SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[ X ] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the year ended December 31, 1999
[ ] 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 1-12577
SITEL CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 47-0684333
(State or jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
111 SOUTH CALVERT, STE. 1900 BALTIMORE, MD 21202
(410) 246-1505
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------------------------
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange On Which Registered
COMMON STOCK, $.001 PAR VALUE THE NEW YORK STOCK EXCHANGE
Securities Registered Pursuant to Section 12(g) of the Act:
NONE
--------------------------------------------
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 ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ____
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 9, 2000 was $393,439,227 based upon the closing price
of $8.8125 for such stock as reported by the New York Stock Exchange on such
date. Solely for purposes of this calculation, persons holding of record more
than 5% of the Company's stock have been included as "affiliates".
As of March 9, 2000 the Company had 69,663,316 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's definitive
proxy statement for the annual meeting of stockholders to be held May 5, 2000
are incorporated into Part III. This 10-K consists of 99 pages. The Exhibit
index is on page 27.
<PAGE>
PART I
------
ITEM 1. BUSINESS
--------
General
SITEL Corporation is the worldwide leader in executing electronic Customer
Relationship Management (eCRM) solutions for large corporations. Founded in
1985, the Company has grown both internally and through acquisitions to include
operations in North America, Europe, Asia Pacific and Latin America. Over 24,000
SITEL employees worldwide represent many of the world's leading brand names. The
Company operates from over 17,000 workstations in over 75 contact centers
located around the globe in 18 countries and offers services in more than 25
languages and dialects.
Electronic Customer Relationship Management (eCRM) is a business strategy
that is focused on maximizing the lifetime value of customers. At the core of
this strategy is the recognition of the importance of knowledge-enabled customer
interaction to enhance customer satisfaction, as well as gather attitudinal and
behavioral data to strengthen customer relationships and build loyalty. In
practical terms, a successful eCRM program requires an investment in tangible
assets such as systems integration, software and hardware, but the real key is
the "human" investment.
SITEL's eCRM services are built around a core belief that people do
business with people, a reality that persists even in the age of anonymous
online communications and one-click shopping. SITEL's solution is designed to
enhance interaction at every stage in the customer lifecycle, from
identification and acquisition of new customers, to customer service for
existing customers, to the provision of technical support, help desks and
assistance in managing receivables. Most importantly, SITEL facilitates this
remote customer communication across all e-media, including telephone, and
increasingly via e-mail and interactive chat on the Internet.
Industry Overview
Over the last 10 years the Company's industry has transformed from
primarily executing telesales and telemarketing campaigns, to providing
long-term outsourced customer relationship management programs. The traditional
advantages of call center activity include low cost per call, direct interaction
with customers and on-line access to detailed customer or product information,
which enables immediate response and resolution of customer inquiries. Today,
the industry is increasingly focused on its clients' key business processes.
Fueling this trend is the growth in consumer telephone, Internet and e-mail
usage, combined with the business imperative for consistent levels of quality
customer service, the continuing reduction in the cost of computer databases,
and the arrival of sophisticated computer telephony integration (CTI).
With the new technologies, each customer `touch', via e-mail, the web or
directly with a customer service professional, allows companies to learn more
about their customer's profile, decision-making process and channel preference.
This data can then update customer information in the client's database enabling
true one to one marketing. As a result of these advantages, contact center-based
customer relationship management activity is becoming central to the way leading
organizations choose to build and maintain customer relationships.
The Company estimates that worldwide expenditures to operate contact
centers exceed $200 billion annually. The eCRM market in 2000 is estimated to
total $30 billion. The outsourced portion of the overall contact center market
has grown significantly since 1984 to around 8% of the market, as corporations
increasingly shift key business processes from internal operations to outsourced
partners. This trend has been further fueled by the growing complexity of
integrating technology and communication. The Company expects to see outsourcing
increase as companies increasingly focus on their core competencies and as
service and competency levels within the customer relationship management
industry continue to rapidly improve.
1
<PAGE>
SITEL's Business
The Company plans, implements and manages long-term eCRM programs that
allow its clients to enhance the value of their customer contacts, relationships
and information. At every stage of the customer lifecycle, the Company endeavors
to give its clients' customers an experience that will reinforce their trust in
the brand; compel them to stay loyal; and encourage their advocacy and support
regardless of how they communicate with the Company's clients and their brands.
Whether that is an individual customer or a business customer, whether they
phone, e-mail or are browsing the client's website, the Company's mission is to
create customer loyalty and value, to increase sales and to differentiate the
client's brand in a positive manner.
SITEL operates from more than 75 facilities in 18 countries throughout the
four major regions of the globe, and has the capability to provide service in
more than 25 languages and dialects. The Company brings industry focus and
expertise in the consumer, financial services, insurance, telecommunications,
technology and utilities sectors.
SITEL's Solutions
The Company provides services at every stage of the customer lifecycle via
all e-media, including telephone, FAX, Interactive Voice Response (IVR), and
increasingly via e-mail and interactive chat on the Internet. The following are
the Company's traditional solutions:
Customer Acquisition -- SITEL contacts that relate to finding customers or
acquiring customers. Typical applications include list building, outbound sales,
inbound sales or order taking, lead generation, Direct Response
Television/bureau, product information requests related to potential sales,
subscription renewals and database cleaning and updating. New applications
include webservicing, or human interaction via voice or text chat, designed to
increase sales generated from a client's website.
Customer Care -- SITEL contacts, whether inbound or outbound, that relate to
handling customer service issues. Typical applications include complaint
handling; billing information; thank-you or other client-initiated information
contacts; reservations; loyalty (frequent flyer) clubs; investor account
inquiries; government information; dealer location contacts; insurance claims
processing; fraud detection/prevention calls; back office requests, such as
connecting a new line, disconnecting service and requesting maintenance support;
warranty call handling; and administrative support regarding a customer's
policy, lease or account.
Technical Support/Help Desk -- Distinguished from customer service contacts,
these are troubleshooting interactions where the agent must diagnose and resolve
software, Internet or computer hardware product or service problems.
Receivables Management -- SITEL makes pre-charge-off and post-charge-off
contacts with customers to collect overdue balances and to prevent fraud.
Consulting -- SITEL offers consulting services to help its clients design and
improve their internal and outsourced contact center operational processes.
SITEL's Internet-Based Services
As the Internet becomes an increasingly important communications medium
between the Company's clients and their customers, SITEL has integrated the
Internet into its Customer Relationship Management programs. SITEL's Internet
strategy is to bring human interaction to Internet-based contacts and to use
technology enabled by the Internet to handle customer contacts more efficiently
and effectively.
2
<PAGE>
SITEL believes that every remote customer contact, whether telephone,
Internet or regular mail should be handled in an integrated fashion, leveraging
the same agent training and systems integration. The Company sees it as a key
goal within eCRM to deliver a high level of integration to provide a unified
view of the customer. This is seen as essential to building strong one to one
customer relationships.
SITEL performed Internet-based services for more than 50 clients in 1999,
including 20 of its 50 largest clients. SITEL's Internet-based services include:
E-mail Handling: SITEL's customer service professionals provide knowledgeable,
comprehensive and timely replies to incoming e-mails that request customer
service and technical support. SITEL's contact center platform also provides
automated e-mail response based on key word recognition.
Voice and Text-Based Chat Web Site Support: Voice chat support, enabling
browsers to simultaneously talk to an agent while visiting their web site, is
currently provided by SITEL using the Internet Call Center that was co-developed
by SITEL and Lucent Technologies in 1998. Text-based chat allows for proactive
or responsive communications with any web site visitor to provide sales support
or customer service. These chat services are further enabled by capabilities to
push web pages to web visitors and the ability of the web agent to work
collaboratively with the web visitor.
Self-Service and Browsing Support: The Internet can enable customers in certain
situations to resolve their problems without human assistance. SITEL is actively
working with its clients to incorporate self-service capabilities into its
solutions to improve customer satisfaction and reduce cost. Examples of
self-service support are customers accessing the answers to frequently asked
questions via `intelligent' search of a data or "Knowledge Base" or prospective
customers completing online insurance applications that are subsequently
reviewed by licensed insurance service professionals employed by SITEL.
Telephone Support: Telephone support, by far the largest revenue generator,
includes technical support and customer service call handling for Internet
services and products as well as closed loop calling in support of electronic
processes. For example, SITEL makes and receives phone calls inside a client
organization ensuring that cases have been successfully closed when web site
visitors ask the client organization to contact them or provide a service or
information.
Industries Served
SITEL provides eCRM solutions primarily across the following industries:
Consumer. The Company services leading consumer products companies and mass
marketing manufacturers, including automotive companies, in responding to
customer inquiries, developing and launching new product and sales campaigns,
managing product recalls, and performing quality surveys and market analyses.
Financial Services. The Company works with financial services companies
including major banks, leasing companies, credit card issuers, mutual fund
companies, auto finance companies/subsidiaries, retail financing companies,
brokerage firms, service providers, mortgage companies and other financial
institutions. SITEL provides personal care service activities such as answering
questions regarding lease terms, handling service requests, arranging credit
card balance transfers, taking and processing loan applications, and making
accounts receivable management and fraud prevention calls. The Company also
conducts integrated sales activities on behalf of clients such as merchant and
customer acquisition, account retention and renewal, lead generation and
appointment scheduling.
3
<PAGE>
Insurance. SITEL provides a broad range of teleservices to the insurance
industry, including direct marketing of non-underwritten insurance products such
as hospital accident protection, hospital indemnity protection, health care
discount plans, mechanical breakdown and credit protection. The Company also
provides personal care services such as sales support, after-hours agent
support, emergency roadside assistance, claims processing and full back-office
support. SITEL also offers sales and service activities for fully underwritten
products such as term life, automobile and homeowner's insurance, as well as
tax-deferred annuities.
Telecommunications. The Company provides a full range of sales and customer
service activities primarily to domestic and international long distance
providers, local exchange carriers, and cellular and PCS providers including
account management, fulfillment, facilities management, new product launch and
database management. The Company provides these services for product lines such
as access lines, vertical services, Internet access, long distance, cellular PCS
and ISDN data services.
Technology. SITEL works with Internet Service Providers, computer hardware
manufacturers and software publishers. The Company provides technical sales,
technical support and customer support services including product launches,
complete sales and account management programs, strategic product support,
corporate help desk, warranty or post-warranty support, and sunset product
support. The Company provides these support services through traditional call
handling, as well as alternative electronic methods, such as e-mail, advanced
integrated voice-response, automated self-help tools and computer telephony
integration.
Utilities. SITEL provides telephone and Internet-based services to public and
private energy companies, including electric power, natural gas, water and
integrated energy providers. The services include customer acquisition, customer
service, direct sale and cross-sale activities, brand development, loyalty
campaigns, database management, and development and call center consulting
services.
Strategic Alliances
Because of the size and scale of CRM solutions today, the Company believes
successful providers will be those that can harness the resources of multiple
vendors to fast track major project implementation and rollout. SITEL has
developed alliances with technology and thought-leadership firms such as Siebel,
IBM Global Services, Call Interactive, Genesys, New Channel and The Centric
Group. The Company plans to continue to develop world class partners, as well as
senior level relationships, with the consultants and third party advisors
developing the projects and programs, which represent SITEL's target market.
Clients
The Company serves over 400 clients in 18 countries. The Company's clients
include four independently managed subsidiaries of General Motors Corporation.
Total revenues from these four clients was 12.2% of the Company's total revenues
in 1999. No other clients under common control generated more than 10% of the
Company's revenues.
Information Technology
SITEL uses industry-standard software from Microsoft and Oracle across its
business units. Within industry sectors, SITEL uses industry-specific call
processing application systems. SITEL has designed and implemented client (or
industry) specific applications to provide highly customized solutions to
clients' specific requirements. SITEL also utilizes a state-of-the-art
technology platform (UNIX and NT architecture) with Windows 95/98/2000 and
NT-based Compaq, Dell and IBM workstations, predictive dialers and automated
call distributors. SITEL representatives have the tools to initiate and receive
effectively and efficiently millions of service transactions per month.
4
<PAGE>
SITEL is in the process of migrating to a common set of preferred operating
platforms which includes: Siebel 99; Oracle DataBase; and Genesys for Computer
Telephony Integration. This will position SITEL to support the current business
requirements for eCRM. Along with the eCRM technology infrastructure, this
common set of technologies will position the Company to provide enhanced global
services for clients and more cost-effectively replicate its processes
throughout its network of contact centers. SITEL Corporation has designated
Siebel 99 as its preferred technology platform. Siebel 99 is an object-based
system which supports SITEL's goal of a common system while still providing a
solution that can be customized to meet each client's unique needs. Siebel
contains the necessary elements to enable a true eCRM service offering.
Siebel interfaces with Oracle as the database engine and Genesys for the
Computer Telephony Integration. This provides flexibility and continued return
from SITEL's investment in existing switch and dialer platforms.
Human Resource Management
Efficient management and operation of large-scale eCRM programs is a highly
people intensive business. One of SITEL's core competencies is managing a
diverse, worldwide workforce. SITEL places great emphasis on its integrated
human resource management strategies, including the recruitment, training and
on-going development, and retention of its employees at all levels of the
organization. The Company seeks to locate customer contact centers in
communities and cities with favorable workforce demographics and populations
with necessary language skills. SITEL is committed to equal employment
opportunity in every market served by the Company.
To build rewarding careers for its 24,000 employees and enable effective
planning for future growth, the Company has developed training and education
programs, as well as performance management and career planning processes,
designed to enable people to learn (both in classrooms as well as on-the job)
and perform at optimum levels on the diverse range of daily e-media customer
contacts, on behalf of the Company's multiple-industry clients.
The Company encourages employee self-development, is establishing its own
corporate virtual university (SITEL University), and aims to develop and promote
individuals from within the organization as much as possible.
As of December 31, 1999, SITEL had over 24,000 employees. In the Company's
European region, employees in Belgium, Sweden and Spain are within the scope of
government sponsored collective bargaining agreements and are represented by
either a labor union or a statutory work council arrangement. In countries with
labor unions or work councils, the Company's ability to reduce its workforce or
its wage rates is subject to agreement or consultation with the appropriate
labor union or works council. SITEL considers its relations with its employees
to be good.
Competition
SITEL is one of the largest independent companies executing eCRM solutions.
SITEL's largest direct competitors include Teletech Holdings, Inc., Convergys
Corporation, EDS's Business Process Management division, Sykes Enterprises Inc.,
Teleperformance International Group, APAC Teleservices, Inc., and West
Teleservices Corporation. With the growth of consumer online usage, there are a
number of new, smaller competitors focusing on providing e-mail and interactive
chat services. The Company also competes with in-house teleservices departments
throughout the world. In-house departments continue to comprise the largest
segment of call center expenditures. Additional competitors with greater
resources than the Company may enter the customer relationship management
industry.
5
<PAGE>
Most of the major outsourcing companies, like SITEL, are positioning
themselves as providers of Customer Relationship Management solutions. However,
SITEL believes it is in a leadership position in terms of large-scale project
implementation and operational experience, global presence and industries
served. The Company has implemented and now manages integrated programs via all
e-media and across the broad range of CRM solutions designed to support the
entire customer lifecycle.
Government Regulation
The Company's business is subject to laws and regulations concerning
teleservices, web-services, collection agencies, consumer privacy, and the
collection and use of consumer data.
In the United States, the Federal Trade Commission (the "FTC") and many
states regulate teleservices, web-services, consumer privacy and the collection
and use of consumer data. The federal Telephone Consumer Protection Act of 1991
(the "TCPA") prohibits teleservices firms from initiating telephone
solicitations to residential telephone subscribers during certain times,
prohibits the use of automated telephone dialing equipment to call certain
telephone numbers, and requires teleservices firms to maintain a "do not call"
list of residential customers. FTC regulations issued pursuant to the federal
Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994 prohibit
misrepresentation regarding products or services offered by telephone
solicitation and address other perceived telemarketing abuses in the offering of
prizes and the sale of business opportunities or investments. The Company
believes it is in compliance with the TCPA and FTC rules. The Company trains its
telephone service representatives to comply with the TCPA and programs its call
management system to avoid telephone calls during restricted hours or to
individuals maintained on the Company's "do not call" list. There are many
existing federal and state regulations concerning the collection and use of
information regarding individuals and the federal and various state governments
have recently proposed limitations on the collection and use of personally
identifiable information regarding consumers. The Company's receivables
management business is required to be licensed under state collection agency
laws and regulations and to comply with various federal and state fair debt
collection practices and consumer credit laws and regulations.
Countries outside the United States in which the Company has substantial
operations generally have yet to enact a detailed regulatory framework for
teleservices. Many countries, including the European Union, have, however,
enacted or proposed data protection laws which regulate consumer privacy and the
collection and use of consumer data. Many of these laws are based on the privacy
principles which were established by the Organisation for Economic Co-operation
and Development (OCED) in its Guidelines on the Protection of Privacy and
Transborder Flows of Personal Data. These laws generally provide individuals
with a right to access and correct incorrect information and many provide that
personally identifiable information can only be used or disclosed for specified
and lawful purposes. Civil and criminal penalties can be imposed for violations
under many of these laws.
The teleservices and web-service industries, consumer groups and regulatory
and legislative bodies are increasingly concerned about "right of privacy"
issues as technological advances have dramatically increased the availability of
information about consumers. This focus, and any resulting laws, regulations or
standards, could impact the Company. It is possible that laws, regulations, or
standards will be enacted for the teleservices and web-service industries which
would, among other things, require the Company to modify current methods of
consumer data collection and limit the use of consumer data by the Company and
its clients.
The industries served by the Company are subject to varying degrees of
government regulation. For example, Company employees who complete the sale of
certain U.S. insurance products are required to be variously licensed by some
state insurance commissions and may also be required to participate in regular
continuing education programs, which are currently provided in-house by the
Company.
The Company generally relies on its clients and their advisors to develop
the scripts and client information to be used by SITEL in making or receiving
customer contacts. The Company generally requires its clients to indemnify it
against claims and expenses arising from clients' products, services, scripts or
directives with respect to the services performed on its clients' behalf.
6
<PAGE>
Quarterly Results and Seasonality
The Company has experienced and expects to continue to experience quarterly
variations in its results of operations principally due to the timing of
clients' customer relationship management initiatives and teleservicing
campaigns and the commencement and terms of new contracts, revenue mix, and the
timing of additional selling, general and administrative expenses to support new
business. The Company experiences periodic fluctuations related to both the
start-up costs associated with expansion and the implementation of clients'
customer relationship management activities. In addition, the Company's business
tends to be slower in the third quarter due to summer holidays in Europe and, to
a lesser degree, in the first quarter due to the changeover of client marketing
strategies that often occur at the beginning of the year.
ITEM 2. PROPERTIES
----------
The Company's executive offices are located in Baltimore, Maryland.
As of December 31, 1999, the Company operated contact centers in various
leased facilities and on client premises and utilized the services of remote
operations sites in various locations as follows:
<TABLE>
<CAPTION>
Company Client ROPS/ Total Number of
Facility Location Centers Centers Off-site Facilities Workstations
- -------------------- ------------ ------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
Australia 1 -- -- 1 325
Belgium 2 -- -- 2 445
Brazil 1 2 -- 3 94
Canada 3 1 -- 4 367
Colombia 1 -- -- 1 276
France 2 -- 2 4 269
Germany 1 -- -- 1 475
Ireland 1 -- -- 1 232
Japan 1 -- -- 1 287
Mexico 2 -- -- 2 514
Netherlands 1 -- -- 1 128
New Zealand -- 3 -- 3 262
Portugal 1 -- -- 1 96
Singapore 1 -- -- 1 159
Spain 7 3 6 16 2,782
Sweden 1 -- 1 2 260
United Kingdom 7 -- -- 7 2,155
United States 33 3 5 41 8,209
------------ ------------ ------------ ------------ ----------------
Totals: 66 12 14 92 17,335
============ ============ ============ ============ ================
</TABLE>
SITEL utilizes a number of remote operations sites ("ROPS") which are owned
and operated by independent third parties and are used by SITEL to meet a
portion of its teleservicing needs. Additionally, SITEL contracts and operates
out of several client sites to support specific client initiatives.
The Company believes its current facilities are suitable and adequate for
its current operations, but additional facilities will be required to support
growth. SITEL believes suitable additional or alternative space will be
available as needed on commercially reasonable terms. The Company's policy is to
rent contact center space although it has from time to time built or purchased
facilities and, in certain cases, subsequently sold them in sales-leaseback
transactions.
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ITEM 3. LEGAL PROCEEDINGS
-----------------
From time to time, the Company is involved in litigation incidental to its
business. Although the ultimate outcome of such litigation cannot be predicted
with certainty, management believes, after consultation with counsel, that the
resolution of such matters will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
There were no matters submitted to a vote of security holders of the
Company during the fourth quarter of 1999.
8
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Executive Officers of the Registrant
The executive officers of the Company are:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
James F. Lynch........................ 50 Chairman of the Board and Director
Phillip A. Clough..................... 38 Chief Executive Officer, President and Director
W. Gar Richlin........................ 54 Executive Vice President, Chief Operating Officer and
Chief Financial Officer
Antoon Vanparys....................... 42 Executive Vice President, Global Business Development
Timothy P. Keyser..................... 53 Executive Vice President, Corporate Development
</TABLE>
Mr. Lynch founded SITEL in 1985 and has served as Chairman and a director
since its inception. From SITEL's inception to January 1997, Mr. Lynch served as
Chief Executive Officer.
Mr. Clough has served as Chief Executive Officer since May 1998 and
President since January 1997. From 1990 until January 1997, he served as an
investment banker with Alex. Brown & Sons Incorporated, most recently as
Principal, focusing on a variety of consumer and business services companies,
including teleservices companies.
Mr. Richlin has served as Chief Operating Officer since December 1998 and
as Executive Vice President and Chief Financial Officer since March 1998. From
September 1997 until joining SITEL, he served as Managing Director and Co-Head
of Corporate Finance for BT Alex. Brown Incorporated. From 1991 until September
1997, Mr. Richlin served as Managing Director and Head of Investment Banking of
Alex. Brown & Sons Incorporated.
Mr. Vanparys has served as Executive Vice President--Global Business
Development since December 1998. From September 1996 until December 1998, he
served as Senior Vice President--Global Business Development and as a director
and a member of the Executive Review Committee of SITEL Europe plc. Before
joining the Company in September 1996 with the merger of the Company and Mitre
plc, Mr. Vanparys served as a Managing Partner and Managing Director of Mitre
plc since 1992 and co-founded Merit Direct Limited, Mitre's predecessor, in
1985.
Mr. Keyser has served as Executive Vice President--Corporate Development
since December 1998, as President of SITEL Latin America since November 1997 and
as Senior Vice President - Mergers and Acquisitions since the Company's initial
public offering in 1995. Mr. Keyser joined the Company in 1992, with the
Company's acquisition of May Telemarketing, Inc., and served as Group President
responsible for the publishing and motorclub divisions until the Company's
initial public offering in 1995.
9
<PAGE>
PART II
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
-------------------------------------------------------------
The Company's common stock is traded on the New York Stock Exchange under
the symbol SWW. The following table sets forth, for the quarter indicated, the
high and low sale prices of the common stock as reported by the New York Stock
Exchange.
HIGH LOW
1998
------------------------------------------------------------------
First Quarter $ 13.56 $ 8.94
Second Quarter $ 13.31 $ 5.75
Third Quarter $ 6.56 $ 2.94
Fourth Quarter $ 3.94 $ 1.75
1999
------------------------------------------------------------------
First Quarter $ 4.94 $ 2.13
Second Quarter $ 3.94 $ 2.00
Third Quarter $ 5.31 $ 2.56
Fourth Quarter $ 7.63 $ 3.88
As of March 9, 2000, SITEL had 69,663,316 shares of common stock
outstanding and 580 record holders of the Company's common stock.
The Company has not declared or paid any cash dividends on its common stock
since its inception, and the Board of Directors currently intends to retain all
earnings for use in the business for the foreseeable future. Furthermore, the
Company's revolving credit facility and Senior Subordinated Notes contain
restrictions on the payment of cash dividends.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
--------------------------------------------------
The following table presents selected historical financial data for the
Company for the years ended 1995, 1996, 1997, 1998 and 1999. The information
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and related notes thereto, included elsewhere herein.
10
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------------
1995 1996 1997 1998 1999
----------- ------------ ------------ ----------- -----------
Income Statement Data: (in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues $ 187,215 $ 312,750 $ 491,474 $ 586,318 $ 737,522
Cost of services 101,617 163,717 270,942 331,586 397,250
Selling, general and administrative
expenses 69,213 120,695 185,589 235,900 312,376
Special compensation expense (1) 34,585 -- -- -- --
Asset impairment and restructuring
expenses (2) -- -- 15,681 6,607 9,596
----------- ------------ ------------ ----------- -----------
Operating income (loss) (18,200) 28,338 19,262 12,225 18,300
Transaction related expense (3) -- 6,988 -- -- --
Interest expense, net 702 227 5,096 12,747 12,785
Other income, net 118 32 126 263 316
----------- ------------ ------------ ----------- -----------
Income (loss) before taxes
and minority interest (18,784) 21,155 14,292 (259) 5,831
Income tax expense (benefit) (6,593) 10,221 11,306 966 6,336
Minority interest 1,262 77 174 (651) 304
----------- ------------ ------------ ----------- -----------
Net income (loss) from
continuing operations (13,453) 10,857 2,812 (574) (809)
Extraordinary loss on refinancing of debt,
net of taxes -- -- -- (514) --
----------- ------------ ------------ ----------- -----------
Net income (loss) $ (13,453) $ 10,857 $ 2,812 $ (1,088) $ (809)
=========== ============ ============ =========== ===========
Income (loss) from continuing operations
per common share:
Basic $ (0.33) $ 0.19 $ 0.05 $ (0.01) $ (0.01)
Diluted $ (0.29) $ 0.16 $ 0.04 $ (0.01) $ (0.01)
Weighted average common shares
outstanding (4):
Basic 40,565 57,793 61,764 63,888 66,550
Diluted 46,477 65,929 68,811 63,888 66,550
Balance Sheet and Other Data:
Working capital $ 24,182 $ 36,836 $ 39,545 $ 41,660 $ 87,384
Total assets 100,960 211,684 385,880 405,610 432,246
Long-term debt, net of current portion 4,305 4,861 115,488 116,237 148,330
Stockholders' equity 65,380 126,725 158,388 161,854 160,698
</TABLE>
- ----------------
(1) Represents a non-cash compensation expense incurred in February 1995
resulting from the grant of stock options with an exercise price of
$.0025 per share to 265 employees of the Company to replace stock
appreciation rights previously granted under the Company's Employee
Equity Benefit Plan and previously granted stock options. Excluding the
special compensation expense and a one-time forgiveness of debt of $0.5
million owed by two stockholders, operating income, net income, basic
income per share and diluted income per share would have been $16.9
million, $9.7 million, $0.24 and $0.21, respectively, for 1995.
(2) Represents a restructuring expense and a writedown of the Company's
investment in its Telebusiness business unit of $5.2 million and $10.5
million, respectively, for the year ended December 31, 1997, a
restructuring expense of $6.6 million for the year ended December 31,
1998 and asset impairment expense of $9.6 million for the year ended
December 31, 1999. Excluding those operating expenses, operating
income, net income, basic income per share and diluted income per share
would have been $34.9 million, $18.5 million, $0.30 and $0.27,
respectively, for 1997, $18.8 million, $3.5 million, $0.05 and $0.05,
respectively for 1998 and $27.9 million, $7.5 million, $0.11 and $0.10,
respectively, for 1999.
11
<PAGE>
(3) Represents expenses resulting from the acquisitions of Mitre plc and
National Action Financial Services, Inc., accounted for as pooling of
interest transactions. Excluding certain one-time operating expenses
and the transaction related expenses, operating income, net income,
basic income per share and diluted income per share would have been
$30.5 million, $19.5 million, $0.34 and $0.30, respectively, for 1996.
(4) See Note 1 to Notes to Consolidated Financial Statements for an
explanation of the determination of weighted average common shares used
in computing net income (loss) per share.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
SITEL Corporation ("SITEL") and subsidiaries (collectively, the "Company")
provide customer relationship management services on behalf of clients in North
America, Europe, Asia Pacific and Latin America. The Company finds, acquires and
retains customers and helps organizations enhance and grow these relationships
through a variety of value-added services via electronic media, including the
telephone and the Internet, and, to a lesser extent, traditional mail. The
Company provides services to clients principally in the consumer, financial
services, insurance, telecommunications, technology and utilities sectors.
SITEL was founded in 1985 by its current chairman, James F. Lynch, in
Omaha, Nebraska. SITEL completed its initial public offering of common stock in
1995, and was the first major independent publicly held company in the
teleservices industry. In 1996, the Company began its international expansion
with acquisitions in Canada and Spain (which also included operations in
Portugal) and, in particular, with the merger with Mitre plc ("Mitre" or the
"Mitre Merger") which was completed in September 1996. At the time of the Mitre
Merger, Mitre had operations in the United Kingdom, Belgium and Japan and was in
the final stages of completing plans to enter Singapore, Hong Kong and Germany.
In 1997, SITEL entered Australia, New Zealand, Sweden and Ireland through
acquisitions; entered Mexico and Colombia through a joint venture with
Corporacion Interamericana de Entretenimiento, S.A. de C.V. ("CIE"); and entered
France on the basis of a client contract. In 1996 and 1997, the Company also
completed acquisitions that gave it the capability to offer receivables
management, consulting and technical support services.
The Mitre Merger was accounted for as a pooling of interests, and
accordingly the financial results of the Company for 1996 have been restated as
if SITEL and Mitre were operated as a single company for this period. The
results for this period have also been restated to reflect the 1996 acquisition
of National Action Financial Services, Inc. ("NAFS"), which was also accounted
for as a pooling of interests.
Results of Operations
1999 Compared to 1998
Revenues. Revenues increased $151.2 million, or 25.8%, to $737.5 million in
1999 from $586.3 million in 1998. Of this increase, $91.0 million was
attributable to increased revenues from existing clients and $60.2 million was
attributable to services initiated for new clients. The implementation of a
significant new contract for an existing client resulted in $72.3 million of
revenues in 1999. These revenues included $33.5 million associated with the
pass-through of certain third-party technology expenses.
12
<PAGE>
Cost of Services. Cost of services represents primarily labor and telephone
expenses directly related to providing remote customer contacts for our clients
via e-media (telephone, FAX, Internet, e-mail, mobile communication) and
traditional mail. Cost of services as a percent of revenue can vary based on the
nature of the contract, the nature of the work and the market in which the
service is provided. Implementations of large contracts in which the
implementation costs are reflected in selling, general and administrative
services can significantly impact cost of services as of percent of revenue.
Accordingly, cost of services as a percent of revenue can vary, sometimes
significantly, from quarter to quarter. Cost of services increased 19.8% to
$397.3 million in 1999 from $331.6 million in 1998. As a percentage of revenues,
cost of services decreased from 56.6% in 1998 to 53.9% in 1999. This decrease
was primarily attributable to revenues associated with the implementation of a
significant contract in 1999 in which significant related costs are included in
selling, general and administrative expenses. Excluding the impact of this
contract, cost of services as a percent of revenues was 56.4%, approximately the
same as 1998. Cost of services as a percentage of revenues was impacted by
improved labor utilization in the United Kingdom and Central Europe, offset by
higher labor costs in Spain associated with a new national labor contract and
lower labor utilization in certain contact centers in the United States due to
variability of outbound sales campaigns.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses represent expenses incurred to directly support and
manage the operations, including costs of management, administration,
technology, facilities, depreciation and amortization, maintenance, sales and
marketing, and client support services. Selling, general and administrative
expenses increased 32.4% to $312.4 million in 1999 from $235.9 million in 1998.
As a percentage of revenues, selling, general and administrative expenses
increased to 42.4% of revenues in 1999 from 40.2% in 1998. The increase was
primarily attributable to $33.5 million of third-party technology expenses
associated with the implementation of a significant new contract in 1999.
Excluding the impact of these technology costs, selling, general and
administrative expenses decreased to 39.6% of revenue in 1999. This decrease was
primarily attributable to the leveraging of overhead costs through revenue
growth in the third and fourth quarters of 1999, offset by re-engineering costs
in the United Kingdom and severance and consolidation costs in the Asia Pacific
region in the first six months of 1999.
Asset Impairment and Restructuring Expenses. In the third quarter of 1999,
the Company recorded a net expense of $9.6 million primarily related to the
write down of capitalized software and related technology assets. During the
quarter, the Company reviewed its capitalized software and related technology
assets for impairment in connection with the change in its technology strategy
as it related to the adoption of a new platform for its Customer Relationship
Management software applications. As a result, the Company wrote down certain
capitalized software and related technology assets by $10.1 million to estimated
fair value.
In the second quarter of 1998, the Company recorded a $6.6 million charge
for restructuring expenses primarily related to its European operations.
Included in that charge were severance and other costs of $6.4 million related
to statutory or contractual severance and other costs for approximately 250
employees. The restructuring expenses also included $0.2 million for the cost of
excess leased facilities. The Company substantially completed its restructuring
plan and recorded a reversal of approximately $459,000 to the restructuring
accrual during the third quarter of 1999.
Operating Income (Loss). Operating income increased 49.7% to $18.3 million
in 1999 from $12.2 million in 1998. Excluding the asset impairment and
restructuring expenses discussed above, operating income increased 48.1% to
$27.9 million in 1999 from $18.8 million in 1998. This increase was primarily
attributable to the implementation of a significant new contract in the U.S. and
substantially higher earnings in the Company's U.S.-based technical support and
Central European businesses, offset by declines in the Spain and U.S.-based
customer acquisition businesses.
13
<PAGE>
Interest Expense, Net. Interest expense, net of interest income, was $12.8
million in 1999 and $12.7 million in 1998 as an increase in total average
borrowings was offset by lower interest rates in Latin America and Europe.
Income Tax Expense. Income tax expense was $6.3 million on pre-tax income
of $5.8 million in 1999 compared to $1.0 million on pre-tax loss of $0.3 million
in 1998. The difference between income tax expense and the expense which would
result from applying the Federal statutory rate to pre-tax income is primarily
due to non-deductible goodwill, non-deductible asset impairment expenses, net
operating losses in certain Asia Pacific subsidiaries for which no tax benefit
is recognized, higher international tax rates in certain jurisdictions and U.S.
state and local income taxes.
Net Loss From Continuing Operations and Net Loss. Net loss from continuing
operations increased from $0.6 million in 1998 to $0.8 million in 1999.
Excluding asset impairment and restructuring expenses, net income from
continuing operations increased from $4.0 million in 1998 to $7.5 million in
1999 for the reasons described above. The difference between net loss from
continuing operations and net loss in 1998 was an extraordinary loss that
related to the write off of the deferred costs on the Company's original Credit
Agreement that was amended in 1998.
1998 Compared to 1997
Revenues. Revenues increased $94.8 million, or 19.3%, to $586.3 million in
1998 from $491.5 million in 1997. Of this increase, $76.3 million was
attributable to services initiated for new clients, $13.0 million was
attributable to increased revenues from existing clients and $5.5 million was
attributable to revenues from businesses acquired in 1998 under the purchase
method of accounting. The increase in revenues from existing clients was
primarily the result of higher calling volumes rather than higher rates.
Cost of Services. Cost of services represents primarily labor and telephone
expenses directly related to customer relationship management activities. Cost
of services increased $60.6 million, or 22.4%, to $331.6 million in 1998 from
$270.9 million in 1997. As a percentage of revenues, cost of services increased
to 56.6% in 1998 from 55.1% in 1997. This increase was primarily attributable to
increases in European and North American expenses. The increase in Europe was
primarily due to higher labor expenses incurred in anticipation of additional
teleservicing campaign business which did not materialize. The increase in cost
of services in North America reflects lower labor utilization in the
telecommunications group and ramp-up and training expenses in the technology
group.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses represent expenses incurred to directly support and
manage the operations, including costs of management, administration, facilities
expenses, depreciation and maintenance, amortization, sales and marketing
activities and client support services. Selling, general and administrative
expenses increased $50.3 million, or 27.1%, to $235.9 million in 1998 from
$185.6 million in 1997. This increase was primarily a result of the Company's
continued growth both internally and through acquisitions and includes an
increase of $11.7 million, or 40.7%, in depreciation and amortization in 1998
compared to 1997. As a percentage of revenues, selling, general and
administrative expenses increased to 40.2% in 1998 from 37.8% in 1997. This
increase relates primarily to lower than expected revenues during most of the
year from European operations and higher expenses associated with the startup
operations in Latin America and Asia Pacific.
Restructuring Expenses. The Company recorded restructuring expenses of $6.6
million in 1998. The restructuring expenses primarily represent expenses
associated with statutory or contractual severance arrangements and related
costs. The charge was driven by two principal factors: a lower level of campaign
business, which historically has represented a large portion of the Company's
business in Europe, and the need to reposition the Company's infrastructure for
increasing amounts of outsourcing business.
14
<PAGE>
Operating Income. Operating income decreased $7.1 million, or 36.5%, to
$12.2 million in 1998 from $19.3 million in 1997. Excluding the restructuring
expenses of $5.2 million and $6.6 million in 1997 and 1998, respectively, and
the write down of the investment in the Telebusiness business unit of $10.5
million in 1997, operating income decreased $16.1 million to $18.8 million in
1998 from $34.9 million in 1997. The decrease in operating income was primarily
attributable to the Company's European operations as described earlier.
Interest Expense, Net. Net interest expense increased to $12.7 million in
1998 from $5.1 million in 1997. This increase was primarily due to increased
borrowings, including the Company's high yield bonds that were issued in 1998.
The increased borrowings were utilized to support the Company's growth,
including acquisitions.
Income Tax Expense. Income tax expense decreased to $1.0 million in 1998
from $11.3 million in 1997 primarily due to a decrease in income before income
taxes and minority interest in 1998 compared to 1997. Excluding the
restructuring expenses in 1998 and 1997 and the write down of the Telebusiness
business unit in 1997, income tax expense was $3.0 million and $11.3 million for
1998 and 1997, respectively, or 47.5% and 37.8% of income before income taxes
and minority interest. The difference between the Company's income tax expense
and that which would be calculated using the statutory Federal income tax rate
of 34% on income is primarily due to non-deductible business acquisition
expenses and international, state and local income taxes. The increase in income
tax expense as a percentage of income before income taxes and minority interest
in 1998 compared to 1997 was due to the impact of the non-deductible business
acquisition expenses which do not change materially from period to period,
combined with lower income before income taxes and minority interest.
Net Income (Loss) From Continuing Operations and Net Income (Loss). Net
income (loss) from continuing operations decreased to a $(0.6) million loss in
1998 from $2.8 million of income in 1997. Excluding the restructuring expenses
in 1998 and 1997 and the write down of the Telebusiness business unit in 1997,
net of tax, net income from continuing operations was $4.0 million in 1998 and
$18.5 million in 1997. The decrease in 1998 compared to 1997 was primarily
attributable to the Company's European operations as described earlier and
additional interest expense. Net income (loss) was a $(1.1) million loss in 1998
compared to $2.8 million of income in 1997. The difference between net income
(loss) from continuing operations and net income (loss) in 1998 was an
extraordinary loss that the Company recognized to write off the deferred costs
of its original Credit Agreement which was amended during 1998.
Liquidity and Capital Resources
Net cash provided by operating activities was $39.3 million in 1999,
consisting primarily of income before non-cash expenses of $54.6 million and an
increase in accrued expenses and short-term payables of $28.1 million offset by
increases in accounts receivable of $38.9 million. The Company anticipates that
accounts receivable balances will continue to grow as the Company grows. Net
cash used in investing activities was $34.5 million in 1999 primarily related to
purchases of property and equipment, offset by cash proceeds from
sale-leasebacks of property and equipment. In addition, the Company acquired
property and equipment of $9.0 million in connection with capitalized leases.
Net cash provided by financing activities was $1.2 million as payments on debt
and capital lease obligations were offset by additional borrowings.
Net cash provided by operating activities was $17.7 million in 1998.
Included in the net cash provided from operations was a net loss of $1.1
million, however that loss included non-cash depreciation and amortization
expenses of $40.4 million. Also included in cash flows from operating activities
was $21.5 million of cash used primarily as a result of an increase in accounts
receivable needed to support growth. The Company anticipates that accounts
receivable balances will continue to grow as the Company grows. Net cash used in
investing activities was $43.1 million for 1998. Included in this total was
$52.0 million used for capital expenditures (primarily call and data management
equipment) and $2.2 million used for
15
<PAGE>
acquisitions. These uses of cash were partially offset by $9.4 million of cash
received from sale-leasebacks of facilities. Net cash provided by financing
activities during 1998 was $16.1 million, primarily attributable to additional
borrowings on notes payable. During 1998, the Company also completed the private
placement of $100 million of 9.25% Senior Subordinated Notes due 2006. The
proceeds from the offering were used to repay borrowings outstanding under the
Company's long term revolving credit facility.
Net cash provided by operating activities was $19.0 million in 1997. The
Company recorded net income of $2.8 million (including a non-cash tax charge of
$5.6 million), depreciation and amortization of $28.7 million and primarily
non-cash restructuring expenses of $15.5 million. This cash flow was offset by
$33.6 million of cash used in operating activities primarily as a result of an
increase in accounts receivable needed to support growth. Net cash used in
investing activities was $131.4 million for 1997. Of this total, $69.4 million
was used for capital expenditures (primarily call and data management equipment
and facilities) and $61.0 million was used for acquisitions. Net cash provided
by financing activities during 1997 was $113.7 million, primarily attributable
to borrowings on the Company's available credit lines and other notes payable.
The Company has historically used equity capital, funds generated from
operations, leases of property and equipment, senior subordinated notes and
borrowings under credit facilities with banks to finance business acquisitions,
capital expenditures and working capital requirements. At December 31, 1999, the
Company had unused lines of credit totaling $19.7 million. The Company obtained
an additional line of credit in January 2000 of $8.1 million. During 1998 and
1999, the Company sought and obtained certain modifications to its existing
long-term credit facility to permit continued availability of borrowing under
such facility. The Company believes that funds generated from operations,
existing cash, leases of property and equipment and the funds available under
its credit facilities will be sufficient to finance its current operations,
planned capital expenditures and internal growth for the foreseeable future.
Future acquisitions, if any, may require additional debt or equity financing.
Year 2000 Issue
The Year 2000 statement which follows is a Year 2000 Readiness Disclosure,
pursuant to the Year 2000 Information and Readiness Disclosure Act, Public Law
No. 105-271.
The Company recognized the need to ensure Year 2000 software and embedded
system failures would not adversely impact its operations. Specifically,
computational errors and system failures were a known risk with respect to dates
after December 31, 1999. The Company established a central Y2K compliance office
that reported directly to the Chief Information Officer. Each of the Company's
operating units also designated information technology (IT) personnel to address
the issues that the unit faced and to report to the central Y2K compliance
office. The Company implemented a system which allowed it to track all IT and
non-IT systems and facility functions for compliance with industry Y2K
standards. This tracking system allowed the Company to monitor and track each
functional point as a single item grouped by how critical the item was in the
Company's ability to perform its daily functions. Based on the output from this
data and an analysis of the system reports, the Company believed that all
functional points which were critical to the Company's functions had been
identified and assessed. Further, the Company developed a remediation plan for
each item in the critical list. Part of the Company's remediation strategy was
in concert with its efforts to acquire or develop new and innovative systems for
its internal operations. The Company has transitioned into the year 2000 with no
major impact on our commitment to servicing our clients. In instances where
minor incidents were reported, contingency plans were invoked and service levels
to our clients were maintained. These minor occurrences had no impact on
day-to-day operations and have since been repaired with no financial impact.
16
<PAGE>
IT issues. Internal systems represented approximately 28% of the overall
effort in the IT applications area. The remaining 72% of the overall effort in
the IT area was in the interface and integration of external client and vendor
application systems. The Company implemented a three-step process of contacting
significant vendors and clients to request information about the status of their
Y2K compliance efforts. In addition to communicating with significant vendors,
the Company tested certain critical vendor application systems for Y2K
compliance. The Company identified mitigation and contingency plans at both the
business and technical IT levels. In addition to communicating with significant
clients, the Company had a strategy to deal with non-compliant external client
customer data by enabling data to be used by the Company's systems.
Non IT issues (facilities). Non-IT issues, with few exceptions, had been
classified into a non-critical category. The few exceptions included dial tone
for the Company's telephony and power from the Company's energy providers. The
Company included these functional points in the critical category for purposes
of scheduling. Based on communications with the providers of these services, the
Company believed that these services would not be interrupted by Year 2000
failures. The Company's contingency plan for the loss of power included
generator systems in the Company's major facilities. The Company's contingency
plan for loss of dial tone included the distribution of network services across
several providers. This would allow the Company to minimally maintain its
service levels in the event of a failure.
Phases. The Company employed a four-phase, nine-process step Project
Methodology that covered each aspect of Y2K compliance. The four phases are:
Phase 1 Assessment
Phase 2 Remediation
Phase 3 Verification and Testing
Phase 4 Implementation
Each process step is necessary within the framework and provides clear
management checkpoints for gauging the progress of activity during execution of
the project plan. The following table outlines the phases and process steps:
<TABLE>
<CAPTION>
Phase 1 Phase 2 Phase 3 Phase 4
Verification/
Process Steps Assessment Remediation Testing Implementation
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Recognition/Awareness X X X X
2. Inventory X
3. Evaluation X
4. Determination X
5. Remediation X
6. Re-engineering X
7. Multi-level testing X X X X
8. Implementation X
9. Post-implementation X
</TABLE>
The Company clearly defined each of the process steps in the Project
Methodology. The Recognition/Awareness step included communication of the Y2K
issues and their importance throughout the Company. The Inventory step included
the identification and cataloging of each item that must be verified for
compliance with Y2K processing. The Evaluation step involved the evaluation and
categorization of the critical nature of each item based on established
criteria. The Determination step included making informed management decisions
regarding the strategy to be taken for each individual item. The Remediation
step involved repair of all components of a process that could improperly
process dates. The Re-engineering
17
<PAGE>
step consisted of rewriting and/or replacing whole units of software code. The
Multi-level testing step involved the development of detailed testing criteria
and the implementation of those testing plans. The Implementation step involved
the coordination of the release of applications/systems into the live systems
environment. The Post-implementation step included the on-going monitoring of
applications/systems that have been repaired and placed into the live systems
environment.
Contingency Plans. The Company developed Year 2000 Business Contingency
Plans for conducting its business operations in the event of crises. This effort
was not limited to the risks posed by the potential Year 2000 failures of the
Company's internal information systems or infrastructures, but also included the
potential secondary impact on the Company of Year 2000 failures, including
potential systems failures of business partners and infrastructure service
providers.
Costs of Y2K Compliance. The Company estimates that the costs to become Y2K
compliant approximate $11 million. Substantially all of these costs have been
incurred through December 31, 1999. Minor internal costs will be incurred in the
first quarter of 2000 in connection with monitoring the impact of the year
change on systems and operations and winding down the Y2K project office.
Quarterly Results and Seasonality
The Company has experienced and expects to continue to experience quarterly
variations in its results of operations principally due to the timing of
clients' customer relationship management initiatives and teleservicing
campaigns and the commencement and terms of new contracts, revenue mix, and the
timing of additional selling, general and administrative expenses to support new
business. The Company experiences periodic fluctuations related to both the
start-up costs associated with expansion and the implementation of clients'
customer relationship management activities. In addition, the Company's business
tends to be slower in the third quarter due to summer holidays in Europe and, to
a lesser degree, in the first quarter due to the changeover of client marketing
strategies that often occur at the beginning of the year.
Effects of Inflation
Inflation has not had a significant effect on the Company's operations. However,
there can be no assurance that inflation will not have a material effect on the
Company's operations in the future.
Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS") 133, Accounting for
Derivative Investments and Hedging Activities, was issued in June 1998. SFAS 133
establishes accounting standards for derivative instruments and for hedging
activities. The standard, as amended by SFAS 137, is effective for all fiscal
quarters of fiscal years beginning after June 15, 2001. The Company anticipates
adopting this accounting pronouncement in the third quarter of 2001; however,
management believes that it will not have a significant impact on the Company's
consolidated financial statements.
Forward-Looking Statements
This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. Such statements
are identified by the use of forward-looking words or phrases which may include
but are not limited to, "intended," "will be positioned," "expects," "expected,"
"anticipates," "anticipated," "believes" and similar expressions. The
forward-looking statements are based on the Company's current expectations. All
statements other than statements of historical facts included in this Form 10-K,
including those regarding the Company's financial position, business strategy,
projected costs and plans and objectives of management for future operations,
are forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, there
can be no assurance that such expectations will prove to be correct. Because
forward-looking statements involve risks and uncertainties, the Company's actual
results could differ materially. Important factors that
18
<PAGE>
could cause actual results to differ materially from the Company's expectations
may include, but are not limited to, the effects of leverage, restrictions
imposed by the terms of indebtedness, reliance on major clients, risks
associated with managing a global business, fluctuations in operating results,
reliance on telecommunications and computer technology, risks associated with
the Company's acquisition strategy, the dependence on telephone service, the
competitive industry, dependence on labor force, foreign currency risks, the
effects of business regulation, dependence on key personnel and control by
management, and risks associated with Year 2000 failures (see discussion above
under the caption "Year 2000 Issue"). All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on
behalf of the Company are expressly qualified in their entirety by this
paragraph. The Company disclaims, however, any intent or obligation to update
its forward-looking statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
The Company is exposed to market risks associated primarily with changes in
foreign currency exchange rates. The Company has operations in many parts of the
world; however, both revenues and expenses of those operations are typically
denominated in the currency of the country of operations, providing a natural
hedge. The Company entered into certain hedging transactions during 1998 and
1999 designed to hedge foreign currency exchange risk related to short term
intercompany loans, however the amounts involved were not material.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The information called for by this item (other than selected quarterly
information, which is set forth as follows) is incorporated by reference from
the Company's Consolidated Financial Statements set forth on pages F-3 through
F-31 hereof.
The following table sets forth income statement data for each of the four
quarters of 1999 and 1998. This quarterly information is unaudited but has been
prepared on a basis consistent with the Company's audited financial statements
presented elsewhere herein and, in the Company's opinion, includes all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the information for the quarters presented. The operating
results for any quarter are not necessarily indicative of results for any future
period.
19
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------------
March 31, June 30, September 30, December 31,
(in thousands, except per share data) 1999 1999 1999 1999
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 164,185 $ 177,996 $ 189,597 $ 205,744
Operating expenses:
Cost of services 88,465 95,343 100,446 112,996
Selling, general and administrative
expenses 74,382 77,989 79,181 80,824
Asset impairment and restructuring
expenses -- -- 9,596 --
------------ ----------- ----------- -----------
Operating income 1,338 4,664 374 (a) 11,924
Interest expense, net (3,156) (2,994) (3,203) (3,432)
Other income (expense), net 63 57 (69) 265
------------ ----------- ----------- -----------
Income (loss) before
income taxes and
minority interest (1,755) 1,727 (2,898) 8,757
Income tax expense (benefit) (203) 1,086 1,762 3,691
Minority interest (69) 133 58 182
------------ ----------- ----------- -----------
Net income (loss) $ (1,483) $ 508 $ (4,718)(a) $ 4,884
============ =========== =========== ===========
Income (loss) per common share:
Basic $ (0.02) $ 0.01 $ (0.07)(a) $ 0.07
Diluted (0.02) 0.01 (0.07)(a) 0.07
Weighted average common shares
outstanding:
Basic 64,842 65,917 67,544 67,854
Diluted 64,842 72,197 67,544 74,398
</TABLE>
(a) Includes asset impairment expenses of $9.6 million. For the three months
ended September 30, 1999, excluding the asset impairment expenses and
related tax effects, operating income, net income, basic income per share
and diluted income per share would have been $10.0 million, $3.6 million,
$0.05 and $0.05, respectively.
20
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------------------------
March 31, June 30, September 30, December 31,
(in thousands, except per share data) 1998 1998 1998 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 137,748 $ 147,307 $ 146,755 $ 154,508
Operating expenses:
Cost of services 77,820 82,585 82,636 88,545
Selling, general and administrative
expenses 54,672 61,096 59,045 61,087
Restructuring expenses -- 6,607 -- --
------------ ------------ ------------ ------------
Operating income (loss) 5,256 (2,981)(a) 5,074 4,876
Interest expense, net (2,590) (3,375) (3,457) (3,325)
Other income, net 135 34 19 75
------------ ------------ ------------ ------------
Income (loss) before
income taxes and
minority interest 2,801 (6,322) 1,636 1,626
Income tax expense (benefit) 1,117 (1,878) 836 891
Minority interest (294) 31 13 (401)
------------ ------------ ------------ ------------
Net income (loss) from
continuing operations 1,978 (4,475)(a) 787 1,136
Extraordinary loss on refinancing of
debt, net of tax 514 -- -- --
------------ ------------ ------------ ------------
Net income (loss) $ 1,464 $ (4,475)(a) $ 787 $ 1,136
============ ============ ============ ============
Income (loss) from continuing
operations per common share:
Basic $ 0.03 $ (0.07) $ 0.01 $ 0.02
Diluted 0.03 (0.07) 0.01 0.02
Net income (loss) per share:
Basic $ 0.02 $ (0.07)(a) $ 0.01 $ 0.02
Diluted 0.02 (0.07)(a) 0.01 0.02
Weighted average common shares
outstanding:
Basic 63,295 63,871 64,081 64,291
Diluted 69,611 63,871 70,640 71,364
</TABLE>
(a) Includes restructuring expenses of $6.6 million. For the three months ended
June 30, 1998, excluding the restructuring expenses and related tax
effects, operating income, net income, basic income per share and diluted
income per share would have been $3.6 million, $0.1 million, $0.00 and
$0.00, respectively.
21
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
-----------------------------------------------------------
None.
PART III
--------
The information required by this Part III is incorporated by reference from
the registrant's definitive proxy statement for the 2000 annual meeting of the
registrant's stockholders to be held on May 5, 2000, which involves the election
of directors. The definitive proxy statement will be filed with the Securities
and Exchange Commission not later than 120 days after the end of the year
covered by this Form 10-K.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
----------------------------------------------------------------
(a) The following documents are filed as a part of this report:
1. Financial Statements. The following Consolidated Financial Statements of
SITEL Corporation and Independent Auditors' Report are included at pages F-1
through F-31 of this Form 10-K:
- Independent Auditors' Report.
- Consolidated Balance Sheets at December 31, 1998 and 1999.
- Consolidated Statements of Income (Loss) For The Years Ended
December 31, 1997, 1998 and 1999.
- Consolidated Statements of Stockholders' Equity For The Years
Ended December 31, 1997, 1998 and 1999.
- Consolidated Statements of Cash Flows For The Years Ended
December 31, 1997, 1998 and 1999.
- Notes to Consolidated Financial Statements.
2. Financial Statement Schedules. The following consolidated financial
statement schedules of SITEL Corporation for the years ended December 31, 1997,
1998 and 1999 are included at pages S-1 through S-2 of this Form 10-K and should
be read in conjunction with the Consolidated Financial Statements:
- Independent Auditors' Report.
- Schedule II - Valuation and Qualifying Accounts.
All other schedules of the Company for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission are
not required under the related instructions, are inapplicable or have been
disclosed in the Notes to Consolidated Financial Statements and, therefore, have
been omitted.
22
<PAGE>
3. Exhibits. The following Exhibits are filed as part of, or are
incorporated by reference into, this Form 10-K:
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C> <C>
(1) 3.1 Amended and Restated Articles of Incorporation
(5) 3.1(a) Articles of Amendment filed September 10, 1996 to the Amended and Restated Articles of Incorporation
(1) 3.4 Amended and Restated Bylaws.
(9) 3.4(a) Amended and Restated Bylaws (conformed copy including Amendment No. 1)
(21) 3.4(b) Amendment No. 2 to Amended and Restated Bylaws
(18) 3.5 Certificate of Designation of Series A Participating Preferred Stock.
(6) 4.2 Specimen Common Stock Certificate.
(19) 4.3 Rights Agreement.
(1) 9.1 Form of General Voting Agreement.
(1) 10.1 SITEL Corporation Stock Option Plan for Replacement of Existing Options.
(6) 10.1(a) Amendment No. 1 to SITEL Corporation Stock Option Plan for Replacement of Existing Options
(1) 10.2 SITEL Corporation Stock Option Plan for Replacement of EEBs.
(6) 10.2(a) Amendment No. 1 to SITEL Corporation Stock Option Plan for Replacement of EEBs.
(4) 10.3 Amended and Restated SITEL Corporation 1995 Employee Stock Option Plan.
(6) 10.3(a) Amendment No. 1 to Amended and Restated SITEL Corporation 1995 Employee Stock Option Plan.
(8) 10.3(b) Amendment No. 2 to Amended and Restated SITEL Corporation 1995 Employee Stock Option Plan
(12) 10.3(c) Amendment No. 3 to Amended and Restated SITEL Corporation 1995 Employee Stock Option Plan.
(7) 10.4 Amended and Restated SITEL Corporation 1995 Non-Employee Directors Stock Option Plan.
(22) 10.4(a) Amendment No. 1 to Amended and Restated SITEL Corporation 1995 Non-Employee Directors Stock Option Plan
(1) 10.5 SITEL Corporation Executive Wealth Accumulation Plan.
(13) 10.5(a) Second Amendment to SITEL Corporation Executive Wealth Accumulation Plan.
(25) 10.5(b) Third Amendment to SITEL Corporation Executive Wealth Accumulation Plan.
(23) 10.6 SITEL Corporation 1999 Stock Incentive Plan.
(24) 10.6(a) Amendment No. 1 to SITEL Corporation 1999 Stock Incentive Plan.
(1) 10.7 Form of Right of First Refusal.
(2) 10.8 Form of Indemnification Agreement with Outside Directors.
(3) 10.9 Form of Indemnification Agreement with Executive Officers.
(14) 10.10 Amended and Restated SITEL Corporation Employee Stock Purchase Plan.
(10) 10.11 Amended Credit Agreement with Bankers Trust Company.
(16) 10.11(a) First Amendment dated as of June 19, 1998 to Amended Credit Agreement.
(20) 10.11(b) Second Amendment dated as of September 30, 1998 to Amended Credit Agreement.
(26) 10.11(c) Third Amendment dated as of September 30, 1999 to Amended Credit Agreement.
(11) 10.12 Indenture governing $100,000,000 9 1/4% Senior Subordinated Notes due 2006.
(17) 10.12(a) First Supplemental Indenture
(15) 10.12(b) Registration Rights Agreement
10.13 Amended and Restated Employment Agreement with James F. Lynch.
10.14 Employment Agreement with Antoon Vanparys
21 Subsidiaries.
23.1 Consent of KPMG LLP
27 Financial Data Schedule.
- -------------------------------------
<FN>
(1) Previously filed as an exhibit under the same exhibit number to the Company's
Registration Statement on Form S-1 (Registration No. 33-91092).
(2) Previously filed as an exhibit under the same exhibit number to the Company's
Form 10-Q for the quarter ended August 31, 1995.
23
<PAGE>
(3) Previously filed as an exhibit under the same exhibit number to the Company's
Registration Statement on Form S-8 (Registration No. 33-99434).
(4) Previously filed as Appendix B to the Company's definitive Proxy Statement for
the Annual Meeting of Stockholders, filed on September 27, 1996.
(5) Previously filed as Exhibit 4.1(a) to the Company's Registration Statement on
Form S-3 (Registration No. 333-13403).
(6) Previously filed as an exhibit under the same exhibit number to the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
(7) Previously filed as Appendix B to the Company's definitive Proxy Statement for
the Annual Meeting of Stockholders, filed on April 30, 1997.
(8) Previously filed as Appendix C to the Company's definitive Proxy Statement for
the Annual Meeting of Stockholders, filed on April 30, 1997.
(9) Previously filed as Exhibit 4.2 to the Company's Registration Statement on Form
S-3 (Registration No. 333-28131).
(10) Previously filed as Exhibit 10.1 to the Company's Form 8-K filed on March 16, 1998.
(11) Previously filed as Exhibit 10.2 to the Company's Form 8-K filed on March 16, 1998.
(12) Previously filed as Exhibit 10.3(c) to the Company's Form 10-Q for the quarter
ended March 31, 1998.
(13) Previously filed as an exhibit under the same exhibit number to the Company's
Form 10-Q for the quarter ended March 31, 1998.
(14) Previously filed as Exhibit 10.12 to the Company's Form 10-Q for the quarter
ended March 31, 1998.
(15) Previously filed as Exhibit 4.2 to the Company's Registration Statement
on Form S-4 filed on April 24, 1998.
(16) Previously filed as Exhibit 10.1 to the Company's Form 8-K filed on July 1, 1998.
(17) Previously filed as Exhibit 4.2 to the Company's Amendment No. 1 to Form S-4
filed on August 21, 1998.
(18) Previously filed as Exhibit A to the Rights Agreement included as Exhibit 1 to
the Company's Registration Statement on Form 8-A filed on August 24, 1998.
24
<PAGE>
(19) Previously filed as Exhibit 1 to the Company's Registration Statement on Form
8-A filed on August 24, 1998.
(20) Previously filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter
ended September 30, 1998.
(21) Previously filed as Exhibit 3.2 to the Company's Form 10-Q for the quarter
ended September 30, 1998.
(22) Previously filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter
ended March 31, 1999.
(23) Previously filed as Exhibit 4.1 to the Company's Registration Statement on
Form S-8 (Registration No. 333-78241).
(24) Previously filed as Exhibit 4.2 to the Company's Registration Statement on
Form S-8 (Registration No. 333-78241).
(25) Previously filed as Exhibit 10.2 to the Company's Form 10-Q for the quarter
ended June 30, 1999.
(26) Previously filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter
ended September 30, 1999.
(b) There were no reports on Form 8-K filed by the Registrant during the fourth
quarter of the fiscal year ended December 31, 1999.
</FN>
</TABLE>
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 22, 2000 SITEL Corporation
By: /s/Phillip A. Clough
--------------------------------
Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
/s/James F. Lynch Chairman of the Board March 22, 2000
- ------------------------- and Director
James F. Lynch
/s/Phillip A. Clough Chief Executive Officer and March 22, 2000
- ------------------------- Director
Phillip A. Clough
/s/W. Gar Richlin Executive Vice President and March 22, 2000
- ------------------------- Chief Financial Officer
W. Gar Richlin (Principal Financial Officer)
/s/James E. Stevenson Corporate Controller March 22, 2000
- ------------------------- (Principal Accounting Officer)
James E. Stevenson
/s/Bill L. Fairfield Director March 22, 2000
- -------------------------
Bill L. Fairfield
/s/Kelvin C. Berens Director March 22, 2000
- -------------------------
Kelvin C. Berens
/s/George J. Kubat Director March 22, 2000
- -------------------------
George J. Kubat
26
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C> <C>
(1) 3.1 Amended and Restated Articles of Incorporation
(5) 3.1(a) Articles of Amendment filed September 10, 1996 to the Amended and Restated Articles of Incorporation
(1) 3.4 Amended and Restated Bylaws.
(9) 3.4(a) Amended and Restated Bylaws (conformed copy including Amendment No. 1)
(21) 3.4(b) Amendment No. 2 to Amended and Restated Bylaws
(18) 3.5 Certificate of Designation of Series A Participating Preferred Stock.
(6) 4.2 Specimen Common Stock Certificate.
(19) 4.3 Rights Agreement.
(1) 9.1 Form of General Voting Agreement.
(1) 10.1 SITEL Corporation Stock Option Plan for Replacement of Existing Options.
(6) 10.1(a) Amendment No. 1 to SITEL Corporation Stock Option Plan for Replacement of Existing Options
(1) 10.2 SITEL Corporation Stock Option Plan for Replacement of EEBs.
(6) 10.2(a) Amendment No. 1 to SITEL Corporation Stock Option Plan for Replacement of EEBs.
(4) 10.3 Amended and Restated SITEL Corporation 1995 Employee Stock Option Plan.
(6) 10.3(a) Amendment No. 1 to Amended and Restated SITEL Corporation 1995 Employee Stock Option Plan.
(8) 10.3(b) Amendment No. 2 to Amended and Restated SITEL Corporation 1995 Employee Stock Option Plan
(12) 10.3(c) Amendment No. 3 to Amended and Restated SITEL Corporation 1995 Employee Stock Option Plan.
(7) 10.4 Amended and Restated SITEL Corporation 1995 Non-Employee Directors Stock Option Plan.
(22) 10.4(a) Amendment No. 1 to Amended and Restated SITEL Corporation 1995 Non-Employee Directors Stock Option Plan
(1) 10.5 SITEL Corporation Executive Wealth Accumulation Plan.
(13) 10.5(a) Second Amendment to SITEL Corporation Executive Wealth Accumulation Plan.
(25) 10.5(b) Third Amendment to SITEL Corporation Executive Wealth Accumulation Plan.
(23) 10.6 SITEL Corporation 1999 Stock Incentive Plan.
(24) 10.6(a) Amendment No. 1 to SITEL Corporation 1999 Stock Incentive Plan.
(1) 10.7 Form of Right of First Refusal.
(2) 10.8 Form of Indemnification Agreement with Outside Directors.
(3) 10.9 Form of Indemnification Agreement with Executive Officers.
(14) 10.10 Amended and Restated SITEL Corporation Employee Stock Purchase Plan.
(10) 10.11 Amended Credit Agreement with Bankers Trust Company.
(16) 10.11(a) First Amendment dated as of June 19, 1998 to Amended Credit Agreement.
(20) 10.11(b) Second Amendment dated as of September 30, 1998 to Amended Credit Agreement.
(26) 10.11(c) Third Amendment dated as of September 30, 1999 to Amended Credit Agreement.
(11) 10.12 Indenture governing $100,000,000 9 1/4% Senior Subordinated Notes due 2006.
(17) 10.12(a) First Supplemental Indenture
(15) 10.12(b) Registration Rights Agreement
10.13 Amended and Restated Employment Agreement with James F. Lynch.
10.14 Employment Agreement with Antoon Vanparys
21 Subsidiaries.
23.1 Consent of KPMG LLP
27 Financial Data Schedule.
- -------------------------------------
<FN>
(1) Previously filed as an exhibit under the same exhibit number to the Company's
Registration Statement on Form S-1 (Registration No. 33-91092).
(2) Previously filed as an exhibit under the same exhibit number to the Company's
Form 10-Q for the quarter ended August 31, 1995.
27
<PAGE>
(3) Previously filed as an exhibit under the same exhibit number to the Company's
Registration Statement on Form S-8 (Registration No. 33-99434).
(4) Previously filed as Appendix B to the Company's definitive Proxy Statement for
the Annual Meeting of Stockholders, filed on September 27, 1996.
(5) Previously filed as Exhibit 4.1(a) to the Company's Registration Statement on
Form S-3 (Registration No. 333-13403).
(6) Previously filed as an exhibit under the same exhibit number to the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
(7) Previously filed as Appendix B to the Company's definitive Proxy Statement for
the Annual Meeting of Stockholders, filed on April 30, 1997.
(8) Previously filed as Appendix C to the Company's definitive Proxy Statement for
the Annual Meeting of Stockholders, filed on April 30, 1997.
(9) Previously filed as Exhibit 4.2 to the Company's Registration Statement on
Form S-3 (Registration No. 333-28131).
(10) Previously filed as Exhibit 10.1 to the Company's Form 8-K filed on March 16, 1998.
(11) Previously filed as Exhibit 10.2 to the Company's Form 8-K filed on March 16, 1998.
(12) Previously filed as Exhibit 10.3(c) to the Company's Form 10-Q for the quarter
ended March 31, 1998.
(13) Previously filed as an exhibit under the same exhibit number to the Company's
Form 10-Q for the quarter ended March 31, 1998.
(14) Previously filed as Exhibit 10.12 to the Company's Form 10-Q for the quarter
ended March 31, 1998.
(15) Previously filed as Exhibit 4.2 to the Company's Registration Statement on
Form S-4 filed on April 24, 1998.
(16) Previously filed as Exhibit 10.1 to the Company's Form 8-K filed on July 1, 1998.
(17) Previously filed as Exhibit 4.2 to the Company's Amendment No. 1 to Form S-4
filed on August 21, 1998.
(18) Previously filed as Exhibit A to the Rights Agreement included as Exhibit 1 to
the Company's Registration Statement on Form 8-A filed on August 24, 1998.
28
<PAGE>
(19) Previously filed as Exhibit 1 to the Company's Registration Statement on Form
8-A filed on August 24, 1998.
(20) Previously filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter
ended September 30, 1998.
(21) Previously filed as Exhibit 3.2 to the Company's Form 10-Q for the quarter
ended September 30, 1998.
(22) Previously filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter
ended March 31, 1999.
(23) Previously filed as Exhibit 4.1 to the Company's Registration Statement on
Form S-8 (Registration No. 333-78241).
(24) Previously filed as Exhibit 4.2 to the Company's Registration Statement on
Form S-8 (Registration No. 333-78241).
(25) Previously filed as Exhibit 10.2 to the Company's Form 10-Q for the quarter
ended June 30, 1999.
(26) Previously filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter
ended September 30, 1999.
</FN>
</TABLE>
29
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements and
Financial Statement Schedules
Consolidated Financial Statements
- ---------------------------------
Independent Auditors' Report.................................................F-2
Consolidated Balance Sheets at December 31, 1998 and 1999................... F-3
Consolidated Statements of Income (Loss) For The Years Ended
December 31, 1997, 1998 and 1999............................................ F-4
Consolidated Statements of Stockholders' Equity For The Years Ended
December 31, 1997, 1998 and 1999............................................ F-5
Consolidated Statements of Cash Flows For The Years Ended December 31,
1997, 1998, and 1999........................................................ F-6
Notes to Consolidated Financial Statements.................................. F-7
Financial Statement Schedules
- -----------------------------
Independent Auditors' Report................................................ S-1
Schedule II - Valuation and Qualifying Accounts............................. S-2
F-1
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors
SITEL Corporation:
We have audited the accompanying consolidated balance sheets of SITEL
Corporation and subsidiaries as of December 31, 1998 and 1999, and the related
consolidated statements of income (loss), stockholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of SITEL
Corporation and subsidiaries as of December 31, 1998 and 1999, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1999, in conformity with generally accepted accounting
principles.
KPMG LLP
Omaha, Nebraska
February 7, 2000
F-2 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
ASSETS 1998 1999
---- ----
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 14,472 $ 22,305
Trade accounts receivable (net of allowance for doubtful accounts of
$3,970 and $5,622 in 1998 and 1999, respectively) 129,809 164,473
Prepaid expenses 5,257 7,997
Deferred income taxes 1,658 1,950
Other assets 6,024 7,825
--------- ---------
Total current assets 157,220 204,550
Property and equipment, net 127,613 118,349
Goodwill, net 93,288 85,258
Deferred income taxes 15,425 15,649
Other assets 12,064 8,440
--------- ---------
Total assets $ 405,610 $ 432,246
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 30,545 $ 7,337
Current portion of long-term debt 3,671 2,838
Current portion of capitalized lease obligations 3,650 4,308
Trade accounts payable 30,784 37,592
Income taxes payable 3,875 7,135
Accrued wages, salaries and bonuses 15,620 19,893
Accrued operating expenses 23,527 28,922
Deferred revenue and other 3,888 9,141
--------- ---------
Total current liabilities 115,560 117,166
Long-term debt, excluding current portion 107,027 136,077
Capitalized lease obligations, excluding current portion 9,210 12,253
Deferred compensation 1,591 1,905
Minority interest 10,368 4,147
Commitments and contingencies
Stockholders' equity:
Common stock, voting, $.001 par value 200,000,000 shares authorized,
64,399,645 and 68,170,828 shares issued and outstanding in 1998
and 1999, respectively 64 68
Paid-in capital 157,892 165,870
Accumulated other comprehensive income (4,428) (12,757)
Retained earnings 8,326 7,517
--------- ---------
Total stockholders' equity 161,854 160,698
--------- ---------
Total liabilities and stockholders' equity $ 405,610 $ 432,246
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands, except per share data)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Revenues $ 491,474 $ 586,318 $ 737,522
--------- --------- ---------
Operating expenses:
Cost of services 270,942 331,586 397,250
Selling, general and administrative expenses 185,589 235,900 312,376
Asset impairment and restructuring expenses 15,681 6,607 9,596
--------- --------- ---------
Total operating expenses 472,212 574,093 719,222
--------- --------- ---------
Operating income 19,262 12,225 18,300
--------- --------- ---------
Other income (expense):
Interest income 561 925 523
Interest expense (5,657) (13,672) (13,308)
Other income, net 126 263 316
--------- --------- ---------
Total other income (expense) (4,970) (12,484) (12,469)
--------- --------- ---------
Income (loss) before income taxes and minority interest 14,292 (259) 5,831
Income tax expense 11,306 966 6,336
Minority interest 174 (651) 304
--------- --------- ---------
Net income (loss) from continuing operations 2,812 (574) (809)
Extraordinary loss on refinancing of debt, net of taxes -- (514) --
--------- --------- ---------
Net income (loss) $ 2,812 $ (1,088) $ (809)
========= ========= =========
Income (loss) from continuing operations per common share:
Basic $ 0.05 $ (0.01) $ (0.01)
Diluted $ 0.04 $ (0.01) $ (0.01)
Income (loss) per common share:
Basic $ 0.05 $ (0.02) $ (0.01)
Diluted $ 0.04 $ (0.02) $ (0.01)
Weighted average common shares outstanding:
Basic 61,764 63,888 66,550
Diluted 68,811 63,888 66,550
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For The Years Ended December 31, 1997, 1998, and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER RETAINED TOTAL
COMMON PAID-IN COMPREHENSIVE EARNINGS STOCKHOLDERS'
STOCK CAPITAL INCOME (DEFICIT) EQUITY
----- ------- ------ --------- ------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 $ 59 $ 117,736 $ 2,328 $ 6,602 $ 126,725
Issuance of 1,891,562 shares of common stock
for options exercised 2 226 -- -- 228
Tax benefit of stock options exercised -- 7,685 -- -- 7,685
Issuance of 2,332,375 shares of common stock
for acquisitions 2 29,679 -- -- 29,681
Comprehensive income (loss):
Net income -- -- -- 2,812 2,812
Currency exchange adjustment -- -- (7,798) -- (7,798)
Change in unrealized gain, net of taxes -- -- (945) -- (945)
---------
Total comprehensive income (loss) -- -- -- -- (5,931)
--------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1997 63 155,326 (6,415) 9,414 158,388
Issuance of 1,192,348 shares of common stock
for options exercised 1 2 -- -- 3
Tax benefit of stock options exercised -- 2,175 -- -- 2,175
Issuance of 41,353 shares of common stock
for acquisitions -- 295 -- -- 295
Other -- 94 -- -- 94
Comprehensive income (loss):
Net loss -- -- -- (1,088) (1,088)
Currency exchange adjustment -- -- 2,059 -- 2,059
Change in unrealized gain, net of taxes -- -- (72) -- (72)
---------
Total comprehensive income (loss) -- -- -- -- 899
--------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1998 64 157,892 (4,428) 8,326 161,854
Issuance of 1,616,087 shares of common stock
for options exercised 2 769 -- -- 771
Tax benefit of stock options exercised -- 541 -- -- 541
Issuance of 2,205,333 shares of common stock
for acquisition of minority interest 2 6,614 -- -- 6,616
Other -- 54 -- -- 54
Comprehensive income (loss):
Net loss -- -- -- (809) (809)
Currency exchange adjustment -- -- (8,329) -- (8,329)
---------
Total comprehensive income (loss) -- -- -- -- (9,138)
--------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1999 $ 68 $ 165,870 $ (12,757) $ 7,517 $ 160,698
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------
1997 1998 1999
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Net income (loss) $ 2,812 $ (1,088) $ (809)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Extraordinary loss on refinancing of debt -- 792 --
Asset impairment and restructuring provision 15,513 4,100 9,596
Depreciation and amortization 28,687 40,355 45,996
Provision for deferred income taxes (1,498) (2,816) (516)
Deferred compensation (53) 184 314
Gain on sale of marketable securities (407) (208) --
Change in assets and liabilities:
Trade accounts receivable (36,977) (18,123) (38,915)
Other assets (7,677) 2,482 (4,423)
Trade accounts payable 5,694 4,063 7,623
Other liabilities 12,920 (11,998) 20,449
--------- --------- ---------
Net cash provided by operating activities 19,014 17,743 39,315
--------- --------- ---------
Cash flows from investing activities:
Purchases of property and equipment (69,437) (52,033) (38,585)
Proceeds from sale-leasebacks of facilities and equipment -- 9,397 3,467
Proceeds from sales of property and equipment 2,711 1,513 639
Acquisitions, net of cash acquired (47,023) (2,193) --
Settlement of purchase price payable (13,934) -- --
Sale of marketable securities 558 257 --
Changes in other assets, net (4,228) -- --
--------- --------- ---------
Net cash used in investing activities (131,353) (43,059) (34,479)
--------- --------- ---------
Cash flows from financing activities:
Borrowings on notes payable 83,307 20,294 3,706
Repayments of notes payable (68,440) (4,398) (26,174)
Borrowings on long-term debt 360,398 149,917 57,789
Repayment of long-term debt (260,499) (149,399) (29,823)
Payment of long-term debt issuance costs -- (3,228) --
Payments on capital lease obligations (2,211) (5,061) (5,056)
Common stock issued, net of expenses 228 3 771
Capital contribution from subsidiary shareholder -- 1,400 --
Sale of stock of subsidiaries -- 6,541 --
Other 900 (9) (63)
--------- --------- ---------
Net cash provided by financing activities 113,683 16,060 1,150
--------- --------- ---------
Effect of exchange rates on cash (2,769) (557) 1,847
--------- --------- ---------
Net increase (decrease) in cash (1,425) (9,813) 7,833
Cash and cash equivalents, beginning of year 25,710 24,285 14,472
--------- --------- ---------
Cash and cash equivalents, end of year $ 24,285 $ 14,472 $ 22,305
========= ========= =========
Supplemental disclosures of cash flow information:
Interest paid $ 4,712 $ 8,986 $ 12,170
Income taxes paid $ 7,859 $ 6,235 $ 2,654
</TABLE>
Supplemental disclosures of non-cash investing and financing activities:
The tax benefit of stock options exercised was $7,685, $2,175 and $541 in
1997, 1998 and 1999, respectively.
The Company incurred capitalized leases of $13,225, $757 and $9,015 in
1997, 1998 and 1999, respectively.
The Company issued stock in connection with the acquisition of businesses
and minority interest with a value of $29,681, $295 and $6,616 in 1997,
1998 and 1999, respectively.
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies and Practices:
(a) Description of Business. SITEL Corporation ("SITEL") and subsidiaries
(collectively, the "Company") provide customer relationship management services
in North America, Europe, Asia Pacific and Latin America. The Company finds,
acquires and retains customers and helps enhance and grow these relationships
through a variety of value-added services via electronic media including the
telephone and the Internet, and, to a lesser extent, traditional mail. The
Company provides services to clients principally in the consumer, financial
services, insurance, telecommunications, technology and utilities sectors.
(b) Principles of Consolidation. The consolidated financial statements
include the financial statements of SITEL Corporation and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
(c) Translation of Foreign Currencies. The Company's non-U.S. subsidiaries,
except in Mexico prior to 1999, use as their functional currency the local
currency of the countries in which they operate. Their assets and liabilities
are translated into U.S. dollars at the exchange rates in effect at the balance
sheet date. Revenues and expenses are translated at the average rates of
exchange prevailing during the period. Translation gains and losses are included
as a component of equity. Transaction gains and losses related to short-term
intercompany accounts are included in the determination of net income.
Prior to 1999, the Company's subsidiary in Mexico used the U.S. dollar as
its functional currency. In 1997 and 1998, the effect of remeasurement into the
functional currency was not material and was included in the determination of
net income (loss).
(d) Revenue Recognition. The Company recognizes revenues as services are
performed for its clients. Certain contracts allow for the provision of services
whereby the Company is able to invoice and receive payment for its services in
advance of the performance of those services. Such advance payments are recorded
as deferred revenue until such time as the services are performed.
(e) Cash Equivalents. Cash equivalents generally consist of highly liquid
debt instruments purchased with an original maturity of three months or less.
(f) Accounts Receivable. Current receivables include unbilled revenues of
$23.6 million and $34.1 million at December 31, 1998 and 1999, respectively.
These items are expected to be billed and collected in the normal course of
business.
(g) Property and Equipment. Property and equipment are stated at cost.
Equipment under capital leases is stated at the present value of minimum lease
payments. Depreciation is calculated on the straight-line method over the
estimated useful lives of the assets which range from 3 to 20 years. Assets
recorded for leasehold improvements and under capital leases are amortized on a
straight-line basis over the shorter of the lease term or estimated useful life
of the asset.
F-7 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(h) Income Taxes. Income taxes are accounted for under the asset and
liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. Valuation allowances, if any, are established when
necessary to reduce deferred tax assets to the amount that is more likely than
not to be realized. Income taxes are not accrued for unremitted earnings of
international operations that have been, or are intended to be, reinvested
indefinitely.
(i) Goodwill. Goodwill consists of the difference between the purchase
price incurred in acquisitions using the purchase method of accounting and the
fair value of net assets acquired and is being amortized using the straight-line
method over 25 years. Accumulated amortization of goodwill at December 31, 1998
and 1999 was $8.8 million and $12.2 million, respectively. The Company monitors
events and changes in circumstances which may require a review of the carrying
value of goodwill at each consolidated balance sheet date to assess
recoverability based on estimated undiscounted future operating cash flows.
Impairments are recognized in operating results when a permanent diminution in
value occurs based on fair value. The assessment of the recoverability of
goodwill will be impacted if estimated future operating cash flows are not
achieved.
(j) Income (Loss) Per Share. Income (loss) per common share is computed by
dividing net income (loss) by the weighted average number of common shares and
common equivalent shares outstanding during each period. The difference in
shares utilized in calculating basic and diluted income per share represents the
number of shares assumed to be issued from the exercise of dilutive stock
options under the Company's stock option plans less shares assumed to be
purchased with proceeds from the exercise of the stock options and the related
tax benefit credited to additional paid-in capital. There are no reconciling
items between the Company's reported net income or loss and net income or loss
used in the computation of basic and diluted income (loss) per share.
(k) Use of Estimates. The preparation of the consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
(l) Stock Compensation. The Company recognizes stock-based compensation
expense using the intrinsic value method. Under that method, no compensation
expense is recorded if the exercise price of the employee stock options equals
or exceeds the market price of the underlying stock on the date of grant. For
disclosure purposes, pro forma net income (loss) and income (loss) per share are
provided as if the fair value method had been applied.
(m) Financial Instruments. Fair values of cash and cash equivalents,
accounts receivable, accounts payable, marketable securities, long term debt
(primarily with variable interest rates) other than the Company's Senior
Subordinated Notes due 2006 (the "Notes"), capital leases and notes payable are
estimated to approximate carrying values due to the short maturities or other
characteristics of these financial instruments. The fair value of the Notes was
approximately $91 million at December 31, 1999, based on market transactions
near that date.
F-8 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During 1997, the Company entered into forward contracts designed to manage
the Company's exposure to fluctuations in the value of currencies of certain
foreign countries in which the Company had significant operations. These
contracts were marked to market with gains or losses recognized in the Company's
statements of income (loss) as other income (expense). Such amounts were not
material.
During 1998 and 1999, SITEL also entered into forward exchange contracts
designed to manage the Company's exposure to fluctuations in the value of
currencies of certain foreign countries where it had foreign-currency
denominated short-term intercompany loans. The forward contracts were marked to
market with gains or losses recognized in the Company's statements of income
(loss) as other income (expense). Such amounts were not material.
(n) Comprehensive Income (Loss). The Company's comprehensive income (loss)
was $(5.9) million, $0.9 million and $(9.1) million for 1997, 1998 and 1999,
respectively. The difference between the Company's reported net income (loss)
and comprehensive income (loss) for those periods is primarily due to the change
in the currency exchange adjustment. The accumulated other comprehensive income
included in the Company's consolidated balance sheets at December 31, 1998 and
1999 is primarily the accumulated currency exchange adjustment.
(o) Reclassifications. Certain amounts from 1998 have been reclassified to
conform to the current year's presentation.
2. Acquisitions:
In January 1997, the Company acquired all of the outstanding capital stock
of Telebusiness Holdings, a systems integration company based in Australia and
New Zealand. In February 1997, the Company acquired substantially all of the
assets of Exton Technology Group, a teleservicing technical support company
based in Madison, Wisconsin. In March 1997, the Company acquired all of the
outstanding stock of Levita Group Pty Ltd., an Australian based teleservicing
company, and all of the outstanding stock of L&R Group Limited, a United Kingdom
based teleservicing consulting firm. In May 1997, the Company acquired all of
the outstanding stock of Support Systems Developers, Inc., a teleservices
technical support company based in Vienna, Virginia. In July 1997, the Company
acquired all of the outstanding stock of Svanberg & Co. Intressenter AB, a
teleservices firm based in Sweden. In September 1997, the Company acquired all
of the outstanding stock of Telephone Marketing Services (Ireland), Ltd., a
teleservices firm based in Ireland. In November 1997, the Company acquired a 49%
equity interest in Grupo de Commercialization Integrada S.A. de C.V. ("GCI"), a
teleservicing subsidiary of Corporacion Interamericana de Entretenimiento, S.A.
de C.V. ("CIE"), an event promotion and management company in Latin America. The
terms of the acquisition provided for the Company's effective control of GCI
through the Company's ability to elect a majority of the board of directors and
through responsibility of the board for the day-to-day operations of GCI.
Therefore, the Company has accounted for the transaction as an acquisition of a
subsidiary and consolidated the results of operations of GCI since the date of
acquisition. Under the terms of the acquisition, the other shareholder of GCI is
also provided certain protective rights which, in the opinion of management, do
not impair the Company's ability to effectively exercise its control over GCI.
Those protective rights include the ability of the other shareholder to veto
actions of the subsidiary resulting in its dissolution or reorganization, its
filing of bankruptcy or insolvency, sale of a significant portion of its assets,
amendment to its by-laws, issuance of additional capital stock or significant
reacquisition of its capital stock, and its contracting with related parties
among other rights.
F-9 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The total cost of the Company's 1997 acquisitions was approximately $76.7
million, subject to certain adjustments and excluding transaction costs and
liabilities assumed. Included in the total cost was the issuance of
approximately 2.3 million shares of the Company's common stock valued at
approximately $29.7 million. These 1997 acquisitions have been accounted for as
purchases and accordingly, the acquired assets and liabilities have been
recorded at their estimated fair values at the dates of acquisition, and the
results of operations have been included in the accompanying consolidated
financial statements since the dates of acquisition. The total purchase price in
excess of the fair market value of the net assets acquired was recorded as
goodwill ($65.6 million).
In May, 1998, the Company acquired all of the outstanding stock of MSC 24
S.A., which owned 100% of Intuiparc Assistance S.A. ("Intuiparc"), a
teleservicing company based in France, through the payment of approximately $1.5
million in cash, including acquisition costs, and the issuance of approximately
41,000 shares of stock valued at approximately $0.3 million. The acquisition of
Intuiparc has been accounted for as a purchase. Accordingly, the purchase price
has been allocated to the assets and liabilities acquired based upon their fair
values at the date of acquisition and the results of operations of Intuiparc
have been included in the consolidated results of operations since the date of
acquisition. Goodwill of approximately $2.5 million was recorded for the excess
of purchase price over the fair value of net assets acquired. Prior to the
acquisition date, the results of operations of Intuiparc were not significant.
3. Sale and Reacquisition of Stock of Subsidiaries:
During 1998 the Company sold newly issued stock of certain subsidiaries
located in the Asia Pacific region to Lend Lease Corporation Limited, Sydney,
Australia and certain of its subsidiaries ("Lend Lease"). Lend Lease paid
approximately $6.6 million for a 20% interest in these subsidiaries, which
provide outsourced call center solutions throughout the region.
In June 1999, the Company reacquired the minority interest in such
subsidiaries from Lend Lease in exchange for 2.2 million shares of the Company's
common stock. Additionally, Lend Lease purchased 1.5 million shares of the
Company's common stock for $4.5 million in cash from two SITEL Corporation
shareholders in a related transaction. The shares issued by the Company were
valued at $6.6 million, based on quoted market prices of the Company's stock.
4. Property and Equipment:
Property and equipment at December 31, 1998 and 1999 consisted of the
following:
(in thousands)
1998 1999
------------- ------------
Computer equipment and software $ 131,362 $ 148,737
Furniture, equipment and other 42,690 43,828
Leasehold improvements 24,596 31,467
Buildings 13,464 11,789
Other 459 324
------------- ------------
212,571 236,145
Less accumulated depreciation 84,958 117,796
------------- ------------
$ 127,613 $ 118,349
============= ============
F-10 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Long-term Debt:
Long-term debt at December 31, 1998 and 1999 consisted of the following:
<TABLE>
<CAPTION>
(in thousands)
1998 1999
------------ ------------
<S> <C> <C>
9.25% Senior Subordinated Notes due in
March, 2006 $ 100,000 $ 100,000
Long-term revolving credit facility at variable interest rates
(8.5% at December 31, 1999) 3,500 30,000
Various notes payable acquired at acquisition of GCI, with variable
interest rates (22.6% at December 31, 1999) 1,288 290
Other notes payable with weighted-average interest rates of 6.1% at
December 31, 1999 5,910 8,625
------------ ------------
110,698 138,915
Less current portion 3,671 2,838
------------ ------------
Total $ 107,027 $ 136,077
============ ============
</TABLE>
In March 1998, the Company completed the private placement of $100 million
of 9.25% Senior Subordinated Notes due 2006 (the "Notes"). The proceeds from the
offering were used to repay borrowings outstanding under the Company's then
outstanding long term revolving credit facility (the "Credit Facility"), which
was also amended on that date.
The Notes which include interest payable semiannually, are general
unsecured obligations of the Company and are subordinated in right of payment to
all existing and future senior debt of the Company. The Notes are guaranteed by
certain of the Company's subsidiaries and contain certain covenants that limit
the ability of the Company and certain of its subsidiaries to, among other
things, incur additional indebtedness, pay dividends or make certain other
restricted payments, consummate certain asset sales, enter into certain
transactions with affiliates, incur liens, merge or consolidate with another
company and sell or otherwise dispose of all or substantially all of the assets
of the Company.
The Notes are redeemable, at the Company's option, in whole or in part from
time to time on or after March 15, 2002. If redeemed during the twelve-month
period commencing on March 15 of the year set forth below, the redemption prices
are as follows, plus in each case, accrued and unpaid interest thereon, if any,
to the date of redemption:
Year Percentage
- --------- --------------
2002 104.63%
2003 103.08%
2004 101.54%
2005 and thereafter 100.00%
F-11 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition, the Company may redeem up to 35% of the aggregate principal
amount of the Notes at any time on or prior to March 15, 2001 at 109.25% of the
principal amount thereof, plus accrued interest to the date of redemption, from
the net proceeds of one or more public equity offerings, as defined. Also, upon
a change of control of the Company, as defined, the Company may be required to
repurchase the Notes at a price equal to 101% of the principal amount thereof,
plus accrued interest to the date of repurchase.
In connection with the repayment of the amounts due under the existing
Credit Facility from the proceeds of the Notes, the Company also reached an
agreement with a syndicate of commercial banks to amend the Company's existing
Credit Facility in 1998. Certain of the financial covenants and restrictions
from the existing facility were amended and the Company's eligible domestic
accounts receivable were pledged as security. The amended facility provides for
interest payable monthly on outstanding borrowings and a variable commitment fee
paid quarterly on any unused balances. The obligations of the Company under the
facility have been guaranteed by the Company's domestic subsidiaries and are
secured by a pledge of the Company's shares in such subsidiaries and certain
other foreign subsidiaries. The facility contains certain financial covenants
and certain restrictions on, among other things, the Company's ability to incur
additional debt, pay dividends or make certain other restricted payments, make
certain investments, and sell assets or merge with another company. The facility
becomes due and payable upon a change of control of the Company as defined in
the facility agreement. The borrowings were limited under the amended Credit
Facility to an amount based upon a percentage of the Company's eligible domestic
accounts receivable, as defined, up to $75 million. As a result of the
amendment, the Company recognized an extraordinary charge of $514,000, net of
tax, to write off the deferred costs of the original Credit Agreement.
Additionally, in 1998 and 1999, the Company sought and obtained certain
modifications to the amended Credit Facility to permit continued availability of
borrowing under such facility. In connection with the modification in 1998 the
total available was reduced to $50 million. As of December 31, 1999, the Company
was in compliance with all of the covenants and restrictions of the amended
facility.
Additionally, several international lines of credit are available to fund
local working capital requirements. The maximum borrowings under these
facilities are $22.3 million. At December 31, 1999, the total amount of
short-term notes payable outstanding under these facilities was $7.3 million
with a weighted-average interest rate of 4.4%. The Company had total domestic
and international unused lines of credit of $19.7 million at December 31, 1999.
The Company obtained an additional international line of credit in January 2000
of $8.1 million.
The aggregate maturities of long-term debt for each of the five years
following December 31, 1999 are as follows:
(in thousands)
Maturities of
Long-term
Year Ending December 31, Debt
- -------------------------------- -----------------
2000 $ 2,838
2001 4,857
2002 1,220
2003 30,000
2004 and thereafter 100,000
F-12 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Income Taxes:
For financial reporting purposes, income (loss) from continuing operations
before income taxes and minority interest includes the following components:
(in thousands)
For The Years Ended December 31,
1997 1998 1999
------------ ------------ ------------
Pretax income (loss):
United States $ 15,005 $ 9,958 $ 12,001
Foreign (713) (10,217) (6,170)
------------ ------------ ------------
Total $ 14,292 $ (259) $ 5,831
============ ============ ============
The components of the provision for income tax expense (benefit) consist
of:
(in thousands)
For The Years Ended December 31,
1997 1998 1999
----------- ------------ -----------
Current:
Federal $ 5,805 $ 1,899 $ 2,740
Foreign 7,112 1,950 3,699
State (113) (67) 413
---------- ------------ ------------
12,804 3,782 6,852
Deferred:
Federal 1,237 960 1,716
Foreign (2,735) (3,776) (2,232)
State -- -- --
---------- ------------ ------------
(1,498) (2,816) (516)
---------- ------------ ------------
Provision for income tax expense $ 11,306 $ 966 $ 6,336
========== ============ ============
In 1998 a tax benefit of $0.3 million was allocated to the extraordinary
loss on the refinancing of debt. Certain of the income tax benefits related to
the exercise of stock options reduce taxes currently payable and are credited to
paid-in capital. The amount credited was $7.7 million, $2.2 million and $0.5
million in 1997, 1998 and 1999, respectively.
F-13 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
(in thousands)
December 31,
1998 1999
------------ ------------
Deferred tax assets:
<S> <C> <C>
Accrued compensation and other liabilities $ 9,013 $ 7,611
Net operating loss and other credit carryforwards 2,984 2,908
Net operating losses related to international operations 4,680 5,193
Depreciation timing differences related to international operations 1,529 3,249
Other 696 928
------------ ------------
Total deferred tax assets 18,902 19,889
------------ ------------
Deferred tax liabilities:
Leased assets and depreciation 1,358 1,648
Other 461 642
------------ ------------
Total deferred tax liabilities 1,819 2,290
------------ ------------
Net deferred tax assets $ 17,083 $ 17,599
============ ============
</TABLE>
The Company has not recorded a valuation allowance related to its deferred
tax assets. Based upon the Company's current and historical pretax earnings,
adjusted for significant deductions estimated to be available from the exercise
of nonqualified stock options, management believes that it is more likely than
not that the Company will generate sufficient taxable income to fully realize
the benefits of its recorded deferred tax assets.
At December 31, 1999, the Company had U.S. Federal net operating loss
carryforwards of $0.9 million, which expire in 2004. At December 31, 1999, the
Company had $5.2 million in foreign net operating losses, of which $3.5 million
expire in 2002 and the remaining $1.7 million can be carried forward
indefinitely. At December 31, 1999, the Company had alternative minimum tax
credit carryforwards of approximately $3.0 million.
F-14 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The reconciliation between the Company's income tax expense as reported in
the accompanying consolidated financial statements and that which would be
calculated applying the U.S. Federal income tax rate of 34% on pretax income
(loss) is as follows:
<TABLE>
<CAPTION>
(in thousands)
For The Years Ended December 31,
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Expected Federal income taxes $ 4,859 $ (88) $ 1,983
State taxes, net of Federal effect (74) (44) 325
Amortization of goodwill 159 222 350
Impact of foreign operations, including goodwill 1,278 1,647 1,199
State incentive tax credits (see note 12) 1,446 -- --
Impairment losses on intangible assets 3,400 -- 2,181
Other 238 (771) 298
------------ ------------ ------------
Total $ 11,306 $ 966 $ 6,336
============ ============ ============
</TABLE>
7. Lease Obligations:
The Company is obligated under various capital leases for property and
certain equipment that expire at various dates through 2015. Capitalized leased
property and equipment included in property and equipment was approximately
$11.8 million and $17.5 million at December 31, 1998 and 1999, respectively, net
of accumulated amortization.
The Company also leases property and certain equipment under noncancelable
operating lease arrangements which expire at various dates through 2014. Rent
expense was approximately $15.4 million, $23.0 million and $26.3 million for the
years ended December 31, 1997, 1998 and 1999, respectively. Certain leases of
real property provide options to extend the lease terms.
Future minimum lease payments under noncancelable operating leases and
future minimum capital lease payments as of December 31, 1999 are as follows:
(in thousands)
Capital Operating
Leases Leases
------------ ------------
2000 $ 5,276 $ 25,288
2001 4,530 23,035
2002 2,336 17,431
2003 1,218 13,748
2004 and thereafter 7,498 48,216
------------ ------------
20,858 $ 127,718
============
Less amount representing interest 4,297
------------
Present value of net minimum lease obligations
including current maturities of $4,308 $ 16,561
============
F-15 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Stock-Based Compensation:
The Company's stock option plans are described as follows:
(a) Stock Plan for Replacement of Existing Options ("Replacement Plan").
Under this plan, options for 4,541,780 shares were granted in 1995,
with an option price of $.0025 per share, as replacements for
3,110,000 options outstanding at February 28, 1995.
(b) Stock Option Plan ("EEB Replacement Plan"). Under this plan, options
for 7,381,720 shares were granted in 1995, with an option price of
$.0025 per share, as replacements for the Company's employee equity
benefit plan ("EEB Plan"). The EEB Plan had 12,655,000 units
outstanding with base values ranging from $0.85 to $1.71.
The following applies to both the Replacement Plan and the EEB
Replacement Plan (collectively, the "Replacement Plans"): Options were
originally exercisable in five equal annual installments from January
1996 to May 2000. The Company recorded these option grants to 265
employees at the estimated fair value at date of grant ($2.91), with a
corresponding charge to special compensation expense totaling $34.6
million in 1995. All options granted were vested as of the date of
grant. The optionees were required to enter into certain voting and
resale agreements which place certain restrictions on actions of the
optionee. No further options will be granted under these plans. On
June 3, 1999, the Company's board of directors amended the Replacement
Plans and the Compensation Committee amended the terms of
approximately 6.3 million outstanding and fully vested stock options
issued under the Replacement Plans. The amendment to the Replacement
Plans permitted the Company to extend the expiration date of the
options held by persons currently employed by or serving as
consultants to the Company to up to ten years after the original grant
date. Pursuant to this authority, the Compensation Committee extended
the expirations of the options held by such employees and consultants
from May 29, 2000 to May 29, 2001. All other contractual terms of the
options were unchanged. The quoted market price of the Company's
common stock on the date of the modification was less than the sum of
the exercise price of the options and previously recognized
compensation expense recorded upon the initial grant of the options.
Consequently, no compensation expense was recorded for the amendment
of the options.
(c) 1999 Stock Incentive Plan ("1999 Plan"). On May 6, 1999, the Company's
stockholders approved the 1999 Plan which replaced the 1995 Employee
Stock Option Plan and the 1995 Non-Employee Directors Stock Option
Plan. The 1999 Plan provides for the granting of various types of
incentive awards (including incentive stock options, nonqualified
options, stock appreciation rights, restricted shares, and performance
shares or units) for the issuance of up to an aggregate of 7,000,000
shares of common stock to employees, consultants and non-employee
directors of the Company and its subsidiaries. Vesting terms vary with
each grant, and option terms may not exceed ten years. Option prices,
set by the Compensation Committee of the Board of Directors, may not
be less than the fair market value at date of grant for incentive
stock options or less than par value for nonqualified stock options.
At December 31, 1999, there were approximately 6.2 million shares
available for issuance pursuant to future grants under the 1999 Plan.
F-16 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(d) 1995 Employee Stock Option Plan ("Employee Plan"). The terms of the
Employee Plan were substantially the same as the 1999 Plan. No further
options will be granted under the Employee Plan.
(e) 1995 Non-Employee Directors Stock Option Plan ("Directors Plan"). The
Directors Plan provided for automatic formula grants of nonqualified
options to each independent director of the Company. Each independent
director was granted options to purchase 18,000 shares of common stock
upon election or re-election to a three-year term on the Board of
Directors. Option prices equaled the fair market value of the common
stock on the date of grant. Options vested and became exercisable in
three equal annual installments commencing one year after grant. On
January 18, 1999, the Company's Board of Directors amended the
Directors Plan to permit discretionary grants of options. Each
independent director was granted additional options that date to
purchase 67,000 shares of common stock at the fair market value of the
common stock on the grant date. These additional options have a term
of ten years and become exercisable in five equal installments
commencing one year after grant. The Directors Plan was administered
by the Board members who were not eligible to participate in the Plan.
No further options will be granted under the Directors Plan.
Additional information as to shares subject to options is as follows:
Weighted-
Average
Exercise
Number of Price
Options per Share
--------------- -------------
Balance, January 1, 1997 16,377,412 $ 0.44
Granted 6,478,211 13.08
Exercised (1,891,562) 0.12
Canceled (5,343,144) 15.69
--------------- -------------
Balance, December 31, 1997 15,620,917 5.78
Granted 7,197,652 4.58
Exercised (1,192,348) .0025
Canceled (7,721,832) 12.63
--------------- -------------
Balance, December 31, 1998 13,904,389 1.96
Granted 2,038,469 4.20
Exercised (1,616,087) 0.48
Canceled (480,819) 3.83
--------------- -------------
Balance, December 31, 1999 13,845,952 $ 2.40
=============== =============
Exercisable at December 31, 1999 4,493,502 $ 1.34
=============== =============
F-17 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The number of options granted and canceled in 1997 and 1998 include the
effect of amendments to the terms of pre-existing option agreements issued under
the Employee Plan. The number of options subject to the amendments and therefore
shown as granted and canceled were 4,222,405 and 5,590,225 in 1997 and 1998,
respectively. The amendments to the terms of the options in both 1997 and 1998
lowered the exercise prices to prevailing market values of the common stock and
altered certain vesting provisions of the options.
In January 2000, options to purchase 1,570,705 shares at an exercise price
of $6.66 per share were granted under the 1999 Plan. Generally, the options
serially vest over five years and terminate after 10 years.
The following table summarizes information about stock options outstanding
at December 31, 1999.
Options Outstanding
------------------------------------------------
Number Weighted-
Outstanding at Average Weighted-
at Remaining Average
Range of December 31, Contractual Exercise
Exercise Prices 1999 Life Price
- -------------------- ------------- ------------- -----------
$.0025 5,685,486 1.02 $ 0.0025
$2.34 to $3.50 5,701,653 7.88 $ 3.39
$3.72 to $9.75 2,370,863 7.32 $ 5.32
$10.53 to $19.50 87,950 6.73 $ 16.51
Options Exercisable
----------------------------
Exercisable Weighted
at Average
Range of December 31, Exercise
Exercise Prices 1999 Price
- ----------------------- ------------- ----------
$.0025 3,304,896 $ 0.0025
$2.34 to $3.50 672,476 $ 3.43
$3.72 to $9.75 463,990 $ 6.06
$10.53 to $19.50 52,140 $ 17.09
The per share weighted-average fair value of stock options granted during
1997, 1998 and 1999, was $7.72, $3.22 and $0.90, respectively, on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions: expected dividend yield 0.0%, expected volatility
factor 30.0%, risk-free interest rate of 6.3%, 5.4% and 5.2% in 1997, 1998 and
1999, respectively, and an expected life of 9.0, 8.0 and 8.3 years in 1997, 1998
and 1999, respectively.
F-18 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Had the Company determined compensation cost based on the fair value at the
grant date for its stock options, the Company's net income (loss) and income
(loss) per share would have been reduced to the pro forma amounts indicated
below:
(in thousands, except per share data)
For The Years Ended December 31,
1997 1998 1999
----------- ----------- ------------
Net income (loss):
As Reported $ 2,812 $ (1,088) $ (809)
Pro Forma (1,473) (2,861) (3,346)
Income (loss) per share:
As Reported:
Basic $ 0.05 $ (0.02) $ (0.01)
Diluted 0.04 (0.02) (0.01)
Pro Forma:
Basic $ (0.02) $ (0.04) $ (0.05)
Diluted (0.02) (0.04) (0.05)
During 1998, the Company implemented an Employee Stock Purchase Plan
("ESPP") which enables eligible employees to purchase the Company's stock at 85%
of the current market value on a quarterly basis. Total purchases and shares
purchased under the ESPP were $200,000 and 56,634 shares, respectively, for 1998
and $206,000 and 52,262 shares, respectively, for 1999. No compensation expense
has been recognized in connection with this plan.
9. Benefit Plans:
The Company's 401(k) plan, adopted in January 1994, covers substantially
all domestic employees who are 18 years of age with 6 months or more of service.
Participants may elect to contribute 1% to 17% of compensation. The Company may
elect to make a year end contribution to the 401(k) plan. No contributions were
made in 1997, 1998 or 1999.
The Company also makes contributions to certain executive and other
employee personal retirement programs, primarily in Europe. Amounts contributed
to those plans were $0.2 million, $1.0 million and $1.2 million in 1997, 1998
and 1999, respectively.
Effective May 15, 1994, the Company adopted a deferred compensation plan
for certain executive employees who elect to contribute to the plan. The Company
may voluntarily match all or a portion of the participants' contributions.
Participants are 100% vested in their contributions and the Company's
contributions vest over a 15-year period. No contributions were made to the plan
in 1997, 1998 or 1999.
F-19 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Segment Data:
The Company's operations are conducted in one business segment: the
provision of customer relationship management services via electronic media
including telephone and the Internet, and, to a lesser extent, traditional mail.
The Company's services are provided through a number of operating subsidiaries
in a variety of locations around the world. However, the nature of services, the
nature of the processes involved in providing those services, the types of
customers and the expected long-term operating income from these subsidiaries
are similar.
A summary of the Company's operations by geographic area follows.
(in thousands)
For The Years Ended December 31,
--------------------------------------------
1997 1998 1999
------------- ------------ ------------
Revenue:
United States $ 250,160 $ 314,500 $ 389,523
United Kingdom 116,055 102,895 114,053
Spain 57,449 52,820 69,403
Other foreign countries 67,810 116,103 164,543
------------- ------------ ------------
$ 491,474 $ 586,318 $ 737,522
============= ============ ============
December 31,
----------------------------
1998 1999
------------ ------------
Long-Lived Assets:
United States $ 87,314 $ 84,621
United Kingdom 31,972 24,322
Spain 37,964 33,146
Other foreign countries 75,715 69,958
------------ ------------
$ 232,965 $ 212,047
============ ============
Revenues are primarily attributed to countries based upon the location where the
services are performed.
Major Customers
The total revenue of various independently managed subsidiaries of one
customer aggregated to 12.2% of the Company's revenues for the year ended
December 31, 1999. No single customer accounted for 10% of the revenues for the
years ended December 31, 1997 and 1998.
11. Contingencies:
From time to time, the Company is involved in litigation incidental to its
business. Although the ultimate outcome of such litigation cannot be predicted
with certainty, management believes, after consultation with counsel, that the
resolution of such matters will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
F-20 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Restructuring and Impairment of Assets:
In 1997, the Company recorded provisions of $15.7 million for restructuring
expenses and impairment losses. Included in this charge were impairment losses
on long-lived assets of $11.0 million, severance and other costs of $3.6
million, and costs related to losses on contractual obligations of $1.1 million.
The Company's restructuring plan included the following initiatives:
o Concurrent with the decision to pursue a new joint-venture equity
partner in the Asia Pacific region, management discontinued virtually
all third party operations of its Telebusiness unit. The decision to
discontinue these operations resulted from the disappointing results
of operations during 1997 combined with the recognition that the
Company's joint-venture partner would not participate in managing or
funding these operations. The resulting impairment loss of
approximately $10.0 million represented primarily the write-off of
unamortized goodwill. The Company also accrued certain other costs of
$0.5 million related to this initiative, including severance for 18
employees. Revenues and operating loss of these operations were
approximately $3.5 million and $1.2 million, before the effects of
these charges, in 1997.
o The Company relocated its corporate headquarters and closed or
consolidated certain under-performing call centers. Costs incurred as
a result of these plans consisted principally of commitments related
to abandoned or excess space for leased facilities of approximately
$1.1 million and impairment losses of $1.0 million which were recorded
by the Company for obsolete technology to record these assets at their
estimated fair value, less costs of disposal. The Company also
incurred severance for 17 employees and other costs of $0.2 million
related to this plan.
The plan to close under-performing call centers also affected
management's assessment of the carrying value of certain deferred tax
assets of $1.4 million originating from state incentive tax credits
related to employment incentives. These deferred tax assets were
expensed in 1997 because management believed that it was more likely
than not that these benefits would ultimately not be utilized.
o The Company reorganized its corporate management in Europe. The
substantial majority of costs related to this plan were severance
costs of $2.8 million for the involuntary termination of 31 employees.
The Company also incurred other costs of $0.1 million related to this
plan.
The amount of actual severance and other costs paid and actual losses
charged against the liability for contractual obligations during 1998 and 1999
was approximately $0.7 million and $0.1 million, respectively.
In 1998, the Company recorded a $6.6 million charge for restructuring
expenses primarily related to its European operations. Included in that charge
was $6.4 million related to statutory or contractual severance and other costs
for approximately 250 employees. The restructuring expenses also include $0.2
million for the cost of excess leased facilities. The Company substantially
completed its restructuring plan and recorded a reversal of $0.5 million to the
restructuring accrual in the third quarter of 1999.
F-21 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the third quarter of 1999, the Company recorded asset impairment
expenses of $10.1 million primarily related to capitalized software and related
technology assets. These impairment expenses were precipitated by the Company's
decision to select an outside vendor to provide its call center software and a
detailed assessment made by management of the utility and plans for future
deployment of existing software assets. The Company's impairment expenses of
$10.1 million in 1999 consist of the following components:
o A write-off of approximately $1.4 million was recorded for a software
platform that will continue to be used by the Company, although used
on a much more limited basis. The amount of the impairment loss was
determined by estimating future discounted cash flows that would be
provided from utilizing the software.
o A write-off of $6.4 million was recorded for the abandonment of
internally developed software and software licenses that will not be
deployed as a result of management's decision to deploy the third
party software.
o A write-off of $2.3 million was recorded for an other-than-temporary
decline of the fair value of an investment by the Company in a
software development firm. The deteriorating financial condition of
the investee and management's decision to abandon plans to purchase
its software contributed to the determination of the impairment loss.
13. Shareholder Rights Plan:
In August 1998, the Company's Board of Directors adopted a Shareholder
Rights Plan (the "Rights Plan") that provides for the issuance of preferred
share purchase rights that expire in August, 2008. The rights generally will be
exercisable and transferable apart from the common stock only after the tenth
day following public disclosure that a person or group of affiliated or
associated persons has acquired 20% or more of the outstanding shares of common
stock (thereby becoming an "Acquiring Person"). The rights will also be
exercisable on such date as the Board of Directors determines after the
commencement or announcement of a tender or exchange offer by a person or group
for 20% or more of the outstanding shares of common stock.
If any person or group of affiliated or associated persons acquires 20% or
more of the outstanding shares of common stock and the Company's redemption
right has expired, each holder of a right (except those held by the Acquiring
Person) will have the right to purchase shares of the Company's common stock (or
in certain circumstances, shares of preferred stock or similar securities of the
Company) having a value equal to two times the exercise price of the right.
Alternatively, if, in a transaction not approved by the Board of Directors, the
Company is acquired in a merger or other business combination or 50% or more of
its assets or earnings power are sold, and the Company's redemption right has
expired, each holder of a right will have the right to purchase that number of
shares of common stock of the acquiring company having the market value of two
times the exercise price of the right. The rights may not be exercisable while
they are redeemable. The rights, which have a $30 exercise price, are redeemable
by the Company at a price of $.001 per right at any time up to and including the
10th day after the time that a person or group has become an Acquiring Person.
F-22 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Supplemental Guarantor Financial Information:
The Company's 9.25% Senior Subordinated Notes are guaranteed, on a full,
unconditional and joint and several basis, by substantially all wholly owned
domestic subsidiaries of the Company. Separate financial statements of the
guarantor subsidiaries are not presented because management has determined that
they would not be material to investors. However, the following condensed
consolidating information presents:
(1) Condensed consolidating financial statements as of December 31, 1998
and December 31, 1999, and for the years ended December 31, 1997, 1998
and 1999 of (a) SITEL Corporation, the parent, (b) the guarantor
subsidiaries, (c) the nonguarantor subsidiaries and (d) SITEL
Corporation on a consolidated basis,
(2) SITEL Corporation, the parent, with the investments in all
subsidiaries accounted for on the equity method, and the guarantor
subsidiaries with the nonguarantor subsidiaries accounted for on the
equity method (one of the guarantor subsidiaries is the parent of the
nonguarantor subsidiaries), and
(3) Elimination entries necessary to consolidate SITEL Corporation, the
parent, with all subsidiaries.
Effective August 1, 1999, the Company merged certain guarantor subsidiaries
into SITEL Corporation and transferred the operations of certain other guarantor
subsidiaries to SITEL Corporation. Accordingly, from and after August 1, 1999,
the financial information of such guarantor subsidiaries is reported under SITEL
Corporation, the parent, in the condensed consolidating financial statements.
The total revenues and total assets represented by such guarantor subsidiaries
as of July 31, 1999, were $97.5 million and $71.1 million, respectively.
F-23 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Balance Sheet
December 31, 1998
(in thousands)
14. Supplemental Guarantor Financial Information (Continued):
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
ASSETS PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
Current assets:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 2,410 $ 1,190 $ 10,872 $ -- $ 14,472
Trade accounts receivable, net 33,676 33,179 75,540 (12,586) 129,809
Prepaid expenses and other
current assets 2,956 241 9,742 -- 12,939
--------- --------- --------- --------- ---------
Total current assets 39,042 34,610 96,154 (12,586) 157,220
Property and equipment, net 33,300 22,523 71,790 -- 127,613
Goodwill, net 1,537 21,021 70,730 -- 93,288
Deferred income taxes 9,390 -- 6,035 -- 15,425
Other assets 8,807 126 3,131 -- 12,064
Investments in subsidiaries 188,690 88,293 -- (276,983) --
Notes receivable, intercompany -- 28,833 -- (28,833) --
--------- --------- --------- --------- ---------
Total assets $ 280,766 $ 195,406 $ 247,840 $(318,402) $ 405,610
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ -- $ -- $ 30,545 $ -- $ 30,545
Current portion of long-term debt 2,136 -- 1,535 -- 3,671
Current portion of capitalized
lease obligations 328 81 3,241 -- 3,650
Trade accounts payable 1,338 1,655 40,377 (12,586) 30,784
Accrued expenses and other
current liabilities 9,963 4,922 32,025 -- 46,910
--------- --------- --------- --------- ---------
Total current liabilities 13,765 6,658 107,723 (12,586) 115,560
Long-term debt, excluding
current portion 103,556 -- 3,471 -- 107,027
Capitalized lease obligations,
excluding current portion -- 58 9,152 -- 9,210
Notes payable, intercompany -- -- 28,833 (28,833) --
Deferred compensation 1,591 -- -- -- 1,591
Minority interest -- -- 10,368 -- 10,368
Stockholders' equity 161,854 188,690 88,293 (276,983) 161,854
--------- --------- --------- --------- ---------
Total liabilities and
stockholders' equity $ 280,766 $ 195,406 $ 247,840 $(318,402) $ 405,610
========= ========= ========= ========= =========
</TABLE>
F-24 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Balance Sheet
December 31, 1999
(in thousands)
14. Supplemental Guarantor Financial Information (Continued):
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
ASSETS PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
Current assets:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 7,477 $ 2,102 $ 12,726 $ -- $ 22,305
Trade accounts receivable, net 120,500 4,310 85,204 (45,541) 164,473
Prepaid expenses and other
current assets 4,024 (7) 13,755 -- 17,772
--------- ---------- ---------- ---------- ----------
Total current assets 132,001 6,405 111,685 (45,541) 204,550
Property and equipment, net 51,231 3,793 63,325 -- 118,349
Goodwill, net 21,564 -- 63,694 -- 85,258
Deferred income taxes 8,111 -- 7,538 -- 15,649
Other assets 7,945 89 406 -- 8,440
Investments in subsidiaries 113,151 84,945 -- (198,096) --
Notes receivable, intercompany -- 20,259 -- (20,259) --
--------- ---------- ---------- ---------- ----------
Total assets $ 334,003 $ 115,491 $ 246,648 $ (263,896) $ 432,246
========= ========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ -- $ -- $ 7,337 $ -- $ 7,337
Current portion of long-term debt 695 -- 2,143 -- 2,838
Current portion of capitalized
lease obligations 1,496 48 2,764 -- 4,308
Trade accounts payable 12,143 1,085 69,905 (45,541) 37,592
Accrued expenses and other
current liabilities 22,555 1,207 41,329 -- 65,091
--------- ---------- ---------- ---------- ----------
Total current liabilities 36,889 2,340 123,478 (45,541) 117,166
Long-term debt, excluding
current portion 130,000 -- 6,077 -- 136,077
Capitalized lease obligations,
excluding current portion 4,511 -- 7,742 -- 12,253
Notes payable, intercompany -- -- 20,259 (20,259) --
Deferred compensation 1,905 -- -- -- 1,905
Minority interest -- -- 4,147 -- 4,147
Stockholders' equity 160,698 113,151 84,945 (198,096) 160,698
--------- ---------- ---------- ---------- ----------
Total liabilities and
stockholders' equity $ 334,003 $ 115,491 $ 246,648 $ (263,896) $ 432,246
========= ========== ========== ========== ==========
</TABLE>
F-25 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Income (Loss)
For the year ended December 31, 1997
(in thousands)
14. Supplemental Guarantor Financial Information (Continued):
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $117,118 $133,042 $241,314 $ -- $491,474
-------- -------- -------- ------- --------
Operating expenses:
Cost of services 60,391 71,703 138,848 -- 270,942
Selling, general and
Administrative expenses 52,950 47,634 85,005 -- 185,589
Restructuring expenses 2,148 -- 13,533 -- 15,681
-------- -------- -------- ------- --------
Total operating
expenses 115,489 119,337 237,386 -- 472,212
-------- -------- -------- ------- --------
Operating income 1,629 13,705 3,928 -- 19,262
-------- -------- -------- ------- --------
Other income (expense):
Equity in earnings (losses) of
Subsidiaries, net of tax 4,390 (4,958) -- 568 --
Intercompany charges 673 1,877 (2,550) -- --
Interest income 213 -- 348 -- 561
Interest expense (2,632) (889) (2,136) -- (5,657)
Other income (expense) 178 (55) 3 -- 126
-------- -------- -------- ------- --------
Total other income
(expense) 2,822 (4,025) (4,335) 568 (4,970)
-------- -------- -------- ------- --------
Income (loss) before income
taxes and minority interest 4,451 9,680 (407) 568 14,292
Income tax expense 1,639 5,290 4,377 -- 11,306
Minority interest -- -- 174 -- 174
-------- -------- -------- ------- --------
Net income (loss) $ 2,812 $ 4,390 $ (4,958) $ 568 $ 2,812
======== ======== ======== ======= ========
</TABLE>
F-26 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Income (Loss)
For the year ended December 31, 1998
(in thousands)
14. Supplemental Guarantor Financial Information (Continued):
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $ 133,640 $ 180,860 $ 271,818 $ -- $ 586,318
--------- --------- --------- --------- ---------
Operating expenses:
Cost of services 72,446 99,121 160,019 -- 331,586
Selling, general and
administrative expenses 65,881 62,246 107,773 -- 235,900
Restructuring expenses -- -- 6,607 -- 6,607
--------- --------- --------- --------- ---------
Total operating
expenses 138,327 161,367 274,399 -- 574,093
--------- --------- --------- --------- ---------
Operating income
(loss) (4,687) 19,493 (2,581) -- 12,225
--------- --------- --------- --------- ---------
Other income (expense):
Equity in earnings (losses) of
subsidiaries, net of tax 6,297 (7,740) -- 1,443 --
Intercompany charges 1,387 2,812 (4,199) -- --
Interest income 455 -- 470 -- 925
Interest expense (9,004) (807) (3,861) -- (13,672)
Other income (expense) 310 (1) (46) -- 263
--------- --------- --------- --------- ---------
Total other income
(expense) (555) (5,736) (7,636) 1,443 (12,484)
--------- --------- --------- --------- ---------
Income (loss) before
income taxes
and minority
interest (5,242) 13,757 (10,217) 1,443 (259)
Income tax expense (benefit) (4,668) 7,460 (1,826) -- 966
Minority interest -- -- (651) -- (651)
--------- --------- --------- --------- ---------
Net income (loss)
from continuing
operations (574) 6,297 (7,740) 1,443 (574)
Extraordinary loss on
refinancing of debt, net of
taxes (514) -- -- -- (514)
--------- --------- --------- --------- ---------
Net income (loss) $ (1,088) $ 6,297 $ (7,740) $ 1,443 $ (1,088)
========= ========= ========= ========= =========
</TABLE>
F-27 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Income (Loss)
For the year ended December 31, 1999
(in thousands)
14. Supplemental Guarantor Financial Information (Continued):
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $ 258,905 $ 130,619 $ 347,998 $ -- $ 737,522
--------- --------- --------- --------- ---------
Operating expenses:
Cost of services 124,442 77,003 195,805 -- 397,250
Selling, general and
administrative expenses 124,351 40,464 147,561 -- 312,376
Asset impairment and
restructuring expenses 3,585 -- 6,011 -- 9,596
--------- --------- --------- --------- ---------
Total operating
expenses 252,378 117,467 349,377 -- 719,222
--------- --------- --------- --------- ---------
Operating income
(loss) 6,527 13,152 (1,379) -- 18,300
--------- --------- --------- --------- ---------
Other income (expense):
Equity in earnings (losses) of
subsidiaries, net of tax 1,840 (7,942) -- 6,102 --
Intercompany charges 220 2,727 (2,947) -- --
Interest income 275 -- 248 -- 523
Interest expense (10,276) (829) (2,203) -- (13,308)
Other income 205 -- 111 -- 316
--------- --------- --------- --------- ---------
Total other income
(expense) (7,736) (6,044) (4,791) 6,102 (12,469)
--------- --------- --------- --------- ---------
Income (loss) before
income taxes
and minority
interest (1,209) 7,108 (6,170) 6,102 5,831
Income tax expense (benefit) (400) 5,268 1,468 -- 6,336
Minority interest -- -- 304 -- 304
--------- --------- --------- --------- ---------
Net income (loss) $ (809) $ 1,840 $ (7,942) $ 6,102 $ (809)
========= ========= ========= ========= =========
</TABLE>
F-28 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Cash Flows
For the year ended December 31, 1997
(in thousands)
14. Supplemental Guarantor Financial Information (Continued):
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by
operating activities $ 7,157 $ 8,466 $ 3,391 $ -- $ 19,014
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Investments in subsidiaries (61,787) (42,917) -- 104,704 --
Purchases of property
and equipment (29,569) (14,463) (25,405) -- (69,437)
Proceeds from sales of
property and equipment 2,196 -- 515 -- 2,711
Acquisitions, net of
cash acquired (19,722) (12,207) (15,094) -- (47,023)
Settlement of purchase
price payable -- -- (13,934) -- (13,934)
Sale of marketable securities 558 -- -- -- 558
Changes in other assets, net (1,925) -- (2,303) -- (4,228)
--------- --------- --------- --------- ---------
Net cash used in
investing activities (110,249) (69,587) (56,221) 104,704 (131,353)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Borrowings on notes payable 68,291 -- 15,016 -- 83,307
Repayments of notes payable (68,291) -- (149) -- (68,440)
Borrowings on long-term debt 360,124 -- 274 -- 360,398
Repayment of long-term debt (259,948) -- (551) -- (260,499)
Net capital contribution
from parent -- 61,787 42,917 (104,704) --
Common stock issued,
net of expenses 228 -- -- -- 228
Payments on capital
lease obligations -- (450) (1,761) -- (2,211)
Other 900 -- -- -- 900
--------- --------- --------- --------- ---------
Net cash provided by
financing activities 101,304 61,337 55,746 (104,704) 113,683
--------- --------- --------- --------- ---------
Effect of exchange rates on cash -- -- (2,769) -- (2,769)
--------- --------- --------- --------- ---------
Net increase (decrease)
in cash (1,788) 216 147 -- (1,425)
Cash and cash equivalents,
beginning of year 13,302 1,859 10,549 -- 25,710
--------- --------- --------- --------- ---------
Cash and equivalents, end of year $ 11,514 $ 2,075 $ 10,696 $ -- $ 24,285
========= ========= ========= ========= =========
</TABLE>
F-29 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Cash Flows
For the year ended December 31, 1998
(in thousands)
14. Supplemental Guarantor Financial Information (Continued):
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities $ (14,118) $ 23,289 $ 8,572 $ -- $ 17,743
--------- ----------- --------- --------- ---------
Cash flows from investing activities:
Investments in subsidiaries 13,372 (6,526) -- (6,846) --
Dividend on common stock -- 10,000 -- (10,000) --
Purchases of property and equipment (15,925) (6,979) (29,129) -- (52,033)
Proceeds from sales of property and
equipment -- -- 1,513 -- 1,513
Proceeds from sale-leasebacks of
facilities 9,397 -- -- -- 9,397
Acquisitions, net of cash acquired -- -- (2,193) -- (2,193)
Sale of marketable securities 257 -- -- -- 257
--------- ----------- --------- --------- ---------
Net cash provided by (used in)
investing activities 7,101 (3,505) (29,809) (16,846) (43,059)
--------- ----------- --------- --------- ---------
Cash flows from financing activities:
Borrowings on notes payable -- -- 20,294 -- 20,294
Repayments of notes payable -- -- (4,398) -- (4,398)
Borrowings on long-term debt 147,767 -- 2,150 -- 149,917
Repayment of long-term debt and
capital lease obligations (146,620) -- (7,840) -- (154,460)
Payment of long-term debt issuance costs (3,228) -- -- -- (3,228)
Net capital contribution from parent -- (13,372) 6,526 6,846 --
Net borrowings and payments on
note to parent -- (7,297) 7,297 -- --
Dividend on common stock -- -- (10,000) 10,000 --
Capital contribution from subsidiary
shareholder -- -- 1,400 -- 1,400
Sale of stock of subsidiaries -- -- 6,541 -- 6,541
Common stock issued, net of expenses 3 -- -- -- 3
Other (9) -- -- -- (9)
--------- ----------- --------- --------- ---------
Net cash provided by (used in)
financing activities (2,087) (20,669) 21,970 16,846 16,060
--------- ----------- --------- --------- ---------
Effect of exchange rates on cash -- -- (557) -- (557)
--------- ----------- --------- --------- ---------
Net increase (decrease) in cash (9,104) (885) 176 -- (9,813)
Cash and cash equivalents,
beginning of year 11,514 2,075 10,696 -- 24,285
--------- ----------- --------- --------- ---------
Cash and equivalents, end of year $ 2,410 $ 1,190 $ 10,872 $ -- $ 14,472
========= =========== ========= ========= =========
</TABLE>
F-30 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Cash Flows
For the year ended December 31, 1999
(in thousands)
14. Supplemental Guarantor Financial Information (Continued):
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by operating activities $ 21,791 $ 6,545 $ 10,979 $ -- $ 39,315
-------- -------- -------- -------- --------
Cash flows from investing activities:
Investments in subsidiaries 6,592 3,528 -- (10,120) --
Purchases of property and equipment (18,351) (2,569) (17,665) -- (38,585)
Proceeds from sale-leasebacks of
facilities 3,467 -- -- -- 3,467
Proceeds from sales of property and
equipment 14 -- 625 -- 639
-------- -------- -------- -------- --------
Net cash provided by (used in)
investing activities (8,278) 959 (17,040) (10,120) (34,479)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Borrowings on notes payable -- -- 3,706 -- 3,706
Repayments of notes payable -- -- (26,174) -- (26,174)
Borrowings on long-term debt 50,150 -- 7,639 -- 57,789
Repayment of long-term debt (25,785) -- (4,038) -- (29,823)
Net capital contribution from parent -- (6,592) (3,528) 10,120 --
Net borrowings and payments on
intercompany balances (32,955) -- 32,955 -- --
Common stock issued, net of expenses 771 -- -- -- 771
Payments on capital lease obligations (564) -- (4,492) -- (5,056)
Other (63) -- -- -- (63)
-------- -------- -------- -------- --------
Net cash provided by (used in)
financing activities (8,446) (6,592) 6,068 10,120 1,150
-------- -------- -------- -------- --------
Effect of exchange rates on cash -- -- 1,847 -- 1,847
-------- -------- -------- -------- --------
Net increase in cash 5,067 912 1,854 -- 7,833
Cash and cash equivalents,
beginning of period 2,410 1,190 10,872 -- 14,472
-------- -------- -------- -------- --------
Cash and equivalents, end of period $ 7,477 $ 2,102 $ 12,726 $ -- $ 22,305
======== ======== ======== ======== ========
</TABLE>
F-31 (Continued)
<PAGE>
INDEPENDENT AUDITORS' REPORT ON THE
FINANCIAL STATEMENT SCHEDULE
The Board of Directors
SITEL Corporation:
Under date of February 7, 2000, we reported on the consolidated balance sheets
of SITEL Corporation and subsidiaries as of December 31, 1998 and 1999, and the
related consolidated statements of income (loss), stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1999.
These consolidated financial statements and our report thereon are incorporated
by reference in the annual report on Form 10-K for the year ended December 31,
1999, which are included in the Form 10-K. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedule in the Form 10-K. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects the information set forth therein.
/s/KPMG LLP
Omaha, Nebraska
February 7, 2000
S-1
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
Schedule II
Valuation and Qualifying Accounts
(dollars in thousands)
<TABLE>
<CAPTION>
Accounts
Beginning Bad debt charged to Ending
Description balance expense allowance balance
----------- ------- ------- --------- -------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts for trade
receivables-- Year ended December 31, 1997 $ 3,188 $ 2,410 $ 499 $ 5,099
Allowance for doubtful accounts for trade
receivables-- Year ended December 31, 1998 $ 5,099 $ 1,087 $ 2,216 $ 3,970
Allowance for doubtful accounts for trade
receivables-- Year ended December 31, 1999 $ 3,970 $ 3,170 $ 1,518 $ 5,622
See accompanying independent auditors' report.
</TABLE>
S-2
Exhibit 10.13
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement ("Agreement") is made
effective the 1st day of December, 1999 between SITEL CORPORATION, a Minnesota
corporation ("Company") and JAMES F. LYNCH ("Executive"). This Agreement amends
and restates in its entirety the Employment Agreement dated effective May 11,
1995 between Company and Executive.
THE PARTIES AGREE AS FOLLOWS:
1. Employment and Duties. Company hereby employs Executive as its Chairman
of the Board and member of the Office of the Chairman throughout the remaining
term of this Agreement and agrees to cause Executive from time to time to be
elected or appointed to such corporate offices or positions. Executive accepts
such employment. The duties and responsibilities of Executive shall include
duties and responsibilities consistent with Executive's corporate offices and
positions, including those set forth in the bylaws of Company from time to time,
overall responsibility for the development and implementation of Company's
business plans and strategies, and such other duties and responsibilities which
the Board of Directors of Company from time to time may reasonably assign to
Executive. Unless otherwise determined by agreement of Executive and the Board
of Directors of Company, Executive also shall serve in the same corporate
offices or positions with Company's subsidiaries (and Company's successor, in
the event of any corporate reorganization) throughout the term of this
Agreement, and shall have the same duties and responsibilities with respect to
such subsidiaries (and such successor) as he has with respect to Company, but
without additional compensation, and Company agrees to cause Executive from time
to time to be elected or appointed to such corporate offices or positions.
2. Term. The original term of this Agreement began June 1, 1995 and ended
May 31, 1998, but the term has continued without interruption for rolling
three-year periods pursuant to the following provision. Commencing on June 1,
1996, and on the same calendar date each year thereafter through and including
June 1, 2002, Executive's employment term under this Agreement has been
automatically extended, and shall continue to be automatically extended, by an
additional consecutive twelve (12) month period, unless sooner terminated in
accordance with this Agreement.
3. Work Efforts; Other Activities. During the term of this Agreement,
Executive shall devote substantially all of his work efforts to the business and
affairs of Company responsibilities assigned to him pursuant to this Agreement.
However, Executive may devote a reasonable amount of his time to civic,
community, or charitable activities and, with the prior approval of the Board of
Directors of Company, to serve as a director of other corporations and other
activities not expressly mentioned in this paragraph. Executive may invest his
personal assets as he deems appropriate so long as such investments do not
interfere with Executive's performance of the duties and responsibilities
assigned to him pursuant to this Agreement.
4. Place of Employment. The office of Executive shall be located in Omaha,
Nebraska during the term of this Agreement, and Executive will not be required
to relocate or transfer his office from the immediate vicinity of the Omaha,
Nebraska metropolitan area. Company shall furnish Executive with offices,
secretarial and other support services consistent with those currently provided
and such other facilities and services at such locations as may be reasonably
required to permit Executive to conveniently fulfill the duties of his
employment.
1
<PAGE>
5. Base Salary. For all services to be rendered by Executive pursuant to
this Agreement, Company agrees to pay Executive during the term of this
Agreement a base annual salary (the "Base Salary") of not less than the greater
of (a) the base salary established for Executive by Company's Compensation
Committee (the "Committee"); or (b) $250,000. The Base Salary shall be
increased, effective on the first day of each fiscal year during Executive's
employment (the "Adjustment Date") by an amount equal to the percentage increase
in the U.S. Department of Labor Consumer Price Index (All Items) for all Urban
Consumers, U.S. City Average, 1982-1984 = 100 (the "Index") since June 1, 1995,
or the previous Adjustment Date, whichever is later. The adjustment shall be
determined no later than three (3) months after the Adjustment Date for which
the adjustment applies. At no time will the Base Salary, as adjusted, be
decreased by a decline of the Index. The Base Salary shall be paid in periodic
installments in accordance with Company's regular payroll practices.
6. Additional Compensation.
(a) Bonus. Within sixty (60) days prior to the commencement of
each fiscal year beginning in 1996 during the term of this Agreement, Executive
and the Committee shall mutually agree upon the criteria upon which a bonus for
Executive for such next fiscal year is to be based. A bonus shall be awarded to
Executive for each fiscal year in accordance with the mutually agreed criteria,
unless Executive and the Committee agree that the bonus shall be awarded on some
other basis in which case a bonus shall be awarded as such other basis as they
have mutually agreed. The Company shall pay such awarded bonus to Executive in
cash within thirty (30) days after it is awarded by the Committee (and no later
than ninety (90) days after the end of such fiscal year for which the bonus is
awarded) unless otherwise agreed to by Executive and Company in advance of the
award. It is expected but not required that the bonus shall be derived from the
annual bonus pool established by the Company for key management, supervisory and
administrative employees.
(b) Stock Option Plans. On June 1 of each year beginning in
1996 during the term of this Agreement (or, with respect to the final year of
this Agreement, upon the effective date of termination of Executive's employment
if such effective date is a date other than June 1) (the "Option Grant Date"),
Company through the Committee shall cause to be granted to Executive options to
purchase that number of shares of Company's voting common stock which is at
least equal to five percent (5%) of the aggregate number of shares for which
options for Company stock were granted since the last Option Grant Date (or,
with respect to the first year of this Agreement, since June 1, 1995) to
Company's employees and to Company's non-employee directors under any stock
option plans (including incentive stock option plans) of Company. The terms
(including price and exercise dates) of the options granted to Executive shall
be as determined by the Committee but shall be comparable to the terms upon
which options were generally granted to other employees of Company during the
applicable period, subject to any differences required under applicable tax laws
with respect to incentive stock options granted to Executive. In all events, the
options granted to Executive shall provide that Executive shall have at least
ninety (90) days following termination of Executive's employment under this
Agreement for any reason other than death, and that Executive's personal
representative or other legal representative shall have at least one (1) year
following Executive's death, to exercise any or all of the outstanding options
granted to Executive to the extent they were exercisable on the date of such
termination of employment or, if Executive's employment is terminated without
cause or constructively or by reason of Executive's death or disability, to
exercise any or all of such outstanding options in full. Executive and Company
acknowledge that Executive voluntarily waived his rights to receive option
grants pursuant to this Section 6(b) on June 1, 1997, June 1, 1998 and June 1,
1999.
(c) Benefit Plans. During the term of this Agreement, Company
shall provide to Executive and his eligible dependents at Company's expense
individual or group medical, hospital, dental, and long-term disability
insurance coverages and group life insurance coverage, in each case at least as
favorable as those coverages provided to the other senior executive officers of
Company or its subsidiaries. Executive shall also be entitled to participate in
such other benefit plans or programs which Company or its
2
<PAGE>
subsidiaries from time to time may make available to its employees generally or
to some or all of its other senior executive officers.
(d) Vacations and Holidays. During the term of this Agreement,
Executive shall be entitled to paid vacations, holidays and time off as are
consistent with past practice and custom for Company's senior executive
officers.
(e) Other Benefits and Allowances. During the term of this
Agreement, Executive shall, in addition, receive the benefits or allowances
described in the attached Schedule 6(e).
(f) Expenses. During the term of this Agreement, Executive
shall be entitled to prompt reimbursement by Company of all reasonable ordinary
and necessary travel, entertainment, and other expenses incurred by Executive
(in accordance with the policies and procedures established by Company for its
senior executive officers) in the performance of his duties and responsibilities
under this Agreement; provided, that Executive shall properly account for such
expenses in accordance with Company policies and procedures, which may include
but are not limited to itemized accountings.
7. Termination of Employment.
(a) Death. Executive's employment under this Agreement shall
terminate upon his death.
(b) Disability. If Executive becomes incapable by reason of
physical injury, disease, or mental illness from substantially performing his
duties under this Agreement for a continuous period of six (6) months or for
more than one hundred eighty (180) days in the aggregate during any twelve (12)
month period (a "Disability Period"), then Company may terminate Executive's
employment under this Agreement.
(c) Cause. Company also may terminate Executive's employment
under this Agreement for cause; however, for purposes of this Agreement, "cause"
shall mean only (i) Executive's confession or conviction of theft, fraud,
embezzlement, or any other crime involving dishonesty, (ii) bad faith or
dishonest conduct on the part of Executive which is materially detrimental to
Company, or (iii) Executive's failure to comply with a lawful directive of the
Board of Directors of Company material to Executive's duties and Executive shall
fail to comply with such directive within thirty (30) days after his receipt of
a written notice from the Board of Directors of Company setting forth in
reasonable detail the particulars necessary for reasonable compliance.
Termination shall occur thirty (30) days after "cause" is established. In no
event shall the results of Company's operations or any business judgment made in
good faith by Executive constitute an independent basis for termination for
cause of Executive's employment under this Agreement.
(d) Voluntary Resignation. Executive may voluntarily resign
from Company's employ at any time upon at least thirty (30) days' prior written
notice of the effective date of such resignation.
(e) Constructive Termination. In the event of Company's
Constructive Termination of Executive's employment, Executive, at his election,
may remain employed or terminate his employment under protest, provided that he
has given written notice to the Board of Directors setting forth the manner in
which he has been constructively terminated and such Constructive Termination is
not timely corrected. In the event of a Constructive Termination, Executive
shall continue to receive all compensation and benefits provided for in this
Agreement, including an office, furnishings, equipment and secretarial services
of his selection of equal quality for the remainder of the term of this
Agreement. "Constructive Termination" for purposes hereof shall mean that (i)
Company has delegated one or more of Executive's duties described in paragraph
1, other than for cause as defined in Section 7(c), and Company fails to confirm
to Executive in writing the reinstatement of any such duty to Executive within
thirty (30) days after receipt by the Board of Directors of Executive's written
notice of protest; (ii) Company has, without Executive's consent, moved its
executive offices from the Omaha, Nebraska metropolitan area; or (iii)
Executive's Base Salary is decreased
3
<PAGE>
below its current level ($400,000) except only on an Adjustment Date in years
beginning no earlier than the year 2001 (but in any event as provided in Section
5 the Base Salary may never be decreased below $250,000).
8. Payments Upon Termination of Employment.
(a) Death or Disability. In the event Executive's employment
shall terminate by reason of death or disability as described in subparagraphs
7(a) or 7(b) above prior to the end of the term of this Agreement, Executive,
his legal representative or beneficiary, as the case may be, shall be entitled
to receive within thirty (30) days after the date of termination a cash amount
equal to eighteen (18) months of Executive's Base Salary, bonuses and other
compensation and benefits provided for in this Agreement (as such term has been
automatically extended pursuant to paragraph 2 above), which cash amount shall
in any event not be less than $1,120,000 or more than $1,300,000. Any
compensation otherwise payable under this subparagraph, however, shall be
reduced by an amount equal to the net payments Executive is entitled to receive
for the same period by reason of any Company paid disability benefit plans or
social security disability income. For purposes of computing the aggregate
bonuses payable under this subparagraph 8(a), such aggregate bonuses shall be
equal to the average of the aggregate bonuses earned by Executive with respect
to his preceding three (3) employment years which amount shall, in turn, be
multiplied by a factor of 1.5.
(b) Termination for Cause. In the event Executive's employment
shall be terminated "for cause" as described in subparagraph 7(c) prior to the
end of the term of this Agreement, Executive shall be entitled to receive within
thirty (30) days after the date of termination, a cash amount equal to his Base
Salary, bonuses and other compensation and benefits up to the date of
termination. Any bonuses for a partial year of employment shall be prorated
through date of termination.
(c) Involuntary Termination. If Company terminates Executive's
employment constructively as described in subparagraph 7(e) above, or if
Executive's employment shall terminate for any other reason not set forth in
subparagraphs 7(a)-(d) above, prior to the end of the term of this Agreement,
then (without limiting any other rights or claims which Executive may have
against Company or others), Executive shall be entitled to receive within thirty
(30) days after the date of termination a cash amount equal to Executive's Base
Salary, bonuses and other compensation and benefits provided for in this
Agreement from the date of such termination through the end of the then term of
this Agreement (as such term has been automatically extended pursuant to
paragraph 2 above), which cash amount shall in any event not be less than
$1,120,000 or more than $1,300,000. For purposes of computing the aggregate
bonuses payable under this subparagraph 8(c), such aggregate bonuses shall be
equal to the average of the aggregate bonuses earned by Executive with respect
to his preceding three (3) employment years which amount shall, in turn, be
multiplied by a factor equal to the number of whole and/or partial employment
years, inclusive of the then current employment year, remaining through the end
of the then term of this Agreement (as such term has been automatically extended
pursuant to paragraph 2 above). For example, if Executive's employment
terminates other than by reason of his death, disability, "cause" as defined in
Section 7(c), or voluntary resignation, on February 1, 2000, and if at the time
of his termination he was receiving a Base Salary of $400,000 per year, was
receiving other compensation and benefits valued at $25,000 per year, and had
received no bonuses during the preceding three (3) employment years, then the
cash amount payable to Executive pursuant to this Section 8(d) shall be the
$1,120,000 minimum, since ($400,000 + $25,000 + $0) = $425,000 x 2.33 (the
number of years remaining in the then term which still runs from February 2000
through May 2002) = $990,250.
The payments provided for above constitute the full amounts which Executive
shall be entitled to be paid under this Agreement in the event of termination of
his employment prior to the end of the term of this Agreement. The following
amounts shall be credited against, and shall therefore reduce, any cash amount
which becomes payable to Executive pursuant to this Section 8: (i) $100,000 per
year (prorated monthly for any partial years) of the Base Salary increase (from
$250,000 to $400,000) implemented effective for the pay
4
<PAGE>
period beginning on or about June 1, 1999 and paid to Executive prior to
termination of employment; and (ii) 100% of any discretionary cash bonuses paid
to Executive between May 11, 1999 and termination of employment. For example, if
Executive were entitled to be paid the cash amount described in the example
given in Section 8(d), and if Executive had been paid $8,333/month x 8 months =
$66,664 of the Base Salary increase and discretionary cash bonuses of $300,000,
then a total of $366,664 would be credited against the cash amount and the
balance of $1,120,000 - $366,664 = $753,336 would be payable to Executive
pursuant to Section 8(d).
9. Notice of Termination. Any termination of Executive's employment by
Company shall be communicated in a written Notice of Termination to Executive.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice
from the Board of Directors which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated.
10. Confidentiality and Noncompetition Agreement. Executive, for the
consideration stated herein, has previously executed a "Noncompetition
Agreement" in the form attached as Schedule 10, which for avoidance of doubt is
hereby confirmed as remaining in full force and effect.
11. Registration Rights. If Executive's employment with Company shall
terminate for any reason other than voluntary resignation or final expiration of
the term of this Agreement, Executive may thereafter require Company to register
any or all of the unregistered shares of common stock that Executive (or his
assigns) may then own as of the date of such termination of employment in
accordance with the provisions of the previously executed "Registration Rights
Agreement" in the form attached as Schedule 11, which for avoidance of doubt is
hereby confirmed as remaining in full force and effect.
12. Successors and Assigns. This Agreement and all rights under this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties hereto and their respective personal or legal representatives,
executors, administrators, heirs, distributees, devisees, legatees, successors,
and assigns. This Agreement is personal in nature, and neither of the parties to
this Agreement shall, without the written consent of the other, assign or
transfer this Agreement or any right or obligation under this Agreement to any
other person or entity.
13. Notices. For purposes of this Agreement, notices and other
communications provided for in this Agreement shall be deemed to be properly
given if delivered personally or sent by United States certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to Executive: James F. Lynch
19 Ginger Cove
Valley, Nebraska 68064
If to Company: SITEL Corporation
111 South Calvert Street
Suite 1900
Baltimore, Maryland 21202
Attn: President
or to such other address as either party may have furnished to the other party
in writing in accordance with this paragraph. Such notices or other
communications shall be effective only upon receipt. Notices also may be given
by facsimile and in such case shall be deemed to be properly given when sent so
long as the sender uses reasonable efforts to confirm and does confirm the
receiver's receipt of the facsimile transmission.
5
<PAGE>
14. Merger, Etc. of Company. If during the term of this Agreement all or
substantially all of the assets and business of Company are disposed of by
merger, consolidation, sale of assets, or otherwise, then Company may elect
either:
(a) to assign this Agreement and all of Company's rights and
obligations under this Agreement to the acquiring or surviving corporation;
provided that such acquiring or surviving corporation shall assume in writing,
in a manner reasonably satisfactory to Executive, all of the obligations of
Company under this Agreement; and provided further that Company (in the event
and so long as it remains in business as an independent going enterprise) shall
remain liable for the performance of its obligations under this Agreement in the
event of an unjustified failure of the acquiring corporation to perform its
obligations under this Agreement; or
(b) in addition to its other rights of termination set forth in
paragraph 7, to terminate this Agreement upon at least thirty (30) days' prior
written notice to Executive and the payment to Executive of the compensation
provided for in subparagraph 8(c).
15. Miscellaneous. No provision of this Agreement may be modified, waived,
or discharged unless such waiver, modification, or discharge is agreed to in
writing and is signed by Executive and an officer of Company (other than
Executive) so authorized by the Board of Directors of Company. No waiver by
either party to this Agreement at any time of any breach by the other party of,
or compliance by the other party with, any condition or provision of this
Agreement to be performed by the other party shall be deemed to be a waiver of
similar or dissimilar provisions or conditions at the same or any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter of this Agreement have been made by
either party that are not expressly set forth in this Agreement.
16. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which other provision shall remain in
full force and effect; nor shall the invalidity or unenforceability of a portion
of any provision of this Agreement affect the validity or enforceability of the
balance of such provision.
17. Counterparts. This document may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute a single agreement.
18. Headings. The headings of the paragraphs contained in this Agreement
are for reference purposes only and shall not in any way affect the meaning or
interpretation of any provision of this Agreement.
19. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal substantive laws, and not the conflicts of law
principles, of the State of Nebraska.
20. Dispute Resolution. Any claim by Executive or Company arising from or
in connection with this Agreement, whether based on contract, tort, common law,
equity, statute, regulation, order, or otherwise, (a "Dispute") shall be
resolved as follows:
(a) Such Dispute shall be submitted to mandatory and binding
arbitration at the election of either Executive or Company (the "Disputing
Party"). Except as otherwise provided in this paragraph 20, the arbitration
shall be pursuant to the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA").
(b) To initiate the arbitration, the Disputing Party shall
notify the other party in writing within thirty (30) days after the occurrence
of the event or events which give rise to the Dispute (the "Arbitration
Demand"), which notice shall (i) describe in reasonable detail the nature of the
Dispute, (ii) state
6
<PAGE>
the amount of any claim, (iii) specify the requested relief, and (iv) name an
arbitrator who (A) has been licensed to practice law in the U.S. for at least
ten (10) years, (B) has no relationship to either Executive or Company, and (C)
is experienced in representing clients in connection with employment-related
disputes (the "Basic Qualifications"). Within fifteen (15) days after the other
party's receipt of the Arbitration Demand, such other party shall serve on the
Disputing Party a written statement (i) answering the claims set forth in the
Arbitration Demand and including any affirmative defenses of such party, (ii)
asserting any counterclaim, which statement shall (A) describe in reasonable
detail the nature of the Dispute relating to the counterclaim, (B) state the
amount of the counterclaim, and (C) specify the requested relief, and (iii)
naming a second arbitrator satisfying the Basic Qualifications. Promptly, but in
any event within five (5) days thereafter, the two (2) arbitrators so named
shall select a third neutral arbitrator from a list provided by the AAA of
potential arbitrators who satisfy the Basic Qualifications and who have no past
or present relationship with the parties or their counsel, except as otherwise
disclosed in writing to and approved by the parties. The arbitration will be
heard by a panel of the three (3) arbitrators so chosen (the "Arbitration
Panel"), with the third arbitrator so chosen serving as the chairperson of the
Arbitration Panel. Decisions of a majority of the members of the Arbitration
Panel shall be determinative.
(c) The arbitration hearing shall be held in Omaha, Nebraska.
The Arbitration Panel is specifically authorized to render partial or full
summary judgment as provided for in the Federal Rules of Civil Procedure. The
Arbitration Panel will have no power or authority, under the Commercial
Arbitration Rules of the AAA or otherwise, to relieve the parties from their
agreement hereunder to arbitrate or otherwise to amend or disregard any
provision of this Agreement, including, without limitation, the provisions of
this paragraph 20.
(d) If an arbitrator refuses or is unable to proceed with
arbitration proceedings as called for by this paragraph 20, such arbitrator
shall be replaced by the party who selected such arbitrator or, if such
arbitrator was selected by the two (2) party-appointed arbitrators, by such two
(2) party-appointed arbitrators' selecting a new third arbitrator in accordance
with subparagraph 20(b), in either case within five (5) days after such
declining or withdrawing arbitrator's giving notice of refusal or inability to
proceed. Each such replacement arbitrator shall satisfy the Basic
Qualifications. If an arbitrator is replaced pursuant to this subparagraph 20(d)
after the arbitration hearing has commenced, then a rehearing shall take place
in accordance with the provisions of this subparagraph 20(d) and the Commercial
Arbitration Rules of the AAA.
(e) Within five (5) days after the closing of the arbitration
hearing, the Arbitration Panel shall prepare and distribute to the parties a
writing setting forth the Arbitration Panel's finding of facts and conclusions
of law relating to the Dispute, including the reason for the giving or denial of
any award. The findings and conclusions and the award, if any, shall be deemed
to be confidential information.
(f) The Arbitration Panel is instructed to schedule promptly
all discovery and other procedural steps and otherwise to assume case management
initiative and control to effect an efficient and expeditious resolution of the
Dispute. The Arbitration Panel is authorized to issue monetary sanctions against
either party if, upon a showing of good cause, such party is unreasonably
delaying the proceeding.
(g) Any award rendered by the Arbitration Panel will be final,
conclusive, and binding upon the parties, and any judgment on such award may be
entered and enforced in any court of competent jurisdiction.
(h) Each party will bear a pro rata share of all fees, costs,
and expenses of the arbitrators; and, notwithstanding any law to the contrary,
each party will bear all of the fees, costs, and expenses of its own attorneys,
experts, and witnesses. However, in connection with any judicial proceeding to
compel arbitration pursuant to this Agreement or to enforce any award rendered
by the Arbitration Panel, the prevailing party in such a proceeding will be
entitled to recover reasonable attorneys' fees and expenses incurred in
connection with such proceedings, in addition to any other relief to which such
party may be entitled.
7
<PAGE>
(i) Nothing contained in the preceding provisions of this
paragraph 20 shall be construed to prevent either party from seeking from a
court a temporary restraining order or other injunctive relief pending final
resolution of a Dispute pursuant to this paragraph 20.
8
<PAGE>
SIGNATURE PAGE TO
JAMES F. LYNCH
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
IN WITNESS WHEREOF, Company and Executive have executed this Agreement.
SITEL CORPORATION, a Minnesota
corporation
By: /s/
------------------------------------
Phillip A. Clough, President and
Chief Executive Officer
/s/
------------------------------------
JAMES F. LYNCH
9
<PAGE>
SCHEDULE 6(e)
CAR
---
Company shall provide Executive with a new luxury automobile not less often
than every three (3) years at least equal in quality to Executive's current
Company automobile.
COUNTRY CLUB MEMBERSHIPS
------------------------
Company shall pay all fees and expenses associated with membership in two
(2) country clubs, including golfing privileges, to the extent Company's payment
of the fees and expenses are tax deductible to Company.
10
<PAGE>
SCHEDULE 10
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
---------------------------------------------
(see attached)
11
<PAGE>
SITEL CORPORATION MANAGEMENT
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS AGREEMENT is entered into this 11th day of May, 1995 by SITEL
CORPORATION, a Minnesota corporation (the "Company"), and JAMES F. LYNCH
("Employee").
Company operates a direct sales and marketing business which creates and
directs large-scale telephone-based marketing programs for large corporate
clients, using inbound, outbound and call interactive telemarketing services.
Its operations and clients are throughout the United States, and are expected to
expand internationally. Employee is the Chief Executive Officer of Company. The
Company desires to continue Employee's employment and Employee desires to
continue his or her employment with the Company under the terms of an employment
agreement being entered into concurrently herewith (the "Employment Agreement").
Employee has direct personal contact and actually does business with
existing clients. Employee is also involved in obtaining new clients for the
Company, and is directly involved in targeting, meeting and negotiating with
prospective clients. The sales cycle to close business with a prospective client
generally takes from three months to one year. The parties recognize that by
reason of the length of time that it requires to develop and retain a
relationship between employees and existing and prospective clients, that it
will take a period of time for the Company to reestablish and retain the
goodwill between the Company and its client without interference from departing
employees.
In order to permit Employee to function as a member of management, the
Company will, from time to time, entrust Employee with highly sensitive,
confidential, and proprietary information belonging to the Company, including
but not limited to knowledge regarding the Company's business, future plans,
trade secrets, know-how, products, suppliers, clients, and employees, which
Company desires to protect. Additionally, the Company will, from time to time,
entrust confidential information of its clients, which was disclosed to the
Company pursuant to certain confidentiality agreements between the Company and
the respective client. Because of the difficulty of isolating the Company's and
protected clients' Confidential Information from other business activities which
Employee may consider pursuing on his or her own, some limitations must be
imposed on Employee's right to compete with the Company or use Confidential
Information of the Company or its clients.
In consideration of the foregoing recitals and the continued employment of
Employee under the terms of the Employment Agreement, the parties agree as
follows:
Section 1 - Nondisclosure of Confidential Information.
- -----------------------------------------------------
(a) "Confidential Information" means information, not generally known, that
is proprietary to Company, including without limitation:
1) financial and accounting data, sales records, profit and loss
and other performance reports, pricing manuals, training
manuals, selling and pricing procedures, financing methods,
data processing and communication information, technical data,
securities information, agreements with insurers, banks, and
other service providers, trade secrets and know-how regarding
Company's business and its products and services;
2) personnel and salary information, including wages, bonuses,
commissions, and fringe benefits;
3) production and processing procedures, formulae and systems;
4) vendor and supplier information;
12
<PAGE>
5) buying practices, sources of supply for components, the
quality, prices and usage of components, information and
materials, manner of vendor payment, profit margins, expense
ratios, pricing, lead time and other information concerning
the Company's buying activities;
6) client lists and prospect lists including, without limitation,
names of contacts, products and services purchased, quantities
of products and services purchased, pricing including
discounts and add-ons, terms, credit histories, timing of
purchases, and payment histories, special demands of
particular clients, and current and anticipated requirements
of clients generally for products or services of the Company;
7) marketing information, including, without limitation,
research, development, testing and client surveys and
preferences regarding the Company's current and new products
or services, and specifications of any new products or
services under development by or for the Company;
8) business projections, strategic planning, marketing planning,
activity and practices, marketing systems and procedures,
pricing policies and practices, and inventory procedures and
systems; and
9) confidential information of the Company's clients.
(b) Employee agrees to receive, hold and treat all Confidential Information
received from or developed for the Company as confidential and secret, to use
such Confidential Information only for the advancement of the interests of the
Company, and to use Employee's best efforts to protect the secrecy of such
Confidential Information. Employee agrees that Confidential Information will be
disclosed by Employee only to those persons who are required to have such
knowledge in connection with their work for the Company and that Employee will
not directly or indirectly disclose any Confidential Information to others
without the prior written consent of the Company. Employee further agrees not to
use, directly or indirectly, any Confidential Information for the benefit of
Employee or any third party. Confidential Information does not include any of
the items in this Section which have become publicly known and made generally
available through no wrongful act of Employee or of others who were under
confidentiality obligations as to the item or items involved.
(c) Employee agrees that upon termination of his or her employment with the
Company, for any reason whatever, voluntary or involuntary, with or without
cause, he or she will immediately return to the Company all equipment, property,
funds, lists, forms, plans, documents or other written or computer material,
software or firmware, or copies of the same, belonging to the Company, or any of
its clients including all materials containing Confidential Information within
his possession, and he will not retain or use any Confidential Information.
Section 2 - Restrictions Against Competition.
- --------------------------------------------
Employee acknowledges that because the Confidential Information made known
to or developed by Employee during his or her employment with the Company could
not practically be disregarded, the provision of similar employee services to a
competitor of the Company immediately following the termination of his or her
employment with the Company would inherently and inevitably result in the use of
Confidential Information of the Company by Employee, even if Employee were to
use his or her best efforts to avoid using such information. In order to prevent
the improper use of Confidential Information and the resulting unfair
competition and misappropriation of the Company's goodwill and other proprietary
interests, Employee agrees that while he or she is employed by the Company and,
unless such termination is without cause ("cause" having only the meaning
described in subparagraph 6(c) of the Employment Agreement), for a period of
eighteen (18) months after the termination of his employment other than without
cause, Employee
13
<PAGE>
will not, directly or indirectly, whether as an employee, agent, consultant,
independent contractor, owner, partner or otherwise:
a) solicit any client of the Company, with whom he or she
actually did business and had personal contact during the term
of his or her employment with the Company, for the purpose of
obtaining the business of such client, in competition with the
Company;
b) advise or recommend to any other person that such person
solicit any client of the Company with whom he or she actually
did business and had personal contact during the term of his
or her employment with the Company, for the purpose of
obtaining the business of such client, in competition with the
Company;
c) solicit any prospective client of the Company, with whom he or
she actually did business and had personal contact during the
term of his or her employment with the Company, for the
purpose of obtaining the business of such client, in
competition with the Company;
d) advise or recommend to any other person that such person
solicit any prospective client of the Company with whom he or
she actually did business and had personal contact during the
term of his or her employment with the Company, for the
purpose of obtaining the business of such client, in
competition with the Company;
e) work for himself or herself or a competitor in an employee,
managerial, marketing or sales capacity, utilizing the
Confidential Information in competition with the Company in
the business of direct sales and marketing utilizing large-
scale telephone-based direct marketing programs for large
corporate clients, whether inbound, outbound or call
interactive, or providing other services then currently
provided by the Company or any prospective services being then
currently developed by the Company during his or her
employment with the Company or at the time of his or her
termination, the details of which Employee was privy to in
Employee's position with the Company; provided that
notwithstanding the foregoing, Employee shall thereafter still
be restricted from using the Confidential Information of the
Company pursuant to Section 1 hereof; or
f) employ, solicit for employment, or advise or recommend to any
other person that such person solicit for employment or
employ, any person employed by the Company.
The phrase "in competition with the Company" shall include Employee working
for a client of the Company, whether as an employee, agent, consultant,
independent contractor, owner, partner or otherwise, to provide telephone based
direct marketing services or other services then currently provided by the
Company or any prospective services being then currently developed by the
Company during Employee's employment with the Company or at the time of
Employee's termination, the details of which Employee was privy to in Employee's
position with the Company.
The phrase "prospective client" shall mean those businesses with whom
Employee has had substantial and extended actual and personal contact to develop
new business for the Company, including developing sales strategies, marketing
information, and proposals, and negotiating providing services to such
prospective clients, or about whom Employee has particular knowledge as a result
of receiving confidential or proprietary information of the Company about such
prospective client.
14
<PAGE>
Employee agrees that the Company's contracts with its clients generally are
from one to three years in duration; that it will take a substantial amount of
time for another employee of the Company to develop good will with the Company's
clients serviced by Employee; the area of its business is national and expanding
internationally; it is reasonable to restrict Employee's competition during the
time period described above in such geographic area; and, that the restrictions
set forth in this Agreement (including, but not limited to, the period of
restriction, activity and geographic area set forth) are fair and reasonable and
are necessarily required for the protection of the interests of Company.
These covenants are independent of one another and are severable. In the
event any part of the covenants set forth in this section shall be held to be
invalid or unenforceable, the remaining parts thereof shall nevertheless
continue to be valid and enforceable as though the invalid and unenforceable
part had not been included herein. If any provisions of these covenants relating
to the time period, activity and/or area of restriction shall be declared by a
court of competent jurisdiction to exceed the maximum time periods, activities
or areas which such court deems reasonable and enforceable, such time period,
activity and/or area of restriction shall be deemed to become and thereafter be
the maximum time period, activity and/or area which such court deems reasonable
and enforceable.
Section 3 - Enforcement of Employee Restrictions.
- ------------------------------------------------
In signing this Agreement, Employee is fully aware of the restrictions that
this Agreement places upon Employee's future employment with someone other than
the Company. However, Employee understands and agrees that Employee's access to
the Confidential Information and clients of the Company makes such restrictions
both necessary and reasonable.
Employee agrees with the Company that if he shall violate or threaten to
violate any of the terms of this Agreement, then the Company shall be entitled
to injunctive relief; such remedy shall be in addition to and not in limitation
of any rights or remedies to which the Company is or may be entitled to at law
or in equity.
This Agreement is severable. In the event any part of the terms of this
Agreement shall be held to be invalid or unenforceable, the remaining parts
thereof shall nevertheless continue to be valid and enforceable as though the
invalid and unenforceable part had not been included herein.
Section 4 - Employment Situation.
- --------------------------------
Employee and Company are concurrently entering into the Employment
Agreement, which agreement constitutes consideration to Employee for this
agreement.
Employee's employment with the Company is subject to the Company's standard
personnel policies, procedures, guidelines, and practices as they may be amended
from time to time. In the event of a conflict between the provisions of such
policies, procedures, guidelines and practices and the provisions of this
Agreement, the provisions of this Agreement shall control.
Section 5 - Survivability.
- -------------------------
The provisions of Section 1 of this Agreement shall survive the termination
of Employee's employment, even if such termination constitutes a wrongful
termination of Employee's employment. The provisions of Section 2 of this
Agreement shall survive the termination of Employee's employment, unless Company
has terminated Employee's employment without cause ("cause" having only the
meaning described in subparagraph 6(c) of the Employment Agreement).
15
<PAGE>
Section 6 - Attorney Review.
- ---------------------------
EMPLOYEE IS ADVISED AND ENCOURAGED TO REVIEW THIS AGREEMENT WITH EMPLOYEE'S
PRIVATE ATTORNEY BEFORE SIGNING IT. TO THE EXTENT, IF ANY, THAT EMPLOYEE
DESIRED, EMPLOYEE HAS TAKEN ADVANTAGE OF THIS RIGHT. EMPLOYEE HAS CAREFULLY READ
AND FULLY UNDERSTAND ALL OF THE PROVISIONS OF THIS AGREEMENT AND IS VOLUNTARILY
ENTERING INTO THIS AGREEMENT.
IF EMPLOYEE HAD THE ADVICE OF AN ATTORNEY IN REVIEWING THIS AGREEMENT,
EMPLOYEE HAD HIS OR HER ATTORNEY SIGN THE AGREEMENT IN THE SPACE INDICATED
EMPLOYEE'S ATTORNEY HAS REVIEWED THE AGREEMENT WITH EMPLOYEE. IF EMPLOYEE CHOOSE
NOT TO HAVE AN ATTORNEY REVIEW THIS AGREEMENT EMPLOYEE HAS SO INDICATED THAT IN
THE ATTORNEY REVIEW SPACE BELOW, BY WRITING AND INITIALING "DECLINED TO USE
ATTORNEY".
Section 7 - Miscellaneous.
- -------------------------
This writing constitutes the entire agreement between the parties hereto
and supersedes any prior understanding or agreements among them respecting the
subject matter. There are no extraneous representations, arrangements,
understandings, or agreements, oral or written, among the parties hereto, except
those fully expressed herein. No amendments or modifications to the terms of
this Agreement shall be made unless made in writing and signed by all the
parties hereto. The failure of either party to enforce at any time any of the
provisions of this Agreement shall not be construed as a waiver of such
provisions or of the right of such party thereafter to enforce any such
provisions. The existence of any claim or cause of action by Employee against
the Company, whether based upon this Agreement or otherwise, shall not
constitute a defense to the enforcement of this agreement by the Company. This
Agreement is severable. In the event any part of the terms of this Agreement
shall be held to be invalid or unenforceable, the remaining parts thereof shall
nevertheless continue to be valid and enforceable as though the invalid and
unenforceable part had not been included herein. This Agreement shall be
construed and governed in accordance with the substantive laws of the State of
Nebraska. This Agreement shall be binding upon and inure to the benefit of the
parties, their heirs, successors and assigns.
16
<PAGE>
SIGNATURE PAGE
TO
SITEL CORPORATION MANAGEMENT
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
SITEL CORPORATION
By: /s/ /s/
--------------------------------- -----------------------------
Matthew H. Gates, President JAMES F. LYNCH
Reviewed:
- ------------------------------------- -----------------------------
Attorney for Employee Date:
(IF EMPLOYEE CHOOSES NOT TO HAVE AN ATTORNEY REVIEW THIS AGREEMENT, EMPLOYEE
WILL WRITE AND INITIAL "DECLINED TO USE ATTORNEY" IN THE SPACE ABOVE.)
17
<PAGE>
SCHEDULE 11
REGISTRATION RIGHTS AGREEMENT
-----------------------------
(see attached)
18
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement is entered into as of the 11th day of
May, 1995, by and among SITEL CORPORATION, a Minnesota corporation, its
successors and assigns (the "Company"), and JAMES F. LYNCH, Chairman of the
Board and Chief Executive Officer (the "Holder").
WHEREAS, the Company and Holder have entered into an Employment Agreement
as of this same date (the "Employment Agreement") and, as partial consideration
therefor, the Company has agreed to provide Holder certain demand and piggyback
registration rights with respect to Holder's stock in Company, which rights may
be exercised by Holder following certain events.
THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
REGISTRATION RIGHTS
-------------------
Section 1.01 Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(b) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(c) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(d) "Shares" means any of the shares of Common Stock of the
Company currently held or hereafter acquired from time to time by the Holder,
including but not limited to the shares acquired pursuant to an incentive stock
option plan, up to ninety (90) days following his date of termination of
employment with the Company.
(e) "Registrable Securities" means any of the following shares
which have not been sold to the public or which have not lost their registration
rights as provided herein: (i) the Shares and (ii) any shares of Common Stock of
the Company, and any securities of the Company or any other corporation, issued
as a dividend or other distribution with respect to or in replacement of or
exchange for the Shares.
(f) The terms "register", "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such registration statement.
(g) "Registration Expenses" shall mean all expenses incurred
by the Company in complying with Article I hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses and the expense of any special audits incident to or required by
any such registration, but excluding the compensation of regular employees of
the Company which shall be paid in any event by the Company and excluding the
fees and expenses of legal counsel for the Holder.
(h) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of the Registrable Securities and
all fees and expenses of legal counsel for the Holder.
19
<PAGE>
(i) "Triggering Event" shall mean the termination of Holder's
employment with Company for any reason except Holder's voluntary resignation or
the final expiration on or after the year 2003 of the term (including renewals)
of the Employment Agreement.
Section 1.02 Demand Registration Rights.
(a) Request for Registration. If within ninety (90) days after
the date of the Triggering Event the Company receives a written request from
Holder that the Company effect a registration with respect to all or a part of
the Registrable Securities of Holder (provided that if less than 25% of the
Registrable Securities of Holder are to be registered such securities shall have
an aggregate proposed offering price to the public of at least $500,000), the
Company will as soon as practicable thereafter use its diligent best efforts to
effect all such registrations, qualifications, or compliances (including without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable requirements or regulations) as
may be so requested and as would permit or facilitate the sale and distribution
of all or such portion of such Registrable Securities as are specified in such
request, provided that the Company shall not be obligated to take any action to
effect any such registration, qualification or compliance pursuant to this
Section 1.02 in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act.
Subject to the foregoing, the Company shall file a
registration statement as soon as practicable after receipt of the request of
the Holder but in any event within sixty (60) days of receipt of such request
provided however, that if the Company shall furnish to the Holder a certificate
signed by the then Chairman of the Board of the Company stating that in the good
faith judgment of the Board of Directors of the Company it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed on or before the date filing would be required and it is therefore
essential to defer the filing of such registration statement, the Company shall
have the right to defer such filing for a period of not more than one hundred
twenty (120) days after receipt of the request of the Holder.
(b) Underwriting. If the Holder intends to distribute the
Registrable Securities covered by its request by means of an underwriting, it
shall so advise the Company as a part of its request made pursuant to this
Section 1.02. The Company shall (together with the Holder) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Holder.
If the underwriter has not limited the number of Registrable
Securities to be underwritten, the Company may include securities for its own
account in such registration if the Holder so agrees.
Section 1.03 Piggyback Registration Rights.
(a) Notice of Proposed Registration. If at any time or from
time to time on or after a Triggering Event the Company shall determine to
register any of its Common Stock, other than (i) a registration relating solely
to employee benefit plans on Form S-8 or similar forms which may be promulgated
in the future, or (ii) a registration on Form S-4 or similar forms which may be
promulgated in the future relating solely to a Commission Rule 145 transaction,
the Company will:
(i) promptly give the Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance). and in
any underwriting involved therein, all the Registrable
Securities specified in a written request or requests, made
within thirty (30) days after receipt of such written notice
from the Company, by the Holder, except as set forth in
Section 1.03(b).
20
<PAGE>
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holder as a part of the written notice given
pursuant to Section 1.03(a)(i). In such event the right of the Holder to
registration pursuant to this Section 1.03 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. The
Holder shall in such case (together with the Company) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting by the Company. Notwithstanding any other provision of this
Section 1.03, if the underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the underwriter may limit
the amount of securities to be included in the registration and underwriting by
the Holder; provided however, the number of Registrable Securities to be
included in such registration and underwriting shall not be reduced to less than
50% of the securities sought to be included therein without the prior written
consent of the Holder. Notwithstanding the above, Holder and his assigns,
cumulatively, shall not be entitled to require the registration of Registrable
Shares to any greater extent, percentage-wise than the extent to which the stock
of any other employee of the Company shall be included in the registration (not
including Form S-8 or similar employee plan registrations). If the Holder
disapproves of the terms of any such underwriting, it may elect to withdraw
therefrom by written notice to the Company and the underwriter. Any Registrable
Securities excluded or withdrawn from such underwriting shall be excluded from
such registration.
Section 1.04 Expenses of Registration. All Registration Expenses incurred
in connection with any registration, qualification or compliance pursuant to
Sections 1.02 and 1.03 shall be borne by the Company. Unless otherwise stated,
all other expenses and all Selling Expenses relating to securities registered by
the Holder shall be borne by the Holder.
Section 1.05 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will, upon request, inform the Holder as to the status of each such
registration, qualification and compliance. At its expense the Company will:
(a) keep such registration, and any qualification or
compliance under state securities laws which the Company determines to obtain,
effective for a period of one hundred eighty (180) days or until the Holder has
completed the distribution described in the registration statement relating
thereto, whichever first occurs; and
(b) furnish such number of prospectuses and other documents
incident thereto as the Holder or any underwriter from time to time may
reasonably request.
Section 1.06 Indemnification.
(a) The Company will indemnify the Holder, his legal counsel
and accountants, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages and liabilities (or action in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereof, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or any violation by the Company of any rule or regulation
promulgated under the Securities Act applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification or compliance, and will reimburse the Holder, his
legal counsel and accountants, and each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss,
21
<PAGE>
damage, liability or expense arises out of or is based on any untrue statement
or omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by or on behalf of the
Holder or underwriter and stated to be specifically for use therein.
(b) The Holder will, if Registrable Securities held by the
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, and each
of its directors, officers, legal counsel and accountants, each underwriter, if
any, of the Company's securities covered by such a registration statement, and
each person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such directors, officers, legal
counsel, accountants, persons, underwriters or control persons for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged omission)
is made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by an instrument duly executed by or on behalf of the Holder and
stated to be specifically for use therein.
(c) Each party entitled to indemnification under this Section
1.06 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to provide notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement, unless such failure
is prejudicial to the Indemnifying Party in defending such claim or litigation.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
(d) If the indemnification provided for in this Section 1.06
is held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall be controlling.
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Section 1.07 Lockup Agreement. In consideration for the Company agreeing to
its obligations under this Article I, the Holder agrees in connection with any
firmly underwritten public offering of the Company's Common Stock, upon request
of the Company or the underwriters managing such offering, not to sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise dispose
of any Registrable Securities (other than those included in the registration)
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed 30 days) from the effective
date of such registration as the Company or the underwriters may specify;
provided, however, that the Holder shall have no obligation to enter into the
agreement described herein unless all executive officers and directors of the
Company and all other holders of more than 5% of the Company's outstanding
Common Stock enter into similar agreements.
Section 1.08 Information by Holder. The Holder shall furnish to the Company
such information regarding the Holder and the distribution of proceeds by the
Holder as the Company may request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
Sections 1.02 or 1.03 of this Agreement.
Section 1.09 Rule 144 Reporting. With a view to making available to the
Holder the benefits of certain rules and regulations of the Commission which at
any time permit the sale of the Registrable Securities to the public without
registration, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times;
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) so long as the Holder owns any unregistered Registrable
Securities, furnish to such Holder forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of said Rule
144 and of the Securities Act and Exchange Act, a copy of the most recent annual
or quarterly report of the Company and such other reports and documents of the
Company as the Holder may reasonably request in availing Holder of any rule or
regulation of the Commission allowing the sale of any such securities without
registration.
Section 1.10 Transfer of Registration Rights. The rights to cause the
Company to register the Registrable Securities granted to the Holder by the
Company under Sections 1.02 and 1.03 may be assigned by the Holder to not more
than five transferees or assignees of any of the Holder's Registrable
Securities, provided that the Company is given written notice by the Holder at
the time of or within a reasonable time after said transfer, stating the name
and address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being assigned, provided that no
such assignment shall increase the number of registrations that the Company may
be required to effect under this Agreement.
ARTICLE II
MISCELLANEOUS
-------------
Section 2.01 Amendment. Any modification, amendment, or waiver of this
Agreement or any provision hereof shall be effective only if in writing and
executed by the Holder and the Company.
Section 2.02 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of Nebraska without regard to its conflicts of
laws principles.
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Section 2.03 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
Section 2.04 Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall either be delivered personally
or by telegram or be mailed by first class mail, postage prepaid, addressed to
the Holder at 19 Ginger Cove, Valley, NE 68064 or to the Company at 13215 Birch
Street, Suite 100, Omaha, NE 68164, or at such other address as either party
shall have furnished to the other party in writing. All notices shall be deemed
effective (a) when received, if personally delivered or sent by telegram, or (b)
three days after deposit in the mail, if mailed as set forth above.
Section 2.05 Severability. If any provision of this Agreement shall be
judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
Section 2.06 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to other
subject matter hereof.
Section 2.07 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
BETWEEN SITEL CORPORATION AND JAMES F. LYNCH
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective representatives thereunto duly authorized as of
the date first above written.
SITEL CORPORATION
By: /s/
---------------------------
Matthew H. Gates, President
/s/
---------------------------
JAMES F. LYNCH
25
Exhibit 10.14
EMPLOYMENT AGREEMENT
--------------------
Employment Agreement made effective as of November 1, 1999, between SITEL
CORPORATION, a Minnesota corporation ("Company") and ANTOON VANPARYS
("Executive").
THE PARTIES AGREE AS FOLLOWS:
1. Employment and Duties. Company hereby employs Executive as its Executive
Vice President--Business Development. The duties and responsibilities of
Executive shall include duties and responsibilities consistent with Executive's
corporate office and position, including those set forth in the bylaws of
Company from time to time, and such other duties and responsibilities which the
Board of Directors and Chief Executive Officer of Company from time to time may
assign to Executive.
2. Term. The term of Executive's employment under this Agreement (the
"Term") shall begin as of the date hereof and shall continue without
interruption through April 30, 2002, unless sooner terminated in accordance with
this Agreement. During the last six months of the Term, Executive shall be
located in Brussels, Belgium and the Company's Belgium subsidiary shall be
Executive's employer.
3. Efforts on Behalf of Company and Other Activities. During the Term, to
the best of his ability and using all his skills, Executive shall devote
substantially all of his working time and efforts to the diligent and faithful
performance of his duties and responsibilities under this Agreement. However,
Executive may devote a reasonable amount of his time to civic, community, or
charitable activities.
4. Place of Employment. The office of Executive shall be located in
Baltimore, Maryland during the Term except that during the last six months of
the Term the office of Executive shall be located in Brussels, Belgium. Company
shall furnish Executive with an office, secretarial and other support services
consistent with those currently provided and such other facilities and services
at such locations as may be reasonably required to permit Executive to fulfill
the duties of his employment.
5. Base Salary. For all services to be rendered by Executive pursuant to
this Agreement, Company agrees to pay Executive during the Term a base annual
salary of $250,000; provided however that for the last six months of the Term
the base annual salary shall be adjusted for Executive's repatriation in the
same manner as Executive's base salary was adjusted in relocating from Belgium
to the U.S. The term "Base Salary" as used in this Agreement shall mean the base
annual salary established by this Section 5. The Base Salary shall be paid in
periodic installments in accordance with Company's regular payroll practices,
but in any event no less frequently than monthly.
6. Additional Compensation.
(a) Bonus. For each calendar year during the Term, Executive
shall be eligible to participate in the Company's bonus program for senior
executives on the terms established by the Compensation Committee for each such
year. For 2000, the Compensation Committee has established a target bonus for
Executive of up to 100% of Executive's Base Salary tied to the Company's
achievement of certain annual earnings per share targets and Executive's
achievement of certain personal objectives. For avoidance of doubt, as provided
in the Company's executive bonus program, Executive must be employed by the
Company at the time a bonus is paid in order to receive such bonus.
(b) Stock Option Plans. Executive has previously been granted
stock options for SITEL common stock. Any further grants of stock options to
Executive shall be at the sole discretion of the Compensation Committee.
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(c) Benefit Plans. During the Term, Executive (and his eligible
dependents where applicable) shall be entitled to participate in the benefit
plans offered from time to time by Company to its senior executive officers, on
terms (including Company and employee contribution percentages, waivers of
waiting periods, applicable deductibles, etc.) no less favorable than those
provided generally to other senior executive officers of the Company, including
without limitation, as may be applicable, individual or group medical, hospital,
dental, and long-term disability insurance coverages, group life insurance
coverage, 401(k), and 401(n) plans.
(d) Vacations and Holidays. During the Term, Executive shall be
entitled to 20 days of paid vacation, holidays and time off per calendar year
(pro-rated for partial calendar years of employment) as is consistent with past
practice and custom for Company's senior executive officers.
(e) Expenses. During the Term, Executive shall be entitled to
prompt reimbursement by Company of all reasonable ordinary and necessary travel,
entertainment, and other expenses incurred by Executive (in accordance with the
policies and procedures established by Company for its senior executive
officers) in the performance of his duties and responsibilities under this
Agreement; provided that Executive shall properly account for such expenses in
accordance with Company policies and procedures, which may include but are not
limited to itemized accountings.
7. Relocation Benefits.
(a) Packing and Transportation of Goods. Subject to prior
approval by the Company of estimates submitted to the Company for such expenses,
the Company shall pay for all transportation and shipping expenses associated
with the packing and transportation of Executive's household goods from
Brussels, Belgium to Baltimore, Maryland, including any storage fees associated
with the goods being transported.
(b) Travel Expenses. The Company shall pay air travel expenses
from Brussels, Belgium to Baltimore, Maryland to move Executive, Executive's
spouse, Executive's children and Executive's pets to Baltimore.
(c) Loan for Purchase of Residence. The Company has extended
Executive a loan to purchase a residence in Baltimore, Maryland (the "Baltimore
House") pursuant to the terms and conditions contained in a Promissory Note (the
"House Note") and mortgage with power of sale, respectively, dated on or about
December 1999 between Executive and the Company (the "Baltimore House Loan").
The House Note provides for payment of interest annually at the rate of 5.42%
per annum and payment of principal in full on or before November 5, 2002 and
sooner upon certain events. The provisions of Section 9(c) shall apply in the
event of termination of the Term prior to repayment in full of the House Note.
(d) Expenses Related to Business Windup. The Company shall pay
or reimburse Executive for up to $193,411 (amount has been grossed up to include
income taxes) in costs incurred in winding up the business affairs of
Executive's consultancy company in Belgium, which amount already has been
grossed up to include income taxes incurred by Executive on the Company's
payment or reimbursement of such costs.
(e) Housing Allowance. During the Term, the Company shall pay
Executive a monthly housing allowance in an amount equal to the cost of
Executive's mortgage payments for the Baltimore House and associated property
insurance and real estate taxes. Executive shall be responsible for all
utilities and other expenses of maintaining such residence, and for the expenses
related to installing any fencing around such residence desired by Executive.
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<PAGE>
(f) Other Expenses and Benefits. The Company shall pay all
expenses associated with United States entry and work visas for Executive and
his family for the Term. The Company shall provide Executive with relocation
assistance from O'Connor Piper and Flynn in connection with housing
requirements, drivers licenses, social security numbers, and related issues
associated with relocating to Baltimore, Maryland. The Company shall reimburse
Executive up to $10,000 as a one-time dislocation allowance to cover such items
as the purchase of essential electrical goods required to replace Executive's
European voltage equipment. The Company shall reimburse Executive up to $1,500
annually for personal tax advice from the Company's expatriate tax advisors,
Deloitte and Touche, during the Term.
8. Termination of Employment.
(a) Termination of Assignment. The Company may terminate
Executive's assignment to the Baltimore headquarters of the Company at any time
effective upon at least 30 days written notice of such termination of
assignment, whereupon Executive's employment under this Agreement shall
terminate. If during the Term Executive's title, authority, role or level of
responsibilities with the Company is materially decreased below the level
established by Section 1, or Executive is required to relocate his primary
office from Baltimore, Maryland (or from Brussels, Belgium during the last six
months of the Term), or Executive is required to primarily report to someone
other than Phillip A. Clough, Chief Executive Officer, and such change has not
been mutually agreed upon by Executive and Company and has not been preceded or
accompanied by a termination for cause pursuant to Section 8(d) or a voluntary
resignation pursuant to Section 8(e), then such change shall constitute a
termination by the Company of Executive's assignment pursuant to this Section
8(a). For avoidance of doubt, if Executive becomes unable to continue his
assignment under Section 1 as a result of the expiration or revocation of his
United States entry and/or work visas during the Term, then the Company would
intend to terminate Executive's assignment pursuant to this Section 8(a). If
Executive's employment terminates pursuant to this Section 8(a), (i) Executive
shall be entitled to receive the Base Salary up through the effective date of
termination; any bonus earned by Executive pursuant to Section 6(a) for a
calendar year already completed but not yet paid; and any benefits to which
Executive is entitled pursuant to Sections 6(b) through 6(e) up through the
effective date of termination; and (ii) the provisions of Section 9 shall apply.
(b) Death. Executive's employment under this Agreement shall
terminate upon Executive's death. If Executive's employment terminates pursuant
to this Section 8(b), (i) Executive or his legal representative shall be
entitled to receive the Base Salary up through the date of Executive's death;
any bonus earned by Executive pursuant to Section 6(a) for a calendar year
already completed but not yet paid; and any benefits to which Executive is
entitled pursuant to Sections 6(b) through 6(e) up through the date of
Executive's death and (ii) the provisions of Section 9 shall apply.
(c) Disability. If Executive becomes incapable by reason of
physical injury, disease, or mental illness from substantially performing his
duties under this Agreement for a continuous period of three months or for more
than 90 days in the aggregate during any 12 month period, then Company may
terminate Executive's employment under this Agreement effective upon 30 days
written notice. If Executive's employment terminates pursuant to this Section
8(c), (i) Executive or his legal representative shall be entitled to receive the
Base Salary up through the effective date of termination; any bonus earned by
Executive pursuant to Section 6(a) for a calendar year already completed but not
yet paid; and any benefits to which Executive is entitled pursuant to Sections
6(b) through 6(e) up through the effective date of termination and (ii) the
provisions of Section 9 shall apply.
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<PAGE>
(d) For Cause. The Company also may terminate Executive's
employment under this Agreement for cause. For purposes of this Agreement, "for
cause" shall mean only (i) Executive's confession or conviction of theft, fraud,
embezzlement, any felony, or any crime involving dishonesty with regard to the
Company or any subsidiary or affiliate of the Company, (ii) Executive's
excessive absenteeism without reasonable cause (other than because of a
disability described in Section 8(c), (iii) habitual and material negligence by
the Executive in the performance of Executive's duties and responsibilities as
described in Section 1 (other than because of a disability described in Section
8(c)) and Executive's failure to cure such negligence within 30 days after
Executive's receipt of a written notice from the Chairman of the Board of
Directors setting forth in reasonable detail the particulars of such negligence,
or (iv) material failure by Executive to comply with a lawful directive of the
Board of Directors (other than because of a disability described in Section
8(c)) and Executive's failure to cure such non-compliance within 10 days after
Executive's receipt of a written notice from the Chairman of the Board of
Directors setting forth in reasonable detail the particulars of such
non-compliance. Termination shall occur effective 30 days after "for cause" is
established. If Executive's employment terminates pursuant to this Section 8(d),
(i) Executive shall be entitled to receive the Base Salary up through the
effective date of termination and any benefits to which Executive is entitled
pursuant to Sections 6(b) through 6(e) up through the effective date of
termination, but shall not be entitled to any bonus for a completed calendar
year which has not yet been paid, and (ii) the provisions of Section 9 shall
apply.
(e) Voluntary Resignation. Executive may voluntarily resign
from Company's employ at any time upon at least 30 days prior written notice of
the effective date of such resignation. If Executive voluntarily resigns, (i)
Executive shall be entitled to receive the Base Salary up through the effective
date of such resignation and any benefits to which Executive is entitled
pursuant to Sections 6(b) through 6(e) up through the effective date of such
resignation, but shall not be entitled to any bonus for a completed calendar
year which has not yet been paid, and (ii) the provisions of Section 9 shall
apply.
9. Post-Termination Provisions.
(a) Repatriation to Commensurate Assignment. Upon the
termination of Executive's employment in the U.S. under this Agreement, other
than a termination "for cause" as set forth in Section 8(d) or by Executive's
voluntary resignation as set forth in Section 8(e), the Company shall use
reasonable efforts to ensure that Executive's assignment to the Company's
Belgium subsidiary is commensurate with Executive's compensation, level of
seniority and responsibilities set forth in this Agreement (a "commensurate
assignment"). The Company shall provide Executive 30 days written notice of the
availability or unavailability of such commensurate assignment prior to
Executive's relocation to Brussels, Belgium for the last six months of
employment under this Agreement. Executive shall not unreasonably refuse any
such commensurate assignment. If such commensurate assignment is not available,
then upon the conclusion of the last six months of employment under this
Agreement in Brussels, Belgium, the Company's Belgium subsidiary shall continue
to pay Executive his then Base Salary provided for in Section 5 for a period of
12 months thereafter on the Company subsidiary's normal payroll dates during
such period.
(b) Post-Termination Relocation Expenses. Upon the termination
of Executive's employment in the U.S. under this Agreement, other than a
termination "for cause" as set forth in Section 8(d) or by Executive's voluntary
resignation as set forth in Section 8(e), the Company shall pay the following
expenses related to Executive's and his family's relocation to Brussels,
Belgium:
(1) Packing and Transportation of Goods. Subject to
prior approval by the Company of estimates submitted to the Company for
such expenses, the Company shall pay for all transportation and
shipping expenses associated with the packing and transportation of
Executive's household goods from Baltimore, Maryland to Brussels,
Belgium including any storage fees associated with the goods being
transported.
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<PAGE>
(2) Travel Expenses. The Company shall pay air travel
expenses from Baltimore, Maryland to Brussels, Belgium for the return
of Executive, Executive's spouse, Executive's children and Executive's
pets to Belgium.
(3) Temporary Living Allowance. Subject to prior
approval by the Company of estimates submitted to the Company for such
expenses, the Company shall pay Executive a temporary living allowance
for 30 days following Executive's relocation to Brussels, Belgium for
expenses relating to hotel and car rental.
(4) Other Expenses. Any other reasonable expenses
incurred by Executive in connection with Executive's relocation to
Brussels, Belgium may be reimbursed by the Company in its sole and
absolute discretion.
(c) Baltimore House Loan. Upon the termination of Executive's
employment in the U.S. under this Agreement, the following provisions shall
apply with respect to the Baltimore House Loan:
(1) Executive's Put Option. Provided Executive's
employment in the U.S. under this Agreement terminates other than "for
cause" as set forth in Section 8(d) and other than by Executive's
voluntary resignation as set forth in Section 8(e), Executive shall
have the option (the "Put Option") to require the Company to accept
title to the Baltimore House, subject to any mortgages against the
Baltimore House incurred by Executive on or before December 1999 from
which mortgages the Company shall indemnify and hold Executive
harmless, as full and complete satisfaction of the Baltimore House
Loan. Executive shall not have a Put Option if Executive's employment
in the U.S. under this Agreement terminates "for cause" as set forth in
Section 8(d) or by Executive's voluntary resignation as set forth in
Section 8(e).
(2) Company's Call Option. Upon the termination of
Executive's employment in the U.S. under this Agreement, the Company
shall have the option (the "Call Option") to require Executive to
transfer title to the Baltimore House to the Company, subject to any
mortgages against the Baltimore House incurred by Executive on or
before December 1999 from which mortgages the Company shall indemnify
and hold Executive harmless, as full and complete satisfaction of the
Baltimore House Loan.
(3) Manner of Exercise of Put Option or Call Option.
The Put Option or Call Option, as the case may be, shall be exercised,
if at all, by Executive delivering written notice of his exercise of
the Put Option to the Company or by the Company delivering written
notice of its exercise of the Call Option to Executive (either such
notice, the "Notice") within 15 days after the effective date of
termination of Executive's employment under this Agreement (the "Notice
Period"). If Executive or the Company, as the case may be, does not
deliver a Notice to the other party within the Notice Period, Executive
or the Company, as the case may be, shall have no further rights in
respect of the Put Option or Call Option, respectively. If either the
Put Option or the Call Option is duly exercised, the closing shall take
place on a date specified by the Company, which date shall be no less
than 10 days and no more than 30 days after the date the Notice is
delivered to the Company in the case of the Put Option or to the
Executive in the case of the Call Option. At the closing, (i) Executive
and his spouse shall convey good and marketable title to the Baltimore
House to the Company by general warranty deed, subject however to the
mortgages recorded on or before December 1999 and easements, covenants
and restrictions of record; (ii) Executive shall obtain the release of
any liens or judgments recorded after December 1999 in connection with
the Baltimore House; and (iii) the Company shall mark the Promissory
Note evidencing the Baltimore House Loan "satisfied and cancelled" and
shall deliver such original note to Executive.
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<PAGE>
(4) Repayment of Baltimore House Loan if Neither Put
Option Nor Call Option Is Exercised. The House Note provides that it
shall be due and payable in full on November 5, 2002 and shall be
payable sooner upon certain events including without limitation
termination of Executive's employment under this Agreement "for cause"
as set forth in Section 8(d) (the parties agreeing that the phrase
"gross misconduct" as used in the House Note has the same meaning as
"for cause" under Section 8(d) for this purpose) or by Executive's
voluntary resignation as set forth in Section 8(e), or sale of the
Baltimore House. For avoidance of doubt, if neither Executive nor the
Company exercises its Put Option or Call Option, as the case may be,
pursuant to Sections 9(c)(1) or 9(c)(2) then the House Note shall
remain payable in accordance with its terms.
10. Termination Notice. Any termination by Company of Executive's
employment under this Agreement shall be communicated in a written Termination
Notice to Executive. For purposes of this Agreement, a "Termination Notice"
shall mean a notice from the Board of Directors which shall indicate the
specific termination provision in this Agreement relied upon and, if applicable,
shall set forth in reasonable detail the facts and circumstances providing a
basis for termination of Executive's employment under the provision so
indicated.
11. Noncompetition Agreement. Executive has previously executed certain
restrictive covenants and agreements of non-competition and non-disclosure
(collectively, the "Noncompetition Agreement"). For avoidance of doubt, the
parties confirm that such Noncompetition Agreement remains in full force and
effect according to its original terms.
12. Successors and Assigns. This Agreement and all rights under this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties hereto and their respective personal or legal representatives,
executors, administrators, heirs, distributees, devisees, legatees, successors,
and assigns. This Agreement is personal in nature, and neither of the parties to
this Agreement shall, without the written consent of the other, assign or
transfer this Agreement or any right or obligation under this Agreement to any
other person or entity, except that the Company may assign the Agreement to a
successor corporation.
13. Notices. For purposes of this Agreement, notices and other
communications provided for in this Agreement shall be deemed to be properly
given if delivered personally or sent by United States certified mail, return
receipt requested, postage prepaid, or sent by overnight delivery service
addressed as follows:
If to Executive: Antoon Vanparys
700 Milldam Road
Baltimore, Maryland 21286
If to Company: SITEL Corporation
111 South Calvert Street, Suite 1900
Baltimore, Maryland 21202
Attention: Phillip A. Clough, CEO
or to such other address as either party may have furnished to the other party
in writing in accordance with this Section. Such notices or other communications
shall be effective when received if delivered personally or when deposited in
the U.S. mail if delivered by certified mail or when deposited with the
overnight delivery service if delivered by that method. Notices also may be
given by facsimile and in such case shall be deemed to be properly given when
sent so long as the sender uses reasonable efforts to confirm and does confirm
the receiver's receipt of the facsimile transmission.
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14. Miscellaneous. No provision of this Agreement may be modified, waived,
or discharged unless such waiver, modification, or discharge is agreed to in
writing and is signed by Executive and an officer of Company so authorized by
the Board of Directors of Company. No waiver by either party to this Agreement
at any time of any breach by the other party of, or compliance by the other
party with, any condition or provision of this Agreement to be performed by the
other party shall be deemed to be a waiver of similar or dissimilar provisions
or conditions at the same or any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter of this Agreement have been made by either party that are not
expressly set forth in this Agreement.
15. Validity. The invalidity or unenforceability of any provision(s) of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which other provision shall remain in full force
and effect; nor shall the invalidity or unenforceability of a portion of any
provision of this Agreement affect the validity or enforceability of the balance
of such provision.
16. Counterparts. This document may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute a single agreement.
17. Headings. The headings of the sections and subsections contained in
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of any provision of this Agreement.
18. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal substantive laws, and not the conflicts of law
principles, of the State of Maryland.
19. Entire Agreement. This Agreement and the Noncompetition Agreement
constitutes the entire agreement of the Parties with respect to the terms of
Executive's employment with the Company, and cancels and supersedes any prior
agreements and understandings of the parties with respect to such subject
matter. There are no representations, warranties, terms, conditions,
undertakings or collateral agreements, express, implied or statutory, between
the parties with respect to such subject matter other than those set forth in
this Agreement and the Non-Competition Agreement. For avoidance of doubt,
without limitation, this Agreement supersedes the re-assignment letter dated on
or about October 14, 1999 from the Company to Executive.
[Signature page follows]
7
<PAGE>
SIGNATURE PAGE TO
EMPLOYMENT AGREEMENT
IN WITNESS WHEREOF, Company and Executive have executed this Agreement.
SITEL CORPORATION, a Minnesota corporation
By: /s/
-------------------------------------
Phillip A. Clough, Chief Executive Officer
/s/
-------------------------------------
ANTOON VANPARYS
8
EXHIBIT 21
SITEL CORPORATION
SUBSIDIARIES
------------
U.S. Subsidiaries
- -----------------
National Action Financial Services, Inc. Georgia
Financial Insurance Services, Inc. Nebraska
Seek The Geek, Inc. Nebraska
SITEL Insurance Marketing Services, Inc. Nebraska
SITEL Insurance Services, Inc. Nebraska
SITEL International, Inc. Nebraska
SITEL Mexico Holdings LLC Nebraska
Non-U.S. Subsidiaries
- ---------------------
SITEL Australia Holdings Pty Ltd. Australia
SITEL Australia Pty Ltd. New South Wales
(Australia)
SITEL Belgium NV Belgium
SITEL do Brasil Ltda. Brazil
SITEL (BVI) International, Inc. British Virgin Islands
SITEL Insurance Services Canada Inc. Canada
SITEL Teleservices Canada Inc. Canada
3101223 Canada Inc. Canada
SITEL de Colombia, S.A. Colombia
SITEL France Holdings SAS France
SITEL Corporation France SA France
SITEL France SA France
SITEL France Consumer Services SA France
SITEL GmbH Germany
SITEL Hong Kong Limited Hong Kong
SITEL TMS Limited Ireland
Telephone Marketing Services (International) Limited Ireland
SITEL Japan KK Japan
Grupo SITEL de Mexico, S.A. de C.V. Mexico
Systems Integrated Telemarketing Netherlands B.V. Netherlands
SITEL New Zealand Limited New Zealand
SITEL Telebusiness New Zealand Limited New Zealand
Action Servicos de Publicidade S.A. Portugal
SITEL Asia Pacific Holdings Pte Limited Singapore
SITEL Asia Pacific Investments Pte Limited Singapore
SITEL Singapore Pte Ltd. Singapore
SITEL Iberica Teleservices, S.A. Spain
Teleaction Hispanica S.A. Spain
Telepromotion S.A. Spain
SITEL Nordic AB Sweden
B's Telemarketing Limited United Kingdom
Leiderman and Roncoroni Limited United Kingdom
SITEL Consulting Limited United Kingdom
SITEL Europe plc United Kingdom
SITEL Stratford Limited United Kingdom
SITEL Stratford [Services] Limited United Kingdom
SITEL Kingston Limited United Kingdom
SITEL Kingston [Services] Limited United Kingdom
SITEL Moor Park Limited United Kingdom
SITEL Moor Park [Services] Limited United Kingdom
SITEL UK Limited United Kingdom
The Training Works Limited United Kingdom
EXHIBIT 23.1
ACCOUNTANTS' CONSENT
The Board of Directors
SITEL Corporation:
We consent to the incorporation by reference in the registration statements
(Numbers 033-99434, 333-19069, 333-30635, 333-44781, and 333-78241) on Form S-8
of SITEL Corporation of our reports dated February 7, 2000, relating to the
consolidated balance sheets of SITEL Corporation and subsidiaries as of December
31, 1998 and 1999, and the related consolidated statements of income (loss),
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1999, and the related schedule, which reports appear
in the December 31, 1999, annual report on Form 10-K of SITEL Corporation.
KPMG LLP
Omaha, Nebraska
March 22, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contain summary information extracted from the consolidated
balance sheet and consolidated statements of income (loss) found on pages F-3
and F-4 of the Company's 10-K and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 22,305
<SECURITIES> 0
<RECEIVABLES> 170,095
<ALLOWANCES> 5,622
<INVENTORY> 0
<CURRENT-ASSETS> 204,550
<PP&E> 236,145
<DEPRECIATION> 117,796
<TOTAL-ASSETS> 432,246
<CURRENT-LIABILITIES> 117,166
<BONDS> 100,000
0
0
<COMMON> 68
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 432,246
<SALES> 737,522
<TOTAL-REVENUES> 737,522
<CGS> 397,250
<TOTAL-COSTS> 719,222
<OTHER-EXPENSES> (316)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,308
<INCOME-PRETAX> 5,831
<INCOME-TAX> 6,336
<INCOME-CONTINUING> (809)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (809)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
