<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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 000-21771
WEST TELESERVICES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 47-0777362
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation of organization)
9910 Maple Street, Omaha, Nebraska 68134
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (402) 571-7700
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
---
At May 12, 1997, 63,330,000 shares of Common Stock, par value $.01 per share, of
the registrant were outstanding.
<PAGE>
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
PART I. FINANCIAL INFORMATION..................................................................3
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1997 and December 31, 1996.................3
Consolidated Statements of Operations -
Three Months Ended March 31, 1997 and 1996.........................................4
Consolidated Statements of Stockholders' Equity....................................5
Consolidated Statement of Cash Flows -
Three Months Ended March 31, 1997 and 1996.........................................6
Notes to Consolidated Condensed Financial Statements...............................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................................8
PART II. OTHER INFORMATION....................................................................11
Item 6. Exhibits and Reports on Form 8-K..................................................11
Signatures................................................................................12
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WEST TELESERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
THREE MONTHS ENDED MARCH 31, 1997 AND YEAR ENDED DECEMBER 31, 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, 1997 December 31, 1996
------------------ -------------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $33,882 $55,065
Accounts receivable, net of allowance for doubtful accounts of $186 and $244 57,571 45,982
Notes receivable 1,592 360
Accounts receivable - financing 13,092 11,805
Deferred income tax - current 45 88
Other 4,070 3,961
----------------- ------------------
Total current assets 110,252 117,261
PROPERTY AND EQUIPMENT
Land and improvements 1,132 1,132
Buildings 8,086 8,043
Telephone and computer equipment 74,412 68,483
Office furniture and equipment 14,849 14,383
Leasehold improvements 18,465 18,130
Construction in process 5,896 749
----------------- ------------------
122,840 110,920
Accumulated depreciation and amortization (45,803) (41,895)
----------------- ------------------
77,037 69,025
GOODWILL, net of amortization of $590 and $168 49,943 50,365
LAND HELD FOR DEVELOPMENT 1,583 1,583
OTHER ASSETS 137 51
----------------- ------------------
$238,952 $238,285
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable - bank $1,000 -
Notes payable - financing 1,249 -
Account payable 23,169 23,271
Customer deposits and holdbacks 9,645 12,662
Accrued wages and benefits 4,570 5,748
Accrued phone expense 7,836 8,404
Other current liabilities 3,157 2,501
Current obligations under capital leases 3,635 10,915
Current maturities of long-term debt - 5,894
Income tax payable - current 7,293 1,697
----------------- ------------------
Total current liabilities 61,554 71,092
OBLIGATIONS UNDER CAPITAL LEASES, less current obligations 4,599 5,714
DEFERRED INCOME TAXES, less current portion 2,630 2,600
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock $0.01 par value, 10,000 shares authorized,
no shares issued and outstanding - -
Common stock $0.01 par value, 200,000 shares authorized,
63,330 shares issued and outstanding 633 633
Additional paid-in capital 157,697 157,719
Retained earnings 11,839 527
----------------- ------------------
Total stockholders' equity 170,169 158,879
----------------- ------------------
$238,952 $238,285
================= ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
WEST TELESERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands except Per Share)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
----------- -----------
<S> <C> <C>
REVENUE $ 95,646 $ 79,488
COST OF SERVICES 51,348 44,141
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 26,145 20,089
----------- -----------
NET OPERATING INCOME 18,153 15,258
OTHER INCOME (EXPENSE):
Interest income 389 86
Interest income - financing, net of interest expense of $93 and
$321 380 111
Interest expense (231) (628)
Minority interest in net income of consolidated subsidiaries - (466)
Other income (expense) (169) (30)
----------- -----------
Net other income (expense) 369 (927)
----------- -----------
NET INCOME BEFORE INCOME TAX EXPENSE: 18,522 14,331
ACTUAL INCOME TAX EXPENSE:
Current income tax expense 7,138 213
Deferred income tax expense 72 -
----------- -----------
Actual income tax expense 7,210 213
----------- -----------
NET INCOME AND NET INCOME BEFORE PROFORMA INCOME TAX EXPENSE 11,312 14,118
PROFORMA INFORMATION:
Income tax expense - 5,164
----------- -----------
Net income $ 11,312 $ 8,954
=========== ===========
Primary and fully diluted earnings per common and common equivalent share $ 0.18 $ 0.17
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 63,395 53,968
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
WEST TELESERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in Thousands)
<TABLE>
<CAPTION>
Total
Common Paid-in Retained Stockholders'
Stock Capital Earnings Equity
--------- -------- ----------- --------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1995 $568 $ 4,743 $32,918 $ 38,229
Distributions to stockholders - - (5,331) (5,331)
Net income - - 14,118 14,118
--------- -------- ----------- --------------
BALANCE, March 31, 1996 $568 $ 4,743 $41,705 $ 47,016
========= ======== =========== ==============
BALANCE, December 31, 1996 $633 $157,719 $ 527 $158,879
Payments for stock registration costs - (22) - (22)
Net income - - 11,312 11,312
--------- -------- ----------- --------------
BALANCE, March 31, 1997 $633 $157,697 $11,839 $170,169
========= ======== =========== ==============
</TABLE>
5
<PAGE>
WEST TELESERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Amounts in Thousands)
<TABLE>
<CAPTION>
Three Months Ended Ended March 31,
1997 1996
-------- ----------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 11,312 14,118
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation 4,425 2,938
(Gain) Loss on sale of equipment 4 (150)
Deferred income tax expense 72 -
Minority Interest - 466
Changes in operating assets and liabilities:
Accounts receivable (12,703) (3,751)
Other assets and vendor receivables (195) (1,379)
Accounts payable (104) (7,550)
Other current liabilities and accrued expenses (1,088) (1,776)
Income tax payable 5,598 161
-------- ----------
Net cash flows from operating activities 7,321 3,077
-------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (12,084) (4,472)
Proceeds from disposal of property and equipment 65 611
Issuance of notes receivable (287) -
Proceeds from payments of notes receivable 168 115
-------- ----------
Net cash flows from investing activities (12,138) (3,746)
-------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of debt (5,894) (510)
Payments of capital lease obligations (8,395) (1,447)
Net change in line of credit agreement 1,000 (1,500)
Distribution to stockholders - (5,331)
Net change in accounts receivable financing and notes payable financing (38) 197
Payments for stock registration costs (22) -
Increase (decrease) in customer deposits and holdbacks (3,017) 411
-------- ----------
Net cash flows from financing activities (16,366) (8,180)
-------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS: (21,183) (8,849)
CASH AND CASH EQUIVALENTS, Beginning of period 55,065 21,861
-------- ----------
CASH AND CASH EQUIVALENTS, End of period 33,882 13,012
======= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest 396 935
======= =========
Cash paid during the period for income taxes 1,224 52
======= =========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Acquisition of equipment through assumption of capital lease obligations - 1,381
======= =========
Reduction of accounts receivable through issuance of notes receivable 1,114 -
======= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
WEST TELESERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL:
The accompanying unaudited consolidated condensed financial statements reflect
all normal and recurring adjustments which are, in the opinion of management,
necessary for a fair presentation of the financial position, operating results,
and cash flows for the interim periods. The consolidated condensed financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto, together with management's discussion and analysis
of financial condition and results of operations, contained in the Company's
Form 10-K for the year ended December 31, 1996, which has previously been filed
with the Securities and Exchange Commission.
Where appropriate, items within the consolidated condensed financial statements
have been reclassified from the previous periods to conform to the current
year's presentation.
2. COMMITMENTS AND CONTINGENCIES
The Company is subject to lawsuits and claims which arise out of the normal
course of its business. In the opinion of management, the disposition of such
claims will not have a material adverse effect on the Company's financial
position or results of operations.
3. RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
Earnings Per Share which specifies the computation, presentation and disclosure
requirements for earnings per share. The objective of the statement is to
simplify the computation of earnings per share. The impact on the Company's
earnings per share is not materially different than earnings per share
determined in accordance with current guidance. SFAS No. 128 is applicable for
fiscal years ending after December 15, 1997.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto. Certain statements under this
caption constitute forward-looking statements which involve risks and
uncertainties. The Company's actual results in the future could differ
significantly from the results discussed or implied in such forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, the effect on financial performance of increased
competition in the teleservices industry, potential future competition,
competitive pricing for services, potential future competing technologies and
trends, dependence on technology and phone service, dependence on the Company's
labor force, reliance on major clients, the success of new product innovations,
legal proceedings and government regulation.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1997 AND 1996
REVENUE: For the three months ended March 31, 1997, revenues increased
$16.1 million, or 20.3%, to $95.6 million up from $79.5 million for the three
months ended March 31, 1996. Inbound operator teleservices accounts for $29.9
million of revenue, interactive teleservices accounts for $36.5 million, and
outbound direct teleservices accounts for $29.2 million. Revenue from inbound
operator teleservices increased approximately $2.1 million to $29.9 million due
in part to entry into customer operator services (or dedicated live operator
services). Customer operator services did not exist in the first quarter of 1996
and during the entire year of 1996 accounted for $7.0 million. In the first
quarter of 1997 customer operator services accounted for $3.0 million of
revenue. Revenue from interactive teleservices increased $5.3 million to $36.5
million. Revenue from outbound direct teleservices increased $8.7 million to
$29.2 million. The increases are primarily the result of servicing the growing
needs of the Company's clients.
COST OF SERVICES: Cost of services represents direct labor, telephone
expense and other costs directly related to teleservices activities. Costs of
services increased $7.2 million, or 16.3%, in the first quarter of 1997 to $51.3
million up from $44.1 million for the comparable period of 1996. As a percentage
of revenue, cost of services remained relatively unchanged at approximately
53.7% for the first quarter of 1997 compared to approximately 55.5% for the
comparable period in 1996. The relative stability is partially due to the
addition of new call centers in new markets which had available, cost-effective
and quality labor.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A"): SG&A expenses
increased by $6.0 million, or 29.9%, to $26.1 million for the first quarter of
1997 up from $20.1 million for the comparable period of 1996. As a percentage of
revenue, SG&A expenses increased to approximately 27.3% for the first quarter of
1997 compared to approximately 25.3% for the first quarter of 1996. The increase
is primarily due to the increase in depreciation expense and other costs
associated with call center expansion.
8
<PAGE>
NET OPERATING INCOME: Net operating income increased by $2.9 million, or
19.0%, to $18.2 million in the first quarter of 1997 up from $15.3 million in
the first quarter of 1996. As a percentage of revenue, net operating income
remained relatively unchanged at approximately 19.0% for the first quarter of
1997 compared to approximately 19.2% in the first quarter of 1996 due to the
factors discussed above.
NET OTHER INCOME (EXPENSE): Net other income (expense) includes interest
income from short-term investments, interest income from an accounts receivable
financing program (net of the related interest expense to fund the program),
interest expense from short-term and long-term borrowings under credit
facilities and capital leases, and minority interest in net income. Other income
(expense) for the first quarter of 1997 totaled $0.4 million compared to ($0.9)
million for the first quarter of 1996. The reduction in interest expense is
primarily due to the repayment of outstanding long term debt in January 1997.
NET INCOME AND PROFORMA NET INCOME: Net income increased by $2.3 million,
or 25.6%, for the first quarter of 1997, to $11.3 million from proforma net
income of $9.0 million for the first quarter of 1996. Net income and proforma
net income include a provision for actual income tax expense and proforma income
tax expense, respectively, at a combined effective rate of approximately 38.9%
for 1997 and approximately 36.3% for 1996. The 1996 rate reflects the combined
federal and state income tax rate of the Company as if it had been treated as a
C Corporation.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity has been cash flow from
operations, supplemented by borrowings under its revolving bank lines of credit.
The Company's credit facilities consist of $8.0 million and $4.5 million
revolving credit facilities, with $0 and $1.0 million outstanding, respectively,
at March 31, 1997. Advances under the revolving credit facilities bear interest
at the prime rate less 0.25% and 0.50%, respectively. The revolving credit
facilities terminate on June 30, 1997 and July 1, 1997, respectively. Aggregate
borrowings under the revolving credit facilities are limited to 80% of eligible
accounts receivable. At March 31, 1997, the Company had no term loans with
banks. Repayment of all bank debt is secured by the Company's accounts
receivable, equipment, real estate, and other assets. In addition, the Company's
loan agreements contain certain financial covenants and restrictions.
The Company also has a $30.0 million revolving bank line used to fund an
accounts receivable financing program offered to certain customers in the pay
per call industry. Borrowings under the facility are limited to a borrowing base
of pledged accounts receivable from certain of the Company's qualified customers
which are assigned by the Company to the bank. There were outstanding borrowings
of $1.2 million under this facility at March 31, 1997. This credit facility
expires on June 30, 1997.
Net cash flow from operating activities increased $4.2 million, or 135%,
to $7.3 million for the first quarter of 1997, compared to an increase of $0.6
million for the first quarter of 1996. The increase in each period was due
principally to higher net income and depreciation and
9
<PAGE>
amortization, partially offset by increased cash used for accounts receivable
resulting from growth in revenue.
Net cash flow used in investing activities was $12.1 million for the first
quarter of 1997 compared to $3.7 million for the first quarter of 1996. The
increase in each period was primarily due to investments in call centers to
support the growth of the business.
Net cash flow used in financing activities was $16.4 million for the first
quarter of 1997 compared to $8.2 million for the first quarter of 1996. The net
cash flow used in financing activities for the first quarter 1997 was used
primarily to pay off $5.9 million in long term bank debt and $8.4 million in
capital leases. In the first quarter 1996 net cash flow from financing
activities was used primarily for distributions made to the existing
stockholders to cover their tax liabilities as S Corporation stockholders and to
provide a return of capital, offsetting borrowings under the Company's credit
facilities, net of repayments.
West Interactive Corporation ("Interactive") is a defendant in a case
brought in the United States District Court for the Southern District of
Georgia, Augusta Division, captioned Lamar Andrews, Individually and as
Representative of a Class of All Other Persons Similarly Situated, Plaintiff v.
American Telephone & Telegraph Company, et al., Defendants, No. CV 191-175. The
Company cannot predict the ultimate outcome of this case or the magnitude of any
potential damages or costs payable by the Company. The Company, therefore,
cannot predict the affect of this matter on the future operations and financial
position of the Company.
CAPITAL EXPENDITURES
The Company's operations will continue to require significant capital
expenditures for capacity expansion and upgrades. Capital expenditures, which
include the acquisition of equipment through the assumption of capital leases,
were $12.1 million in the first quarter of 1997. The Company projects its
capital expenditures for the balance of 1997 to be approximately $35.0 million,
primarily for capacity expansion and upgrades at existing facilities and the
addition of four new call centers.
The Company believes that the cash flow from operations, together with
existing cash and cash equivalents and available borrowings under its credit
facilities will be adequate to meet its capital requirements for the foreseeable
future. The Company may pledge additional property or assets of the Company or
any of its subsidiaries, which are not already pledged as collateral securing
the new and existing credit facilities. The Company or its affiliates may be
required to guarantee existing or additional credit facilities.
INFLATION
The Company does not believe that inflation has had a material effect on
its results of operations. However, there can be no assurance that the Company's
business will not be affected by inflation in the future.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.01 Employment Agreement between the Company and
Michael M. Sturgeon, dated March 17, 1997.
27.01 Financial Data Schedule.
(b) Reports on Form 8-K
None.
11
<PAGE>
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.
Date: May 14, 1997
WEST TELESERVICES CORPORATION
By: /s/ Troy L. Eaden
--------------------------
Troy L. Eaden
Chief Executive Officer
By: /s/ Michael A. Micek
---------------------------
Michael A. Micek
Chief Financial Officer
Vice President Finance and Treasurer
12
<PAGE>
INDEX TO EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE
NUMBER ----------- NUMBER
------ ------
10.01 Employment Agreement between the Company and
Michael M. Sturgeon, dated March 17, 1997.
27.01 Financial Data Schedule.
13
<PAGE>
EXHIBIT 10.01
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into effective the 17th day of March, 1997,
between West Telemarketing Corporation a Delaware corporation ("Employer") and
MICHAEL STURGEON ("Employee").
- ----------------
RECITALS
A. WHEREAS, Employer and Employee have agreed to certain terms and
conditions of employment between the parties; and
B. WHEREAS, the parties desire to enter into this Agreement to memorialize
the terms and conditions of the employment relationship and any prior and
existing employment agreement(s) between the parties.
NOW THEREFORE, the parties agree as follows;
1. Employment. Employer agrees to employ Employee in his capacity as
----------
EXECUTIVE VICE PRESIDENT - SALES AND MARKETING of Employer. Employer may also
- ----------------------------------------------
direct Employee to perform such duties for West Telemarketing Corporation
Outbound and West Interactive Corporation and other entities which now are, or
in the future may be, affiliated with Employer (the "Affiliates"), subject to
the limitation that Employee's total time commitment shall be consistent with
that normally expected of similarly situated executive level employees.
Employee shall serve Employer and the Affiliates faithfully, diligently and to
the best of his ability. Employee agrees during the term of this Agreement to
devote his best efforts, attention, energy and skill to the performance of his
employment and/or consulting duties and to furthering the interest of Employer
and the Affiliates.
2. Term of Employment. Employee's employment under this Agreement shall
------------------
commence effective the 17th day of March, 1997, and shall continue for a period
---- ----- ----
of two years unless terminated or renewed under the provisions of Paragraph 6
below.
(a) Unless terminated pursuant to paragraph 6(a), the term of employment
shall be extended by one year at the end of each successive year so
that at the beginning of each successive year the term of this
Agreement will be two years.
3. Compensation. Employer shall pay Employee as set forth in Exhibit A
------------
attached hereto and incorporated herein as is fully set forth in this paragraph.
Employee may receive additional discretionary bonuses as determined by the Board
of Directors of Employer in its sole discretion provided nothing contained
herein shall be construed as a commitment by the corporation to declare or pay
any such bonuses.
<PAGE>
4. Benefits. In addition to the compensation provided for in Paragraph 3
--------
above, Employer will provide Employee with employment benefits commensurate to
those received by other executive level employees of Employer during the term of
this Agreement.
5. Other Activities. Employee shall devote substantially all of his
----------------
working time and efforts during the Company's normal business hours to the
business and affairs of the Company and to the duties and responsibilities
assigned to him pursuant to this Agreement. Employee may devote a reasonable
amount of his time to civic, community or charitable activities. Employee in
all events shall be free to invest his assets in such manner as will not require
any substantial services by Employee in the conduct of the businesses or affairs
of the entities or in the management of the assets in which such investments are
made.
6. Term and Termination. The termination of this Agreement shall be
--------------------
governed by the following:
(a) The term of this Agreement shall be for the period set out in paragraph
2 unless earlier terminated in one of the following ways:
(1) Death. This Agreement shall immediately terminate upon the death
-----
of Employee.
(2) For Cause. The Employer, upon written notice to Employee, may
---------
terminate the employment of Employee at any time for "cause." For
purposes of this paragraph, "cause" shall be deemed to exist if,
and only if, the CEO and COO of Employer, in good faith, determine
that Employee has engaged, during the performance of his duties
hereunder, in significant objective acts or omissions constituting
dishonesty, willful misconduct or gross negligence relating to the
business of Employer.
(3) Without Cause. The Employer, upon written notice to Employee, may
-------------
terminate the employment of Employee at any time without cause.
(4) Resignation. Employee, upon written notice to Employer, may
-----------
resign from the employment of Employer at any time.
2
<PAGE>
(b) Accrued Compensation on Termination. In the event of termination of
-----------------------------------
the Agreement, Employee shall be entitled to receive:
(1) salary earned prior to and including the date of termination;
(2) any bonus earned as of the end of the month immediately preceding
the date of termination; and
(3) all benefits, if any, which have vested as of the date of
termination.
7. Consulting.
----------
(a) In the event of termination of employment pursuant to paragraph
6(a)(3) or 6(a)(4) above, Employer and Employee agree that
Employee shall, for a minimum period of twenty-four (24) months
from the date of termination serve as a consultant to Employer.
(b) In the event of termination pursuant to paragraph 6(a)(2),
Employer and Employee agree that Employer may, at its sole
option, elect to retain the services of Employee as a consultant
for a period of twenty-four (24) months from the date of
termination and that Employee will serve as a consultant to
Employer if Employer so elects.
(c) During any period of consulting, Employee shall be acting as an
independent contractor. As part of the consulting services,
Employee agrees to provide certain services to Employer,
including, but not limited to, the following:
(1) oral and written information with reference to continuing
programs and new programs which were developed or under
development under the supervision of Employee;
(2) meeting with officers and managers of Employer to discuss
and review programs and to make recommendations;
(3) analysis, opinion and information regarding the
effectiveness and public acceptance of their programs.
(d) During the consulting period, Employee shall continue to receive,
as compensation for his consulting, the annualized salary set
forth in Exhibit A. No bonus of any kind will be paid during any
period of consulting.
(e) Employee hereby agrees that during any period of consulting, he
will devote his full attention, energy and skill to the
performance
3
<PAGE>
of his duties and to furthering the interest of Employer and the
affiliates, which shall include, and Employee acknowledges, a
fiduciary duty and obligation to Employer. Employee acknowledges
that this prohibition includes, but is not necessarily limited
to, a preclusion from any other employment or consulting by
Employee during the consulting period except pursuant to
paragraph 7(f) hereafter.
(f) During the term of this Agreement, including any period of
consulting, Employee shall not, singly, jointly, or as a member,
employer or agent of any partnership, or as an officer, agent,
employee, director, stockholder or investor of any other
corporation or entity, or in any other capacity, engage in any
business endeavors of any kind or nature whatsoever, other than
those of Employer or its Affiliates without the express written
consent of Employer, provided, however, that Employee may own
stock in a publicly traded corporation. Employee agrees that
Employer may in its sole discretion give or withhold its consent
and understands that Employer's consent will not be unreasonably
withheld if the following conditions are met:
(1) Employee's intended employment will not interfere in
Employer's opinion with Employee's duties and obligations as
a consultant, including the fiduciary duty assumed
hereunder; and
(2) Employee's intended employment or activity would not, in the
opinion of Employer, place Employee in a situation where
confidential information of Employer or its Affiliates known
to Employee may benefit Employee's new employer; and
(3) Employee's new employment will not, in Employer's opinion,
result, directly or indirectly, in competition with Employer
or its Affiliates, then or in the future.
(g) Notwithstanding any provisions in this Agreement to the contrary,
the provisions of paragraph 7 shall survive the termination of
this Agreement.
(h) Employer shall reimburse Employee for all reasonable expenses
incurred by Employee in furtherance of his consulting duties
pursuant to this Agreement provided the expenses are pre-approved
by Employer.
4
<PAGE>
(i) Benefits During Consulting Period. Employee and his dependents
shall be entitled to continue their participation in all benefit
plans in effect on the date of Employee's termination from
employment during the period of consulting, under the same terms
and conditions and at the same net cost to Employee as when
employed by Employer unless Employee accepts new employment
during the consulting term in accordance with paragraph 7 above,
in which event all benefits will cease, at Employer's option,
when the new employment is accepted by Employee.
8. Confidential Information. In the course of Employee's employment,
------------------------
Employee will be provided with certain information, technical data and know-how
regarding the business of Employer and its Affiliates and their products, all of
which is confidential (hereinafter referred to as "Confidential Information").
Employee agrees to receive, hold and treat all confidential information received
from Employer and its Affiliates as confidential and secret and agrees to
protect the secrecy of said Confidential Information. Employee agrees that the
Confidential Information will be disclosed only to those persons who are
required to have such knowledge in connection with their work for Employer and
that such Confidential Information will not be disclosed to others without the
prior written consent of the Employer. The provisions hereof shall not be
applicable to: (a) information which at the time of disclosure to Employee is a
matter of public knowledge; or (b) information which, after disclosure to
Employee, becomes public knowledge other than through a breach of this
Agreement. Unless the Confidential Information shall be of the type herein
before set forth, Employee shall not use such Confidential Information for his
own benefit or for a third party's or parties' benefit at any time. Upon
termination of employment, Employee will return all books, records and other
materials provided to or acquired by Employee during the course of employment
which relate in any way to Employer or its business. The obligations imposed
upon Employee by this paragraph shall survive the expiration or termination of
this Agreement.
9. Covenant Not to Compete. Notwithstanding any other provision of this
-----------------------
Agreement to the contrary, Employee covenants and agrees that for the period of
two (2) years following termination of his employment with Employer for any
reason he will not:
(a) directly or indirectly, for himself, or as agent of, or on behalf of,
or in connection with, any person, firm, association or corporation,
engage in any business competing directly for the customers,
prospective customers or accounts of the Employer or any of its
Affiliates with whom Employee had contact or about whom Employee
learned during the course of his employment with Employer and during
the one (1) year immediately preceding the end of his employment.
(b) induce or attempt to induce any person employed by Employer or any of
its Affiliates, in any capacity, at the time of the termination of
Employee's
5
<PAGE>
service with Employer, to leave his employment, agency directorship or
office with Employer or the Affiliate.
c) induce or attempt to induce any customer of Employer or any of its
Affiliates to terminate or change in any way its business relationship
with Employer or the Affiliate.
Employee agrees the knowledge and information gained by him in the
performance of his duties would be valuable to those who are now, or might
become, competitors of the Employer or its Affiliates and that the business of
Employer and its Affiliates by its nature, covers at least the entire United
States of America and Canada. In the event these covenants not to compete are
held, in any respect, to be an unreasonable restriction upon the Employee, the
Court so holding may reduce the territory, or time, to which it pertains or
otherwise reasonably modify the covenant to the extent necessary to render this
covenant enforceable by said Court for the reasonable protection of Employer and
its Affiliates. The obligations imposed upon Employee by this paragraph are
severable from, and shall survive the expiration or termination of, this
Agreement.
10. Developments.
------------
(a) Employee will make full and prompt disclosure to Employer of all
inventions, improvements, discoveries, methods, developments, software
and works of authorship, whether patentable or not, which are created,
made, conceived, reduced to practice by Employee or under his
direction or jointly with others during his employment by Employer,
whether or not during normal working hours or on the premises of
Employer which relate to the business of Employer as conducted from
time to time (all of which are collectively referred to in this
Agreement as "Developments").
(b) Employee agrees to assign, and does hereby assign, to Employer (or any
person or entity designated by Employer) all of his right, title and
interest in and to all Developments and all related patents, patent
applications, copyrights and copyright applications.
(c) Employee agrees to cooperate fully with Employer, both during and
after his employment with Employer, with respect to the procurement,
maintenance and enforcement of copyrights and patents (both in the
United States and foreign countries) relating to Developments.
Employee shall sign all papers, including, without limitation,
copyright applications, patent applications, declarations, oaths,
formal assignments, assignment or priority rights, and powers of
attorney, which Employer may deem necessary or desirable in order to
protect its rights and interest in any Developments.
6
<PAGE>
11. Injunction and Other Relief. Both parties hereto recognize that the
---------------------------
services to be rendered under this Agreement by Employee are special, unique and
of extraordinary character, and that in the event of the breach of Employee of
the terms and conditions of this Agreement to be performed by him, or in the
event Employee performs services for any person, firm or corporation engaged in
the competing line of business with Employer as provided in Paragraph 9, or if
Employee shall breach the provisions of this Agreement with respect to
Confidential Information or consulting services, then Employer shall be
entitled, if it so elects, in addition to all other remedies available to it
under this Agreement or at law or in equity to affirmative injunctive relief.
12. Severability. In the event that any of the provisions of this
------------
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such invalidity or unenforceability shall not affect the remainder
of this Agreement and same shall be construed as if such invalid or
unenforceable provisions had never been a part hereof. In the event any court
would invalidate or fail to enforce any provision of Paragraph 7 and or
Paragraph 9 of this Agreement, Employee shall return any sums paid to Employee
by Employer pursuant to the consulting provision in paragraph 7 hereof.
13. Governing Law. This Agreement shall be governed by the laws of the
-------------
State of Nebraska.
14. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties respecting the employment of Employee by Employer and
supersedes all prior understandings, arrangements and agreements, whether oral
or written, including without limitation, any existing employment agreement, and
may not be amended except by a writing signed by the parties hereto.
15. Notice. Notices to Employer under this Agreement shall be in writing
------
and sent by registered mail, return receipt requested, at the following address:
President - West Telemarketing Corporation
9910 Maple Street
Omaha, Nebraska 68134
16. Miscellaneous. Employee acknowledges that:
-------------
(a) He has consulted with or had an opportunity to consult with an
attorney of Employee's choosing regarding this Agreement.
(b) He will receive substantial and adequate consideration for his
obligations under this Agreement.
7
<PAGE>
(c) He believes the obligations, terms and conditions hereof are
reasonable and necessary for the protectable interests of Employer and
are enforceable.
(d) This Agreement contains restrictions on his post-employment
activities.
IN WITNESS WHEREOF, Employer has, by its appropriate officers, executed
this Agreement and Employee has executed this Agreement as of the day and year
first above written.
WEST TELEMARKETING CORPORATION,
Employer
By:/s/ Thomas B. Barker
___________________________________
Its: President
__________________________________
/s/ Michael M. Sturgeon
______________________________________
Michael M. Sturgeon, Employee
___________________
8
<PAGE>
EXHIBIT A
INTEROFFICE MEMO
TO: Mike Sturgeon
FROM: Tom Barker
DATE: March 25, 1997
SUBJECT: 1997 Compensation Plan - Exhibit A
- --------------------------------------------------------------------------------
Your compensation plan in 1997 for Executive Vice President of Marketing and
Sales for West TeleServices is outlined below.
1. You will be paid a base salary of $200,000 for the 1997 calendar year. This
is a minimum guarantee and you will be paid at the annualized rate
beginning 3/17/97. Should you elect to voluntarily terminate your
employment, you will be compensated for your services through the date of
your actual termination.
2. It is our intent to ensure that your 1998 compensation plan provides you
with the proper incentive to help West TeleServices meet its 1998 revenue
plan. You will be provided with the goals and objectives and your
compensation plan for 1998 no later than December 1, 1997.
cc: Carol Padon
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FIRST
QUARTER 1997 FORM 10-Q OF WEST TELESERVICES CORPORATION, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FINANCIAL STATEMENTS CONTAINED THEREIN.
</LEGEND>
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 33,882
<SECURITIES> 0
<RECEIVABLES> 57,571
<ALLOWANCES> 186
<INVENTORY> 0
<CURRENT-ASSETS> 110,252
<PP&E> 122,840
<DEPRECIATION> 45,803
<TOTAL-ASSETS> 238,952
<CURRENT-LIABILITIES> 61,554
<BONDS> 0
0
0
<COMMON> 633
<OTHER-SE> 169,536
<TOTAL-LIABILITY-AND-EQUITY> 238,952
<SALES> 95,646
<TOTAL-REVENUES> 96,415
<CGS> 51,348
<TOTAL-COSTS> 77,493
<OTHER-EXPENSES> 169
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 231
<INCOME-PRETAX> 18,522
<INCOME-TAX> 7,210
<INCOME-CONTINUING> 11,312
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,312
<EPS-PRIMARY> $0.18
<EPS-DILUTED> $0.18
</TABLE>
