applicable year. Computer programs that are not Year 2000 compliant will be
unable, for example, to determine whether date references to "00" refers to
the year 1900 or 2000. Determining whether the Company's and its clients'
systems are Year 2000 compliant is critical because the Company utilizes a
significant number of software programs and operating systems throughout its
organization, and the Company's systems regularly interface with the various
information systems of its clients. The Company's or its clients' failure to
detect and remediate Year 2000 related problems in its or their computer and
information systems could have a material adverse effect on the business,
results of operations or financial condition of the Company.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 -- CONTINUED
The Company, in conjunction with an outside consulting firm, has
implemented a multiphased program to inventory, assess, remediate and test
its systems for Year 2000 compliance (the "Program"). The Company has nearly
completed the enterprisewide inventory, and the target date for the
completion of the assessment, analysis and remediation associated with the
Year 2000 issues is September 1999. The targeted completion date includes
addressing the technology and non-technology interfaces with its clients and
suppliers.
The consulting firm works with full-time Company employees who are
dedicated to the Program. The assessments completed to date have led to the
need to migrate several human resource- and payroll-oriented applications to
Year 2000 compliant software, upgrade several telephone switches and procure
several hundred replacement workstations. Analysis and testing of
Company-generated software applications have been initiated. The Company
anticipates that the need for software conversion caused by Year 2000 issues
is not anticipated to be significant, given the Company's extensive use of
off-the-shelf products.
While the cost to address Year 2000 issues continues to be developed as
the assessment phase nears completion, the Company currently anticipates that
the total cost of assessment and remediation will be between $5 million and
$10 million. Of this total approximately 50% is anticipated to be new capital
expenditures to replace non-compliant computer hardware and software. For the
quarter ended March 31, 1999, the Company has incurred approximately $2.2
million in inventory and assessment work and equipment and software
replacement work on Year 2000 issues, $500,000 which was expensed in the
accompanying statement of operations and were funded by cash flow from
operations. Expenditures in 1999 will be funded primarily through cash flow
from operations and available cash on hand.
FORWARD-LOOKING STATEMENTS
All statements contained in this "Management's Discussion and Analysis
of Financial Condition and Results of Operations" or elsewhere in this
quarterly report, that are not statements of historical facts are
forward-looking statements that involve substantial risks and uncertainties.
Forward-looking statements include (i) the anticipated level of capital
expenditures for 1999; (ii) the Company's belief that existing cash,
available borrowings and cash from operations will be sufficient to finance
the Company's near term operations; (iii) the Company's estimate of the
impact of the Year 2000 issues; (iv) the Company's belief that near-term
interest rate fluctuations will not result in a material effect on future
earnings, fair values or cash flows of the Company; (v) the Company's belief
that foreign currency rate fluctuations may positively or negatively affect
revenues and net income attributable to the Company's foreign subsidiaries;
and (vi) statements relating to the Company or its operations that are
preceded by terms such as "anticipates", "expects", "believes" and similar
expressions.
The Company's actual results, performance or achievements may differ
materially from those implied by such forward-looking statements as a result
of various factors, including the following: TeleTech's agreements with its
clients do not ensure that TeleTech will generate a specific level of revenue
and may be canceled by the clients on short notice. The amount of revenue
TeleTech generates from a particular client is dependent upon customers'
interest in and use of the client's products or services, some of which are
recently introduced or untested. The loss of a significant client or the
termination or completion of a significant client program may have a material
adverse effect on TeleTech's capacity utilization and results of operations.
There can be no assurance that the Company will be successful in integrating
acquired companies into the Company's existing businesses, or that any
completed acquisition will enhance the Company's business, results of
operations or financial condition. There are certain risks inherent in
conducting international business, including without limitation exposure to
currency fluctuations, longer payment cycles and greater difficulties in
accounts receivable collection.
12
<PAGE>
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FOR THE THREE MONTHS ENDED MARCH 31, 1999
Market risk represents the risk of loss that may impact the financial
position, results of operations or cash flows of the Company due to adverse
changes in financial and commodity market prices and rates. The Company is
exposed to market risk in the areas of changes in U.S. interest rates and
changes in foreign currency exchange rates as measured against the U.S.
dollar. These exposures are directly related to its normal operating and
funding activities. Historically, and as of March 31, 1999, the Company has
not used derivative instruments or engaged in hedging activities.
INTEREST RATE RISK
The interest on the Company's line of credit and its Canadian
subsidiary's operating loan is variable based on the bank's base rate or
offshore rate, and therefore, affected by changes in market interest rates.
At March 31, 1999, there was approximately $434,000 in borrowings outstanding
on the operating loan and $25.0 million outstanding on the line of credit.
The Company monitors interest rates frequently and has sufficient cash
balances to pay off the line of credit and any early termination penalties,
should interest rates increase significantly. The Company's investments are
typically short-term in nature and as a result do not expose the Company to
significant risk from interest rate fluctuations. Therefore, the Company does
not believe that reasonably possible near-term changes in interest rates will
result in a material effect on future earnings, fair values or cash flows of
the Company.
FOREIGN CURRENCY RISK
The Company has wholly owned subsidiaries in Argentina, Australia,
Brazil, Canada, Mexico, New Zealand, Singapore and the United Kingdom.
Revenues and expenses from these operations are typically denominated in
local currency, thereby creating exposures to changes in exchange rates. The
changes in the exchange rate may positively or negatively affect the
Company's revenues and net income attributed to these subsidiaries.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As disclosed in the Company's 1998 Annual Report on Form 10-K, in late
November 1996, CompuServe notified TeleTech that CompuServe was withdrawing
its WOW! Internet service from the marketplace and that effective January 31,
1997, it would terminate all the programs TeleTech provided to CompuServe.
Pursuant to its agreement with TeleTech, CompuServe was entitled to terminate
the agreement for reasonable business purposes upon 120 days' advance notice
and payment to TeleTech of a termination fee calculated in accordance with
the agreement. In December 1996, TeleTech filed suit against CompuServe in
the Federal District Court for the Southern District of Ohio to enforce these
termination provisions and collect the termination fee. CompuServe filed a
counterclaim in December 1996 alleging that the Company breached other
provisions of this agreement and seeking unspecified monetary damages. In
March 1997, CompuServe asserted a right to offset certain accounts receivable
it owes to the Company for services rendered against the amount that may be
awarded to CompuServe on its counterclaim, if any. These accounts receivable
total $4.3 million. In mid-1997, because of the proposed acquisition of
CompuServe by WorldCom, the parties agreed to delay proceedings in the
lawsuit. In December 1997, proceedings related to the lawsuit were
recommenced and then stayed again pending settlement negotiations, which
currently are moving forward. Although the Company believes that these legal
proceedings will not have a material adverse effect on the Company's
financial condition or results of operations, the ultimate outcome of the
proceedings is uncertain.
From time to time, the Company is involved in litigation, most of which
is incidental to its business. In the Company's opinion, no litigation to
which the Company currently is a party is likely to have a material adverse
effect on the Company's results of operations or financial condition.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following documents are filed as an exhibit to this report:
10.15 Employment Agreement dated March 2, 1998 between
Joseph Livingston and TeleTech
10.16 Employment Agreement dated February 25, 1999 between
Steven B. Coburn and TeleTech
10.17 Employment Agreement dated March 11, 1998 between
Deborah C. Gentry and TeleTech
10.18 Employment Agreement dated March 16, 1999 between
Vincent Cipolla and TeleTech
27.1 Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TELETECH HOLDINGS, INC.
-----------------------
(Registrant)
Date: May 11, 1999 /s/ KENNETH D. TUCHMAN
---------------------------- ---------------------------------
Kenneth D. Tuchman
Chairman of the Board, and Chief
Executive Officer
Date: May 11, 1999 /s/ STEVEN B. COBURN
---------------------------- ---------------------------------
Steven B. Coburn, Chief Financial
Officer
15
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EXHIBIT 10.15
Employment agreement: Joseph D. Livingston
March 2, 1998
Terms of Agreement:
TERM: 3 years
TITLE: As agreed between J. Livingston & K. Tuchman
COMPENSATION:
Base: $380,000 (Annual review of 10% minimum, when President hired)
Annual Bonus: $150,000
Stock: 180,000 shares @ $8.50 Vesting monthly; Immediate vesting if
sold/merged and/or acquired.
Life Insurance: Additional 5 million dollars
Board: Will be proposed as next internal, w/president
OTHER: No "At-will Clause"
Non-Compete Clause, 1 yr.
Paid unused vacation annually (4 wks)
Country Club Membership
All other terms of condition apply from previous employment Agreement.
Agreed: Agreed:
/s/ Kenneth D. Tuchman /s/ Joseph D. Livingston
Kenneth D. Tuchman Joseph D. Livingston
Chairman, President & CEO Executive VP & COO
<PAGE>
EXHIBIT 10.16
FEBRUARY 25, 1999
Steven B. Coburn
TeleTech
1700 Lincoln Street
14th Floor
Denver, Colorado 80203-4514
RE: LETTER AGREEMENT
Dear Steve:
I am writing to confirm your agreement with TeleTech Holdings, Inc.
("TeleTech") regarding the amendment of your employment agreement:
1. EFFECTIVE DATE OF THIS AGREEMENT. The Effective Date of this Agreement
shall be deemed to be January 1, 1999.
2. TERM. The term of this Agreement shall be 3 years from the Effective Date
("Term").
3. JOB RESPONSIBILITIES. Your job duties and responsibilities as Chief
Financial Officer with TeleTech, which are set forth more fully in your
Employment Agreement, dated as of April 1, 1996 ("Employment Agreement")
shall remain as provided in such Employment Agreement.
4. BASE SALARY. Subject to the terms and conditions of this Agreement, as of
the Effective Date, your Annual Base Salary shall be $250,000.00.
5. BONUS. You will be eligible to receive an Annual Discretionary Bonus of up
to 50% of your Annual Base Salary, of which $50,000.00 shall be guaranteed.
6. ADDITIONAL STOCK OPTIONS. You will be entitled to 120,000 additional
Non-Qualified Stock Options upon the following terms and conditions:
a. STRIKE PRICE. $6.00 per share;
b. VESTING. Except as otherwise provided herein, these stock options
will vest in equal monthly installments over a 3-year period,
beginning as of the Effective Date, and continuing thereafter, as long
as you remained employed by TeleTech.
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c. EXERCISE DATE. Subject to the restrictions of the securities laws and
other applicable rules and regulations, only vested stock options are
exercisable. Except as otherwise provided herein, any stock options
which are not vested on the date of termination of your employment for
any reason shall be null, void and of no effect.
d. STOCK PLAN. The stock options granted by this Agreement shall be
subject to TeleTech's Stock Plan as may be amended from time-to-time.
e. CHANGE OF CONTROL. In the event of a Change of Control, all of your
unvested stock options (including any unvested stock options
previously granted to you pursuant to the TeleTech Holdings, Inc.
Non-Qualified Stock Option Agreement dated as of September 7, 1995
(the "Non-Qualified Stock Option Agreement"), as well as any unvested
options granted to you pursuant to this Agreement) will immediately
vest and become exercisable. The meaning of "Change of Control" shall
be as set forth in EXHIBIT 1 attached hereto.
f. NOTICE OF INTENT TO EXERCISE TELETECH OPTIONS OR SELL TELETECH SHARES.
Prior to exercising any vested options or selling any shares owned by
you, you must give TeleTech written notice that you intend to do so.
7. ADDITIONAL FRINGE BENEFITS. You will receive health insurance, vacations
and other employee benefits that are generally made available to executive
employees. In addition, you shall receive life insurance benefits in
amounts not less than $4,000,000.00.
8. OTHER EXISTING AGREEMENTS. Except for those provisions which have been
deleted or modified on the copies attached as Exhibits hereto or as
provided herein, and except as otherwise specifically inconsistent with the
provisions of this Agreement, the parties hereto reaffirm their agreement
to and the effectiveness of the following agreements:
A. The Letter Agreement dated as of September 5, 1995, which is attached
hereto as EXHIBIT 2;
B. The Employment Agreement dated as of April 1, 1996, which is attached
hereto as EXHIBIT 3, (except for paragraph 13.4, which shall be
replaced with the following language: "The Arbitrator's fees shall
be borne by the Company. Notwithstanding the above, the Arbitrator
shall have the discretion to require the losing party to reimburse the
prevailing party for the Arbitrator's fees paid by the prevailing
party");
C. The TeleTech Holdings, Inc. Non-Qualified Stock Option Agreement dated
as of September 7, 1995, which is attached hereto as EXHIBIT 4 (the
"Non-Qualified Stock Option Agreement");
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D. The Special Release and Covenant executed in 1996, which is attached
hereto as EXHIBIT 5, and which you expressly ratify and affirm as in
full force and effect as of the date that you execute this Agreement;
E. The Agreement for At-Will Employment dated as of June 21, 1996, which
is attached hereto as EXHIBIT 6;
F. The Arbitration Agreement dated as of June 22, 1995, which is attached
hereto as EXHIBIT 7 (except for paragraph 10.2, which shall be
replaced with the following language: "The Arbitrator's fees shall
be borne by the Company. Notwithstanding the above, the Arbitrator
shall have the discretion to require the losing party to reimburse the
prevailing party for the Arbitrator's fees paid by the prevailing
party");
G. The Employee Proprietary Information and Invention Agreement dated as
of June 6, 1995, which is attached hereto as EXHIBIT 8;
H. The Confidentiality Agreement dated as of January 10, 1996, which is
attached hereto as EXHIBIT 9; and
I. The miscellaneous agreements executed by you in connection with your
employment, which are attached hereto as EXHIBIT 10.
Each of these agreements shall be deemed to be incorporated into this
Agreement by reference.
9. PAST COMPENSATION. You agree that, except for compensation due to you
under this Agreement, the Non-Qualified Stock Options due to you under the
terms and conditions and vesting schedules of the Non-Qualified Stock
Option Agreement and any unused vacation time, you are owed no additional
compensation of any type whatsoever for any period prior to and up to the
Effective Date.
10. SEVERANCE IN THE EVENT OF TERMINATION BY TELETECH WITHOUT CAUSE. In the
event that you are terminated by TeleTech without cause (i.e., for any
reason other than for the reasons specifically identified as Termination
"For Cause" in paragraph 11 hereof), you shall receive severance benefits
equal to: (a) 6 months of your Annual Base Salary (i.e., $125,000.00); and
(b) a 6-month pro-rata share of all of the Annual Discretionary Bonus for
which you are eligible (i.e., $62,500.00); and (c) the immediate vesting of
any stock options that are scheduled to vest in accordance with the vesting
schedules of the Non-Qualified Stock Option Agreement and this Agreement
within 13 months after the date of your termination. In this regard, you
agree to execute a reasonable and mutually agreeable separation agreement
and mutual release and other related documents in connection with
3
<PAGE>
your receipt of the severance benefits contained herein.
11. TERMINATION "FOR CAUSE." For purposes of this Agreement, termination by
TeleTech "For Cause" shall be deemed to consist of the following: (a) the
willful refusal to perform your duties as Chief Financial Officer; (b) the
breach of this Agreement; (c) fraud, theft, embezzlement, conviction of a
felony (or a misdemeanor resulting or intended to result in gain or
personal enrichment at the expense of TeleTech); or (d) violations of any
laws or regulations in the conduct of TeleTech's business or on TeleTech's
premises.
12. AT-WILL EMPLOYMENT. You agree that your employment at TeleTech as of and
after the Effective Date of this Agreement shall be "At-Will" and may be
terminated by either Party at any time with or without notice and with or
without cause. Nothing contained herein or otherwise shall be deemed to be
a commitment to or guarantee of future employment.
13. RELEASE OF CLAIMS. Except as otherwise provided in this Agreement, for and
in consideration of the benefits provided herein and your continued
employment hereunder, you on behalf of yourself and any heirs and
dependents, executors, administrators and assigns hereby release and
discharge TeleTech and any of its shareholders, officers, directors,
partners, employees, agents, contractors, attorneys, assigns, parent
companies, subsidiary companies, affiliates, predecessors-in-interest,
successors and assigns (hereinafter, "Releasees") from any and all rights,
claims, causes of action, liability, damages, attorney?s fees and costs of
any kind or nature, whether known or unknown, which you ever had or now
have against Releasees by reason of any actual or alleged act, omission,
transaction, practice, conduct, occurrence or other matter occurring up to
and including the date of this agreement and arising out of, connected with
or incidental to your employment with TeleTech. FOR PURPOSES OF THIS
SECTION, YOU ACKNOWLEDGE THAT THIS RELEASE OF CLAIMS IS EFFECTIVE AS OF THE
DATE OF EXECUTION HEREOF and not as of the Effective Date as defined
herein.
13. MISCELLANEOUS.
a. The parties agree that this Agreement is fair and reasonable and has
been entered into freely and voluntarily after good faith, arms length
negotiations.
b. You agree that you have been advised to seek independent counsel
regarding the terms and conditions and the negotiation of this
Agreement.
c. You agree that you are the owner of any claims, etc. released by this
Agreement and that you have not assigned any claims, etc. related to
TeleTech to anyone.
d. The parties agree that, in entering into this Agreement, they have not
relied upon any representations, warranties, promises and/or any
conditions made
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<PAGE>
by the other party which are not specifically set forth in this
Agreement.
e. This Agreement will be governed by Colorado law.
f. This Agreement was negotiated and drafted jointly.
g. This Agreement, including the Exhibits, contains the entire agreement
between the parties relating to its subject matter, supersedes all
prior agreements, negotiations, and oral understandings, if any, and
may not be amended, supplemented, or discharged, except by an
instrument in writing signed by each of the parties.
5
<PAGE>
h. The parties agree that there are no collateral oral agreements between
them with respect to the subject matter of this Agreement, or
otherwise.
ACCEPTED AND AGREED TO:
TELETECH
/s/ Kenneth D. Tuchman
--------------------------------------
KENNETH D. TUCHMAN
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
/s/ Steven B. Coburn
--------------------------------------
STEVEN B. COBURN
6
<PAGE>
EXHIBIT 1
CHANGE OF CONTROL
For purposes of this Agreement, "Change of Control" shall mean the any of
the following:
(i) any consolidation, merger or other similar transaction (A)
involving TeleTech, if TeleTech is not the continuing or surviving
corporation, or (B) which contemplates that all or substantially all of the
business and/or assets of TeleTech will be controlled by another corporation;
(ii) any sale, lease, exchange or transfer (in one transaction or
series of related transactions) of all or substantially all of the assets of
TeleTech;
(iii) approval by the stockholders of TeleTech of any plan or
proposal for the liquidation or dissolution of TeleTech, unless such plan or
proposal is abandoned within 60 days following such approval;
(iv) the acquisition by any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act), or two or more persons
acting in concert, of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 40% or more of the outstanding shares
of voting stock of TeleTech; provided, however, that for purposes of the
foregoing, "person" excludes Kenneth D. Tuchman and his affiliates; or
(v) if, during any period of 15 consecutive calendar months
commencing on the date of this Agreement, those individuals (the "CONTINUING
DIRECTORS") who either (A) were directors of TeleTech on the first day of
each such period, or (B) subsequently became directors of TeleTech and whose
actual election or initial nomination for election subsequent to that date
was approved by a majority of the Continuing Directors then on the board of
directors of TeleTech, cease to constitute a majority of the board of
directors of TeleTech.
7
<PAGE>
Ms. Deborah Gentry
March 11, 1998
Page 1
EXHIBIT 10.17
[TeleTech Letterhead]
March 11, 1998
Ms. Deborah Gentry
42 Arbor Creek Drive
Pittsford, NY 14534
Dear Deborah:
It is with pleasure that we extend you this offer of employment as Senior
Vice President of Global Human Resources with TeleTech Services Corporation
("TeleTech") in our Denver executive headquarters. You will report to Ken
Tuchman and/or to TeleTech's President. Upon acceptance of this offer, you
will become an integral part of a selected team of professionals who thrive
upon and demand excellence. Great care has been taken to select what we
believe is the "best of the best" to complement a total team effort dedicated
to TeleTech's mission.
Your base salary will be $185,000. You will receive a guaranteed annual bonus
of 30% of your base upon completion of your first year. Following your first
year, you will have a bonus opportunity of 30% of your base, to be awarded
based upon satisfactory achievement of MBO goals mutually agreed upon from
year to year. You will have an opportunity for input and participation in
this process. You will start with TeleTech no later than April 1, 1998, or
such other date as you and I may mutually agree (your "Start Date").
You will receive vacation accrued each pay period initially to a maximum of 3
weeks per year, and after the third anniversary of your Start Date, 4 weeks
per year. You will be eligible for TeleTech's medical and dental insurance
plans on the first of the month following a mandatory 90-day waiting period
after the Start Date. TeleTech will reimburse any COBRA payments that you may
have during that period. You will be eligible for TeleTech's 401(k) plan
during the enrollment period which follows your first 6 months of service.
On the first anniversary of your Start Date, and each of the following
anniversaries of your Start Date, you will be eligible under the Stock Plan
(the "Plan") for TeleTech's non-qualified incentive stock options exercisable
for up to 100,000 shares at $9.50 per share
<PAGE>
Ms. Deborah Gentry
March 11, 1998
Page 2
under the Plan, which will cliff-vest (i.e., vest on each anniversary with no
accrual for any partial year) as follows:
<TABLE>
<S> <C>
year 1 - - 20% of options
year 2 - - 20% (cumulative 40%)
year 3 - - 20% (cumulative 60%)
year 4 - - 20% (cumulative 80%)
year 5 - - 20% (cumulative 100%)
</TABLE>
Your option agreement will also provide that vesting of your awarded options
will accelerate forward two years upon a chance of control of TeleTech
Holdings, Inc. ("THI"), meaning that (1) Ken Tuchman owns or controls
beneficially less than 20% of THI common stock, and (2) within 6 months after
such change, your title, responsibilities, or compensation are materially
diminished. TeleTech is presently considering creating an Executive Stock
Plan (the "Executive Plan"), to award additional options to key employees,
and you will be eligible to participate in the Executive Plan when it is set
up. Except as stated above for a change for control, all vesting will be
contingent upon continued employment.
You will also be eligible to participate in the Employee Stock Purchase Plan
("ESPP") in accordance with its terms. Under the ESPP, participating
employees may elect to withhold up to 10% of their compensation (to a maximum
of $15,000) in any calendar year. TeleTech then periodically sells to each
participating employee as many shares of stock as can be purchased with that
employee's total withholdings during that period. The price for the stock
under the ESPP is the lower of 90% of the fair market value of the stock on
either the first business day or the last business day of any offering
period, subject to the discretion of the Compensation Committee and the terms
of the ESPP.
TeleTech will reimburse you for reasonable and necessary expenses up to
$85,000, incurred by your within 1 year after your signing of this letter,
upon submission of satisfactory documentation. "Relocation expenses" shall
mean temporary living expenses (which shall cease upon your purchase or
long-term rental of a home in Denver), travel expenses in accordance with
TeleTech's travel policy, all costs associated with the buying and selling of
Gentry properties and leases (including buying down mortgage points) and
moving expenses.
Your employment with TeleTech will be formalized in standard agreements,
required for all our executives, which will incorporate the terms of this
letter. Your employment agreement will further provide for payment to you of
$92,500 in the event in any termination without cause. Your TeleTech
agreements will also provide for non-competition, non-disclosure, protection
of trade secrets and confidentiality, and mandatory and binding arbitration.
<PAGE>
Ms. Deborah Gentry
March 11, 1998
Page 3
We are extremely excited at the prospect of your joining our executive team.
If you have any questions, please contact me.
<PAGE>
Ms. Deborah Gentry
March 11, 1998
Page 4
Please execute two copies of this Agreement, returning an original to me and
retaining one for your files.
Sincerely,
/s/ Kenneth D. Tuchman
- ----------------------
Kenneth D. Tuchman
President and CEO
I agree to the terms and conditions of this offer of employment and will begin
working for TeleTech Holdings, Inc. no later than April 1, 1998.
Signed: /s/ Deborah Gentry
--------------------------------------
Deborah Gentry
Date: 3/11/98
--------------------------
This offer is extended and is dependent upon reference checking, presenting
of appropriate documentation to measurement Immigration and Naturalization
requirements and upon receipt of a signed Non-Disclosure/Non-Compete
Agreement upon your arrival; a valid drivers license or ID card and Social
Security card, birth certificates, or unexpired INS Employment Authorization,
or a valid U.S. Passport or Certificate of Naturalization.
<PAGE>
EXHIBIT 10.18
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is entered into as of
March 16, 1999 by and between TeleTech Holdings, Inc., a Delaware corporation
("TELETECH" or "EMPLOYER"), and Vincent Cipolla ("EMPLOYEE").
W I T N E S S E T H:
WHEREAS, Employee currently is employed by Pamet River, Inc., a
Massachusetts corporation ("PAMET"), and Pamet has agreed to merge with and
into a wholly-owned subsidiary of TeleTech (the "MERGER");
WHEREAS, as a condition precedent to consummation of the Merger,
Employer has agreed to employ Employee, and Employee has agreed to accept
employment with Employer, in accordance with the terms and conditions set
forth herein;
WHEREAS, Employer is engaged in the business of providing strategic
assessment of marketing needs, database and integrated marketing services,
such as advertising, direct response and public relations (together with any
similar activities in which the Company is engaged as of the date hereof, the
"BUSINESS");
WHEREAS, Employee has had an opportunity to review the terms and
conditions of this Agreement, to negotiate the terms hereof and to engage
independent legal counsel on his behalf; and
WHEREAS, in consideration of Employer's employment of Employee, the
terms, conditions and covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Employee and Employer agree to execute and be bound by this Agreement.
NOW THEREFORE, intending to be legally bound, the parties hereto agree
as follows:
1. RECITALS. Each of the above recitals is incorporated into this
Agreement and is binding upon the parties hereto.
2. EMPLOYMENT; DUTIES.
(a) Employer hereby employs Employee as Chief Executive
Officer of Pamet, as it is operated after the Merger as a separate division
or subsidiary of TeleTech (the "DIVISION"), and as Chief Marketing Officer of
TeleTech, and Employee hereby accepts such employment with Employer.
Employee shall devote his full time and best efforts to the performance of
all duties as shall be assigned to him from time to time by Employer and
shall use his best efforts to promote the business and prospects of Employer.
Unless otherwise specifically
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agreed in writing by Employer, Employee shall not engage in any other
business activity or be gainfully employed other than pursuant to this
Agreement. Employee acknowledges that, as part of his employment duties
hereunder, Employee may be required to perform services for subsidiaries of
Employer, on behalf of and as requested by Employer.
(b) In performing his duties hereunder, Employee shall
report directly to, and shall be subject to the supervision of, (i) Kenneth
D. Tuchman, so long as he serves as the Chairman of the Board and as the
Chief Executive Officer and President of TeleTech, or (ii) if and after
Kenneth D. Tuchman ceases to serve as the Chief Executive Officer and
President of TeleTech, the President of TeleTech; provided that the President
of TeleTech reports directly to the Chairman of the Board of TeleTech,
otherwise Employee shall report directly to and shall be subject to the
supervision of the Chief Executive Officer of TeleTech. Employee shall have
such authority and responsibilities with respect to the Division that are
commensurate with the authority and responsibility of the chief executive
officer (or the equivalent) of other comparable operating subsidiaries of
TeleTech, including the authority to hire and fire employees of the Division.
3. BASE COMPENSATION. Employer shall pay to Employee the sum of
$350,000.00 per year (the "SALARY") less applicable income tax withholdings.
The Salary shall be payable in equal bi-weekly installments in accordance
with Employer's customary compensation policies.
4. PERFORMANCE BONUSES.
(a) ANNUAL BONUS. Employee will be entitled to receive an
annual bonus of up to 50% of the Salary (the "ANNUAL BONUS") if the Employee
and the Division achieve certain performance targets and management
objectives mutually established by Employee and Employer prior to the first
day of each fiscal year (or as soon thereafter as practicable); PROVIDED
that, the performance targets and objectives with respect to fiscal 1999
shall be mutually agreed by Employee and Employer no later than 90 days after
the date hereof. The financial statements of the Division, as compiled in
connection with the annual audit of Employer's consolidated financial
statements for any fiscal year, shall be conclusive evidence of whether
Employee is entitled to all or any portion of the Annual Bonus for such
fiscal year, to the extent such performance target can be derived therefrom.
The Annual Bonus, or any portion thereof to which Employee is entitled, shall
be paid to Employee no more than ten business days after the date of the
report issued by TeleTech's independent auditors with respect to TeleTech's
consolidated financial statements for the fiscal year to which the Annual
Bonus relates.
(b) CONTINGENT BONUS. Employee will be entitled to receive
a bonus (the "CONTINGENT BONUS") pursuant to the Pamet River, Inc. Bonus
Plan, a copy of which is attached hereto as EXHIBIT A (the "PLAN"), if and to
the extent that the Division achieves the Operating Income Targets specified
in the Plan. The determination of whether Employee is entitled to the
Contingent Bonus, and the amount and method of payment of the Contingent
Bonus with respect to any fiscal year, shall be governed by the provisions of
the Plan.
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(c) OTHER BONUS. Employee will be entitled to participate
in such other bonus plans that Employer may, in its sole discretion, make
generally available to senior management of Employer.
5. EMPLOYEE BENEFITS.
(a) HOLIDAYS AND VACATION TIME. Employee shall be entitled
to such paid holidays and vacation time as is consistent with Employer's
standard holiday and vacation policy applicable to senior management of
Employer.
(b) SICK LEAVE. Employer will continue to pay the Salary in
full during any absences due to illness or involuntary injury in accordance
with Employer's standard sick leave policy applicable to senior management of
Employer. Under Employer's standard policy as in effect on the date hereof
(which may be amended in Employer's discretion), Employee is entitled to a
period of absence due to illness or involuntary injury of up to six days in
each 12-calendar month period, which entitlement accrues separately with
respect to each 12-month period. Upon request by Employer, Employee must
provide evidence, to the reasonable satisfaction of Employer, that any
absence was due to illness or involuntary injury of Employee.
(c) OTHER BENEFITS. Subject to Employer's rules, policies
and regulations as in effect from time to time (and subject to applicable
eligibility requirements, including minimum employment period), Employee
shall be entitled to all other rights and benefits for which Employee may be
eligible under any: (i) group life insurance, disability or accident, death
or dismemberment insurance, (ii) medical and/or dental insurance program,
(iii) 401(k) benefit plan, (iv) non-qualified deferred compensation plan, or
(v) other employee benefits that Employer may, in its sole discretion, make
generally available to senior management of Employer; PROVIDED, HOWEVER, that
nothing herein shall obligate Employer to establish or maintain any of such
benefits or benefit plans.
(d) SENIORITY. Employer agrees that, for employee benefits
purposes, Employee shall be given credit (as an employee of Employer) for his
period of service with Pamet and shall maintain his seniority (as recognized
by Pamet as of the date hereof).
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<PAGE>
6. PARTICIPATION IN STOCK PLAN.
(a) STOCK OPTIONS GRANTED. Employer agrees to grant to
Employee an option to purchase 300,000 shares of TeleTech common stock, par
value $.01 per share ("COMMON STOCK"), which option will be granted on or
about the date of this Agreement (the "OPTION"). The Option will be granted
pursuant to TeleTech's 1999 Stock Option and Incentive Plan, which will be
submitted for the approval of the stockholders of TeleTech at its Annual
Meeting of Stockholders to be held in May 1999 or, if such approval is not
sought or obtained, TeleTech's existing Stock Plan, as Amended and Restated,
or any other similar stock option plan adopted by TeleTech (the applicable
plan, the "STOCK PLAN"). The Option will (i) have an exercise price equal to
the fair market value of the Common Stock on the grant date, (ii) vest pro
rata over the five years following the date of grant (subject to acceleration
in accordance with the terms set forth in the option agreement executed by
Employee and TeleTech), and (iii) otherwise be governed by and subject to the
terms of the Stock Plan and TeleTech's standard form of option agreement for
the Stock Plan, which shall be executed by TeleTech and Employee concurrently
with the grant of such Option.
(b) OTHER STOCK PLAN BENEFITS. Subject to Employer's rules,
policies and regulations as in effect from time to time (and subject to
applicable eligibility requirements, including minimum employment period),
Employee may be eligible to receive other benefits under the Stock Plan and
under the TeleTech Holdings, Inc. Employee Stock Purchase Plan, which
benefits will be granted in the sole and absolute discretion of the
committees administering such plans and will be subject to the terms of such
plans. Employee's receipt of any such benefits will be contingent upon
Employee signing such option agreements or other instruments that Employer
deems to be necessary or appropriate and to such other restrictions as are
required by the plans and/or applicable law.
(c) EMPLOYER'S SOLE DISCRETION REGARDING STOCK, ETC.
Subject to Section 6(a), Employee acknowledges and agrees that Employer has
the right, in its sole discretion, to make all decisions regarding its stock,
stock rights, Stock Plan benefits, profits, debt and equity configuration,
including but not limited to what types, when and to whom to issue stock,
stock rights, Stock Plan benefits, profits, debt and equity interests.
7. TERM.
(a) The term of this Agreement and Employee's employment
hereunder shall commence as of the date hereof and shall terminate on the
date two years after the date hereof (the "TERM"). Subject to Sections 7(b)
and 8(b), upon expiration of the Term, Employee will be entitled to only (i)
unpaid compensation for services rendered through the date of termination
(including a pro rata amount of the Salary and any Annual Bonus and
Contingent Bonus earned but not paid), (ii) employee benefits through the
date of termination, and (iii) subject to the terms of the Stock Plan and
applicable award agreement, benefits under the Stock Plan awarded and vested
prior to the date of termination.
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(b) If Employer terminates Employee's employment hereunder
prior to expiration of the Term other than "For Cause" (an "INVOLUNTARY
TERMINATION"), then Employee shall be entitled to receive (i) a pro rata
amount of the Salary from the date of termination until the earlier of six
months after the date of termination or the expiration of the Term, and (ii)
a pro rata portion of the Annual Bonus for the fiscal year in which the
termination occurred, computed through the earlier of six months after the
date of termination or the end of the Term, if and to the extent that the
performance targets and management objectives with respect to the Annual
Bonus for such fiscal year have been achieved on a year-to-date basis as of
the date of termination. An Involuntary Termination shall include Employee's
voluntarily termination of his employment hereunder (A) within 30 days after
Employer materially reduces Employee's duties and responsibilities hereunder
or effects a permanent change in Employee's duties and responsibilities that
are materially inconsistent with Employee's duties and responsibilities then
in effect (other than as a result of Employee's repeated failure to meet
performance levels or management objectives as then in effect), (B) within 30
days after Employer's receipt of written notice from Employee that Employer
is in material breach of its obligations under this Agreement, which material
breach has not been cured during such 30-day period, or (C) promptly after
Employer requires or demands that Employee do something known to be
unethical, immoral or illegal.
8. TERMINATION FOR CAUSE.
(a) Notwithstanding Section 7, Employer may terminate
Employee's employment immediately upon the occurrence of any of the following
(each, a termination "FOR CAUSE"):
(i) the death of Employee;
(ii) Employee's failure or inability to fully perform his
duties hereunder as a result of any mental, physical or emotional
disability or condition that lasts, or is reasonably expected to last,
for 90 days (whether or not consecutive) in any 12-month period or for
any 60 consecutive days, which disability or condition shall be
determined, in Employer's discretion, by a physician selected by Employer
subject to Employee's reasonable approval (which approval shall not be
unreasonably delayed or denied);
(iii) Employee's substantial or repeated failure to meet
performance levels or management objectives as established by Employer
from time to time;
(iv) Employee's failure to comply with (A) any lawful
directives, rules or policies of the Board of Directors of Employer or
any officer of Employer to whom Employee reports or (B) Employer's
employee code of ethics, as the same may be adopted and amended from time
to time;
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(v) Employee's conviction or plea of nolo contendere for
any felony or any crime involving moral turpitude, or the commission by
Employee of theft, embezzlement, fraud, misappropriation of funds, breach
of fiduciary duty, abuse of trust or the violation of any other law or
ethical rule relating to Employee's employment;
(vi) Employee's unexplained and repeated absence from
work or Employee's failure to perform his duties hereunder, which failure
amounts to a material neglect of his duties to Employer and is not cured
within 10 days after written notice thereof by Employer;
(vii) Employer's reasonable belief that Employee has
breached any other material covenant or agreement of this Agreement,
including, without limitation, Sections 10 and 11, and such breach is
incapable of cure or, if curable, Employee has not remedied such breach
within seven days of receipt of notice from Employer specifying the
breach; or
(viii) the impending threat upon Employer, as determined by
Employer in its reasonable discretion, of any criminal or civil liability
caused by or arising out of the unlawful action or inaction of Employee.
(b) In the event Employee is terminated "For Cause,"
Employee will be entitled to receive only (i) unpaid compensation (including
a pro rata amount of the Salary) for services rendered through the date of
termination, (ii) employee benefits through the date of termination, and
(iii) subject to the terms of the Stock Plan, benefits under the Stock Plan
awarded and vested prior to the date of termination that are not forfeited as
a result of such termination.
9. INVENTIONS AND OTHER MATTERS.
(a) Employee agrees that all ideas, inventions, discoveries
or improvements made at any time during the period of Employee's employment
(as determined in accordance with Section 9(b)), including, without
limitation, new machines, devices, computer software (including, without
limitation, source code, operating systems and specifications, data, data
bases, files, documentation and other materials related thereto), programs,
processes, uses, apparatuses, specialized information relating in any way to
or is useful in the business or products of Employer or Employer's actual or
demonstrably anticipated research or development, trade marks or service
marks, designs or compositions of any kind that Employee, individually or
with others, that may originate or develop or has originated or been
developed, while employed by Employer (collectively, "INVENTIONS"), shall
belong to and be the sole property of Employer and shall constitute works
made pursuant to Employee's employment with Employer or works specially
ordered or commissioned as "works made for hire" under the United States
Copyright Act and other applicable law. Without limiting the foregoing,
Employee hereby assigns and transfers to Employer all rights, title, and
interest of whatever nature that Employee may have, including, without
limitation, any patent, trade secret, trademark or service mark rights (and
any goodwill
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appurtenant thereto), any rights of publicity and any right, title and
interest in any copyright and any right that may affix under any copyright
law now or hereinafter in force and effect, in the United States or in any
other country or countries, in and to any Invention. Employee acknowledges
and agrees that Employer also shall have the royalty-free right to use in its
businesses, and to make and sell products, processes, programs, systems
designs, methods, formulas, apparatus, techniques, and services derived from
any Inventions (whether or not patentable or copyrightable), as well as all
improvements thereof or know-how related thereto. The provisions of this
Section 9 extend back nunc pro tunc to the Employee's date of first
employment by Pamet and by Employer and extend into the future. Further, the
provisions of this Section 9 shall survive termination of this Agreement for
any reason.
(b) For purposes of this Agreement, an Invention shall be
deemed to have been "made at any time during the period of Employee's
employment" if, during such period, the Invention was conceived, in part or
in whole, or first actually reduced to practice. Employee agrees that any
patent, copyright or trade mark application filed by or for the benefit of
Employee or any of his affiliates within one year after termination of
Employee's employment shall be presumed to relate to an Invention made during
the term of his employment and Employee shall have the burden of proof to
prove otherwise.
(c) This Section 9 shall not apply to an Invention for which
no equipment, supplies, facilities or Confidential Information of Employer
was used and that was developed entirely on Employee's own time, unless (i)
the invention relates in any way to or is useful in the business or products
of Employer, or Employer's actual or demonstrably anticipated research or
development, or (ii) results from any work performed by Employee for or on
behalf of Employer.
(d) Employee agrees, without further consideration, to (i)
promptly disclose each such Invention to Employer, to Employee's immediate
supervisor and to such other individuals as Employer may direct, (ii) execute
and to join others in executing such applications, assignments and other
documents as may be necessary or convenient to vest in Employer, or its
designee, full title to each such Invention and as may be necessary or
convenient to obtain United States and foreign patents and copyrights
thereon, to the extent Employer may so choose in its sole discretion, (iii)
testify in any legal proceeding relative to such Invention whenever requested
to do so by Employer, and (iv) furnish all facts relating to said Inventions
or the history thereof.
(e) Employee agrees that he will not any time, except as
authorized or directed by Employer, publish or disclose any information or
knowledge constituting or concerning any Invention or Inventions.
10. CONFIDENTIAL INFORMATION.
(a) Employee recognizes that he will occupy a position of
trust with respect to Employer and that, in connection with the performance
of his duties, Employer will make available to Employee, and Employee will
have access to, certain Confidential Information (as
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defined herein). Employee acknowledges and agrees that any and all
Confidential Information learned or obtained by Employee during the course of
his employment by Employer or otherwise, whether developed by Employee alone
or in conjunction with others or otherwise, shall be and is the property of
Employer and its affiliates.
(b) Employee shall not disclose, directly or indirectly, and
will keep confidential any and all Confidential Information and will not use
any Confidential Information, in any manner, other than in connection with
Employee's discharge of his duties hereunder. The provisions of this Section
10 shall survive termination of this Agreement for any reason.
(c) Employee shall return promptly to Employer upon the
earliest to occur of termination of this Agreement, termination of Employee's
employment with Employer and Employer's request, any and all copies of
Confidential Information and all copies of any analyses, compilations,
studies or other documents containing or reflecting Confidential Information.
(d) For purposes of this Agreement, the term "CONFIDENTIAL
INFORMATION" means all information, data, know-how, systems and procedures of
a technical or commercial nature owned by or relating to Employer or any of
its affiliates, whether prior to, during or after the termination or
expiration of this Agreement, including but not limited to all ideas,
concepts, experimental and research data; computer software, including,
without limitation, source code, operating systems and specifications,
programs, data, data bases, files, documentation and other materials related
thereto; service techniques and protocols, business and marketing plans;
information relating to financial information, pricing, cost and sales
information, contractual arrangements, advertising and promotions, market
research data and other information about Employer's and its affiliates'
actual and prospective employees, customers, suppliers and vendors; patents
and patent applications, inventions and improvements (whether patentable or
not), development projects, designs, practices, recipes, processes, methods,
know-how, techniques and other facts relating to the business of Employer and
its affiliates; and all other trade secrets and information of a confidential
and proprietary nature. WITHOUT IN ANY WAY LIMITING THE FOREGOING,
"CONFIDENTIAL INFORMATION" ALSO INCLUDES ALL INFORMATION RELATING TO ANY
OPTIONS OR OTHER AWARDS GRANTED TO EMPLOYEE, PURSUANT TO THE STOCK PLAN OR
OTHERWISE, INCLUDING THE AMOUNT OF ANY SUCH AWARD, THE EXERCISE PRICE AND THE
RATE OF VESTING THEREOF.
(e) Employee hereby acknowledges that each parent,
subsidiary and other affiliate of Employer is expressly made a third party
beneficiary hereto for purposes of protecting its rights and interests
hereunder.
11. NON-COMPETITION.
(a) Employer and Employee recognize that Employee has been
retained to occupy a position that constitutes part of the professional,
management and executive staff of
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Employer, whose duties will include the formulation and execution of
management policy. Employee, for and in consideration of the payments,
rights and benefits provided herein, agrees that so long as he is employed by
Employer and, if Employer terminates his employment For Cause or if Employee
voluntarily terminates his employment with Employer (other than an
Involuntary Termination), for a period of one year thereafter, Employee shall
not (i) work, (ii) assist, (iii) own any interest, directly or indirectly and
whether individually or as a joint venturer, partner, member, officer,
director, shareholder, consultant, employee or otherwise, in or (iv) make a
financial investment, whether in the form of equity or debt, in any business
that is directly competitive with the Business in the United States,
Australia, New Zealand, the United Kingdom, Mexico, Canada or in any other
market in which Employer is conducting business at the time Employee's
employment with Employer is terminated, with respect to Employer's clients or
customers.
(b) Notwithstanding the foregoing, nothing herein shall
prohibit Employee from holding 5% or less of any class of voting securities
of any entity whose equity securities are listed on a national securities
exchange or regularly traded in the over-the-counter market and for which
quotations are readily available on the National Association of Securities
Dealers Automated Quotation system.
(c) Upon the termination of Employee's employment with
Employer, and for one year thereafter, Employee shall immediately notify
Employer of each employment or agency relationship entered into by Employee,
and each corporation, proprietorship or other entity formed or used by
Employee, the business of which is directly or indirectly, similar to or in
competition with the business of Employer. The provisions of this Section 11
shall survive termination of this Agreement for any reason.
(d) Employee agrees that the restrictions contained in this
Section 11 are reasonable as to time and geographic scope because of the
nature of the Business and Employee agrees, in particular, that the
geographic scope of this restriction is reasonable because companies in the
same industry as the Business compete on a nationwide basis. Employee
acknowledges that the Company is in direct competition with all other
companies that provide services similar to the Company's products and
services throughout the United States, Australia, New Zealand, the United
Kingdom, Mexico, Canada and other markets in which Employer may be conducting
business at the time Employee's employment with Employer is terminated, and
because of the nature of the business, Employee agrees that the covenants
contained in this Section 11 cannot reasonably be limited to any smaller
geographic area.
12. NON-SOLICITATION AND NON-INTERFERENCE.
(a) Employee acknowledges that Employer has invested and
will continue to invest substantial time and effort in assembling its present
staff of personnel. Employee agrees that so long as he is employed by
Employer and, if Employer terminates his employment For Cause or if Employee
voluntarily terminates his employment with Employer (other than an
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Involuntary Termination), for a period of one year thereafter, Employee shall
not either directly or indirectly employ, solicit for employment, or advise
or recommend to any other person that such other person employ or solicit for
employment, any of Employer's employees.
(b) Employee acknowledges that all customers of Pamet or
Employer, which Employee has serviced or hereafter services during Employee's
employment by Pamet or Employer and all prospective customers from whom
Employee has solicited or may solicit business while in the employ of
Employer, are and shall be customers solely of Employer. Employee agrees
that so long as he is employed by Employer and, if Employer terminates his
employment For Cause or if Employee voluntarily terminates his employment
with Employer (other than an Involuntary Termination), for a period of one
year thereafter, Employee shall not directly or indirectly solicit business,
as to products or services competitive with the Business of Employer, from
any of Employer's customers with whom Employee had contact during his
employment with Employer.
(c) Employee agrees that so long as he is employed by
Employer and, if Employer terminates his employment For Cause or if Employee
voluntarily terminates his employment with Employer (other than an
Involuntary Termination), for a period of one year thereafter, Employee shall
not directly or indirectly interfere with any relationship between Employer
and any of its suppliers, clients or employees. Employee agrees that during
such one year period, he will not influence or attempt to influence any of
the customers or clients of Employer not to do business with Employer.
(d) Employee agrees that the restrictions contained in this
Section 12 are reasonable as to time and geographic scope because of the
nature of the Business and Employee agrees, in particular, that the
geographic scope of this restriction is reasonable because companies in the
same industry as the Business compete on a nationwide basis. Employee
acknowledges that the Company is in direct competition with all other
companies that provide services similar to the Company's products and
services throughout the United States, Australia, New Zealand, the United
Kingdom, Mexico, Canada and other markets in which Employer may be conducting
business at the time Employee's employment with Employer is terminated, and
because, of the nature of the Business, Employee expressly agrees that the
covenants contained in this Section 12 cannot reasonably be limited to any
smaller geographic area.
13. EMPLOYMENT RELATIONSHIP. The relationship between Employer and
Employee is and shall be specifically limited to an employer/employee
relationship. As a result, nothing contained in this Agreement or relating
to any past, present or future relationship between Employee and Employer
(employment or otherwise) shall be construed as creating any partnership,
joint venture, trustee/beneficiary or other type of fiduciary or business
relationship between the parties.
14. PRIOR OBLIGATIONS. Employee represents and warrants that (a)
Employee has no obligation of confidence or other commitments to any previous
employer or any others that
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conflict with this Agreement or restrict Employee's field of activities,
except those, if any, as set forth on SCHEDULE B hereto, and (b) no other
agreement to which Employee is subject will conflict with, prevent, be
breached by, interfere with or in any manner affect the terms and conditions
of this Agreement.
15. DEDICATION OF SERVICES. Employee agrees that while employed
with Employer, Employee shall devote his entire productive time, ability and
attention to the business of Employer during Employer's normal business
hours. Employee further agrees that during his employment by Employer,
Employee will not, without Employer's prior written consent, directly or
indirectly engage in any employment, consulting, or other activity that would
conflict with Employee's employment with Employer.
16. USE OF EMPLOYEE IN VIDEOS AND OTHER MEDIA. Employee
acknowledges that part of Employee's duties may entail Employee's
participation in both audio and video training aids, such as photographs,
films, video tapes, audio tape recordings and the like. Employee agrees that
during the Term and for so long thereafter as Employer may, in its sole and
absolute discretion, desire to use such training aids in which Employee has
been involved (whether by filming or photographing Employee, audio or video
taping of Employee, combinations thereof, or in any other manner whatsoever)
Employer may use any and all such training aids, without further consent or
approval from Employee, in Employer's usual business operations and training
programs.
17. USE OF EMPLOYEE IN ADVERTISING. Employee acknowledges and
agrees that Employer may, in Employer's discretion, use Employee's name and
photograph in certain advertising media primarily for the benefit of
Employer. Employee understands that such advertising requires substantial
lead time to prepare and is usually purchased several months in advance of
the actual appearance of the advertising in selected media. Employee
therefore agrees that Employer may, throughout the Term and for a reasonable
time after the termination of such employment (but not to exceed six months),
for any cause or reason whatsoever, use Employee's name and photograph in
connection with all advertising deemed necessary or desirable by Employer, in
its sole and absolute discretion.
18. EMPLOYEE'S DUTIES UPON TERMINATION. Employee understands and
agrees that all documents and notes written by Employee within the scope of
his employment with Employer and any and all original and copies of documents
Employee received or created while employed by Employer, including but not
limited to all correspondence, memoranda, letters, call reports, notes, price
lists, training or other manuals, mailing lists, customer lists, advertising
materials, information regarding Employer's clients and customers,
information regarding Employer's suppliers, information regarding Employer's
operations, information regarding Employer's computer programs or equipment,
information regarding technology used by Employer, and financial documents,
whether such documents constitute Confidential Information, belong
exclusively to Employer. Employee shall return all of such materials to
Employer promptly upon
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the earlier to occur of termination of this Agreement or termination of
Employee's employment with Employer.
19. AGREEMENT TO ARBITRATE.
(a) Employer and Employee hereby mutually agree that any disputes
that arise between Employee and Employer or any of its officers, directors,
stockholders, supervisors, co-employees, agents, partners, subsidiaries,
affiliates or successors that cannot be resolved informally shall be decided
by submission of the dispute to binding arbitration before a sole neutral
arbitrator of JAMS/ENDISPUTE who is a retired judge, at 73 Tremont Street,
Boston, MA 02108 pursuant to the AAA's Commercial Arbitration Rules governing
such proceedings, and not by a lawsuit or by resort to court process, except
as specifically set forth below. BOTH PARTIES ACKNOWLEDGE AND AGREE THAT
THEY ARE GIVING UP THEIR RESPECTIVE CONSTITUTIONAL RIGHTS TO HAVE ANY SUCH
DISPUTE DECIDED IN A COURT OF LAW BEFORE A JURY, AND INSTEAD ARE ACCEPTING
THE USE OF THE ARBITRATION PROCESS.
(b) SCOPE OF ARBITRATION. Except as specifically excluded
herein, this Section 19 applies to any and all disputes, INCLUDING, BY WAY OF
EXAMPLE ONLY AND NOT LIMITED TO, disputes regarding termination of Employee's
employment; discrimination and unlawful harassment of any kind (including,
without limitation, claims arising under Title VII of the Civil Rights Act of
1964, as amended, 42 U.S.C. Section 2000(e) ET SEQ. and the Civil Rights Act
of 1991; the Age Discrimination in Employment Act, as amended, 29 U.S.C.
Section 621, ET SEQ.; the Americans with Disabilities Act of 1990, 42 U.S.C.
Section 12101 ET SEQ.; the Family and Medical Leave Act of 1993, 29 U.S.C.
Section 2612 ET SEQ.; and all applicable state and local anti-discrimination
laws and constitutional provisions); disputes arising under any other
applicable federal, state or local labor statutes, regulations or orders;
disputes regarding assault and battery; negligent supervision; defamation;
invasion of privacy; wages and overtime; and disputes regarding the formation
and enforceability of this Section 19. The following types of disputes are
excluded from the scope of coverage of this Section 19: (i) workers'
compensation claims by Employee for on-the-job injuries; and (ii) any and all
claims by Employer against Employee, including claims for injunctive relief,
arising out of Employee's breach or threatened breach of Sections 9, 10, 11
and 12 of this Agreement.
(c) GENERAL RULES AND CONDUCT OF ARBITRATIONS.
(i) RIGHT TO COUNSEL. Either party shall have the
right to have counsel represent him/it at the arbitration hearing and in
pre-arbitration proceedings.
(ii) DISCOVERY. Employer and Employee hereby agree
that pre-arbitration discovery shall be permitted in accordance with the
Federal Rules of Civil Procedure, except that (A) there shall be no limit on
the number of depositions that may be noticed by either party, and (B) in
connection with any pre-arbitration disclosure of expert testimony in
accordance with Rule 26(a)(2), the timing of the expert disclosure shall be
set by the arbitrator.
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(iii) AUTHORITY OF ARBITRATOR. The arbitrator shall
have the authority to (A) resolve any discovery disputes that arise between
the parties and to hold conferences by telephone or in person as necessary;
(B) resolve any dispute relating to the interpretation, applicability or
enforceability of this Section 19; and (C) entertain a motion to dismiss and
a motion for summary judgment, applying the standards governing such motions
under Federal Rule Of Civil Procedure 12(b)(6) and Rule 56. The arbitrator
is required to render his decision in writing, with an opinion stating the
bases of his decision.
(iv) TRANSCRIPT. Either party has the right to have a
written transcript made of the arbitration proceedings. The transcript shall
be paid for by the party requesting it.
(v) BRIEFS. Either party has the right to file a
post-arbitration brief, which shall be considered by the arbitrator.
(d) PAYMENT OF COSTS AND FEES. Each party shall bear its
own costs and attorneys' fees incurred in connection with the arbitration.
The arbitrator shall have the discretion to award costs to the prevailing
party. The arbitrator's fees shall be borne equally by the parties. Each
party shall post his or its portion of the arbitrator's anticipated fee prior
to the commencement of the arbitration.
(e) APPEALS. Either side shall have the right to appeal the
arbitrator's decision by applying to a court of competent jurisdiction (as
defined herein) for an order vacating the award for any of the reasons set
forth in 9 U.S.C. Section 10, or on the basis that the arbitrator has made a
mistake of law or fact. The arbitration decision shall stand if it is
supported by substantial evidence. Where the parties to the arbitration meet
the diversity of citizenship requirements set forth in 28 U.S.C. Section 1332
and the amount in controversy exceeds $50,000, exclusive of interest and
costs, or where the arbitration has decided a federal question as defined in
28 U.S.C. Section 1331, the court of competent jurisdiction to which the
appeal must be made shall the United States court in and for the district
wherein the award was made. Where the parties are not diverse and the
arbitrator has not decided a federal questions, the court of competent
jurisdiction to which the appeal must be made shall the state trial court in
and for the district wherein the award is made.
20. JURISDICTION FOR NON-ARBITRABLE DISPUTES; SERVICE OF PROCESS.
Each of the parties hereto agrees and acknowledges that all actions or
proceedings initiated by Employer against Employee and arising directly or
indirectly out of Sections 9, 10, 11 and/or 12 of this Agreement are excluded
from the arbitration provisions of Section 19. The parties further agree
that all such actions that are brought to judicial proceedings shall be
litigated in the United States District Court for the district of Colorado
or, in the event such court cannot or will not exercise jurisdiction, in the
state courts of the State of Colorado (the "COURTS"). Each of the parties
hereto expressly submits to the jurisdiction and venue of the Courts and
consents to process being served in any suit, action or proceeding of the
nature referred to above either (a) by the mailing of a copy thereof by
registered or certified mail, postage prepaid, return receipt requested, to
his or its address as set forth herein or (b) by serving a copy thereof upon
such party's authorized agent for
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service of process (to the extent permitted by applicable law, regardless
whether the appointment of such agent for service of process for any reason
shall prove to be ineffective or such agent for service of process shall
accept or acknowledge such service); PROVIDED that, to the extent lawful and
practicable, written notice of said service upon said agent shall be mailed
by registered or certified mail, postage prepaid, return receipt requested,
to the party at his or its address as set forth herein. Each party hereto
agrees that such service, to the fullest extent permitted by law, (i) shall
be deemed in every respect effective service of process upon him or it in any
such suit, action or proceeding and (ii) shall be taken and held to be valid
personal service upon and personal delivery to him or it. Each party hereto
waives any claim that the Courts are an inconvenient forum or an improper
forum based on lack of venue or jurisdiction. Each party shall bear its own
costs and attorneys' fees incurred in connection with any such actions or
proceedings.
21. INJUNCTIVE RELIEF. Employee acknowledges that damages would be
an inadequate remedy for Employee's breach of any of the provisions of
Sections 9, 10, 11 and/or 12 of this Agreement, and that breach of any of
such provisions will result in immeasurable and irreparable harm to Employer.
Therefore, in addition to any other remedy to which Employer may be entitled
by reason of Employee's breach or threatened breach of any such provision,
Employer shall be entitled to seek and obtain a temporary restraining order,
a preliminary and/or permanent injunction, or any other form of equitable
relief from any court of competent jurisdiction restraining Employee from
committing or continuing any breach of such Sections, without the necessity
of posting a bond. It is further agreed that the existence of any claim or
cause of action on the part of Employee against Employer, whether arising
from this Agreement or otherwise, shall in no way constitute a defense to the
enforcement of the provisions of Section 9, 10, 11 or 12 of this Agreement.
22. MISCELLANEOUS.
(a) NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given (i) when made, if delivered
personally, (ii) three days after being mailed by certified or registered
mail, postage prepaid, return receipt requested, or (iii) two days after
delivery to a reputable overnight courier service, to the parties, their
successors in interest or their assignees at the following addresses, or at
such other addresses as the parties may designate by written notice in the
manner aforesaid:
To Employer:
TeleTech Holdings, Inc.
1700 Lincoln Street, Suite 1400
Denver, Colorado 80203
Attention: President
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To Employee, to his home address as then recorded on
the books and records of Employer.
(b) GOVERNING LAW. This Agreement shall be governed as to
its validity and effect by the internal laws of the State of Colorado,
without regard to its rules regarding conflicts of law.
(c) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of (i) the heirs, executors and legal
representatives of Employee, upon Employee's death, and (ii) any successor of
Employer, and any such successor shall be deemed substituted for Employee or
Employer, as the case may be, under the terms hereof for all purposes. As
used in this Agreement, "successor" shall include any person, firm,
corporation or other business entity that at any time, whether by purchase,
merger, consolidation or otherwise, directly or indirectly acquires a
majority of the assets, business or stock of Employer. Employee acknowledges
and agrees that the rights and obligations of Employer hereunder may be
assigned to and assumed by any of its wholly or majority-owned subsidiaries,
without Employee's consent, which assignment and assumption shall constitute
a release of TeleTech, its subsidiaries or any of their respective affiliates
that is then bound by the terms of this Agreement, of all of its obligations
and liabilities hereunder.
(d) INTEGRATION. This Agreement (together with any option
agreement Employer may require Employee to execute in order to avail himself
of any Stock Plan benefits specifically contemplated herein and any agreement
to release and hold harmless Employer executed concurrently herewith)
constitutes the entire agreement between the parties with respect to all
matters covered herein, including but not limited to the parties' employment
relationship and Employee's entitlement to compensation, commissions and
benefits from Employer or any of its affiliated companies and/or the
termination of Employee's employment. This Agreement supersedes all prior
oral or written understandings and agreements relating to its subject matter
and all other business relationships between Employer and/or its affiliated
companies.
(e) NO REPRESENTATIONS. No person or entity has made or has
the authority to make any representations or promises on behalf of any of the
parties which are inconsistent with the representations or promises contained
in this Agreement, and this Agreement has not been executed in reliance on
any representations or promises not set forth herein. Specifically, no
promises, warranties or representations have been made by anyone on any topic
or subject matter related to Employee's relationship with Employer or any of
its executives or employees, including but not limited to any promises,
warranties or representations regarding future employment, compensation,
commissions and benefits, any entitlement to stock, stock rights, Stock Plan
benefits, profits, debt and equity interests in Employer or any of its
affiliated companies or regarding the termination of Employee's employment.
In this regard, Employee agrees that no promises, warranties or
representations shall be deemed to be made in the future unless they are set
forth in writing and assigned by an authorized representative of Employer.
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(f) AMENDMENTS. This Agreement may be modified only by a
written instrument executed by the parties that is designated as an amendment
to this Agreement.
(g) COUNTERPARTS. This Agreement is being executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(h) SEVERABILITY AND NON-WAIVER. Any provision of this
Agreement (or portion thereof) which is deemed invalid, illegal or
unenforceable in any jurisdiction shall, as to that jurisdiction and subject
to this Section, be ineffective to the extent of such invalidity, illegality
or unenforceability, without affecting in any way the remaining provisions
thereof in such jurisdiction or rendering that or any other provisions of
this Agreement invalid, illegal, or unenforceable in any other jurisdiction.
If any covenant should be deemed invalid, illegal or unenforceable because
its scope is considered excessive, such covenant shall be modified so that
the scope of the covenant is reduced only to the minimum extent necessary to
render the modified covenant valid, legal and enforceable. No waiver of any
provision or violation of this Agreement by Employer shall be implied by
Employer's forbearance or failure to take action.
(i) ATTORNEY FEES. In the event that any action or
proceeding is commenced by any party hereto for the purpose of enforcing any
provision of this Agreement, the parties to such action, proceeding or
arbitration may receive as part of any award, settlement, judgment, decision
or other resolution of such action or proceeding, whether or not reduced to a
court judgement, their costs and reasonable attorneys fees as determined by
the person or body making such award, settlement, judgment, decision or
resolution.
(j) VOLUNTARY AND KNOWLEDGEABLE ACT. EMPLOYEE REPRESENTS
AND WARRANTS THAT EMPLOYEE HAS READ AND UNDERSTANDS EACH AND EVERY PROVISION
OF THIS AGREEMENT AND HAS FREELY AND VOLUNTARILY ENTERED INTO THIS AGREEMENT.
[Signature Page Follows]
-16-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
EMPLOYER:
TeleTech Holdings, Inc.
By: /s/ Steven B. Coburn
---------------------------------
Steven B. Coburn
Chief Financial Officer
EMPLOYEE:
/s/ Vincent Cipolla
------------------------------------
Vincent Cipolla
-17-
<PAGE>
SCHEDULE B
EMPLOYEE'S PRIOR OBLIGATIONS
Employee has the following obligation(s) of confidence or other
commitments to previous employer(s) which restrict his field of activities
and/or conflict with the confidentiality and/or non-competition provisions of
the attached agreement:
None.
-18-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
TeleTech Holdings, Inc.'s 1999 first quarter Form 10-Q and is
qualified in its entirety by reference to such Form 10-Q filing.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 13,747
<SECURITIES> 36,230
<RECEIVABLES> 75,423
<ALLOWANCES> 3,167
<INVENTORY> 0
<CURRENT-ASSETS> 132,500
<PP&E> 130,023
<DEPRECIATION> 43,790
<TOTAL-ASSETS> 257,940
<CURRENT-LIABILITIES> 59,693
<BONDS> 24,993
0
0
<COMMON> 609
<OTHER-SE> 171,608
<TOTAL-LIABILITY-AND-EQUITY> 257,940
<SALES> 110,638
<TOTAL-REVENUES> 110,638
<CGS> 74,368
<TOTAL-COSTS> 102,772
<OTHER-EXPENSES> (619)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 416
<INCOME-PRETAX> 8,069
<INCOME-TAX> 3,258
<INCOME-CONTINUING> 4,811
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,811
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
