-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HtZxtA3inJF3zuUW4vjhn7zFhRjkoWJ3DvLsBtTKpj0UACpwYynu4kk9IRaN4Ap0 HTsLnx/HUJC+RwYfB+c1Zg== 0000950116-00-000647.txt : 20000411 0000950116-00-000647.hdr.sgml : 20000411 ACCESSION NUMBER: 0000950116-00-000647 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICT GROUP INC CENTRAL INDEX KEY: 0001013149 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 232458937 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-20807 FILM NUMBER: 581652 BUSINESS ADDRESS: STREET 1: 800 TOWN CENTER DR CITY: LANGHORNE STATE: PA ZIP: 19047 BUSINESS PHONE: 2157570200 MAIL ADDRESS: STREET 1: 800 TOWN CENTER DR CITY: LANGHORNE STATE: PA ZIP: 19047-1748 10-K 1 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 fiscal year ended December 31, 1999 --------------------- or [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ____________ to ___________ Commission File Number 0-20807 ICT GROUP, INC. (Exact name of registrant as specified in its charter.) Pennsylvania 23-2458937 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 800 Town Center Drive Langhorne, Pennsylvania 19047 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 215-757-0200 Title of each class: Name of each exchange on which registered: None None Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 ------------------------------------------------- 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. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant is approximately $42,401,800. Such aggregate market value was computed by reference to the closing price of the Common Stock as reported on the National Market of The Nasdaq Stock Market on March 15, 2000. For purposes of this calculation only, the registrant has defined affiliates as including all directors and executive officers. In making such calculation, registrant is not making a determination of the affiliate or non-affiliate status of any holders of shares of Common Stock. The number of shares of the registrant's Common Stock outstanding as of March 15, 2000 was 11,820,025. DOCUMENTS INCORPORATED BY REFERENCE Portions of Registrant's definitive Proxy Statement relating to the 2000 Annual Meeting of Shareholders are incorporated by reference into Part III hereof. ICT GROUP, INC. FORM 10-K ANNUAL REPORT For Fiscal Year Ended December 31, 1999 TABLE OF CONTENTS
PART I Page ---- Item 1. Business...........................................................................................................1 Item 2. Properties.........................................................................................................9 Item 3. Legal proceedings..................................................................................................9 Item 4. Submission of Matters to a Vote of Security Holders................................................................9 PART II Item 5. Market for registrant's common equity and related stockholder matters.............................................10 Item 6. Selected financial data...........................................................................................11 Item 7. Management's discussion and analysis of financial condition and results of operations.............................12 Item 7A. Qualitative and quantitative disclosure about market risk.........................................................14 Item 8. Financial statements and supplementary data.......................................................................15 Item 9. Changes in and disagreements with accountants on accounting and financial disclosure..............................15 PART III Item 10. Directors and executive officers of the registrant................................................................15 Item 11. Executive compensation............................................................................................15 Item 12. Security ownership of certain beneficial owners and management....................................................15 Item 13. Certain relationships and related transactions....................................................................15 PART IV Item 14. Exhibits, financial statement schedules, and reports on form 8-K..................................................15
-i- This document contains certain forward-looking statements that are subject to risks and uncertainties. Forward-looking statements include certain information relating to outsourcing trends as well as other trends in the CRM services and the overall domestic economy, the Company's business strategy including the markets in which it operates, the services it provides, its ability to attract new clients and the customers it targets, the benefits of certain technologies the Company has acquired or plans to acquire and the investment it plans to make in technology, the Company's plans regarding international expansion, the implementation of quality standards, the seasonality of the Company's business, variations in operating results and liquidity, as well as information contained elsewhere in this document where statements are preceded by, followed by or include the words "believes," "plans," "intends," "expects," "anticipates" or similar expressions. For such statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The forward-looking statements in this document are subject to risks and uncertainties that could cause the assumptions underlying such forward-looking statements and the actual results to differ materially from those expressed in or implied by the statements. The most important factors that could prevent the Company from achieving its goals--and cause the assumptions underlying the forward-looking statements and the actual results of the Company to differ materially from those expressed in or implied by those forward-looking statements--include, but are not limited to, the following: (i) the competitive nature of the CRM services industry and the ability of the Company to continue to distinguish its services from other CRM service companies and other marketing activities on the basis of quality, effectiveness, reliability and value; (ii) economic conditions which could alter the desire of businesses to outsource certain sales and service functions and the ability of the Company to obtain additional contracts to manage outsourced sales and service functions; (iii) the ability of the Company to offer value-added services to businesses in its targeted industries and the ability of the Company to benefit from its industry specialization strategy; (iv) risks associated with investments and operations in foreign countries including, but not limited to, those related to relevant local economic conditions, exchange rate fluctuations, relevant local regulatory requirements, political factors, generally higher telecommunications costs, barriers to the repatriation of earnings and potentially adverse tax consequences; (v) technology risks including the ability of the Company to select or develop new and enhanced technology on a timely basis, anticipate and respond to technological shifts and implement new technology to remain competitive; (vi) the ability of the Company to successfully identify, complete and integrate strategic acquisitions that expand or complement its business; and (vii) the results of operations which depend on numerous factors including, but not limited to, the timing of clients' teleservices campaigns, the commencement and expiration of contracts, the timing and amount of new business generated by the Company, the Company's revenue mix, the timing of additional selling, general and administrative expenses and the general competitive conditions in the CRM services industry and the overall economy. PART I ITEM 1. BUSINESS ICT Group, Inc. (the "Company" or "ICT") is a global supplier of customer relationship management (CRM) services. The Company provides integrated telesolutions, e-solutions and market solutions helping its clients identify, acquire, retain, service, measure, and maximize the lifetime value of their customer relationships. ICT's telesolutions offering includes outbound telesales and inbound customer support for sales and service applications, domestically and internationally. Its e-solutions offering provides real-time interaction-driven customer support for Internet sales and service applications through Web-enabled customer contact center services, e-mail management and processing, and multi-channel CRM services. Market research, database marketing, and data mining capabilities are available through its market solutions offering, including questionnaire design, telephone interviewing, and data coding, tabulating, and analysis services. The Company's customer management services experience, Internet and CRM technology capabilities and expertise in select target industries enables it to provide its clients with high quality cost-effective customer management services. While these solutions are available on an outsourced basis, using ICT's customer contact centers, the Company believes that there is also a trend by businesses to purchase them on a hosted or co-sourced basis. Accordingly, ICT intends to offer these services through a hosted arrangement, using the client's facility, or co-sourced arrangement, using both the client's facility and ICT's technologically compatible customer contact centers. 1 Industry Overview: The CRM services market includes traditional teleservices activities such as outbound and inbound customer support, Internet-based sales and service support, and marketing services including database marketing, market research, and data mining. Teleservices and other customer contact center outsourcing services have evolved significantly in recent years, with the expansion of e-business and Internet sales and service programs. Dot.com companies, click-and-mortar e-commerce companies, Internet service providers (ISPs) and application service providers (ASPs) are becoming increasingly focused on providing real-time, customer support for business and consumer-based Internet applications. The Company believes that this trend will continue and anticipates expanded demand for its services. The Company believes that there are two shifts in the way businesses interact with customers in today's Internet enhanced marketplace. E-commerce has grown dramatically and with the addition of this new channel comes an increasing need for businesses to optimize the value of their customer relationships. To remain competitive in today's e-business marketplace, companies are realizing the importance of implementing an integrated CRM solution to effectively attract, acquire, retain, service, and measure customer satisfaction, at every touchpoint in the customer communication cycle in order to maximize the lifetime value of each customer. ICT believes that the industries it has traditionally served will expand their CRM programs to include e-solutions and market solutions. The vertical markets ICT has traditionally served include: insurance, financial services, telecommunications/utilities, pharmaceutical and health care services, and information technology. In addition to these vertical markets, the Company also believes that new dot.com companies, ISPs and ASPs outside its traditional targeted markets will also embrace these trends. The Company believes that the growing trend for integrated global CRM services by its traditional vertical markets as well as dot.com's, click-and-mortar e-commerce companies, and ISPs and ASPs presents attractive opportunities for companies such as ICT that provide a full range of CRM technology powered services through sophisticated telesolutions, e-solutions, and market solutions. ICT Approach: ICT believes that it has distinguished itself in the CRM services industry by providing a range of integrated telesolutions, e-solutions and market solutions for domestic and international clients to identify, acquire, retain, service, measure and maximize the lifetime value of their customers. With extensive experience in customer management services as well as strategic relationships with technology leaders, the Company's management team has emphasized its CRM experience, economies of scale, technology leadership and expertise in target industries as a means of establishing ICT as a global supplier of integrated CRM services. The convergence of the Internet customer's demand for personal interaction-driven service and the embrace of CRM by dot.com companies, click-and-mortar e-commerce companies, ISPs and ASPs, and direct marketing companies that have added an Internet channel for distribution has presented a significant growth business opportunity for ICT. The Company's aggressive technology and business development initiatives differentiate ICT from traditional contact center competitors. Additionally, ICT's scalability, customer service experience and international capabilities differentiate the Company from newly established dot.com customer service providers. Strategy With the growth of the Internet as a means of transacting business and the poor customer service experienced by many on-line buyers, ICT believes significant opportunities exist to expand its business. The Company's growth strategy includes the following key elements: o Pursue E-Commerce Opportunities. The Company plans to pursue opportunities presented by the growth in demand for consistent, personalized customer support for e-commerce sales and service. By aggressively building our Internet support sales, marketing, and advanced technology initiatives while concurrently leveraging our existing management, operations, systems, and sales infrastructure, ICT can offer cost-effective, multi-channel CRM services to a wide array of customers domestically and internationally. 2 o Expand Value-Added Services. The Company will continue to complement its core telesolutions expertise with additional value-added services, such as marketing, research and consulting services, as well as a complete suite of comprehensive CRM services. The Company's goal is to offer an integrated suite of telesolutions, e-solutions and market solutions to help its clients identify, acquire, retain, service, measure and maximize the lifetime value of their customer relationships. o Develop Strategic Alliances and Acquisitions. ICT intends to continue pursuing strategic alliances with, and acquisitions of, domestic and international businesses that provide complementary CRM services. The Company is currently utilizing state-of-the-art CRM software and Internet platform technologies from leading edge partners such as Aspect Communications Corporation, Siebel Systems, Inc., Oracle and Mustang.com. o Increase International Presence. The Company plans to broaden its geographic reach and further develop its expertise in CRM services in international markets by focusing on businesses with multinational operations. ICT currently provides multilingual services in the United States, Europe, Latin America, Canada and Australia. ICT intends to expand its operations in these areas. o Focus on Industry Specialization. The Company believes it has gained a competitive advantage by concentrating on servicing businesses in a limited number of targeted industries and intends to maintain its industry specialization. In addition, the Company believes that industry specialization will enable it to attract new clients because of its industry expertise. At the same time the Company intends to broaden its marketing efforts to target the rapidly expanding needs of dot.com's click-and-mortar companies and application service providers in a variety of industry sectors. o Maintain Technology Investment. The Company intends to continue making substantial investments in technology to maintain its technological strength within the CRM services industry. ICT has been an industry leader in the implementation of innovative CRM technologies to lower its effective cost per contact and to improve its sales and customer service. The Company has made significant investments in information and communications technologies and believes it was among the first to offer fully automated CRM services, collaborative web browsing services and to implement predictive dialing equipment that it believes is now recognized industry-wide to be essential in handling consumer outbound telemarketing. o Continue Commitment to Quality Service. ICT has consistently emphasized quality service and extensive employee training by investing in quality assurance personnel and procedures. The Company intends to continue its commitment to providing quality service, as illustrated by its achieving ISO 9002 certification in all its domestic and international sales and service focused business units by December 31, 1999. ICT's Services ICT delivers its telesolution, e-solution and market solution CRM services through three business segments which are supported by the Company-wide marketing, sales, systems and corporate units. ICT's domestic sales force is organized into a series of industry sectors focused on selling the full range of the Company's services to clients in their respective target industries. ICT believes this organizational structure allows the Company to provide comprehensive solutions to its clients' CRM service needs, since it enables ICT's sales and customer service personnel to develop in-depth knowledge of the needs of businesses in their designated industries. In February 2000, ICT announced the formation of iCT ConnectedTouch.com, LLC a new wholly owned subsidiary formed to provide highly focused innovative E-solutions designed to maximize the value of customer relationships for business-to-business and business-to-consumer e-business sales and service operations. iCT ConnectedTouch.comsm is focused on supporting 1) dot.com companies and bricks-and-mortar e-commerce companies, 2) Internet support service companies including ISPs and ASPs, as well as 3) traditional direct marketing service companies that have added an Internet channel for sales and service. 3 Domestic TeleServices Traditional teleservices are offered in the United States through the Company's Domestic TeleServices segment, which is comprised of the TeleDirect and TeleSolutions business units. ICT TeleDirect. ICT TeleDirect provides teleservices support activities primarily for the insurance and financial products and services, credit card and endorsed products sectors. ICT TeleSolutions. ICT TeleSolutions provides teleservices support activities primarily for the telecommunications, information services, energy services and consumer goods industries. International Services The Company offers domestic and international multilingual teleservices and customer care services through four business units comprising ICT International Services. The growth of multinational corporations and the increase in non-English speaking residents in the United States has increased the demand for the multilingual capabilities that ICT provides. The segment currently consists of the following units: ICT Eurotel. Eurotel provides pan-European, multilingual teleservices and customer care services to Europe from its contact centers in Dublin, Ireland and London, England. ICT Spantel. Spantel provides bi-lingual English and Spanish teleservices from its Miami, Florida contact center to the rapidly growing marketplace of Spanish-speaking American and Latin American consumers and businesses. ICT Canada. The Company opened its first Canadian contact center in January 1996 with service representatives who are fluent in French and English. As of December 31, 1999, ICT Canada has contact centers located in Moncton and Riverview, New Brunswick, Canada and in Halifax and Sydney, Nova Scotia, Canada. ICT Australia. This unit was formed in the first quarter of 1999 to provide telemarketing services for North American and European multinational companies in the Pacific Rim. Customer Management Services ICT provides businesses in its target industries with marketing, research and consulting services, and ongoing customer care services, through its Customer Management Services segment. This segment presently consists of the following business units: ICT Financial Marketing Services. This business unit's management team consists of professionals who have client-side banking experience in branch management and operations, marketing, advertising, research, electronic funds transfer, home and branchless banking, customer service and systems support. As of December 31, 1999, ICT Financial Marketing Services operated dedicated inbound/outbound contact centers in Amherst, New York and Morrilton, Arkansas. ICT Medical Marketing Services. Through this business unit, ICT provides service for the increasingly complex needs of healthcare and pharmaceutical clients. ICT's dedicated contact center is equipped with computer and telecommunications software and hardware to service both outbound and inbound client applications. Work stations are staffed by dedicated staff to meet the sophisticated product and customer profiles of specific clients. As of December 31, 1999, ICT Medical Marketing Services operated a dedicated contact center in Langhorne, Pennsylvania. ICT Research Services. This business unit provides businesses with value added market research survey design, data collection and consulting services. ICT's Research Services makes extensive use of advanced technology, including integrated predictive dialing and Computer Assisted Telephone Interviewing software, to obtain market and customer data cost effectively. As of December 31, 1999, ICT Research Services conducted surveys from centers in Depew, New York and Langhorne, Pennsylvania. 4 Customer Care Management Services business unit was established in mid-1996 to pursue outsourcing opportunities for customer care management. This division offers services such as site and system equipment consultation, facility launch, program planning and implementation, staffing, technical support and ongoing customer care management. Depending on client needs, ICT will assume sole or shared responsibilities for the management of a client's customer care operations. As of December 31, 1999 this business unit operated contact centers in Lakeland, Florida and Langhorne, Pennsylvania. Contact Center Facilities The following table lists the Company's contact center facilities as of December 31, 1999: ------------------------------------------------------------- Locations ------------------------------------------------------------- Morrilton, AR; New Castle, DE; Fort Lauderdale, FL; Lakeland, FL; Miami, FL; Louisville, KY; Lewiston, ME; Oxford, ME; Pittsfield, ME; Wilton, ME; Amherst, NY; Depew, NY; Lancaster, OH; Sharonville, OH; Allentown, PA; Burnham, PA; Dubois, PA; Langhorne, PA(3); Trevose, PA; Chesapeake, VA; Norfolk, VA; Martinsburg, WV; Parkersburg, WV; Westover, WV; Halifax, Nova Scotia, Canada; Moncton, New Brunswick, Canada; Riverview, New Brunswick, Canada; Sydney, Nova Scotia, Canada; Dublin, Ireland; and London, U.K. ------------------------------------------------------------- Target Industries ICT's domestic sales force is assigned to specific industry sectors, which enables its sales personnel to develop in-depth industry and product knowledge. Several of the industries that ICT serves are undergoing deregulation and consolidation, which provides the Company with additional opportunities as businesses search for low cost solutions for their marketing, sales and customer support needs. In 1999, business within the insurance and financial services industries accounted for 65% of the Company's revenues. The industries targeted by the Company and the principal services provided are described below. Insurance ICT works with large consumer insurance companies to market and provide customer support services for products such as life, accident, health, and property and casualty insurance. The Company's insurance group operates numerous dedicated contact centers and in 1999, the Company sold approximately 1.5 million insurance policies on behalf of its clients. ICT employs approximately 410 agents collectively holding over 8,500 state or Canadian provincial insurance licenses. The Company has a full-service agent licensing and a continuing education department, which enables its agents to obtain licenses in 47 states and eight Canadian provinces and to maintain their compliance with insurance regulations. Clients include, but are not limited to, JCPenney Life Insurance Company, Progressive and American Security Group. Financial Services ICT provides banks and other financial services clients with a wide range of services, including card-holder acquisition, active account generation, account balance transfer, account retention and customer service. With the acquisition in 1995 of its Financial Marketing Services operations, ICT began offering additional banking services, such as marketing and servicing home equity loans, lines of credit, loan-by-phone, checking and deposit account acquisition, mortgage loans and other traditional banking products. Among ICT's financial services clients in 1999 are Advanta, Fleet Boston, Discover, Banc One, MBNA, and Metris. 5 Telecommunications/Utilities ICT provides teleservices and customer care management services for major telecommunications companies for long distance, cellular and cable products and services, regional telecommunications companies marketing advanced telephone features, and companies which provide billing support services to telecommunications carriers. Within the telecommunications/utilities industry, ICT clients in 1999 include, but are not limited to, Bell Atlantic, Integretel, and Green Mountain.com. Pharmaceuticals and Health Care Services Leveraging ICT's insurance market position into the managed care industry, the Company, through its ICT Medical Marketing Services business unit, serves pharmaceutical manufacturers, medical advertising agencies, health insurance companies, hospitals and other health care related suppliers, for the sale and marketing of products to both health care professionals (hospitals, physicians, pharmacists and nurses) and health care consumers (patients and prospective patients). The applications the Company offers in this market segment consist of business-to-business, business-to-professional and business-to-consumer, utilizing inbound and outbound services to sell products, to conduct market research, develop marketing databases and provide customer service. Clients in this category in 1999 include, but are not limited to, SmithKline Beecham, Roche, Aetna/U.S. Healthcare and Pacificare. Information Technology ICT provides sophisticated marketing resources for both outbound and inbound applications on behalf of clients in the computer software and hardware industries. Outbound applications include, but are not limited to, new customer acquisition, customer retention and sales lead generation. Inbound applications include, but are not limited to, customer service, first-level customer technical support and the sale of personal computer-related products. ICT's clients frequently integrate outbound and inbound call campaigns, seeking to achieve favorable compounding results. Information technology clients in 1999 include, but are not limited to, Sony Computer Entertainment and AOL Canada. Technology ICT invests heavily in system and software technologies designed to improve contact center production thereby lowering the effective cost per contact made or received, and to improve sales and customer service effectiveness by providing its sales and service representatives with real-time access to customer and product information. Since January 1995, the Company has invested over $51 million in information and communications systems and software enabling it to use state-of-the-art contact center technology. ICT believes it was one of the first fully automated teleservices company and among the first to implement predictive dialing equipment, for outbound telemarketing and market research and to provide collaborative web browsing services. ICT realizes significant cost savings through the use of innovative contact handling technology, automatic call distributors ("ACD") and advanced scripting software, all of which optimize agent utilization. An ACD is a phone switch that accepts an inbound call from the public network and routes that call to the most advantageous, available resource to handle the call. Scripting software is used in contact centers to provide the agent with the appropriate information to use during the contact and to specify the content and sequence of the information captured from the customer. The Company utilizes a scalable set of UNIX processors to support its outbound and inbound contact center operations. The term scalable in the computer industry generally means that a system or product line is configured to work cost-effectively at both low and high volume. Dedicated UNIX processors are used for inbound contact centers while predictive dialing systems, networked to UNIX processors at the Company's corporate data center, are used at each outbound contact center. The predictive dialing systems support local call and data management: the UNIX processors provide centralized list management, data consolidation, report generation and interfaces with client order processing systems. ICT Group uses a series of Customer Relationship Management (CRM) software to prepare outbound and inbound scripts, manage, update and reference client data files, collect statistical transaction and performance data and assist in the preparation of internal and client reports. This CRM software includes ICT Group's proprietary call transaction management system ("CTMS") as well as IMA's Edge TeleBusiness Software and Siebel's Contact Management systems. The use of the Edge and Siebel systems as well as Oracle's database management system provides a scalable and robust suite of applications to support our client's business needs. 6 ICT introduced several technology solutions in 1999 to support multi-channel customer contacts. These solutions include ICT Net2tel.com(sm), giving ICT the ability to interact with Internet users via text chat, voice over the Internet, or two line call back. In addition, ICT introduced high-volume email handling capabilities in 1999. The Company intends to take advantage of these technologies to provide an integrated solution to support multi-channel contact management. Quality Assurance, Personnel and Training ICT emphasizes quality service and extensive employee training as a way to compete effectively and invests heavily in quality assurance personnel and practices. ICT's quality assurance and training departments are responsible for the development and enforcement of contact center policies and procedures, the selection and training of telephone service representatives, the training and professional development of contact center management personnel, monitoring of calls and verification and editing of all sales. Through the Company's quality assurance department, both the Company and its clients are able to perform real time on-site and remote call monitoring to maintain quality and efficiency. Sales confirmations are recorded (with the customer's consent) in order to verify the accuracy and authenticity of transactions. Additionally, ICT is able to provide to its clients immediate updates on the progress of an ongoing telemarketing effort. Access to this data allows ICT and its clients to identify potential campaign shortfalls and to immediately modify or enhance a telemarketing effort. In 1998 the Company completed the installation of digital recording technology in all US outbound centers. This installation allows the consolidation of all verification activities into a centralized location and effectively created a "third party" verification center. Verification results are now available to Operations and Client Services by the end of the calling day. Also, each center can access the recordings for review with supervisory staff or the service representative. The Company's commitment to providing quality service is further illustrated by its current effort toward certification with ISO 9002 standards, which are administered by the International Organization for Standardization and represent an international consensus on the essential features of a quality system to ensure the effective operation of a business. All domestic and international sales and service focused business units are ISO 9002 registered as of December 31, 1999. Management believes that a key driver of ICT's success is the quality of its employees. The Company tailors its recruiting and training techniques toward the industries it serves. Service representatives receive a detailed review of each program in which they are to participate along with training regarding the background, structure and philosophy of the client that is sponsoring the program. As is typical in the teleservices industry, over 90% of the Company's service representatives are part-time employees. As of February 24, 2000, ICT employed approximately 6,000 persons, of which more than 5,200 were service representatives. None of ICT's employees are currently represented by a labor union. The Company considers its relations with its employees to be good. Clients The Company generally operates under month-to-month contractual relationships with its teleservices clients. The pricing component of a contract is often comprised of an initial fee, a base service charge and separate charges for ancillary services. Service charges are usually based upon an hourly rate for outbound calls and per-minute rates for inbound calls. On occasion, the Company performs services for which it is paid commissions based on completed sales under contracts terminable by the Company with 30 or fewer days notice. ICT's Customer Management Services typically enter into longer term, contractual relationships that may contain provisions for early contract terminations. The Customer Management Services segment's revenues represented approximately $45.1 million, or 29%, of the Company's consolidated revenues in 1999. ICT targets those companies which it believes have the greatest potential to generate recurring revenues to the Company based on their ongoing direct sales and customer service needs. At December 31, 1999, ICT provided direct sales and customer service to approximately 75 clients. The Company's largest clients in recent years have been MMIG and JCPenney Life Insurance Company, which together accounted for approximately 17% of the Company's net revenues in 1999. No other client accounted for more than 10% of the Company's net revenues in 1999. Competition The CRM services industry is intensely competitive and the Company's principal competition in its primary markets comes from large service organizations, including, but not limited to, Convergys Corporation, SITEL Corporation, TeleTech Holdings, Inc., APAC TeleService, Inc. and West Telemarketing Corporation. The Company competes with numerous independent firms, some of which are as large or larger than ICT, as well as the in-house 7 operations of many of its clients or potential clients. In addition, most businesses that are significant consumers of these services utilize more than one teleservice firm at a time and reallocate work among various firms from time to time. Some of this work is contracted on an individual project basis, with the effect that the Company and other firms seeking such business are required to compete with each other frequently as individual projects are initiated. Furthermore, the Company believes there is a trend among businesses with in house contact center operations toward outsourcing the management of those operations to others and that this trend may attract new competitors, including, but not limited to, competitors that are substantially larger and better capitalized than ICT, into the Company's market. Additionally, ICT faces competitors in its CRM ASP offerings. This competition is primarily separated into two categories: Software only ASPs and ASPs that provide both software and services (Hybrid ASPs). The Company competes with several competitors in each of these categories. Software only ASP companies that compete with ICT include: LivePerson, FaceTime and eConvergent. Hybird ASP competitors would include: PeopleSupport, Brigade Solutions and SafeHarbor.com. While the Company believes it has more customer service experience and a broader technological offering then its current competitors, new competition may be attracted into ICT's e-solutions market. Government Regulation Both the federal and state governments regulate telemarketing sales practices. The Federal Telephone Consumer Protection Act of 1991 (the "TCPA,"), enforced by the Federal Communications Commission, imposes restrictions on unsolicited telephone calls to residential telephone subscribers. Under the TCPA, it is unlawful to initiate telephone solicitations to residential telephone subscribers before 8:00 a.m or after 9:00 p.m. local time at the subscriber's location, or to use automated telephone dialing systems or artificial or prerecorded voices to certain subscribers. Additionally, the TCPA requires telemarketing firms to develop a written policy implementing a "do-not-call" list, and to train its telemarketing personnel to comply with these restrictions. The TCPA creates a right of action for both consumers and state attorneys general. A court may award actual damages or minimum statutory damages of $500 for certain violations, which may be trebled for willful or knowing violations. Currently, the Company trains its service representatives to comply with the regulations of the TCPA and programs its call management system to avoid initiating telephone calls during restricted hours or to individuals maintained on an applicable do-not-call list. The Federal Trade Commission (the "FTC") regulates both general sales practices and telemarketing specifically. Under the Federal Trade Commission Act (the "FTC Act"), the FTC has broad authority to prohibit a variety of advertising or marketing practices that may constitute "unfair or deceptive acts and practices." Pursuant to its general enforcement powers, the FTC can obtain a variety of types of equitable relief, including injunctions, refunds, disgorgement, the posting of bonds, and bars from continuing to do business, for a violation of the acts and regulations it enforces. The FTC also administers the Federal Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994 (the "TCFAPA"). Under the TCFAPA, the FTC has issued regulations prohibiting deceptive, unfair or abusive practices in telemarketing sales. Generally, these rules prohibit misrepresentations of the cost, quantity, terms, restrictions, performance or characteristics of products or services offered by telephone solicitation or of refund, cancellation or exchange policies. The regulations also regulate the use of prize promotions in telemarketing to prevent deception and require that a telemarketer identify promptly and clearly the seller on whose behalf the telemarketer is calling, the purpose of the call, the nature of the goods or services offered and, if applicable, that no purchase or payment is necessary to win a prize. The regulations also require that telemarketers maintain records on various aspects of their business. Analogous restrictions apply to industries regulated by the SEC. The Company believes that it is in compliance with the TCPA and its implementing regulations, as well as with the regulations promulgated pursuant to the TCFAPA. Failure to comply with either the TCPA or the TCFAPA could adversely affect or limit the Company's current or future operations. Most states have enacted statutes similar to the FTC Act generally prohibiting unfair or deceptive acts and practices. Additionally, some states have enacted laws and others are considering enacting laws targeted directly at telemarketing practices. For example, telephone sales in certain states are not final until a written contract is delivered to and signed by the buyer, and such a contract often may be canceled within three business days. At least one state also prohibits telemarketers from requiring credit card payment, and several other states require certain telemarketers to obtain licenses, post bonds or submit sales scripts to the state's attorney general. Under the more general statutes, depending on the willfulness and severity of the violation, penalties can include imprisonment, fines and a range of equitable remedies such as consumer redress or the posting of bonds before continuing in business. Many of the statutes directed specifically at telemarketing practices provide for a private right of action for the recovery of damages or provide for enforcement by state agencies permitting the recovery of significant civil or criminal penalties, costs and attorneys' fees. There can be no assurance that any such laws, if enacted, will not adversely affect or limit the Company's current or future operations. 8 ITEM 2. PROPERTIES The Company's corporate headquarters are located in Langhorne, Pennsylvania in leased facilities consisting of approximately 29,500 square feet of office space rented under leases that expire in April 2001. The Company also leases all of the facilities used in its contact center operations, as well as office space in Chicago, Illinois, and Seattle, Washington for its sales offices. The leases for the Company's facilities expire generally between July 2000 and May 2009 and typically contain renewal options. The Company believes that its existing facilities are suitable and adequate for its current operations, but additional facilities will be required to support growth. The Company believes that suitable additional or alternative space will be available as needed on commercially reasonable terms. ITEM 3. LEGAL PROCEEDINGS From time to time, the Company is involved in litigation incidental to its business. In the opinion of management, no litigation to which the Company is currently a party is likely to have a material adverse effect on the Company's results of operations, financial condition or liquidity, if decided adversely to the Company. As previously reported by the Company, on October 23, 1997, a shareholder, purporting to act on behalf of a class of ICT shareholders filed a complaint in the United States District Court for the Eastern District of Pennsylvania against the Company and certain of its directors. The complaint alleges that the defendants violated the federal securities laws, and seeks compensatory and other damages, including rescission of stock purchases made by the plaintiff and other class members in connection with the Company's initial public offering effective June 14, 1996. The defendants believe the complaint is without merit, deny all of the allegations of wrongdoing and are vigorously defending the suit. On February 2, 1998, the defendants filed a motion to dismiss the complaint. On May 19, 1998, the complaint was dismissed by a judge for the United States District Court for the Eastern District of Pennsylvania with leave to plaintiff to file an amended complaint on narrow accounting allegations. On June 22, 1998, plaintiffs filed a First Amended Class Action Complaint purporting to bring negligence claims in connection with the Company's initial public offering. The defendants continue to deny all allegations of wrongdoing, believe the amended complaint is without merit and are vigorously defending the suit. On November 3, 1998, the court granted a motion appointing Rowan Klein and Michael Mandat as lead plaintiffs. On February 2, 1999, the court dismissed the case without prejudice, directing that the case remain in status quo, that the statute of limitations be tolled and that the parties continue with discovery and advise the court if assistance by the court is needed. Since that time the defendants filed a motion for summary judgement seeking to have the case dismissed on the grounds that there is no material issue of fact. Plaintiffs filed a response in opposition to defendant's motion and discovery was conducted by the parties. The court has not ruled as yet on defendants' motion. On July 12, 1996, Main Street Marketing of America Incorporated ("Main Street Marketing") brought a demand for arbitration against the Company in the Commonwealth of Pennsylvania claiming damages as a result of the Company's alleged breach of a service agreement under which the Company agreed to provide Main Street Marketing with various data entry and data processing services relating to Main Street Marketing's magazine subscription program. Main Street Marketing alleges that the Company committed various breaches of the service agreement and has demanded an award in excess of $15 million. The Company has responded to this demand for arbitration by denying liability and counterclaiming in an amount in excess of $125,000. Discovery has progressed in this matter, but has not yet been completed. It is not possible at this stage of the proceeding to evaluate the probable outcome of this litigation. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 9 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock trades on the National Market segment of The Nasdaq Stock Market under the symbol "ICTG." The following table sets forth, for the periods indicated, the high and low sales prices as quoted on The Nasdaq Stock Market. Period High Low ------ ---- --- Fiscal 1998: First Quarter 5 5/8 3 3/4 Second Quarter 5 1/2 3 3/4 Third Quarter 4 3/8 2 Fourth Quarter 2 7/8 1 7/8 Fiscal 1999: First Quarter 4 1/2 2 5/8 Second Quarter 5 3/8 2 11/16 Third Quarter 9 5/8 4 1/2 Fourth Quarter 15 5/8 6 1/16 As of March 15, 2000, there were 43 holders of record of the Company's Common Stock. On March 15, 2000, the closing sale price of the Common Stock as reported by The Nasdaq Stock Market was $8.00. The Company has never declared or paid any cash dividends on its capital stock. The Company currently intends to retain its earnings to finance future growth and working capital needs and, therefore, does not anticipate paying any cash dividends in the foreseeable future. Additionally, the Company's bank agreement limits the payment of dividends. 10 ITEM 6. SELECTED FINANCIAL DATA The following selected financial data are derived from the financial statements of the Company. The data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 and the consolidated financial statements and related notes thereto included in Item 8.
For Year Ended December 31, ------------------------------------------------------------------ 1995 1996 1997 1998 1999 ------------------------------------------------------------------ (In thousands, except per share amounts) Statement of Operations Data: Net revenues $ 52,116 $ 71,599 $ 91,653 $ 120,982 $ 153,049 --------- -------- -------- --------- --------- Operating expenses: Cost of services 28,639 38,537 50,662 69,588 84,390 Selling, general and administrative 21,073 30,708 37,009 47,012 60,080 Nonrecurring compensation expense -- 12,689 -- -- -- --------- -------- -------- --------- --------- Total operating expenses 49,712 81,934 87,671 116,600 144,470 --------- -------- -------- --------- --------- Operating income (loss) 2,404 (10,335) 3,982 4,382 8,579 Interest expense (income), net 834 180 (398) 406 801 --------- -------- -------- --------- --------- Income (loss) before taxes 1,570 (10,515) 4,380 3,976 7,778 Income taxes (benefit) -- (2,998) 1,708 1,550 3,033 --------- -------- -------- --------- --------- Net income (loss) $ 1,570 $ (7,517) $ 2,672 $ 2,426 $ 4,745 ========= ======== ======== ========= ========= Diluted earnings (loss) per share $ .17 $ (.72) $ .22 $ .20 $ 0.39 ========= ======== ======== ========= ========= Shares used in computing diluted earnings per share 9,490 10,407 12,044 12,023 12,261 ========= ======== ======== ========= ========= Pro Forma data: Historical income (loss) before income taxes $ 1,570 $(10,515) Pro forma income tax expense (benefit) (1) 667 (3,767) --------- -------- Pro forma net income (loss) (1) $ 903 $ (6,748) ========= ======== Pro forma diluted earnings (loss) per share (1) $ .10 $ (.65) ========= ======== Shares used in computing pro forma diluted earnings (loss) per share 9,490 10,407 ========= ======== As of December 31, -------------------------------------------------------------------- 1995 1996 1997 1998 1999 -------------------------------------------------------------------- (In thousands) Balance Sheet Data: Cash and cash equivalents $ 447 $ 18,298 $ 17,711 $14,225 $12,239 Working capital (deficit) (1,601) 27,066 25,530 27,093 26,767 Total assets 18,481 49,112 61,578 75,876 78,073 Long-term debt, less current maturities 881 1,057 4,799 14,000 10,000 Capitalized lease obligations, less current maturities 1,632 1,296 1,498 833 308 Shareholders' equity 3,843 41,020 43,368 45,785 50,340
- ----------- (1) A pro forma provision for income taxes for periods prior to the effective date of the Company's offering has been computed as if the Company had been fully subject to federal and state income taxes. 11 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The following table sets forth statement of operations data as a percentage of net revenues for the periods indicated:
Year Ended December 31, ---------------------------------------------------------- 1999 1998 1997 ---------------------------------------------------------- Net revenues 100.0% 100.0% 100.0% ------ ------ ------ Operating expenses Cost of services 55.1 57.5 55.3 Selling, general and administrative 39.3 38.9 40.4 ---- ---- ---- Total operating expense 94.4 96.4 95.7 ---- ---- ---- Operating income 5.6 3.6 4.3 Interest expense .8 .8 .5 Interest income (.3) (.5) (1.0) ---- ---- ----- Income before income taxes 5.1 3.3 4.8 Income tax expense 2.0 1.3 1.9 ---- ---- ---- Net income 3.1% 2.0% 2.9% ==== ==== ====
Years Ended December 31, 1999 and 1998 Net Revenues. Net revenues increased 27% to $153.0 million from $121.0 million in 1998 primarily due to strong revenue growth from customers in the insurance, telecommunications, and health care industries and our expansion into Internet Support Services. Domestic TeleServices revenues grew 6% to $83.9 million from $79.0 million in 1998. Growth in this segment was restrained by a slowdown in telesales campaigns which utilized credit card files. This low growth rate resulted in reduced profitability for the Domestic TeleServices segment. International Services (formerly International TeleServices) revenues grew 80% to $24.0 million in 1999 from $13.4 million in 1998 due to our rapid growth in Europe, Canada, Spantel and the Company's expansion into Australia. Customer Management Services (previously reported separately as Marketing Services and Management Services) revenues increased 58% to $45.1 million from $28.6 million in 1998 reflecting the addition and expansion of several customer care contracts. Cost of Services. Cost of services, which consist primarily of direct labor and telecommunications costs, increased 21% to $84.4 million in 1999 from $69.6 million in 1998, resulting from increased business activity in each of the business units. The increase was primarily due to the increased direct labor required to support the increased revenue volume. As a percentage of revenues, cost of services decreased to 55% in 1999 from 58% in 1998, primarily due to telecommunication costs per hour decreasing 19% through reductions in rates paid to our domestic and international carriers combined with the increased ability to pass through telecommunication costs on many of our customer care contracts. Selling, General and Administrative. Selling, general and administrative expenses increased 28% to $60.1 million in 1999 from $47.0 million in 1998 largely due to the addition of facilities, contact center personnel and other infrastructure to support increased calling volumes, as well as our investment in marketing and systems to support our Internet Support Services initiatives. As a percentage of revenues, selling, general and administrative expenses were 39% in both 1999 and 1998. 12 Interest Expense, net. Net interest expense reflects the interest expense related to capital leases and term debt partially offset by investment income. Net interest expense increased $395,000 to $801,000 in 1999 from $406,000 in 1998 due to higher average outstanding debt and lower average invested funds in 1999. Income Taxes. Income taxes increased $1.5 million to $3.0 million in 1999 from $1.5 million in 1998. In both 1999 and 1998, the provision for income taxes was approximately 39% of income before taxes. Years Ended December 31, 1998 and 1997 Net Revenues. Net revenues increased 32% in 1998 to $121.0 million from $91.7 million in 1997 primarily due to growth in TeleServices and Customer Management Services revenues. Combined TeleServices segment revenues increased 29% to $92.4 million in 1998 from $71.4 million in 1997 resulting from continued strong growth in the domestic market. International Services segment revenues grew 4% to $13.4 million in 1998 from $12.9 million in 1997. Domestic TeleServices segment revenues grew 35% to $79.0 million in 1998 from $58.5 million in 1997 as a result of growth in the financial services and telecommunications industries. Customer Management Services revenues increased 41% to $28.6 million in 1998 from $20.3 million in 1997 reflecting the addition and expansion of several customer care contracts. Cost of Services. Cost of services increased 37% to $69.6 million in 1998 from $50.7 million in 1997, resulting from increased business activity in each of the business units. As a percentage of revenues, cost of services increased to 58% in 1998 from 55% in 1997 primarily due to lower average prices and increased labor costs the Company incurred as a result of the favorable economic climate and historically low unemployment levels. These conditions made it more difficult for the Company to attract sufficient contact center staff. Selling, General and Administrative. Selling, general and administrative expenses increased 27% to $47.0 million in 1998 from $37.0 million in 1997 due to an increased number of contact centers and related workstation capacity and additional sales and systems support. As a percentage of revenues, selling, general and administrative expenses declined to 39% in 1998 from 40% in 1997 as the Company has consolidated certain contact centers into larger centers, spread fixed costs of operations over the larger centers and generally managed fixed expenses to support a larger revenue base. Interest Expense (Income), Net. Net interest expense of $406,000 versus net interest income of $398,000 in 1998 and 1997, respectively, reflects the interest expense related to capital leases and borrowings against the Company's line of credit for capital expansion partially offset by investment income. The increase in net interest expense is the result of increased average outstanding balances on the line of credit and decreased average invested funds in 1998 as compared to 1997. In 1998, the Company financed capital equipment purchases under its line of credit. In 1998, the Company borrowed approximately $12.2 million under its line of credit which was converted to term debt. Income Taxes. Income taxes decreased $159,000 to $1.5 million for 1998 from $1.7 million in 1997. In both 1998 and 1997, the provision for income taxes was approximately 39% of income before income taxes. Quarterly Results and Seasonality The Company has experienced and expects to continue to experience significant quarterly variations in operating results, principally as a result of the timing of client programs, the commencement and expiration of contracts, the timing and amount of new business generated by the Company, the Company's revenue mix, the timing of additional selling, general and administrative expenses to support the growth and development of existing and new business units and competitive industry conditions. 13 The Company's business tends to be strongest in the second and fourth quarters due to the high level of client sales activity in the spring and prior to the holiday season. In the first quarter, business generally levels off or slows from the previous quarter as a result of reduced client sales activity and client transitions to new marketing programs during the first quarter of the calendar year. In addition, the Company typically expands its operations in the first quarter to support anticipated business growth beginning in the second quarter. As a result, selling, general and administrative costs typically increase in the first quarter without a commensurate increase in revenues which results in decreased profitability for the first quarter versus the previous fourth quarter. Also, demand for the Company's services typically slows or decreases in the third quarter as the volume of business decreases during the summer months. In addition, the Company's operating expenses increase during the third quarter in anticipation of higher demand for its services during the fourth quarter. Liquidity and Capital Resources Cash provided by operations in 1999 was $11.5 million compared to $292,000 in 1998. The increase of approximately $11.2 million resulted from higher net income and non-cash charges, as well as strong collection of accounts receivable. Cash used in investing activities in 1999 was $8.6 million compared to $14.8 million in 1998. The Company added 752 workstations in 1999 versus adding 896 in 1998, and financed approximately half of its capital expenditures in 1999 under operating leases. Cash used in financing activities was $4.6 million in 1999 as compared to $11.1 million provided by financing activities in 1998. In 1999, the Company repaid $4.0 million of term debt and made no borrowings under its line of credit. The Company's operations will continue to require significant capital expenditures. Historically, equipment purchases have been financed through the Company's equipment line of credit, operating leases, and through capitalized lease obligations with various equipment vendors and lending institutions. The capital lease obligations are payable in varying installments through 2001. Outstanding obligations under capitalized leases at December 31, 1999 were $833,000. In 1998, the Company signed a three-year, $45.0 million credit agreement with BankBoston, N.A. and Summit Bancorp. At December 31, 1999, outstanding obligations under the credit agreement were $14.0 million, leaving $27.0 million available to the Company. Repayments of termed out amounts permanently reduce the amount available to borrow under the Line of Credit. The Company believes that cash on hand, together with cash flow generated from operations and funds available under the credit agreement will be sufficient to finance its current operations and planned capital expenditures at least through 2000. ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK The Company's operations are exposed to market risks primarily as a result of changes in interest rates and foreign currency exchange rates. The Company does not use derivative financial instruments for speculative or trading purposes. Interest Rate Risk The Company's exposure to market risk for changes in interest rates relates to its long term debt obligations. The fixed rate of 7% on the Company's long term debt at December 31, 1999 approximates market rates; thus, the fair value of the debt approximates its reported value. In the past the Company has not entered into financial instruments such as interest rates swaps or interest rate lock agreements. However, it may consider these instruments to manage the impact of changes in interest rates based on management's assessment of future interest rates, volatility of the yield curve and the Company's ability to access the capital markets in a timely manner. Foreign Currency Risk The Company does not use foreign currency exchange contracts or purchase currency options to hedge local currency cash flows. The Company has operations in Canada, Ireland, the United Kingdom, and Australia which are subject to foreign currency fluctuations. As currency rates change, translation of income statements of these operations from local currencies to US dollars affects year-to-year comparability of operating results. The Company's foreign operations represent 12.4% of the Company's consolidated revenues for the year ended December 31, 1999. In addition, foreign operations produced 15.0% of the business associated with domestic revenues. Management does not expect the risk of foreign currency fluctuations to be material. 14 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements of the Company being filed under this Item 8 can be found beginning on page F-1 of this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to this item will be contained in the Registrant's Proxy Statement for the 2000 Annual Meeting of Shareholders (the "Proxy Statement"), which is hereby incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION Information with respect to this item will be contained in the Proxy Statement, which is hereby incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information with respect to this item will be contained in the Proxy Statement, which is hereby incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information with respect to this item will be contained in the Proxy Statement, which is hereby incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K Financial Statements and Financial Statement Schedules See Index to Financial Statements at page F-1. Reports on Form 8-K The Company did not file any reports on Form 8-K during the last quarter of the period covered by this report. Exhibits The following is a list of exhibits filed as part of this annual report on Form 10-K. Where so indicated by footnote, exhibits which were previously filed are incorporated by reference. For exhibits incorporated by reference, the location of the exhibit in the previous filing is indicated parenthetically except for in those situations where the exhibit number was the same as set forth below. 15
3.1 Articles of Incorporation. (2) 3.2 Bylaws. (2) 9.1 Voting Trust Agreement among John J. Brennan, Donald P. Brennan and the Company, dated February 2, 1996. (1) (Exhibit 10.11) 9.2 Amendment No. 1 to Voting Trust Agreement among John J. Brennan, Donald P. Brennan and the Company, dated May 9, 1996. (2) (Exhibit 10.17) 9.3 Form of Voting Agreement between the Company and certain option holders. (1) (Exhibit 10.13) 10.1 ICT Group, Inc. 1987 Stock Option Plan. (1) (2)+ 10.2 ICT Group, Inc. Equity Incentive Plan. (1)+ 10.3 ICT Group, Inc. Equity Compensation Plan. (2)+ 10.4 ICT Group, Inc. 1996 Non-Employee Directors Plan. (2)+ 10.5 Employment Agreement between John J. Brennan and the Company, dated May 8, 1996.(2)+ 10.7 Employment Agreement between John L. Magee and the Company, dated April 1, 1987. (1)+ 10.8 Employment Agreement between John D. Campbell and the Company, dated October 1, 1987. (1)+ 10.9 Employment Agreement between Maurice J. Kerins and the Company, dated April 1, 1987. (1)+ 10.10 Employment Agreement between Robert F. Small and the Company, dated April 1, 1987. (1)+ 10.11 Shareholders Agreement among John J. Brennan, Donald P. Brennan and the Company, dated February 2, 1996. (1) (Exhibit 10.12) 10.13 $45,000,000 Credit Agreement dated as of April 21, 1998 among the Company, Eurotel Marketing Limited, Yardley Enterprises, Inc., Harvest Resources, Inc., ICT/Canada Marketing, Inc., the Lenders referred to therein, BankBoston, N.A. as Administrative Agent and Summit Bank as Co-Agent (3) (Exhibit 10.13) 10.14 Employment Agreement between Vincent A. Paccapaniccia and the Company, dated August 24, 1998. 10.15 First Amendment to Credit Agreement among the Company, Eurotel Marketing Limited, Yardley Enterprises, Inc., Harvest Resources, Inc., ICT/Canada Marketing, Inc., the Lenders referred to therein, BankBoston, N.A. as Administrative Agent and Summit Bank as Co-Agent (3) (Exhibit 10.13) dated December 22, 1998. 10.16 Employment Agreement between John P. McCabe and the Company, dated April 18, 1997* 10.17 Employment Agreement between Timothy F. Kowalski and the Company, dated July 7, 1997* 10.18 Employment Agreement between Vincent M. Dadamo and the Company, dated May 29, 1999* 10.19 ICT Group, Inc. Non-Qualified Deferred Compensation Plan* 21 List of Subsidiaries* 23 Consent of Independent Public Accountants* 27 Financial Data Schedule*
- --------- * Filed herewith. + Compensation plans and arrangements for executives and others. (1) Filed as an exhibit to the Company's Registration Statement on Form S-1 on April 26, 1996 (Registration No. 333-4150). (2) Filed as an exhibit to Amendment No. 2 to the Company's Registration Statement on Form S-1 on June 4, 1996 (Registration No. 333-4150). (3) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q on May 13, 1998. 16 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. ICT GROUP, INC. (Registrant) Dated: March 27, 2000 By:/s/ John J. Brennan -------------------------------- John J. Brennan Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- By: /s/ John J. Brennan Chairman, President, Chief March 27, 2000 -------------------------------------- Executive Officer and Director John J. Brennan (principal executive officer) By: /s/ Vincent A. Paccapaniccia Senior Vice President, Finance and March 27, 2000 -------------------------------------- Administration, Chief Financial Officer Vincent A. Paccapaniccia and Asst. Secretary (principal financial and accounting officer) By: /s/ Donald P. Brennan Director March 27, 2000 -------------------------------------- Donald P. Brennan By: /s/ Bernard Somers Director March 27, 2000 -------------------------------------- Bernard Somers By: /s/ John Stoops Director March 27, 2000 -------------------------------------- John Stoops
17 EXHIBIT INDEX
Exhibit No. Description - ----------- ----------- 10.16 Employment Agreement between John P. McCabe and the Company, dated April 18, 1997* 10.17 Employment Agreement between Timothy F. Kowalski and the Company, dated July 7, 1997* 10.18 Employment Agreement between Vincent M. Dadamo and the Company, dated May 29, 1999* 10.19 ICT Group, Inc. Non-Qualified Deferred Compensation Plan* 21 List of Subsidiaries* 23 Consent of Independent Public Accountants* 28 Financial Data Schedule*
18 ICT GROUP, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE Page ---- REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2 CONSOLIDATED BALANCE SHEETS F-3 CONSOLIDATED STATEMENTS OF OPERATIONS F-4 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY F-5 CONSOLIDATED STATEMENTS OF CASH FLOWS F-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7 FINANCIAL STATEMENT SCHEDULE: II. VALUATION AND QUALIFYING ACCOUNTS F-18 F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To ICT Group, Inc.: We have audited the accompanying consolidated balance sheets of ICT Group, Inc. (a Pennsylvania corporation) and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1999. These financial statements and schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of ICT Group, Inc. and subsidiaries as of December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the Index to Consolidated Financial Statements and Financial Statement Schedule is presented for purposes of complying with the Securities and Exchange Commission's rules and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Philadelphia, Pa., February 11, 2000 F-2 ICT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
December 31, -------------------------------- ASSETS 1999 1998 ------ --------------- --------------- CURRENT ASSETS: Cash and cash equivalents $ 12,239,021 $ 14,255,253 Accounts receivable, net of allowance for doubtful accounts of $804,588 and $514,897 28,796,353 26,343,681 Prepaid expenses and other 2,599,418 1,557,915 Deferred income taxes 556,456 194,739 --------------- --------------- Total current assets 44,191,248 42,351,588 PROPERTY AND EQUIPMENT, net 29,420,635 28,634,260 DEFERRED INCOME TAXES 2,858,145 3,155,279 OTHER ASSETS 1,602,721 1,735,191 --------------- --------------- $ 78,072,749 $ 75,876,318 =============== =============== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 4,000,000 $ 4,000,000 Current portion of capitalized lease obligations 524,642 665,487 Accounts payable 7,868,817 6,884,079 Accrued expenses 5,031,018 3,708,736 --------------- --------------- Total current liabilities 17,424,477 15,258,302 --------------- --------------- LONG-TERM DEBT 10,000,000 14,000,000 --------------- --------------- CAPITALIZED LEASE OBLIGATIONS 308,289 832,931 --------------- --------------- COMMITMENTS AND CONTINGENCIES (Note 8) SHAREHOLDERS' EQUITY: Preferred stock, $.01 par value, 5,000,000 shares authorized, none issued -- -- Common stock, $.01 par value, 40,000,000 shares authorized, 11,810,025 and 11,642,475 shares issued and outstanding 118,100 116,425 Additional paid-in capital 49,402,416 49,334,130 Deferred compensation -- (53,716) Retained earnings (accumulated deficit) 1,554,005 (3,191,000) Accumulated other comprehensive loss (734,538) (420,754) --------------- --------------- Total shareholders' equity 50,339,983 45,785,085 --------------- --------------- $ 78,072,749 $ 75,876,318 =============== ===============
The accompanying notes are an integral part of these statements. F-3 ICT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended December 31, --------------------------------------------- 1999 1998 1997 ------------ --------------- ------------- NET REVENUES $153,049,467 $120,981,890 $ 91,652,978 ------------ ------------ ------------ OPERATING EXPENSES: Cost of services 84,390,236 69,587,985 50,662,062 Selling, general and administrative 60,079,796 47,011,939 37,008,848 ------------ ------------ ---------- 144,470,032 116,599,924 87,670,910 ------------ ------------ ------------ Operating income 8,579,435 4,381,966 3,982,068 INTEREST EXPENSE 1,261,652 1,019,511 478,726 INTEREST INCOME (460,684) (613,682) (876,668) ------------ ------------ ------------ Income before income taxes 7,778,467 3,976,137 4,380,010 INCOME TAXES 3,033,462 1,549,309 1,708,204 ------------ ------------ ------------ NET INCOME $ 4,745,005 $ 2,426,828 $ 2,671,806 ============ ============ ============ EARNINGS PER SHARE: Basic earnings per share $ 0.40 $ 0.21 $ 0.23 ============ ============ ============ Diluted earnings per share $ 0.39 $ 0.20 $ 0.22 ============ ============ ============ Shares used in computing basic earnings per share 11,748,776 11,569,931 11,542,234 ============ ============ ============ Shares used in computing diluted earnings per share 12,261,075 12,023,152 12,044,341 ============ ============ ============
The accompanying notes are an integral part of these statements. F-4 ICT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Accumulated Common Stock Additional Deferred Retained Other Comp- Total --------------------- Paid-in Compen- Earnings Rehensive Shareholders' Shares Amount Capital sation (Deficit) Income (loss) Equity ----------- -------- ----------- --------- ----------- ------------- ------------ BALANCE, DECEMBER 31, 1996 11,538,300 $115,383 $49,338,490 $(161,140) $(8,289,634) $ 17,245 $41,020,344 Cancellation of stock options -- -- (84,648) -- -- -- (84,648) Amortization of deferred compensation -- -- -- 53,712 -- -- 53,712 Exercise of stock options 4,000 40 4,037 -- -- -- 4,077 ----------- Comprehensive income: Net income -- -- -- -- 2,671,806 -- 2,671,806 Currency translation adjustment -- -- -- -- -- (297,092) (297,092) ----------- Total comprehensive income 2,374,714 ----------- -------- ----------- --------- ----------- --------- ----------- BALANCE, DECEMBER 31, 1997 11,542,300 115,423 49,257,879 (107,428) (5,617,828) (279,847) 43,368,199 Amortization of deferred compensation -- -- -- 53,712 -- -- 53,712 Exercise of stock options 100,175 1,002 76,251 -- -- -- 77,253 ----------- Comprehensive income: Net income -- -- -- -- 2,426,828 -- 2,426,828 Currency translation adjustment -- -- -- -- -- (140,907) (140,907) ----------- Total comprehensive income 2,285,921 ----------- -------- ----------- --------- ----------- --------- ----------- BALANCE, DECEMBER 31, 1998 11,642,475 116,425 49,334,130 (53,716) (3,191,000) (420,754) 45,785,085 Amortization of deferred compensation -- -- -- 53,716 -- -- 53,716 Exercise of stock options 167,550 1,675 68,286 -- -- -- 69,961 ----------- Comprehensive income: Net income -- -- -- -- 4,745,005 -- 4,745,005 Currency translation adjustment -- -- -- -- -- (313,784) (313,784) ----------- Total comprehensive income 4,431,221 ----------- -------- ----------- --------- ----------- --------- ----------- BALANCE, DECEMBER 31, 1999 11,810,025 $118,100 $49,402,416 -- $ 1,554,005 $(734,538) $50,339,983 =========== ======== =========== ========= =========== ========= ===========
The accompanying notes are an integral part of these statements. F-5 ICT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended December 31, ---------------------------------------------- 1999 1998 1997 -------------- ----------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,745,005 $ 2,426,828 $ 2,671,806 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation and amortization 8,003,889 5,667,166 3,859,914 Deferred income tax expense (benefit) (64,583) 143,857 (242,216) (Increase) decrease in- Accounts receivable (2,452,672) (8,659,610) (4,144,986) Prepaid expenses and other (1,041,503) 309,612 (985,159) Other assets 42,587 (406,491) (38,438) Increase (decrease) in- Accounts payable 984,738 1,061,441 3,015,999 Accrued expenses 1,322,282 (250,466) 2,036,003 ------------- ----------- ------------ Net cash provided by operating activities 11,539,743 292,337 6,172,923 ------------ ----------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (8,646,665) (14,755,145) (10,585,839) ------------- ----------- ------------ Net cash used in investing activities (8,646,665) (14,755,145) (10,585,839) ------------- ----------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt -- 12,161,222 5,515,066 Payments on long-term debt (4,000,000) (346,202) (671,444) Payments on capitalized lease obligations (665,487) (744,333) (724,694) Proceeds from exercise of stock options 69,961 77,253 4,077 ------------- ----------- ------------ Net cash provided by (used in) financing activities (4,595,526) 11,147,940 4,123,005 ------------- ----------- ------------ EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (313,784) (140,907) (297,092) ------------- ----------- ------------ NET DECREASE IN CASH AND CASH EQUIVALENTS (2,016,232) (3,455,775) (587,003) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 14,255,253 17,711,028 18,298,031 -------------- ----------- ------------ CASH AND CASH EQUIVALENTS, END OF YEAR $ 12,239,021 $14,255,253 $ 17,711,028 ============= =========== ============
The accompanying notes are an integral part of these statements. F-6 ICT GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BACKGROUND: ICT Group, Inc. and subsidiaries (the "Company") is a global supplier of Customer Relationship Management (CRM) services - consisting of integrated telesolutions, e-solutions and market solutions - which help its clients identify, acquire, retain, service, measure and maximize the lifetine value of their customer relationships. The Company manages 32 customer contact centers in the U.S., Europe, Canada and Australia from which it supports outbound and inbound telesales, customer management services, Web-enabled center services and e-mail management processing for domestic and multinational corporations and institutions, primarily in the insurance, financial, telecommunications/utilities, pharmaceutical and healthcare and information technology industries. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Principles of Consolidation The consolidated financial statements include the accounts of ICT Group, Inc. and its subsidiaries. All material intercompany balances and transactions have been eliminated. Pursuant to Statement of Financial Accounting Standards ("SFAS") No. 52, substantially all assets and liabilities of the Company's foreign subsidiaries are translated at the period-end currency exchange rate and revenues and expenses are translated at an average currency exchange rate for the period. The resulting translation adjustment is accumulated in a separate component of shareholders' equity. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue Recognition The Company recognizes revenues on programs as services are performed, generally based on hours of work incurred. Amounts collected from customers prior to the performance of services are recorded as deferred revenues. Cash and Cash Equivalents Cash and cash equivalents include cash and highly liquid investments purchased with an original maturity of three months or less. Cash equivalents at December 31, 1999 consist of an overnight repurchase agreement, money market accounts and investment-grade commercial paper. F-7 Property and Equipment December 31, ----------------------------- 1999 1998 ----------- ------------- Communications and computer equipment $41,969,697 $ 37,269,157 Furniture and fixtures 9,556,467 7,257,311 Leasehold improvements 4,678,383 3,031,414 ----------- ------------- 56,204,547 47,557,882 Less - Accumulated depreciation and amortization (26,783,912) (18,923,622) ----------- ------------- $29,420,635 $ 28,634,260 =========== ============= Property and equipment are recorded at cost. Depreciation and amortization are provided over the estimated useful lives of the applicable assets using the straight-line method. The lives used are as follows: Communications and computer equipment 5 years Furniture and fixtures 5-7 years Leasehold improvements Lease term Depreciation expense was $7,860,290, $5,564,496 and $3,721,321 for the years ended December 31, 1999, 1998 and 1997, respectively. Repairs and maintenance are charged to expense as incurred. Additions and betterments are capitalized. Equipment under capital leases included in property and equipment is $5,946,468, with related accumulated amortization of $5,072,021 and $4,315,682 at December 31, 1999 and 1998, respectively. Other Assets December 31, -------------------------- 1999 1998 ------------- ---------- Deposits $ 866,021 $ 867,701 Goodwill, net of accumulated amortization of $278,427 and $217,941 629,508 689,994 Other 107,192 177,496 ------------- ---------- $ 1,602,721 $1,735,191 ============= ========== Goodwill is amortized over 15 years on a straight-line basis. The Company evaluates the realizability of goodwill based on estimates of undiscounted future cash flows over the remaining useful life of the assets acquired. If the amount of such estimated undiscounted future cash flows is less than the net book value of the assets acquired, the assets are written down to the amount of the estimated undiscounted cash flows. Management believes that there has been no impairment of goodwill as of December 31, 1999. F-8 Accrued Expenses December 31, ------------------------ 1999 1998 ----------- ---------- Payroll and related benefits $ 2,977,313 $1,786,945 Telecommunications expense 900,192 871,761 Income tax payable -- 103,367 Interest 24,500 325,646 Other 1,129,013 621,017 ----------- ---------- $ 5,031,018 $3,708,736 =========== ========== Income Taxes The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes," the objective of which is to recognize the amount of current and deferred income taxes payable or refundable at the date of the financial statements as a result of all events that have been recognized in the financial statements as measured by enacted tax laws. Supplemental Cash Flow Information For the years ended December 31, 1999, 1998 and 1997, the Company paid interest of $1,562,798, $736,473, and $440,660, respectively. Capital lease obligations of $947,208, were incurred on equipment leases entered into in 1997. For the years ended December 31, 1999, 1998 and 1997, the Company paid income taxes of $3,529,584, $1,968,387 and $919,637, respectively. Major Customers and Concentration of Credit Risk In 1999, 1998 and 1997, two customers accounted for approximately 17%, 22% and 31% of net revenues, respectively. In 1999, 1998 and 1997, net revenues from customers within the insurance industry accounted for 35%, 34% and 42% of total net revenues, respectively, and customers within the financial services industry accounted for 30%, 33% and 24% of total net revenues, respectively. The loss of the Company's major customers or a downturn in the insurance or financial services industries could have a material adverse effect on the Company's business. Concentration of credit risk is limited to trade receivables and is subject to the financial conditions of certain major customers. The Company does not require collateral from its customers. Earnings Per Share The Company has presented earnings per share pursuant to SFAS No. 128, "Earnings Per Share," and the Securities and Exchange Commission Staff Accounting Bulletin No. 98. Basic earnings per share ("Basic EPS") is computed by dividing the net income for each year by the weighted average number of shares of Common stock outstanding for each year. Diluted earnings per share ("Diluted EPS") is computed by dividing net income for each year by the weighted average number of shares of Common stock and the dilutive effect of Common stock equivalents during each year. For the years ended December 31, 1999, 1998 and 1997, the dilutive effect of Common stock equivalents used in computing Diluted EPS was 512,299, 453,221 and 502,107, respectively. For the years ended December 31, 1999, 1998 and 1997, options to purchase 68,500, 782,429 and 618,418 shares of Common stock were outstanding but not included in the computation of Diluted EPS as the result would be antidilutive. F-9 Comprehensive Income (Loss) The Company follows SFAS No. 130, "Reporting Comprehensive Income". This statement requires companies to classify items of other comprehensive income by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of the balance sheet. 3. DEBT: December 31, ------------------------ 1999 1998 ----------- ----------- Term loan, interest at 7%, principal payments of $333,333 per month through June 2003 $14,000,000 $18,000,000 Less - Current portion (4,000,000) (4,000,000) ----------- ----------- $10,000,000 $14,000,000 =========== =========== Future maturities of long-term debt are as follows at December 31, 1999: 2000 $ 4,000,000 2001 4,000,000 2002 4,000,000 2003 2,000,000 ------------ $ 14,000,000 ============ In April 1998, the Company entered into an agreement with two banks under which the Company obtained a line of credit for an aggregate of $45.0 million (the "Line of Credit"). Upon execution of the agreement, all principal amounts outstanding under prior agreements, plus accrued interest and fees incurred in connection with the new agreement, were rolled into the Line of Credit. This agreement was amended in December 1998 to allow for an annual calendar year term out. Borrowings may be used for acquisitions, working capital, capital expenditures, and other corporate purposes. The Line of Credit can be drawn upon through April 2001, at which time all amounts outstanding are repayable, unless the Company has elected to term out eligible borrowings as described below. Interest on borrowings is calculated at a variable rate and payable quarterly. Under the terms of the amended agreement, the Company has the option, once each year, to convert amounts borrowed for capital expenditures to term loans. Amounts converted to term loans are repayable monthly in fifty-four equal principal payments plus interest. Interest on the term loans is variable at a base rate, as defined, minus .5%. The Company may elect to convert such variable rate to a fixed rate, as defined, plus 1.50%. In December 1998, the Company elected to convert borrowings under the Line of Credit into a term loan. The term loan is repayable in 54 monthly installments of $333,333 plus interest at a fixed rate of 7%, commencing January 1999. Repayments of termed out amounts permanently reduce the amount available to borrow under the Line of Credit. The Company must pay a commitment fee of .25% on the average daily balance of any unused amount of the Line of Credit, payable quarterly. The amount of the unused Line of Credit at December 31, 1999 totaled $27,000,000. The Company incurred interest expense of $0 and $650,908 under the Line of Credit for the years ended December 31, 1999 and December 31, 1998, respectively. The weighted average interest on borrowings under the Line of Credit for the year ended December 31, 1998 was 7.4%. Borrowings under the Line of Credit are secured by substantially all of the Company's assets. The Company is required to maintain certain financial ratios and a specified level of net worth, as defined, and payments of dividends and repurchases of stock are limited. F-10 4. CAPITALIZED LEASE OBLIGATIONS: The Company leases certain equipment under capital leases. Future minimum lease payments as of December 31, 1999, are as follows: 2000 $ 599,824 2001 308,107 ------------ Total minimum lease payments 907,931 Less- Amount representing interest (75,000) ------------ Present value of minimum lease payments 832,931 Less- Current portion (524,642) ------------ $ 308,289 ============ 5. INCOME TAXES: The components of the income (loss) before income taxes are as follows: Year Ended December 31, ---------------------------------------- 1999 1998 1997 ----------- ------------ ------------ Domestic $ 7,519,791 $ 4,038,383 $ 3,192,559 Foreign 258,676 (62,246) 1,187,451 ----------- ------------- ------------ $ 7,778,467 $ 3,976,137 $ 4,380,010 =========== ============ ============ The components of the provision (benefit) for income taxes are as follows: Year Ended December 31, ------------------------------------------------------- 1999 1998 1997 -------------- -------------- --------------- Current: Federal $ 2,680,365 $ 1,271,126 $ 1,339,098 State -- 9,746 10,540 Foreign 417,680 124,580 462,831 -------------- -------------- -------------- 3,098,045 1,405,452 1,812,469 -------------- -------------- -------------- Deferred: Federal 123,445 121,725 (90,898) State (38,548) 22,132 (13,367) Foreign (149,480) -- -- -------------- -------------- -------------- (64,583) 143,857 (104,265) -------------- -------------- -------------- $ 3,033,462 $ 1,549,309 $ 1,708,204 ============== ============== ============== F-11 The approximate income tax effect of each type of temporary difference is as follows: December 31, ------------------------------- 1999 1998 -------------- -------------- Gross deferred tax assets: Nonrecurring compensation expense $ 3,526,358 $ 4,006,203 Accruals and reserves not currently deductiible for tax 556,456 301,059 Deferred compensation -- 83,791 Other 192,034 -- -------------- -------------- $ 4,274,848 $ 4,391,053 ============== ============== Gross deferred tax liabilities: Cash basis of accounting $ -- $ (287,364) Depreciation methods (755,433) (619,265) Other (104,814) (134,406) -------------- -------------- $ (860,247) $ (1,041,035) ============== ============== The Company has recorded no valuation reserve for deferred tax assets as of December 31, 1999. Although realization is not assured, management believes it is more likely than not that all of the deferred tax assets will be realized. The amount of the deferred tax asset considered realizable, however, could be reduced in the near-term if estimates of future taxable income are reduced. In June 1996, the Company recorded a nonrecurring compensation charge of $12.7 million relating to the extension of stock options. In connection with the compensation charge, the Company recorded a deferred tax benefit of $4.7 million based on the then excess of the Company's stock price ($16 per share) over the exercise price of the extended options. To the extent the stock price is below $16 per share when the options are exercised, the actual tax deduction the Company will receive will be less than the carrying amount of the deferred tax asset. Based on the Company's stock price at December 31, 1999 of $12.25 per share, an impairment of $717,000 would have occurred had all of the extended options been exercised. To the extent non-extended options are exercised that result in a tax deduction the potential impairment of the deferred tax asset would be reduced. The reconciliation of the statutory federal income tax rate to the Company's effective income tax rate is as follows: Year Ended December 31, ------------------------- 1999 1998 1997 ---- ---- ---- Federal statutory tax rate 34.0% 34.0% 34.0% State income taxes, net of federal tax benefit .2 1.3 4.0 Other 4.8 3.7 1.0 -------------------------- 39.0% 39.0% 39.0% ======= ======= ======= F-12 6. PROFIT SHARING PLAN: The Company maintains a trusteed profit sharing plan (Section 401(k)) for all qualified employees, as defined. The Company matches 50% of employee contributions, up to a maximum of 6% of the employee's compensation; however, it may also make additional contributions to the Plan based upon profit levels and other factors. No such additional contributions were made in 1999, 1998 or 1997. Employees are fully vested in their contributions, while full vesting for the Company's contributions occurs upon death, disability, retirement or completion of five years of service. In 1999, 1998 and 1997, the Company's contributions were $446,050, $323,060 and $296,529, respectively. The Plan's trustees are the management of the Company. In 1999, the Company adopted a Non-Qualified Deferred Compensation Plan for certain employees, with deferrals to commence in April 2000. This plan will allow these employees to defer a portion of their compensation on a pre-tax basis. Currently, there is no employer match on any amounts deferred. Employees are fully vested in their deferred amounts, but withdrawals are not permitted until the plan is terminated, the employee attains age 65, or the employee terminates, becomes disabled, or dies. Other withdrawals are permitted for unforeseeable emergencies only. 7. EQUITY PLANS: Stock Option Plans The Company's 1996 Equity Compensation Plan authorizes up to 1,120,000 shares of Common Stock for issuance in connection with the granting to employees and consultants of incentive and nonqualified stock options, restricted stock, stock appreciation rights and other awards based on the Company's Common Stock. The options to be granted and the option prices are established by the Board of Directors or a committee composed of two or more of its members. Incentive stock options are granted at prices not less than fair market value. Options are exercisable for periods not to exceed ten years, as determined by the Board of Directors or its committee. As of December 31, 1999, 449,625 shares of Common Stock were available for grant under the plan. The Company's 1996 Non-Employee Director Plan authorizes up to 30,000 shares of Common Stock for issuances of nonqualified stock options to non-employee directors. As of December 31, 1999, 22,000 shares of Common Stock are available for grant under this plan. As of December 31, 1999, there were options to purchase 574,675 shares of Common Stock outstanding in connection with the Company's 1987 Stock Option Plan. No future grants will be made under this plan. Equity Incentive Plan In December 1995, the Company adopted an Equity Incentive Plan that provided for the issuance of up to 270,000 Equity Incentive Units ("Units"). In December 1995, the Company awarded 159,300 Units with a purchase price of $1.02 per Unit. Each Unit allows the holder the right to purchase one share of Common Stock at a specified price. Units are exercisable for a period not to exceed ten years from the date of grant. As of December 31, 1999, there were 85,500 Units outstanding. No more Units will be granted under the Equity Incentive Plan. F-13 Information with respect to the options granted under the stock option plans and Units is as follows: Weighted Exercise Average Exercise Shares Price Price ---------- -------------- ---------------- Outstanding, December 31, 1996 1,010,877 .04 - 16.25 .81 Granted 148,500 4.13 - 16.00 6.48 Exercised (4,000) 1.02 1.02 Canceled (38,852) 1.02 - 1.57 1.09 --------- -------------- ---------- Outstanding, December 31, 1997 1,120,525 .04 - 16.25 1.55 Granted 235,200 4.75 - 4.88 4.87 Exercised (100,175) .04 - 1.57 .77 Canceled (19,900) 1.57 - 4.88 3.08 --------- -------------- ---------- Outstanding, December 31, 1998 1,235,650 .04 - 16.25 2.22 Granted 300,800 3.40 - 11.00 3.91 Exercised (167,550) .04 - 4.75 .45 Canceled (40,475) 1.02 - 16.00 6.30 --------- -------------- ---------- Outstanding, December 31, 1999 1,328,425 $ .04 - 16.25 2.71 ========= =============== ========== The following table summarizes information about stock options and units outstanding at December 31, 1999:
Options Outstanding Options Exercisable ------------------- ------------------- Weighted Weighted Average Average Range of Number Remaining Exercise Number Weighted Average Exercise Price Outstanding Life Price Exercisable Exercise Price -------------- ----------- --------- ---------- ------------- ---------------- $ .04 to $ 1.63 660,175 4 $ .27 657,475 $ .26 $1.64 to $ 4.88 508,250 9 4.10 169,825 4.42 $4.89 to $ 8.13 106,500 8 5.35 41,850 5.18 $9.75 to $16.25 53,500 7 14.36 34,900 14.70 ----------- --------- ---------- ------------ -------------- $ .04 to $16.25 1,328,425 6 $ 2.71 904,050 $ 1.83 =========== ========= ========== ============ ==============
Company Option Plans The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and the related interpretations in accounting for its stock option plans. The disclosure requirement of SFAS No. 123, "Accounting for Stock-Based Compensation," was adopted by the Company in 1996. Had compensation cost for the Company's stock-based compensation plans been determined under SFAS No. 123, the Company's net income would have been decreased to the pro forma amounts indicated below. Because the SFAS No. 123 method of accounting is not required to be applied to options granted prior to January 1, 1995, the resulting pro forma compensation charge may not be representative of that to be expected in future years. F-14 Year Ended December 31, ----------------------------------------------- 1999 1998 1997 ------------ ------------ ------------ Net income, as reported $ 4,745,005 $ 2,426,828 $ 2,671,806 Pro forma net income $ 4,131,810 $ 2,175,662 $ 2,497,235 Diluted EPS, as reported $ .39 $ .20 $ .22 Pro forma Diluted EPS $ .34 $ .18 $ .21 The weighted average fair value of the options granted in 1999, 1998 and 1997 is estimated at $2.05, $2.12 and $3.64 per share, respectively, on the date of grant using the Black-Scholes option pricing model with the following assumptions: no expected dividend yield, volatility of 85%, weighted average risk-free interest rate of 5% in 1999, 5% in 1998 and 6% in 1997, and an expected life of 2 years in 1999 and 1998 and 7 years in 1997. 8. COMMITMENTS AND CONTINGENCIES: ------------------------------ The Company leases office facilities and certain equipment under operating leases. Rent expense was $9,716,388, $7,087,136 and $4,951,149 for the years ended December 31, 1999, 1998 and 1997, respectively. Future minimum rentals for all operating leases are as follows: 2000 $9,633,524 2001 8,275,244 2002 6,932,559 2003 5,490,704 2004 3,272,424 2005 and thereafter 3,992,859 The Company enters into agreements with its telephone long-distance carriers ranging from one to three years, which provide for, among other things, annual minimum purchases and termination penalties. From time to time, the Company is involved in certain legal actions arising in the ordinary course of business. In management's opinion, the outcome of such actions will not have a material adverse effect on the Company's financial position or results of operations. In October 1997, a shareholder, purporting to act on behalf of a class of ICT shareholders filed a complaint in the United States District Court for the Eastern District of Pennsylvania against the Company and certain of its directors. The complaint alleges that the defendants violated the federal securities laws, and seeks compensatory and other damages, including rescission of stock purchases made by the plaintiff and other class members in connection with the Company's Offering in June 1996. The defendants believe the complaint is without merit, deny all of the allegations of wrong doing and are vigorously defending the suit. In February 1998, the defendants filed a motion to dismiss the complaint. In May 1998, the complaint was dismissed by a judge for the United States District Court for the Eastern District of Pennsylvania with leave to plaintiff to file an amended complaint on narrow accounting allegations. In June 1998, plaintiffs filed a First Amended Class Action Complaint purporting to bring negligence claims in connection with the Company's Offering. The defendants continue to deny all allegations of wrongdoing, believe the amended complaint is without merit and are vigorously defending the suit. In November 1998, the court granted a motion appointing Rowan Klein and Michael Mandat as lead plaintiffs. In February 1999, the court dismissed the case without prejudice, directing that the case remain in status quo, that the statute of limitations be tolled and that the parties continue with discovery and advise the court if assistance by the court is needed. Since that time the defendants filed a motion for summary judgement seeking to have the case dismissed on the grounds that there is no material issue of fact. Plaintiffs filed a response in opposition to defendant's motion and discovery was conducted by the parties. The court has not ruled as yet on defendants' motion. In July 1996, Main Street Marketing of America Incorporated ("Main Street Marketing") brought a demand for arbitration against the Company claiming damages as a result of the Company's alleged breach of a service agreement under which the Company agreed to provide Main Street Marketing with various data entry and data processing services relating to Main Street Marketing's magazine subscription program. Main Street Marketing alleges that the Company committed various breaches of the service agreement and has demanded an award in excess of $15 million. The Company has responded to this demand for arbitration by denying liability and counterclaiming in an amount in excess of $125,000. Discovery has progressed in this matter, but has not yet been completed. It is not possible at this stage of the proceeding to evaluate the probable outcome of this litigation. F-15 The Company has renewable employment agreements with nine key executives with terms ranging from one to three years. The agreements provide for, among other things, severance payments ranging from six months to three years. 9. OPERATING AND GEOGRAPHIC INFORMATION: ------------------------------------- Under the disclosure requirements of SFAS No. 131, the Company classifies its operations into three business segments: Domestic TeleServices, International Services, and Customer Management Services. Previously, the Company reported disclosure for four operating segments. The Company reassessed its operating segments and determined that three operating segments more appropriately reflect the Company's business operations. Specifically, the Company has combined the previously reported Marketing Services and Management Services segments of its business into a single segment called Customer Management Services. The operating segments are managed separately because each operating segment represents a strategic business unit that offers different services. The accounting policies of the operating segments are the same as described in the summary of significant accounting policies (see Note 2). Segment assets include amounts specifically identified to each segment. Corporate assets consist primarily of property and equipment. The Domestic TeleServices segment provides inbound and outbound telemarketing services. The International Services segment provides international multilingual inbound and outbound telemarketing services, customer management services, marketing, research and other value-added services and includes business conducted by Spantel for the US Hispanic market. The Customer Management Services segment provides marketing, research, consulting teleservices, and ongoing customer care management in behalf of customers operating on the Company's target industries. For the Year Ended December 31, ------------------------------------------ 1999 1998 1997 ------------- ------------ ----------- (In thousands) Revenues: Domestic TeleServices $ 83,896 $ 79,030 $ 58,480 International Services 24,008 13,373 12,867 Customer Management Services 45,145 28,579 20,306 ------------- ------------ --------- $ 153,049 $ 120,982 $ 91,653 ============= ============ ========= Operating income (loss): Domestic TeleServices $ 3,958 $ 5,791 $ 4,306 International Services (99) (1,263) 161 Customer Management Services 4,720 (146) (485) ------------- ------------ --------- $ 8,579 $ 4,382 $ 3,982 ============= ============ ========= Total Assets: Domestic TeleServices $ 41,408 $ 41,786 $ 37,662 International Services 15,777 13,356 9,777 Customer Management Services 15,853 15,996 10,288 Corporate 5,035 4,738 3,851 ------------- ------------ --------- $ 78,073 $ 75,876 $ 61,578 ============= ============ ========= Depreciation and Amortization: Domestic TeleServices $ 3,242 $ 2,583 $ 2,177 International Services 1,793 1,005 563 Customer Management Services 1,602 1,110 352 Corporate 1,367 969 768 ------------- ------------ --------- $ 8,004 $ 5,667 $ 3,860 ============= ============ ========= Capital Expenditures: Domestic TeleServices $ 1,625 $ 4,496 $ 4,106 International Services 5,036 4,046 3,276 Customer Management Services 1,444 4,327 1,007 Corporate 542 1,886 2,197 ------------- ------------ --------- $ 8,647 $ 14,755 $ 10,586 ============= ============ ========= F-16 The following table represents information about the Company by geographic area: For the Year Ended December 31, ---------------------------------------- 1999 1998 1997 ---------- ---------- --------- (In thousands) Revenues: United States $ 134,018 $ 111,067 $ 81,248 Canada 9,155 4,676 5,902 Europe 8,391 5,239 4,503 Australia 1,485 -- -- ---------- ---------- --------- $ 153,049 $ 120,982 $ 91,653 ========== ========== ========= Operating income (loss): United States $ 9,395 $ 5,655 $ 3,513 Canada 1,186 1,463 1,151 Europe (1,650) (2,736) (682) Australia (352) -- -- ---------- ---------- --------- $ 8,579 $ 4,382 $ 3,982 ========== ========== ========= Identifiable assets: United States $ 62,496 $ 68,107 $ 55,107 Canada 6,388 3,078 1,955 Europe 8,516 4,691 4,516 Australia 673 -- -- ---------- ---------- --------- $ 78,073 $ 75,876 $ 61,578 ========== ========== ========= F-17 ICT GROUP, INC. AND SUBSIDIARIES SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
Balance, Beginning of Charged to Balance, Description Year Expense Deductions End of Year - -------------------------------- ------------ ----------- ---------- ----------- Allowance for doubtful accounts: 1999 $ 514,897 $1,145,177 $ (855,486) $ 804,588 1998 345,897 456,697 (287,697) 514,897 1997 354,524 315,539 (324,166) 345,897
F-18 EX-10.16 2 EXHIBIT 10.16 Exhibit 10.16 EMPLOYMENT AGREEMENT THIS AGREEMENT, made as of April 18, 1997, by and between ICT GROUP, INC., a Pennsylvania corporation (hereinafter called "Company"), and John P. McCabe, an individual (hereinafter called "Employee"). WITNESSETH Company wishes to employ Employee and Employee wishes to enter into the employ of Company on the terms and conditions contained in this Agreement. NOW, THEREFORE, in consideration of the facts, mutual promises and covenants contained herein and intending to be legally bound hereby, Company and Employee agree as follows: 1. Employment. Company hereby employs Employee as President, Financial Marketing Services and Employee hereby accepts employment by Company for the period of time and upon the terms, conditions and restrictions contained in this Agreement. 2. Duties and Responsibilities. (a) Employee agrees to assume such duties and responsibilities normally associated with the position indicated above, and as may be assigned to Employee by the President of the Company from time to time. Employee shall perform any other duties reasonably required by Company and, if requested by Company, shall serve as an officer or director of Company without additional compensation. (b) Throughout the term of this Agreement, Employee shall devote his entire working time, energy, skill and best efforts to the performance of his duties hereunder in a manner which will faithfully and diligently further the business and interest of Company. During the term of this Agreement, Employee may not, directly or indirectly, do any work for any other company. 3. Term. This Agreement shall be for a term of one (1) year, commencing on May 19, 1997 and ending on May 18, 1998 unless sooner terminated as hereinafter provided. Unless either party elects to terminate this Agreement at the end of the original or any renewal term by giving the other party written notice of such election at least ninety (90) days before the expiration of the then current term, this Agreement shall be deemed to have been renewed for an additional term of one (1) year commencing on the day after the expiration of the current term, unless sooner terminated as hereinafter provided. 4. Compensation. (a) For all of the service rendered by Employee to Company, Employee shall receive a gross annual salary of $ 150,000.00, less taxes and other deductions required by law, payable in reasonable periodic installments in accordance with Company's regular payroll practices in effect from time to time. Employee's base salary shall be reviewed by Company's Board of Directors annually and may be adjusted by the Board of Directors in its sole discretion. (b) In addition to Employee's base salary, Company may pay Employee from time to time such bonuses or other additional compensation as Company may determine in its soles discretion. (c) Throughout the term of this Agreement, Employee shall be eligible to participate in Company's insurance and other benefit plans and programs subject to their terms, conditions and restrictions. Nothing herein shall preclude Company from modifying or terminating any insurance or other benefit plan or program. (d) Employee shall accrue vacation pay at a rate of 1.50 days per full-month of employment. (e) Employee will not receive any remuneration or any other benefit from any client or any other company or individual in connection with any transaction in which Company is involved, directly or indirectly. Nor will Employee assign or give any part of the compensation which he receives from Company to any other employee, agent or representative of Company, to any client or any of its employees, agents or representatives, or to any other person or entity involved, directly or indirectly, with Company. 5. Expenses. Company will reimburse Employee for all reasonable expenses incurred by Employee in connection with the performance of Employee's duties hereunder upon receipt of vouchers therefor satisfactory to Company and in accordance with Company's regular reimbursement procedures and practices in effect from time to time. 6. Post-Termination Payments. (a) If Employee is terminated by Company pursuant to Paragraph 10 hereof, Company shall pay to Employee a monthly severance payment in an amount equal to Employee's monthly salary at the time of termination for twelve (12) months. (b) Employee shall make reasonable efforts to obtain replacement income (through employment and other sources) during the period in which Employee receives post-termination payments from Company. (c) Company's obligation to make post-termination payments pursuant to Paragraph 6(a) shall be offset by any compensation earned by Employee, as an employee, consultant, independent contractor or otherwise, during the period in which Employee receives such post-termination payments. (d) Company's obligations under Paragraph 6(a) shall cease in the event Employee fails to make reasonable efforts to obtain replacement income or in the event Employee breaches any of the restrictions or obligations set forth in Paragraphs 12 and 13 of this Agreement. 7. Inability. If Employee is unable to perform the essential functions of his job, with or without reasonable accommodations, for whatever reason, for a period of thirteen (13) consecutive weeks or for a cumulative period of nineteen (19) weeks during any twelve-month period, Company shall have the right to terminate Employee's employment, in which event Company shall have no further obligations or liabilities hereunder after the date of such termination. The termination of Employee's employment with Company pursuant to this Paragraph shall not release Employee from Employee's obligations and restrictions under Paragraphs 12 and 13 of this Agreement. 8. Death. If Employee dies, Company shall have no further obligations or liabilities to Employee's estate or legal representative or otherwise after the date of his death. 9. Discharge for Cause. Company may discharge Employee at any time for "Cause", which shall include, but not be limited to: willful misconduct, fraud, misappropriation, malfeasance, misfeasance, nonfeasance, embezzlement, gross negligence, self-dealing, dishonesty, misrepresentation, conviction of a crime of moral turpitude, or material violation by Employee of any Company policy or provision of this Agreement. In the event Company terminates Employee's employment for Cause, Company shall have no further obligations or liabilities to Employee after the date of such discharge. The termination of Employee's employment with Company pursuant to this Paragraph shall not release Employee from Employee's obligations and restrictions under Paragraphs 12 and 13 of this Agreement. 10. Discharge Not for Cause. Notwithstanding any other provision of this Agreement, Company may discharge Employee at any time without cause by providing Employee with 30 days written notice, which notice Company may waive, in whole or in part, in its sole discretion, by paying Employee for such 30 days. Upon termination of Employee pursuant to this Paragraph, Company shall be obligated to provide Employee with post-termination payments in accordance with Paragraph 6, but shall have no further obligations or liabilities to Employee after the date of his termination. The termination of Employee's employment with Company pursuant to this paragraph shall not release Employee from Employee's obligations and restrictions under Paragraphs 12 and 13 of this Agreement. 11. Termination by Employee. Employee may terminate his employment under this Agreement at any time by providing Company with 30 days written notice, which notice Company may waive, in whole or in part, in its sole discretion, by paying Employee for such 30 days, Company shall have no further obligations or liabilities to Employee after the date of his termination. The termination of Employee's employment with Company pursuant to this Paragraph shall not release Employee from Employee's obligations and restrictions under Paragraphs 12 and 13 of this Agreement. 12. Company Property. (a) All advertising, sales, manufacturers' and other materials or articles or information, including without limitation data processing reports, client sales analyses, invoices, price lists or information, samples or any other materials or data of any kind furnished to Employee by Company or developed by Employee on behalf of Company or at Company's direction or for Company's use or otherwise in connection with Employee's employment hereunder, are and shall remain the sole and confidential property of Company. (b) Immediately upon termination of Employee's employment, whether by Employee or Company, whether during the term of this Agreement, upon its expiration or subsequent to its expiration, Employee shall deliver to Company, all Company property (for example, keys and credit cards) and all documents, books, records, lists and other documents relating to Company's business, regardless of where or by whom said writings were kept or prepared, retaining no copies. (c) In the event Employee receives notice from Company that his employment is or will be terminated or Employee provides Company with notice of his intent to resign, within five (5) days of receiving or providing such notice, and thereafter as may be requested by Company, Employee shall provide Company with a list of all clients and potential clients with whom he is working and/or negotiating and a summary of the status of each matter with which he is involved, directly or indirectly. 13. Restrictive Covenants, Trade Secrets, Etc. (a) For a period of one (1) year after the termination of his employment with Company, for any reason whatsoever, whether during the term of this Agreement, upon its expiration or subsequent to its expiration, whether by Employee or Company, Employee shall not for his own benefit or for the benefit of any third party, directly or indirectly, in any capacity, participate in any of the following activities: (i) hire or do any business with any employee of Company or otherwise induce or attempt to influence any employee of Company to terminate his or her employment with Company; (ii) divert, solicit, or do any business with any current, former (within two (2) years of the date of termination), or potential (engaged in discussion with Company as of the date of termination) client of Company; or (iii) cause or attempt to cause any current, former, or potential client to refrain from doing business with Company. In light of the fact that the clients of Company will be engaged in operations nationwide and Company will be contacting potential customers for its clients throughout the entire United States, the restrictions set forth in this Paragraph 13(a) shall apply throughout the entire United States. (b) During the term of this Agreement and at all times thereafter, Employee shall not use for his personal benefit, or disclose, communicate or divulge to, or use for the direct or indirect benefit of any person, firm, association or company other than Company, any material referred to in Paragraph 12 above or any information regarding the business methods, business policies, procedures, techniques, research or development projects or results, trade secrets, or other knowledge or processes of or developed by Company or any names and addresses of clients or customers or any data on or relating to past, present or prospective clients or customers or any other confidential information relating to or dealing with the business operations or activities of Company, made known to Employee or learned or acquired by Employee while in the employ of Company. (c) Any and all writing, inventions, improvements, processes, procedures and/or techniques which Employee may make, conceive, discover or develop, either solely or jointly with any other person or persons, at any time during the term of this Agreement, whether during working hours or at any other time and whether at the request or upon the suggestion of Company or otherwise, which relate to or are useful in connection with any business now or hereafter carried on or contemplated by Company, including developments or expansions of its present fields of operations, shall be the sole and exclusive property of Company. Employee shall make full disclosure to Company of all such writings, inventions, improvements, processes, procedures and techniques, and shall do everything necessary or desirable to vest the absolute title thereto in Company. Employee shall write and prepare all specifications and procedures regarding such inventions, improvements, processes, procedures and techniques and other aid and assist Company so that Company can prepare and present applications for copyright or Letters Patent therefor and can secure such copyright or Letters Patent wherever possible, as well as reissues, renewals, and extensions thereof, and can obtain the record title to such copyright or patents so that Company shall be the sole and absolute owner thereof in all countries in which it may desire to have copyright or patent protection. Employee shall not be entitled to any additional or special compensation or reimbursement regarding any and all such writings, inventions, improvements, processes, procedures and techniques, except that Company shall reimburse Employee for any expenses which Employee may incur in vesting absolute title thereto in Company. (d) Employee acknowledges that the restrictions contained in the foregoing subparagraphs (a), (b), and (c), in view of the nature of the business in which Company is engaged, are reasonable and necessary in order to protect the legitimate interests of Company, and that any violation thereof would result in irreparable injuries to Company, and Employee therefore acknowledges that, in the event of his violation of any of these restrictions, Company shall be entitled to obtain from any court of competent jurisdiction preliminary and permanent injunctive relief as well as damages and an equitable accounting of all earnings, profits and other benefits arising from such violation, which rights shall be cumulative and in addition to any other rights or remedies to which Company may be entitled. (e) Employee agrees that if any or any portion of the foregoing covenants or the application thereof, is construed to be invalid or unenforceable, the remainder of such covenant or covenants shall not be affected and the remaining covenant or covenants shall then be given full force and effect without regard to the invalid or unenforceable portion(s). If the covenant is held to be unenforceable because of the area covered, the duration thereof or the scope thereof, Employee agrees that the court making such determination shall have the power to reduce the area and/or the duration and/or scope thereof, and the covenant shall then be enforceable in its reduced form. (f) If Employee violates any of the restrictions contained in the foregoing subparagraph (a), the restrictive period shall not run in favor of Employee from the time of the commencement of any violation until such time as the violation shall be cured by Employee to the satisfaction of Company. 14. Prior Agreements. Employee represents to Company (a) that there are no restrictions, agreements or understandings whatsoever to which Employee is a party which would prevent or make unlawful his execution of this Agreement or his employment hereunder; (b) there are no agreements, restrictions or understandings whatsoever to which Employee is a party which place any limitations as to the companies or individuals with whom he may do business; (c) that his execution of this Agreement and his employment hereunder shall not constitute a breach of any contract, agreement or understanding, oral or written, to which he is a party and by which he is bound; and (d) that he is free and able to execute this Agreement and to enter into employment by Company. 15. Miscellaneous. (a) Waiver. The waiver by Company of a breach of any provision of this Agreement by Employee shall not operate or be construed as a waiver of any subsequent breach by Employee. No waiver shall be valid unless in writing and signed by Company's President. (b) Controlling Law. This Agreement and all questions relating to validity, interpretation, performance and enforcement (including, without limitation, provisions concerning limitations of actions), shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, and without the aid of any canon, custom or rule of law requiring construction against the draftsman. (c) Notices. All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received only when delivered (personally, by courier service such as Federal Express, or by other messenger) or when deposited in the United States mails, registered or certified mail, postage prepaid, return receipt requested, addressed in the case of Company, to its President at its principal place of business, and in case of Employee, to his home address, (d) Binding Nature of Agreement. This Agreement shall be binding upon and inure to the benefit of Company and its successors and assigns and shall be binding upon Employee, his heirs and legal representatives. (e) Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. (f) Provisions Separable. The provisions of this Agreement are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part. (g) Entire Agreement. This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written. The express terms hereof control and supersede any course of performance an/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing and signed by the Company's President. (h) Paragraph Headings. The paragraph headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation. (i) Survival. The covenants contained in Paragraphs 12 and 13 shall survive the expiration of this Agreement and the termination of Employee's employment. (j) Number of Days. In computing the number of days for purposes of this Agreement, all days shall be counted, including Saturdays, Sundays and holidays; provided, however, that if the final day of any time period falls on a Saturday, Sunday or holiday on which federal banks are or may elect to be closed, then the final day shall be deemed to be the next day which is not a Saturday, Sunday or such holiday. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement in Langhorne, Pennsylvania on the date first above written. ICT GROUP, INC. By:_____________________________ ______________________ John J. Brennan John P. McCabe ________________________________ ______________________ Date Date EX-10.17 3 EXHIBIT 10.17 Exhibit 10.17 EMPLOYMENT AGREEMENT THIS AGREEMENT, made as of July 7, 1997, by and between ICT GROUP, INC., a Pennsylvania corporation (hereinafter called "Company"), and Timothy Kowalski, an individual (hereinafter called "Employee"). WITNESSETH Company wishes to employ Employee and Employee wishes to enter into the employ of Company on the terms and conditions contained in this Agreement. NOW, THEREFORE, in consideration of the facts, mutual promises and covenants contained herein and intending to be legally bound hereby, Company and Employee agree as follows: 1. Employment. Company hereby employs Employee as Chief Information Officer and Employee hereby accepts employment by Company for the period of time and upon the terms, conditions and restrictions contained in this Agreement. 2. Duties and Responsibilities. (a) Employee agrees to assume such duties and responsibilities normally associated with the position indicated above, and as may be assigned to Employee by the President of the Company from time to time. Employee shall perform any other duties reasonably required by Company and, if requested by Company, shall serve as an officer or director of Company without additional compensation. (b) Throughout the term of this Agreement, Employee shall devote his entire working time, energy, skill and best efforts to the performance of his duties hereunder in a manner which will faithfully and diligently further the business and interest of Company. During the term of this Agreement, Employee may not, directly or indirectly, do any work for any other company. 3. Term. This Agreement shall be for a term of one (1) year, commencing on August 1, 1997 and ending on July 31, 1998 unless sooner terminated as hereinafter provided. Unless either party elects to terminate this Agreement at the end of the original or any renewal term by giving the other party written notice of such election at least ninety (90) days before the expiration of the then current term, this Agreement shall be deemed to have been renewed for an additional term of one (1) year commencing on the day after the expiration of the current term, unless sooner terminated as hereinafter provided. 4. Compensation. (a) For all of the service rendered by Employee to Company, Employee shall receive a gross annual salary of $ 125,000.00, less taxes and other deductions required by law, payable in reasonable periodic installments in accordance with Company's regular payroll practices in effect from time to time. Employee's base salary shall be reviewed by Company's Board of Directors annually and may be adjusted by the Board of Directors in its sole discretion. (b) In addition to Employee's base salary, Company may pay Employee from time to time such bonuses or other additional compensation as Company may determine in its soles discretion. (c) Throughout the term of this Agreement, Employee shall be eligible to participate in Company's insurance and other benefit plans and programs subject to their terms, conditions and restrictions. Nothing herein shall preclude Company from modifying or terminating any insurance or other benefit plan or program. (d) Employee shall accrue vacation pay at a rate of 1.5 days per full-month of employment. (e) Employee will not receive any remuneration or any other benefit from any client or any other company or individual in connection with any transaction in which Company is involved, directly or indirectly. Nor will Employee assign or give any part of the compensation which he receives from Company to any other employee, agent or representative of Company, to any client or any of its employees, agents or representatives, or to any other person or entity involved, directly or indirectly, with Company. 5. Expenses. Company will reimburse Employee for all reasonable expenses incurred by Employee in connection with the performance of Employee's duties hereunder upon receipt of vouchers therefor satisfactory to Company and in accordance with Company's regular reimbursement procedures and practices in effect from time to time. 6. Post-Termination Payments. (a) If Employee is terminated by Company pursuant to Paragraph 10 hereof, Company shall pay to Employee a monthly severance payment in an amount equal to Employee's monthly salary at the time of termination for six (6) months. (b) Employee shall make reasonable efforts to obtain replacement income (through employment and other sources) during the period in which Employee receives post-termination payments from Company. (c) Company's obligation to make post-termination payments pursuant to Paragraph 6(a) shall be offset by any compensation earned by Employee, as an employee, consultant, independent contractor or otherwise, during the period in which Employee receives such post-termination payments. (d) Company's obligations under Paragraph 6(a) shall cease in the event Employee fails to make reasonable efforts to obtain replacement income or in the event Employee breaches any of the restrictions or obligations set forth in Paragraphs 12 and 13 of this Agreement. 7. Inability. If Employee is unable to perform the essential functions of his job, with or without reasonable accommodations, for whatever reason, for a period of thirteen (13) consecutive weeks or for a cumulative period of nineteen (19) weeks during any twelve-month period, Company shall have the right to terminate Employee's employment, in which event Company shall have no further obligations or liabilities hereunder after the date of such termination. The termination of Employee's employment with Company pursuant to this Paragraph shall not release Employee from Employee's obligations and restrictions under Paragraphs 12 and 13 of this Agreement. 8. Death. If Employee dies, Company shall have no further obligations or liabilities to Employee's estate or legal representative or otherwise after the date of his death. 9. Discharge for Cause. Company may discharge Employee at any time for "Cause", which shall include, but not be limited to: willful misconduct, fraud, misappropriation, malfeasance, misfeasance, nonfeasance, embezzlement, gross negligence, self-dealing, dishonesty, misrepresentation, conviction of a crime of moral turpitude, or material violation by Employee of any Company policy or provision of this Agreement. In the event Company terminates Employee's employment for Cause, Company shall have no further obligations or liabilities to Employee after the date of such discharge. The termination of Employee's employment with Company pursuant to this Paragraph shall not release Employee from Employee's obligations and restrictions under Paragraphs 12 and 13 of this Agreement. 10. Discharge Not for Cause. Notwithstanding any other provision of this Agreement, Company may discharge Employee at any time without cause by providing Employee with 30 days written notice, which notice Company may waive, in whole or in part, in its sole discretion, by paying Employee for such 30 days. Upon termination of Employee pursuant to this Paragraph, Company shall be obligated to provide Employee with post-termination payments in accordance with Paragraph 6, but shall have no further obligations or liabilities to Employee after the date of his termination. The termination of Employee's employment with Company pursuant to this paragraph shall not release Employee from Employee's obligations and restrictions under Paragraphs 12 and 13 of this Agreement. 11. Termination by Employee. Employee may terminate his employment under this Agreement at any time by providing Company with 30 days written notice, which notice Company may waive, in whole or in part, in its sole discretion, by paying Employee for such 30 days, Company shall have no further obligations or liabilities to Employee after the date of his termination. The termination of Employee's employment with Company pursuant to this Paragraph shall not release Employee from Employee's obligations and restrictions under Paragraphs 12 and 13 of this Agreement. 12. Company Property. (a) All advertising, sales, manufacturers' and other materials or articles or information, including without limitation data processing reports, client sales analyses, invoices, price lists or information, samples or any other materials or data of any kind furnished to Employee by Company or developed by Employee on behalf of Company or at Company's direction or for Company's use or otherwise in connection with Employee's employment hereunder, are and shall remain the sole and confidential property of Company. (b) Immediately upon termination of Employee's employment, whether by Employee or Company, whether during the term of this Agreement, upon its expiration or subsequent to its expiration, Employee shall deliver to Company, all Company property (for example, keys and credit cards) and all documents, books, records, lists and other documents relating to Company's business, regardless of where or by whom said writings were kept or prepared, retaining no copies. (c) In the event Employee receives notice from Company that his employment is or will be terminated or Employee provides Company with notice of his intent to resign, within five (5) days of receiving or providing such notice, and thereafter as may be requested by Company, Employee shall provide Company with a list of all clients and potential clients with whom he is working and/or negotiating and a summary of the status of each matter with which he is involved, directly or indirectly. 13. Restrictive Covenants, Trade Secrets, Etc. (a) For a period of one (1) year after the termination of his employment with Company, for any reason whatsoever, whether during the term of this Agreement, upon its expiration or subsequent to its expiration, whether by Employee or Company, Employee shall not for his own benefit or for the benefit of any third party, directly or indirectly, in any capacity, participate in any of the following activities: (i) hire or do any business with any employee of Company or otherwise induce or attempt to influence any employee of Company to terminate his or her employment with Company; (ii) divert, solicit, or do any business with any current, former (within two (2) years of the date of termination), or potential (engaged in discussion with Company as of the date of termination) client of Company; or (iii) cause or attempt to cause any current, former, or potential client to refrain from doing business with Company. In light of the fact that the clients of Company will be engaged in operations nationwide and Company will be contacting potential customers for its clients throughout the entire United States, the restrictions set forth in this Paragraph 13(a) shall apply throughout the entire United States. (b) During the term of this Agreement and at all times thereafter, Employee shall not use for his personal benefit, or disclose, communicate or divulge to, or use for the direct or indirect benefit of any person, firm, association or company other than Company, any material referred to in Paragraph 12 above or any information regarding the business methods, business policies, procedures, techniques, research or development projects or results, trade secrets, or other knowledge or processes of or developed by Company or any names and addresses of clients or customers or any data on or relating to past, present or prospective clients or customers or any other confidential information relating to or dealing with the business operations or activities of Company, made known to Employee or learned or acquired by Employee while in the employ of Company. (c) Any and all writing, inventions, improvements, processes, procedures and/or techniques which Employee may make, conceive, discover or develop, either solely or jointly with any other person or persons, at any time during the term of this Agreement, whether during working hours or at any other time and whether at the request or upon the suggestion of Company or otherwise, which relate to or are useful in connection with any business now or hereafter carried on or contemplated by Company, including developments or expansions of its present fields of operations, shall be the sole and exclusive property of Company. Employee shall make full disclosure to Company of all such writings, inventions, improvements, processes, procedures and techniques, and shall do everything necessary or desirable to vest the absolute title thereto in Company. Employee shall write and prepare all specifications and procedures regarding such inventions, improvements, processes, procedures and techniques and other aid and assist Company so that Company can prepare and present applications for copyright or Letters Patent therefor and can secure such copyright or Letters Patent wherever possible, as well as reissues, renewals, and extensions thereof, and can obtain the record title to such copyright or patents so that Company shall be the sole and absolute owner thereof in all countries in which it may desire to have copyright or patent protection. Employee shall not be entitled to any additional or special compensation or reimbursement regarding any and all such writings, inventions, improvements, processes, procedures and techniques, except that Company shall reimburse Employee for any expenses which Employee may incur in vesting absolute title thereto in Company. (d) Employee acknowledges that the restrictions contained in the foregoing subparagraphs (a), (b), and (c), in view of the nature of the business in which Company is engaged, are reasonable and necessary in order to protect the legitimate interests of Company, and that any violation thereof would result in irreparable injuries to Company, and Employee therefore acknowledges that, in the event of his violation of any of these restrictions, Company shall be entitled to obtain from any court of competent jurisdiction preliminary and permanent injunctive relief as well as damages and an equitable accounting of all earnings, profits and other benefits arising from such violation, which rights shall be cumulative and in addition to any other rights or remedies to which Company may be entitled. (e) Employee agrees that if any or any portion of the foregoing covenants or the application thereof, is construed to be invalid or unenforceable, the remainder of such covenant or covenants shall not be affected and the remaining covenant or covenants shall then be given full force and effect without regard to the invalid or unenforceable portion(s). If the covenant is held to be unenforceable because of the area covered, the duration thereof or the scope thereof, Employee agrees that the court making such determination shall have the power to reduce the area and/or the duration and/or scope thereof, and the covenant shall then be enforceable in its reduced form. (f) If Employee violates any of the restrictions contained in the foregoing subparagraph (a), the restrictive period shall not run in favor of Employee from the time of the commencement of any violation until such time as the violation shall be cured by Employee to the satisfaction of Company. 14. Prior Agreements. Employee represents to Company (a) that there are no restrictions, agreements or understandings whatsoever to which Employee is a party which would prevent or make unlawful his execution of this Agreement or his employment hereunder; (b) there are no agreements, restrictions or understandings whatsoever to which Employee is a party which place any limitations as to the companies or individuals with whom he may ado business; (c) that his execution of this Agreement and his employment hereunder shall not constitute a breach of any contract, agreement or understanding, oral or written, to which he is a party and by which he is bound; and (d) that he is free and able to execute this Agreement and to enter into employment by Company. 15. Miscellaneous. (a) Waiver. The waiver by Company of a breach of any provision of this Agreement by Employee shall not operate or be construed as a waiver of any subsequent breach by Employee. No waiver shall be valid unless in writing and signed by Company's President. (b) Controlling Law. This Agreement and all questions relating to validity, interpretation, performance and enforcement (including, without limitation, provisions concerning limitations of actions), shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, and without the aid of any canon, custom or rule of law requiring construction against the draftsman. (c) Notices. All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received only when delivered (personally, by courier service such as Federal Express, or by other messenger) or when deposited in the United States mails, registered or certified mail, postage prepaid, return receipt requested, addressed in the case of Company, to its President at its principal place of business, and in case of Employee, to his home address, (d) Binding Nature of Agreement. This Agreement shall be binding upon and inure to the benefit of Company and its successors and assigns and shall be binding upon Employee, his heirs and legal representatives. (e) Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. (f) Provisions Separable. The provisions of this Agreement are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part. (g) Entire Agreement. This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, expressed or implied, oral or written except as contained in offer letter of employment to you dated July 9, 1997. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing and signed by the Company's President. (h) Paragraph Headings. The paragraph headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation. (i) Survival. The covenants contained in Paragraphs 12 and 13 shall survive the expiration of this Agreement and the termination of Employee's employment. (j) Number of Days. In computing the number of days for purposes of this Agreement, all days shall be counted, including Saturdays, Sundays and holidays; provided, however, that if the final day of any time period falls on a Saturday, Sunday or holiday on which federal banks are or may elect to be closed, then the final day shall be deemed to be the next day which is not a Saturday, Sunday or such holiday. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement in Langhorne, Pennsylvania on the date first above written. ICT GROUP, INC. By:______________________________ ____________________________ John J. Brennan Timothy Kowalski _________________________________ ____________________________ Date Date EX-10.18 4 EXHIBIT 10.18 Exhibit 10.18 EMPLOYMENT AGREEMENT THIS AGREEMENT, made as of May 25, 1999, by and between ICT GROUP, INC., a Pennsylvania corporation (hereinafter called "Company"), and Vincent Dadamo, an individual (hereinafter called "Employee"). WITNESSETH Company wishes to employ Employee and Employee wishes to enter into the employ of Company on the terms and conditions contained in this Agreement. NOW, THEREFORE, in consideration of the facts, mutual promises and covenants contained herein and intending to be legally bound hereby, Company and Employee agree as follows: 1. Employment. Company hereby employs Employee as Senior Vice President and General Counsel and Employee hereby accepts employment by Company for the period of time and upon the terms, conditions and restrictions contained in this Agreement. 2. Duties and Responsibilities. (a) Employee agrees to assume such duties and responsibilities normally associated with the position indicated above, and as may be assigned to Employee by the President of the Company from time to time. Employee shall perform any other duties reasonably required by Company and, if requested by Company, shall serve as an officer or director of Company without additional compensation. (b) Throughout the term of this Agreement, Employee shall devote his entire working time, energy, skill and best efforts to the performance of his duties hereunder in a manner which will faithfully and diligently further the business and interest of Company. During the term of this Agreement, Employee may not, directly or indirectly, do any work for any other company. Vincent Dadamo Employment Agreement Page 2 3. Term. This Agreement shall be for a term of one (1) year, commencing on June 28, 1999 and ending on June 27, 2000 unless sooner terminated as hereinafter provided. Unless either party elects to terminate this Agreement at the end of the original or any renewal term by giving the other party written notice of such election at least ninety (90) days before the expiration of the then current term, this Agreement shall be deemed to have been renewed for an additional term of one (1) year commencing on the day after the expiration of the current term, unless sooner terminated as hereinafter provided. 4. Compensation. (a) For all of the service rendered by Employee to Company, Employee shall receive a gross annual salary of $140,000.00, less taxes and other deductions required by law, payable in reasonable periodic installments in accordance with Company's regular payroll practices in effect from time to time. Employee's base salary shall be reviewed by Company's Board of Directors annually and may be adjusted by the Board of Directors in its sole discretion. (b) In addition to Employee's base salary, Company may pay Employee from time to time such bonuses or other additional compensation as Company may determine in its soles discretion. (c) Throughout the term of this Agreement, Employee shall be eligible to participate in Company's insurance and other benefit plans and programs subject to their terms, conditions and restrictions. Nothing herein shall preclude Company from modifying or terminating any insurance or other benefit plan or program. (d) Employee shall accrue vacation pay at a rate of 1.67 days per full-month of employment. (e) Employee will not receive any remuneration or any other benefit from any client or any other company or individual in connection with any transaction in which Company is involved, directly or indirectly. Nor will Employee assign or give any part of the compensation which he receives from Company to any other employee, agent or representative of Company, to any client or any of its employees, agents or representatives, or to any other person or entity involved, directly or indirectly, with Company. Vincent Dadamo Employment Agreement Page 3 5. Expenses. Company will reimburse Employee for all reasonable expenses incurred by Employee in connection with the performance of Employee's duties hereunder upon receipt of vouchers therefor satisfactory to Company and in accordance with Company's regular reimbursement procedures and practices in effect from time to time. 6. Post-Termination Payments. (a) If Employee is terminated by Company pursuant to Paragraph 10 hereof, Company shall pay to Employee a monthly severance payment in an amount equal to Employee's monthly salary at the time of termination for six (6) months. (b) Employee shall make reasonable efforts to obtain replacement income (through employment and other sources) during the period in which Employee receives post-termination payments from Company. (c) Company's obligation to make post-termination payments pursuant to Paragraph 6(a) shall be offset by any compensation earned by Employee, as an employee, consultant, independent contractor or otherwise, during the period in which Employee receives such post-termination payments. (d) Company's obligations under Paragraph 6(a) shall cease in the event Employee fails to make reasonable efforts to obtain replacement income or in the event Employee breaches any of the restrictions or obligations set forth in Paragraphs 12 and 13 of this Agreement. 7. Inability. If Employee is unable to perform the essential functions of his job, with or without reasonable accommodations, for whatever reason, for a period of thirteen (13) consecutive weeks or for a cumulative period of nineteen (19) weeks during any twelve-month period, Company shall have the right to terminate Employee's employment, in which event Company shall have no further obligations or liabilities hereunder after the date of such termination. The termination of Employee's employment with Company pursuant to this Paragraph shall not release Employee from Employee's obligations and restrictions under Paragraphs 12 and 13 of this Agreement. 8. Death. If Employee dies, Company shall have no further obligations or liabilities to Employee's estate or legal representative or otherwise after the date of his death. Vincent Dadamo Employment Agreement Page 4 9. Discharge for Cause. Company may discharge Employee at any time for "Cause", which shall include, but not be limited to: willful misconduct, fraud, misappropriation, malfeasance, misfeasance, nonfeasance, embezzlement, gross negligence, self-dealing, dishonesty, misrepresentation, conviction of a crime of moral turpitude, or material violation by Employee of any Company policy or provision of this Agreement. In the event Company terminates Employee's employment for Cause, Company shall have no further obligations or liabilities to Employee after the date of such discharge. The termination of Employee's employment with Company pursuant to this Paragraph shall not release Employee from Employee's obligations and restrictions under Paragraphs 12 and 13 of this Agreement. 10. Discharge Not for Cause. Notwithstanding any other provision of this Agreement, Company may discharge Employee at any time without cause by providing Employee with 30 days written notice, which notice Company may waive, in whole or in part, in its sole discretion, by paying Employee for such 30 days. Upon termination of Employee pursuant to this Paragraph, Company shall be obligated to provide Employee with post-termination payments in accordance with Paragraph 6, but shall have no further obligations or liabilities to Employee after the date of his termination. The termination of Employee's employment with Company pursuant to this paragraph shall not release Employee from Employee's obligations and restrictions under Paragraphs 12 and 13 of this Agreement. 11. Termination by Employee. Employee may terminate his employment under this Agreement at any time by providing Company with 30 days written notice, which notice Company may waive, in whole or in part, in its sole discretion, by paying Employee for such 30 days, Company shall have no further obligations or liabilities to Employee after the date of his termination. The termination of Employee's employment with Company pursuant to this Paragraph shall not release Employee from Employee's obligations and restrictions under Paragraphs 12 and 13 of this Agreement. Vincent Dadamo Employment Agreement Page 5 12. Company Property. (a) All advertising, sales, manufacturers' and other materials or articles or information, including without limitation data processing reports, client sales analyses, invoices, price lists or information, samples or any other materials or data of any kind furnished to Employee by Company or developed by Employee on behalf of Company or at Company's direction or for Company's use or otherwise in connection with Employee's employment hereunder, are and shall remain the sole and confidential property of Company. (b) Immediately upon termination of Employee's employment, whether by Employee or Company, whether during the term of this Agreement, upon its expiration or subsequent to its expiration, Employee shall deliver to Company, all Company property (for example, keys and credit cards) and all documents, books, records, lists and other documents relating to Company's business, regardless of where or by whom said writings were kept or prepared, retaining no copies. (c) In the event Employee receives notice from Company that his employment is or will be terminated or Employee provides Company with notice of his intent to resign, within five (5) days of receiving or providing such notice, and thereafter as may be requested by Company, Employee shall provide Company with a list of all clients and potential clients with whom he is working and/or negotiating and a summary of the status of each matter with which he is involved, directly or indirectly. 13. Restrictive Covenants, Trade Secrets, Etc. (a) For a period of one (1) year after the termination of his employment with Company, for any reason whatsoever, whether during the term of this Agreement, upon its expiration or subsequent to its expiration, whether by Employee or Company, Employee shall not for his own benefit or for the benefit of any third party, directly or indirectly, in any capacity, participate in any of the following activities: (i) hire or do any business with any employee of Company or otherwise induce or attempt to influence any employee of Company to terminate his or her employment with Company; (ii) divert, solicit, or do any business with any current, former (within two (2) years of the date of termination), or potential (engaged in discussion with Company as of the date of termination) client of Company; or (iii) cause or attempt to cause any current, former, or Vincent Dadamo Employment Agreement Page 6 potential client to refrain from doing business with Company. In light of the fact that the clients of Company will be engaged in operations nationwide and Company will be contacting potential customers for its clients throughout the entire United States, the restrictions set forth in this Paragraph 13(a) shall apply throughout the entire United States. (b) During the term of this Agreement and at all times thereafter, Employee shall not use for his personal benefit, or disclose, communicate or divulge to, or use for the direct or indirect benefit of any person, firm, association or company other than Company, any material referred to in Paragraph 12 above or any information regarding the business methods, business policies, procedures, techniques, research or development projects or results, trade secrets, or other knowledge or processes of or developed by Company or any names and addresses of clients or customers or any data on or relating to past, present or prospective clients or customers or any other confidential information relating to or dealing with the business operations or activities of Company, made known to Employee or learned or acquired by Employee while in the employ of Company. (c) Any and all writing, inventions, improvements, processes, procedures and/or techniques which Employee may make, conceive, discover or develop, either solely or jointly with any other person or persons, at any time during the term of this Agreement, whether during working hours or at any other time and whether at the request or upon the suggestion of Company or otherwise, which relate to or are useful in connection with any business now or hereafter carried on or contemplated by Company, including developments or expansions of its present fields of operations, shall be the sole and exclusive property of Company. Employee shall make full disclosure to Company of all such writings, inventions, improvements, processes, procedures and techniques, and shall do everything necessary or desirable to vest the absolute title thereto in Company. Employee shall write and prepare all specifications and procedures regarding such inventions, improvements, processes, procedures and techniques and other aid and assist Company so that Company can prepare and present applications for copyright or Letters Patent therefor and can secure such copyright or Letters Patent wherever possible, as well as reissues, renewals, and extensions thereof, and can obtain the record title to such copyright or patents so that Company shall be the sole and absolute owner thereof in all Vincent Dadamo Employment Agreement Page 7 countries in which it may desire to have copyright or patent protection. Employee shall not be entitled to any additional or special compensation or reimbursement regarding any and all such writings, inventions, improvements, processes, procedures and techniques, except that Company shall reimburse Employee for any expenses which Employee may incur in vesting absolute title thereto in Company. (d) Employee acknowledges that the restrictions contained in the foregoing subparagraphs (a), (b), and (c), in view of the nature of the business in which Company is engaged, are reasonable and necessary in order to protect the legitimate interests of Company, and that any violation thereof would result in irreparable injuries to Company, and Employee therefore acknowledges that, in the event of his violation of any of these restrictions, Company shall be entitled to obtain from any court of competent jurisdiction preliminary and permanent injunctive relief as well as damages and an equitable accounting of all earnings, profits and other benefits arising from such violation, which rights shall be cumulative and in addition to any other rights or remedies to which Company may be entitled. (e) Employee agrees that if any or any portion of the foregoing covenants or the application thereof, is construed to be invalid or unenforceable, the remainder of such covenant or covenants shall not be affected and the remaining covenant or covenants shall then be given full force and effect without regard to the invalid or unenforceable portion(s). If the covenant is held to be unenforceable because of the area covered, the duration thereof or the scope thereof, Employee agrees that the court making such determination shall have the power to reduce the area and/or the duration and/or scope thereof, and the covenant shall then be enforceable in its reduced form. (f) If Employee violates any of the restrictions contained in the foregoing subparagraph (a), the restrictive period shall not run in favor of Employee from the time of the commencement of any violation until such time as the violation shall be cured by Employee to the satisfaction of Company. 14. Prior Agreements. Employee represents to Company (a) that there are no restrictions, agreements or understandings whatsoever to which Employee is a party which would prevent or make unlawful his execution of this Agreement or his employment hereunder; (b) there are no agreements, restrictions or understandings whatsoever to which Employee is a party which place any limitations as to the companies Vincent Dadamo Employment Agreement Page 8 or individuals with whom he may ado business; (c) that his execution of this Agreement and his employment hereunder shall not constitute a breach of any contract, agreement or understanding, oral or written, to which he is a party and by which he is bound; and (d) that he is free and able to execute this Agreement and to enter into employment by Company. 15. Miscellaneous. (a) Waiver. The waiver by Company of a breach of any provision of this Agreement by Employee shall not operate or be construed as a waiver of any subsequent breach by Employee. No waiver shall be valid unless in writing and signed by Company's President. (b) Controlling Law. This Agreement and all questions relating to validity, interpretation, performance and enforcement (including, without limitation, provisions concerning limitations of actions), shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, and without the aid of any canon, custom or rule of law requiring construction against the draftsman. (c) Notices. All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received only when delivered (personally, by courier service such as Federal Express, or by other messenger) or when deposited in the United States mails, registered or certified mail, postage prepaid, return receipt requested, addressed in the case of Company, to its President at its principal place of business, and in case of Employee, to his home address, (d) Binding Nature of Agreement. This Agreement shall be binding upon and inure to the benefit of Company and its successors and assigns and shall be binding upon Employee, his heirs and legal representatives. (e) Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. Vincent Dadamo Employment Agreement Page 9 (f) Provisions Separable. The provisions of this Agreement are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part. (g) Entire Agreement. This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written. The express terms hereof control and supersede any course of performance an/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing and signed by the Company's President. (h) Paragraph Headings. The paragraph headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation. (i) Survival. The covenants contained in Paragraphs 12 and 13 shall survive the expiration of this Agreement and the termination of Employee's employment. (j) Number of Days. In computing the number of days for purposes of this Agreement, all days shall be counted, including Saturdays, Sundays and holidays; provided, however, that if the final day of any time period falls on a Saturday, Sunday or holiday on which federal banks are or may elect to be closed, then the final day shall be deemed to be the next day which is not a Saturday, Sunday or such holiday. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement in Langhorne, Pennsylvania on the date first above written. ICT GROUP, INC. By:_____________________________ ____________________________ John J. Brennan Vincent Dadamo ________________________________ ____________________________ Date Date EX-10 5 EXHIBIT 10.19 Exhibit 10.19 800 TOWN CENTER DRIVE - LANGHORNE, PA 19047-1748 215-757-0200 - 800-799-6880 - Fax 215-702-2100 www.ictgroup.com ICT [logo] HUMAN RESOURCES March 16, 2000 Fidelity Investments 200 Magellan Way Covington, KY RE: Letter Of Instruction By my signature below, I authorize the following changes to the ICT Group, Inc. Non-Qualified Executive Retirement Plan, # 44167: The Implementation date for the plan is changed to April 1, 2000. Sincerely, /s/ Anne Beeson - ----------------------- Anne Beeson Vice President of Human Resources 4/11/94 The CORPORATEplan for Retirement Select Plan BASIC PLAN DOCUMENT IMPORTANT NOTE This document is not an IRS approved Prototype Plan. An Adopting Employer may not rely solely on this Plan to ensure that the Plan is unfunded and maintained primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees and exempt from parts 2 through 4 of Title I of the Employee Retirement Income Security Act of 1974 with respect to the Employer's particular situation. Fidelity Management Trust Company, its affiliates and employees may not provide you with legal advice in connection with the execution of this document. This document should be reviewed by your attorney and/or accountant prior to execution. 4/11/94 CPR SELECT BASIC PLAN DOCUMENT ARTICLE 1 ADOPTION AGREEMENT ARTICLE 2 DEFINITIONS 2.01 - Definitions ARTICLE 3 PARTICIPATION 3.01 - Date of Participation 3.02 - Resumption of Participation Following Re-employment 3.03 - Cessation or Resumption of Participation Following a Change in Status ARTICLE 4 CONTRIBUTIONS 4.01 - Deferral Contributions 4.02 - Matching Contributions 4.03 - Time of Making Employer Contributions ARTICLE 5 PARTICIPANTS' ACCOUNTS 5.01 - Individual Accounts ARTICLE 6 INVESTMENT OF CONTRIBUTIONS 6.01 - Manner of Investment 6.02 - Investment Decisions ARTICLE 7 RIGHT TO BENEFITS 7.01 - Normal or Early Retirement 7.02 - Death 7.03 - Other Termination of Employment 7.04 - Separate Account 7.05 - Forfeitures 7.06 - Adjustment for Investment Experience 7.07 - Hardship Withdrawals ARTICLE 8 DISTRIBUTION OF BENEFITS PAYABLE AFTER TERMINATION OF SERVICE 8.01 - Distribution of Benefits to Participants and Beneficiaries 8.02 - Determination of Method of Distribution 8.03 - Notice to Trustee 8.04 - Time of Distribution ARTICLE 9 AMENDMENT AND TERMINATION 9.01 - Amendment by Employer 9.02 - Retroactive Amendments 9.03 - Termination 9.04 - Distribution Upon Termination of the Plan 2 4/11/94 ARTICLE 10 MISCELLANEOUS 10.01 - Communication to Participants 10.02 - limitation of Rights 10.03 - Nonalienability of Benefits 10.04 - Facility of Payment 10.05 - Information between Employer and Trustee 10.06 - Notices 10.07 - Governing Law ARTICLE 11 PLAN ADMINISTRATION 11.01 - Powers and responsibilities of the Administrator 11.02 - Nondiscriminatory Exercise of Authority 11.03 - Claims and Review Procedures 11.04 - Cost of Administration 4/11/94 PREAMBLE It is the intention of the Employer to establish herein an unfunded plan maintained solely for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of ERISA. Article 1. Adoption Agreement. ------------------ Article 2. Definitions. ----------- 2.01. Definitions. ----------- (a) wherever used herein, the following terms have the meanings set forth below, unless a different meaning is clearly required by the context: (1) "Account" means an account established on the books of the Employer for the purpose of recording amounts credited on behalf of a Participant and any income, expenses, gains or losses included thereon. (2) "Administrator" means the Employer adopting this Plan, or other person designated by the Employer in Section 1.01(b). (3) "Adoption Agreement" means Article 1 under which the Employer establishes and adopts or amends the Plan and designates-the optional provisions selected by the Employer. The provisions of the Adoption Agreement shall be an integral part of the Plan. (4) "Beneficiary" means the person or persons entitled under Section 7.02 to receive benefits under the Plan upon the death of a Participant. (5) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (6) "Compensation" shall mean for purposes of Article 4 (Contributions) wages as defined in Section 3401(a) of the Code and all other payments of compensation to an employee by the employer (in the course of the employers trade or business) for which the employer is required to finish the employee a written statement under Section 6041 (d) and 6051 (a) (3) of the Code, excluding any items elected by the Employer in Section 1.04, reimbursements or other expense allowances, fringe benefits (cash and non-cash), moving. expenses, deferred compensation and welfare benefits, but including amounts that are not includable in the gross income of the Participant under a salary reduction agreement by reason of the application of Sections 125, 402 (a) (8), 402 (h), or 403 (b) of the Code. Compensation must be determined without regard to any rules under Section 3401(a) of the Code that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Section 3401(a)(2) of the Code). Compensation shall generally be based on the amount that would have been actually paid to the Participant during the Plan Year but for an election under Section 4.01. 4/11/94 In the case of any Self-Employed Individual or an Owner-Employee Compensation shall mean the Individual's Earned Income. (7) "Earned Income" means the net earnings of a Self-Employed Individual derived from the trade or business with respect to which the Plan is established and for which the personal services of such individual are a material income-providing factor, excluding any items not included in gross income and the deductions allocated to such items, except that for taxable years beginning after December 31, 1989 net earnings shall be determined with regard to the deduction allowed under Section 164(f) of the Code, to the extent applicable to the Employer. Net earnings shall be reduced by contributions of the Employer to any qualified plan, to the extent a deduction is allowed to the Employer for such contributions under Section 404 of the Code. (8) "Employee" means any employee of the Employer, Self-Employed Individual or Owner-Employee. (9) "Employer" means the employer named in Section 1.02(a) and any Related Employers designated in Section 1.02(b). (10) "Employment Commencement. Date" means the date on which the Employee first performs an Hour of Service. (11) "ERISA" means the Employee Retirement Income Security Act of 1974, as from time to time amended. (12) "Fidelity Fund" means any Registered Investment Company which is made available to plans utilizing the CORPORATEplan for Retirement Select Plan. (13) "Fund Share" means the share, unit, or other evidence of ownership in a Fidelity Fund. (14) "Hour of Service" means, with respect to any Employee, (A) Each hour for which the Employee is directly or indirectly paid, or entitled to payment, for the performance of duties for the Employer or a Related Employer, each such hour to be credited to the Employee for the computation period in which the duties were performed; (B) Each hour for which the Employee is directly or indirectly paid, or entitled to payment, by the Employer or Related Employer (including payments made or due from a trust fund or insurer to which the Employer contributes or pays premiums) on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity, disability, layoff, jury duty, military duty, or leave of absence, each such hour to be credited to the Employee for the Eligibility Computation Period in which such period of time occurs, subject to the following rules: (i) No more than 501 Hours of Service shall be credited under this paragraph (B) on account of any single continuous period during which the Employee performs no duties; 2 4/11/94 (ii) Hours of Service shall not be credited under this paragraph (B) for a payment which solely reimburses the Employee for medically-related expenses, or which is made or due under a plan maintained solely for the purpose of complying with applicable workmen's compensation, unemployment compensation or disability insurance laws; and (iii) If the period during which the Employee performs no duties falls within two or more computation periods and if the payment made on account of such period is not calculated on the basis of units of time, the Hours of Service credited with respect to such period shall be allocated between not more than the first two such computation periods on any reasonable basis consistently applied with respect to similarly situated Employees: and (C) Each hour not counted under paragraph (A) or (B) for which back pay, irrespective of mitigation of damages, has been either awarded or agreed to be paid by the Employer or a Related Employer, each such hour to be credited to the Employee for the computation period to which the award or agreement pertains rather than the computation period in which the award agreement or payment is made. For purposes of determining Hours of Service, Employees of the Employer and of all Related Employers will be treated as employed by a single employer. For purposes of paragraphs (B) and (C) above; Hours of Service will be calculated in accordance with the provisions of Section 2530.200b-2(b) of the Department of Labor regulations which are incorporated herein by reference. Solely for purposes of determining whether a break in service for participation purposes has occurred in a computation period, an individual who is absent from work for maternity or paternity reasons shall receive credit for the hours of service which would otherwise been credited to such individual but for such absence, or in any case in which such hours cannot be determined, 8 hours of service per day of such absence. For purposes of this paragraph, an absence from work for maternity reasons means an absence (1) by reason of the pregnancy of the individual, (2) by reason of a birth of a child of the individual, (3) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (4) for purposes of caring for such child for a period beginning immediately following such birth or placement. The hours of service credited under this paragraph shall be credited (1) in the computation period in which the absence begins. if the crediting is necessary to prevent a break in service in that period, or (2) in all other cases, in the following computation period. (15) "Normal Retirement Age" means the normal retirement age specified in Section 1.06 (a) of the Adoption Agreement. (16) "Owner-Employee" means, if the Employer is a sole proprietorship, the individual who is the sole proprietor, or if the Employer is a partnership, a partner who owns more than 10 percent of either the capital interest or the profits interest of the partnership. 3 4/11/94 (17) "Participant" means any Employee who participates in the Plan in accordance with Article 3 hereof. (18) "Plan" means the plan established by the Employer as set forth herein as a new plan or as an amendment to an existing plan, by executing the Adoption Agreement, together with any and all amendments hereto. (19) "Plan Year" means the 12-consecutive month period designated by the Employer in Section 1.01(d). (20) "Registered Investment Company" means any one or more corporations, partnerships or trusts registered under the Investment Company Act of 1940 for which Fidelity Management and Research Company serves as investment advisor. (21) "Related Employer" means any employer other than the Employer named in Section 1.02(a), if the Employer and such other employer are members of a controlled group of corporations (as defined in Section 414(b) of the Code) or an affiliated service group (as defined in Section 414(m)), or are trades or businesses (whether or not incorporated) which are under common control (as defined in Section 414(c)), or such other employer is required to be aggregated with the Employer pursuant to regulations issued under Section 414(o). (22) "Self-Employed Individual" means an individual who has Earned Income for the taxable year from the Employer or who would have had Earned Income but for the fact that the trade or business had no net profits for the taxable year. (23) "Trust" means. the trust created by the Employer. (24) "Trust Agreement" means the agreement between the Employer and the Trustee, as set forth in a separate agreement, under which assets are held, administered, and managed subject to the claims of the Employer's creditors in the event of the Employer's insolvency, until paid to Plan Participants and their Beneficiaries as specified in the Plan. (25) "Trust Fund" means the property held in the Trust by the Trustee. (26) "Trustee" means the corporation or individuals appointed by the Employer to administer the Trust in accordance with the Trust Agreement. (27) "Years of Service for Vesting" means, with respect to any Employee, the number of whole years of his periods of service with the Employer or a Related Employer (the elapsed time method to compute vesting service), subject to any exclusions elected-by the Employer in Section 1.07(b). An Employee will receive credit for the aggregate of all time period(s) commencing with the Employee's Employment Commencement Date and ending on the date a break in service begins, unless any such years are excluded by Section 1.07(b). An Employee will also receive credit for any period of severance of less than 12 consecutive months. Fractional periods of a year will be expressed in terms of days. 4 4/11/94 In the case of a Participant who has 5 consecutive 1-year breaks in service, all years of service after such breaks in service will be disregarded for the purpose of vesting the Employer-derived account balance that accrued before such breaks, but both pre-break and post-break service will count for the purposes of vesting the Employer-derived account balance that accrues after such breaks. Both accounts will share in the earnings and losses of the fund. In the case of a Participant who does not have 5 consecutive 1-year breaks in service, both the pre-break and post-break service will count in vesting both the pre-break and post-break employer-derived account balance. A break in service is a period of severance of at least 12 consecutive months. Period of severance is a continuous period of time during which the Employee is not employed by the Employer. Such period begins on the date the Employee retires, quits or is discharged, or if earlier, the 12 month anniversary of the date on which the Employee was otherwise first absent from service. In the case of an individual who is absent from work for maternity or paternity reasons, the 12 consecutive month period beginning on the first anniversary of the first date of such absence shall not constitute a break in service. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (1) by reason of the pregnancy of the individual, (2) by reason of the birth of a child of the individual, (3) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (4) for purposes of caring for such child for a period beginning immediately following such birth or placement. If the Plan maintained by the Employer is the plan of a predecessor employer, an Employee's Years of Service for Vesting shall include years of service with such predecessor employer. In any case in which the Plan maintained by the Employer is not the plan maintained by a predecessor employer, service for such predecessor shall be treated as service for the Employer to the extent provided in Section 1.08. (b) Pronouns used in the Plan are in the masculine gender but include the feminine gender unless the context clearly indicates otherwise. Article 3. Participation. ------------- 3.01. Date of Participation. An eligible Employee (as set forth in Section 1.03(a)) will become a Participant in the Plan on the first Entry Date after which he becomes an eligible Employee if he has filed an election pursuant to Section 4.01. If the eligible Employee does not file an election pursuant to Section 4.01 prior to his first Entry Date, then the eligible Employee will become a Participant in the Plan as of the first day of a Plan Year for which he has filed an election. 3.02. Resumption of Participation Following Re employment. If a Participant ceases to be an Employee and thereafter returns to the employ of the Employer he will again become a Participant as of an Entry Date following the date on which he completes an Hour of Service for the Employer following his re employment, if he is an eligible Employee as defined in Section 1.03(a), and has filed an election pursuant to Section 4.01. 5 4/11/94 3.03. Cessation or Resumption of Participation Following a Chancre in Status. If any Participant continues in the employ of the Employer or Related Employer but ceases to be an eligible Employee as defined in Section 1.03(a), the individual shall continue to be a Participant until the entire amount of his benefit is distributed; however, the individual shall not be entitled to make Deferral Contributions or receive an allocation of Matching contributions during the period that he is not an eligible Employee. Such Participant shall continue to receive credit for service completed during the period for purposes of determining his vested interest in his Accounts. In the event that the individual subsequently again becomes an eligible Employee, the individual shall resume full participation in accordance with Section 3.01. Article 4. Contributions. ------------- 4.01. Deferral Contributions. Each Participant may elect to execute a salary reduction agreement with the Employer to reduce his Compensation by a specified percentage not exceeding the percentage set forth in Section 1.05 (a) and equal to a whole number multiple of one (1) percent. Such agreement shall become effective on the first day of the period as set forth in the Participant's election. The election will be effective to defer Compensation relating to all services-performed in a Plan Year subsequent to the filing of such an election. An election once made will remain in effect until a new election is made. A new election will be effective as of the first day of the following Plan Year and will apply only to Compensation payable with respect to services rendered after such date. Amounts credited to a Participant's account prior to the effective date of any new election will not be affected and will be paid in accordance with that prior election. The Employer shall credit an amount to the account maintained on behalf of the Participant corresponding to the amount of said reduction. Under no circumstances may a salary reduction agreement be adopted retroactively. A Participant may not revoke a salary reduction agreement for a Plan year during that year. 4.02. Matching Contributions. If so provided by the Employer in Section 1.05(b), the Employer shall make a Matching Contribution to be credited to the account maintained on behalf of each Participant who had Deferral Contributions made on his behalf during the year and who meets the requirement, if any, of Section 1.05(b)(3). The amount of the Matching Contribution shall be determined in accordance with Section 1.05(b). 4.03. Time of Making Employer Contributions. The Employer will from time to time make a transfer of assets to the Trustee for each Plan Year. The Employer shall provide the Trustee with information on the amount to be credited to the separate account of each Participant maintained under the Trust. Article 5. Participants' Accounts. ---------------------- 5.01. Individual Accounts. The Administrator will establish and maintain an Account for each Participant which will reflect Matching and Deferral Contributions credited to the Account on behalf of the Participant and earnings, expenses, gains and losses credited thereto, and deemed investments made with amounts in the Participant's Account. The Administrator will establish and maintain such other accounts and records as it decides in its discretion to be reasonably required or appropriate in order to discharge its duties under the Plan. Participants will be furnished statements of their Account values at least once each Plan Year. 6 4/11/94 Article 6. Investment of Contributions. --------------------------- 6.01. Manner of Investment. All amounts credited to the Accounts of Participants shall be treated as though invested and reinvested only in eligible investments selected by the Employer in Section 1.11(b). 6.02. Investment Decisions. Investments in which the Accounts of Participants shall be treated as invested and reinvested shall be directed by the Employer or by each Participant, or both, in accordance with the Employer's election in Section 1.11(a). (a) All dividends, interest, gains and distributions of any nature earned in respect of Fund Shares in which the Account is treated as investing shall be credited to the Account as though reinvested in additional shares of that Fidelity Fund. (b) Expenses attributable to the acquisition of investments shall be charged to the Account of the Participant for which such investment is made. Article 7. Right to Benefits. ----------------- 7.01. Normal or Early Retirement. If provided by the Employer in Section 1.07 (d), each Participant who attains his Normal Retirement Age or Early Retirement Age will have a nonforfeitable interest in his Account in accordance with the vesting schedule elected in Section 1.07. If a Participant retires on or after attainment of Normal or Early Retirement Age, such retirement is referred to as a normal retirement on or after his normal retirement, the balance of the Participant's Account, plus any amounts thereafter credited to his Account, subject to the provisions of Section 7.06, will be distributed to him in accordance with Article 8. If provided by the Employer in Section 1.06, a Participant who separates from service before satisfying the age requirements for early retirement; but has satisfied the service requirement will be entitled to the distribution of his Account, subject to the provisions of Section 7.06, in accordance with Article 8, upon satisfaction of such age requirement. 7.02. Death. If a Participant dies before the distribution of his Account has commenced, or before such distribution has been completed, his Account shall become vested in accordance with the vesting schedule elected in Section 1.07 and his designated Beneficiary or Beneficiaries will be entitled to receive the balance or remaining balance of his Account, plus any amounts thereafter credited to his Account, subject to the provisions of Section 7.06. Distribution to the Beneficiary or Beneficiaries will be made in accordance with Article 8. A Participant may designate a Beneficiary or Beneficiaries, or change any prior designation of Beneficiary or Beneficiaries by giving notice to the Administrator on a form designated by the Administrator. If more than one person is designated as the Beneficiary, their respective interests shall be as indicated on the designation form. 7 4/11/94 A copy of the death notice or other sufficient documentation must be filed with and approved by the Administrator. If upon the death of the Participant there is, in the opinion of the Administrator, no designated Beneficiary for part or all of the Participant's Account, such amount will be paid to his surviving spouse or, if none, to his estate (such spouse or estate shall be deemed to be the Beneficiary for purposes of the Plan). If a Beneficiary dies after benefits to such Beneficiary have commenced, but before they have been completed, and, in the opinion of the Administrator, no person has been designated to receive such remaining benefits, then such benefits shall be paid to the deceased Beneficiary's estate. 7.03. Other Termination of Employment. If provided by the Employer in Section 1.06, if a Participant terminates his employment for any reason other than death or normal retirement, he will be entitled to a termination benefit equal to (i) the vested percentage(s) of the value of the Matching Contributions to his Account, as adjusted for income, expense, gain, or loss, such percentages) determined in accordance with the vesting schedule(s) selected by the Employer in Section 1.07, and (ii) the value of the Deferral Contributions to his Account as adjusted for income, expense, gain or loss. The amount payable under this Section 7.03 will be subject to the provisions of Section 7.06 and will be distributed in accordance with Article 8. 7.04. Separate Account. If a distribution from a Participant's Account has been made to him at a time when he has a nonforfeitable right to less than 100 percent of his Account, the vesting schedule in Section 1.07 will thereafter apply only to amounts in his Account attributable to Matching Contributions allocated after such distribution. The balance of his Account immediately after such distribution will be transferred to a separate account which will be maintained for the purpose of determining his interest therein according to the following provisions. At any relevant time prior to a forfeiture of any portion thereof under Section 7.05, a Participant's nonforfeitable interest in his Account held in a separate account described in the preceding paragraph will be equal to P(AB + (RxD))-(RxD), where P is the nonforfeitable percentage at the relevant time determined under Section 7.05; AB is the account balance of the separate account at the relevant time; D is the amount of the distributions and R is the ratio of the account balance at the relevant time to the account balance after distribution. Following a forfeiture of any portion of such separate account under Section 7.05 below, any balance in the Participant's separate account will remain fully vested and nonforfeitable. 7.05. Forfeitures. If a Participant terminates his employment, any portion of his Account (including any amounts credited after his termination of employment) not payable to him under Section 7.03 will be forfeited by him. For purposes of this paragraph, if the value of a Participant's vested account balance is zero, the Participant shall be deemed to have received a distribution of his vested interest immediately following termination of employment. Such forfeitures will be applied to reduce the contributions of the Employer under the Plan (or administrative expenses of the Plan). 8 4/11/94 7.06. Adjustment for Investment Experience. If any distribution under this Article 7 is not made in a single payment, the amount remaining in the Account after the distribution will be subject to adjustment until distributed to reflect the income and gain or loss on the investments in which such amount is treated as invested and any expenses properly charged under the Plan and Trust to such amounts. 7.07. Hardship Withdrawals. Subject to the provisions of Article 8, a Participant shall not be permitted to withdraw his Account (and earnings thereon) prior to retirement or termination of employment, except if permitted under Section 1.09, a Participant may apply to the Administrator to withdraw some or all of his Account if such withdrawal is made on account of a hardship as determined by the Employer. Article 8. Distribution of Benefits Payable after Termination of Service. -------------------------------------------------------------- 8.01. Distribution of Benefits to Participants and Beneficiaries. (a) Distributions under the Plan to a Participant or to the Beneficiary of the Participant shall be made in a lump sum in cash or, if elected by the Employer in Section 1.10 and specified in the Participant's deferral election, under a systematic withdrawal plan (installment(s))not exceeding 10 years upon retirement, death or other termination of employment. (b) Distributions under a systematic withdrawal plan must be made in substantially equal annual, or more frequent, installments, in cash, over a period certain which does not extend 10 years. The period, certain specified in a Participant's first deferral election specifying distribution under a systematic withdrawal plan shall apply to all subsequent elections of distributions under a systematic withdrawal plan made by the Participant. 8.02. Determination o(pound) Method of Distribution. The Participant will determine the method of distribution of benefits to himself and the method of distribution to his Beneficiary. Such determination will be made at the time the Participant makes a deferral election. If the Participant does not determine the method of distribution to him or his Beneficiary, the method shall be a lump sum. 8.03. Notice to Trustee. The Administrator will notify the Trustee in writing whenever any Participant or Beneficiary is entitled to receive benefits under the Plan. The Administrator's notice shall indicate the form, amount and frequency of benefits that such Participant or Beneficiary shall receive. 8.04. Time of Distribution. In no event will distribution to a Participant be made later than the date specified by the Participant in his salary reduction agreement. 9 4/11/94 Article 9. Amendment and Termination. ------------------------- 9.01 Amendment by Employer. The Employer reserves the authority to amend the Plan by filing with the Trustee an amended Adoption Agreement, executed by the Employer only, on which said Employer has indicated a change or changes in provisions previously elected by it. Such changes are to be effective on the effective date of such amended Adoption Agreement. Any such change notwithstanding, no Participant's Account shall be reduced by such change below the amount to which the Participant would have been entitled if he had voluntarily left the employ of the Employer immediately prior to the date of the change. The Employer may from time to time make any amendment to the Plan that may be necessary to satisfy the Code or ERISA. The Employer's board of directors or other individual specified in the resolution adopting this Plan shall act on behalf of the Employer for purposes of this Section 9.01. 9.02 Retroactive Amendments. An amendment made by the Employer in accordance with Section 9.01 may be made effective on a date prior to the first day of the Plan Year in which it is adopted if such amendment is necessary or appropriate to enable the Plan and Trust to satisfy the applicable requirements of the Code or ERISA or to conform the Plan to any change in federal law or to any regulations or ruling thereunder. Any retroactive amendment by the Employer shall be subject to the provisions of Section 9.01. 9.03. Termination. The Employer has adopted the Plan with the intention and expectation that contributions will be continued indefinitely: However, said Employer has no obligation or liability whatsoever to maintain the Plan for any length of time and may discontinue contributions under the. Plan or terminate the Plan at any time by written notice delivered to the Trustee without any liability hereunder for any such discontinuance or termination. 9.04. Distribution upon Termination of the Plan. Upon termination of the Plan, no further Deferral Contributions or Matching Contributions shall be made under the Plan, but Accounts of Participants maintained under the Plan at the time of termination shall continue to be governed by the terms of the Plan until paid out in accordance with the terms of the Plan. Article 10. Miscellaneous. ------------- 10.01. Communication to Participants. The Plan will be communicated to all Participants by the Employer promptly after the Plan is adopted. 10 02. Limitation of Rights. Neither the establishment of the Plan and the Trust, nor any amendment thereof, nor the creation of any fund or account, nor the payment of any benefits, will be construed as giving to any Participant or other person any legal or equitable right against the Employer, Administrator or Trustee, except as provided herein; and in no event will the terms of employment or service of any Participant be modified or in any way affected hereby. 10.03. Nonalienability of Benefits. The benefits provided hereunder will not be subject to alienation, assignment, garnishment, attachment, execution or levy of any kind, either voluntarily or involuntarily, and any attempt to cause such benefits to be so subjected will not be recognized, except to such extent as may be required by law. 10 4/11/94 10.04. Facility of Payment. In the event the Administrator determines, on the basis of medical reports or other evidence satisfactory to the Administrator, that the recipient of. any benefit payments under the Plan is incapable of handling his affairs by reason of minority, illness, infirmity or other incapacity, the Administrator may direct the Trustee to disburse such payments to a person or institution designated by a court which has jurisdiction over such recipient or a person or institution otherwise having the legal authority under State law for the care and control of such recipient. The receipt by such person or institution of any such payments shall be complete acquittance therefore, and any such payment to the extent thereof, shall discharge the liability of the Trust for the payment of benefits hereunder to such recipient. 10.05. Information between Employer and Trustee. The Employer agrees to furnish the Trustee, and the Trustee agrees to furnish the Employer with such information relating to the Plan and Trust as may be required by the other in order to carry out their respective duties hereunder, including without limitation information required under the Code or ERISA and any regulations issued or forms adopted thereunder. 10.06. Notices. Any notice or other communication in connection with this Plan shall be deemed delivered in writing if addressed as provided below and if either actually delivered at said address or, in the case of a letter, three business days shall have elapsed after the same shall have been deposited in the United States mails, first-class postage prepaid and registered or certified: (a) If to the Employer or Administrator, to it at the address set forth in the Adoption Agreement, to the attention of the person specified to receive notice in the Adoption Agreement; (b) If to the Trustee, to it at the address set forth in the Trust Agreement; or, in each case at such other address as the addressee shall have specified by written notice delivered in accordance with, the foregoing to the addressor's then effective notice address. 10.07. Governing Law. The Plan and the accompanying Adoption Agreement will be construed, administered and enforced-according to ERISA, and to the extent not preempted thereby, the laws of the Commonwealth of Massachusetts. Article 11. Plan Administration. ------------------- 11.01. Powers and responsibilities of the Administrator. The Administrator has the full power and the full responsibility to administer the Plan in all of its details, subject, however, to the applicable requirements of ERISA. The Administrator's powers and responsibilities include, but are not limited to, the following: (a) To make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan; (b) To interpret the Plan, its interpretation thereof in good faith to be final and conclusive on all persons claiming benefits under the Plan; (c) To decide all questions concerning the Plan and the eligibility of any person to participate in the Plan; 11 4/11/94 (d) To administer the claims and review procedures specified in Section 11.03; (e) To compute the amount of benefits which will be payable to any Participant, former Participant or Beneficiary in accordance with the provisions of the Plan; (f) To determine the person or persons to whom such benefits will be paid; (g) To authorize the payment of benefits; (h) To comply with the reporting and disclosure requirements of Part 1 of Subtitle B of Title I of ERISA; (i) To appoint such agents, counsel, accountants, and consultants as may be required to assist in administering the Plan; (j) By written instrument, to allocate and delegate its responsibilities, including the formation of an Administrative Committee to administer the Plan; 11.02. Nondiscriminatory Exercise of Authority. Whenever, in the administration of the Plan, any discretionary action by the Administrator is required, the Administrator shall exercise its authority in a. nondiscriminatory manner so that all persons similarly situated will receive substantially the same treatment. 11.03. Claims and Review Procedures. (a) Claims Procedure. If any person believes he is being denied any rights or benefits under the Plan, such person may file a claim in writing with the Administrator. If any such claim is wholly or partially denied, the Administrator will notify such person of its decision in writing. Such notification will contain (i) specific reasons for the denial, (ii,) specific reference to pertinent Plan provisions, (iii) a description of any additional material or information necessary for such person to perfect such claim and an explanation of why such material or information is necessary, and (iv) information as to the steps to be taken if the person wishes to submit a request for review. Such notification will be given within 90 days after the claim is received by the Administrator (or within 180 days, if special circumstances require an extension of time for processing the claim, and if written notice of such extension and circumstances is-given to such person within the initial 90-day period). If such notification is not given within such period, the claim will be considered denied as of the last day of such period and such person may request a review of his claim. (b) Review Procedure. Within 60 days after the date on which a person receives a written notice of a denied claim (or, if applicable, within 60 days after the date on which such denial is considered to have occurred), such person (or his duly authorized representative) may (i) file a written request with the Administrator for a review of his denied claim and of pertinent documents and (ii) submit written issues and comments to the Administrator. The Administrator will notify such person of its decision in writing. Such notification will be written in a manner calculated to be understood by such person and will contain specific reasons for the decision as well as specific references to pertinent Plan provisions. The decision on review will be made within 60 days after the request for review is received by the Administrator (or within 120 days, if special circumstances require an extension of time for processing the request, such as an 12 4/11/94 election by the Administrator to hold a hearing, and if written notice of such extension and circumstances is given to such person within the initial 60-day period). If the decision on review is not made within such period, the claim will be considered denied. 11.04. Costs of Administration. Unless some or all costs and expenses are paid by the Employer, all reasonable costs and expenses (including legal, accounting, and employee communication fees) incurred by the Administrator and the Trustee in administering the Plan and Trust will be paid first from the forfeitures (if any) resulting under Section 7.05, then from the remaining Trust Fund. All such costs and expenses paid from the Trust Fund will, unless allocable to the Accounts of particular Participants, be charged against the Accounts of all Participants on a prorata basis or in such other reasonable manner as may be directed by the Employer. 13 CPR SELECT THE CORPORATEplan FOR RETIREMENT SELECT PLAN Adoption Agreement IMPORTANT NOTE This document is not an IRS approved Prototype Plan. An Adopting Employer may not rely solely on this Plan to ensure that the Plan is "unfunded and maintained primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees" and exempt from Parts 2 through 4 of Title I of the Employee Retirement Income Security Act of 1974 with respect: to the Employer's particular situation: Fidelity Management Trust Company, its affiliates and employees may not provide you with legal advice in connection with the execution of this document. This document should be reviewed by your. attorney and/or accountant prior to execution. 4/11/94 INSTRUCTIONS - ADOPTION AGREEMENT All sections of this Adoption Agreement must be completed, except where stated as optional. An Employer may only select the options listed. An Employer should consult with its attorney and/or accountant for assistance in completing this Agreement. 1.01. PLAN INFORMATION: ---------------- (a) Enter the legal name of the Plan. (b) Complete only if the Plan Administrator is not the Employer. (Fidelity is not the Plan Administrator). A Committee may be designated to act on behalf of the Plan Administrator. However, in such case, the Employer or other Plan Administrator would still be named in this section. (c) This is the three digit number assigned to the plan as required by the Internal Revenue Service. For a new plan, if the Employer does not currently or has never maintained another employee benefit pension plan then this Plan Number will be "001". If the Employer currently maintains or has ever maintained another employee benefit pension plan then this Plan will be "002". If the Employer currently maintains or has ever maintained two other employee benefit pension plans then this Plan will be "003", etc. An existing Employer plan that is a conversion from another plan document must use the same three digit plan number currently in effect. (d) Enter the month and day of the Plan Year end (i.e., December 31). The Plan Year must be the last day of a month. (e)(1) (Select (1) or (2).) If this is a new Plan then enter the Effective Date. (e)(2) Enter the Effective Date of Amendment to the CPR Select Plan. This is the date that all Plan assets will be wired to Fidelity and when the provisions in this Adoption Agreement will become effective. This date MUST be the first day of a month. The Effective Date must be the same date as the Implementation Date. The Implementation Date is also identified in the Fidelity Service Agreement. 4/11/94 ADOPTION AGREEMENT ARTICLE 1 1.01 PLAN INFORMATION (a) Name of Plan: This is the ICT Group Non-Qualified Executive Retirement Plan (the "Plan") (b) Name of Plan Administrator, if not the Employer: _________________________________________________ Address: _____________________________________ Phone Number: ________________________________ The Plan Administrator is the agent for service of legal process for the Plan. (c) Three Digit Plan Number: 003 (d) Plan Yead End (month/day): 12/31 (e) Plan Status (check one): (1) [ x ] Effective Date of new Plan: 2/1/2000 (2) [ ] Amendment Effective Date: _____________________. The original effective date of the Plan: _________________. 4/11/94 INSTRUCTIONS - PAGE 2 1.02. EMPLOYER: (a) Enter the Employer's legal name, principal address, contact name and phone number. If one or more Related Employers are dopting this Plan then the Employer identified in this section should be the Employer sponsoring the plan. (a)(1)Enter the Employer's Federal tax identification number. This is not the Federal tax identification number of the Plan. (a)(2)Select the business form(s) of the Employer. Related Employers under 1.02.(b) adopting the CPR Select Plan that have mul pie business forms may select more than one business form, if applicable. A sole proprietor, partnership or Subchapter S corporation should consult with its attorney and/or accountant before adopting the plan with respect to the issue of whether the plan can benefit owners or whether it should cover only common-law employees. (a)(3)Enter the month and day of the Employer's, not the Plan's, fiscal tax year end. (b) (Optional) If Employer is part of an affiliated service group or controlled group of employers (collectively defined as "Related Employers") then it may include one or more Related Employers in the definition of "Employer" under this Plan. (Unrelated Employers CANNOT be included as part of the Employer's Plan. Please consult your attorney and/or accountant for assistance on the definition of legally Related Employers.) Each Related Employer must take the appropriate legal action (i.e., Board of Directors' Resolution for a corporation) to included as part of the Employer's Plan. 4/11/94 1.02 EMPLOYER (a) The Employer is: ICT Group, Inc. Address: 800 Town Center Drive Langhorne, PA 19047 Contact's Name: Nancy Laumakis Telephone Number: (215) 702-2152 (1) Employer's Tax Identification Number: 23-2458937 (2) Business form of Employer (check one): (A) [ x ] Corporation (B) [ ] Sole proprietor or partnership (C) [ ] Subchapter S Corporation (3) Employer's fiscal year end: 12/31 (b) The term "Employer" includes the following Related Employer(s) (as defined in Section 2.01(a)(21)): ____________ NONE ___________ _____________________________ _____________________________ _____________________________ 4/11/94 2 INSTRUCTIONS - PAGE 3 1.03. COVERAGE: (a) To be exempt from Parts 2 through 4 of Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and to comply with Department of Labor rules, the Plan must be "unfunded and maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees". The Department of Labor has not defined or issued formal guidance on who constitutes a "management or highly compensated employee". Additionally, to avoid current income taxation of amounts deferred, certain IRS rules and regulations must be followed. You must consult your attorney and/or accountant for assistance on (i) compliance with the reporting and disclosure requirements of Part 1 of Title I of ERISA, (ii) whether or not a particular employee or group of employees would be included within the definition of "management or highly compensated employees", and (iii) whether the Plan satisfies all IRS rules and regulations applicable to this type of plan. List the names of employees who will be eligible to participate in the Plan on Attachment A. (b) (Select one option.) The Entry Date is the date an eligible Employee may actually begin participating in the Plan. Participation may occur only on or after the date an Employee files an election with Employer. Such election will relate only to services to be performed after the election is filed and before the end of the Plan Year. An election once made remains in effect until a participant files a new election for a subsequent Plan Year. 1.04. COMPENSATION (Select one option): Compensation is defined under the Plan as total Compensation paid which would be reportable as earnings in the wages, tips and other Compensation box on the annual IRS tax Form W-2 ("W-2 Compensation") but for the election under Section 1.05, subject to any elections in Section 1.04(a) through (d). For purposes of determining Contributions under Section 1.05, W-2 Compensation is modified as follows: to include: o Internal Revenue Code Section 401(k) salary deferrals; o Internal Revenue Code Section 125 salary deferrals (Employee pre-tax contributions to a "cafeteria plan"); o Elective contributions under Internal Revenue Code Sections 402(h) (Simplified Employee Pension), 403(b) (Tax Sheltered Annuities), other deferred compensation described in Section 457(b) (Plan of State and Local Governments and Tax-Exempt Organizations), or 414(h)(2) (Plan of a State or Political Subdivision of the Government), and to exclude: o Deferred compensation other than amounts deferred under this Plan; o Fringe benefits (cash and non-cash); o Moving expenses; o Reimbursements or other expense allowances; o Welfare benefits. However, Compensation for purposes of the Internal Revenue Code actual deferral percentage test and the actual contribution percentage test under an Internal Revenue Code Section 401(k) plan will be based upon the aforementioned definition of Compensation reduced by amounts elected under Section 1.05 and regardless of any items excluded from the definition of Compensation in Section 1.04(a) through (d). An Employer may exclude overtime pay, bonuses, commissions, and/or the value of a qualified or non-qualified stock option granted from an Employee's Compensation by checking the appropriate option(s) in (a) through (d). If compensation will be deferred as W-2 compensation without any of the exclusions in (a) through (d), then select option (e). 1.05. EMPLOYER CONTRIBUTIONS: Complete (a). (b) is optional. (a) An Employer may allow a Participant to elect to contribute Deferral Contributions in a whole percentage, from 1% to ____ %, of Compensation into the Plan. The election will be effective to defer Compensation relating to all 4/11/94 1.03 COVERAGE (a) Only those Employees listed in Attachment A will be eligible to participate in the Plan. (b) The Entry Date(s) shall be (check one): (1) [ x ] the first day of each Plan Year. (2) [ ] the first day of each Plan Year and the date six months later. (3) [ ] the first day of each Plan Year and the first day of the fourth, seventh, and tenth months. (4) [ ] the first day of each month. 1.04 COMPENSATION For purposes of determining Contributions under the Plan, Compensation shall be as defined in Section 2.01(a)(6), but excluding (check the appropriate box(es)): (a) [ x ] Overtime Pay. (b) [ ] Bonuses. (c) [ ] Commissions. (d) [ x ] The value of a qualified or a non-qualified stock option granted to an Employee by the Employer to the extent such value is includable in the Employee's taxable income. (e) [ ] No exclusions. 1.05 CONTRIBUTIONS (a) Deferral Contributions. The Employer shall make a Deferral Contribution in accordance with Section 4.01 on behalf of each Participant who has an executed salary reduction agreement in effect. with the Employer for the Plan Year (or portion of the Plan Year) in question, not to exceed ____ % of Compensation for that Plan Year. 4/11/94 3 Instructions - Page 4 services performed in a Plan Year subsequent to the filing of such an election. An election once made is irrevocable for a Plan Year and remains in effect until a Participant makes a new election for a subsequent Plan Year. A new election will be effective as of the first day of the following Plan Year and will apply only to Compensation payable with respect to services rendered after such date. Amounts credited to a Participant's account prior to the effective date of any new election will not be affected and will be paid in accordance with that prior election. (b) (Optional). An Employer may elect to match all Employee Deferral Contributions, subject to any percentage of Compensation and/or dollar limit(s) under Section 1.05(b)(2), based upon 50% (Option (A)), 100% (Option (B)), a specified percentage (Option (C)), or a tiered match (Option (D)), a percentage declared by the Board (Option (E)) or an "other" option to be completed (Option (F)). An Employer may make Discretionary Matching Contributions, if any, each Plan Year based upon a percentage of Participant Employee Deferral Contributions (Option (E)). This option enables the Employer to vary the Matching Contribution annually without having to amend the CPR Select Plan Adoption Agreement. The amount of Matching Contributions, if any, will be determined annually by the Employer and then communicated to,.the Participants. The Employer may declare the Matching Contributions at any time during the Plan Year. A corporate Employer must pass a Board of Directors Resolution declaring the Matching Contribution for a particular Plan Year. A Sole Proprietor or a Partnership must write a Letter of Intent declaring the Matching Contribution for a particular Plan Year. Employer Matching Contributions must be computed based upon the amount of a Participant's Deferral Contributions, subject to any percentage of Compensation and/or dollar limit(s) under Section 1.05(b)(2). (b)(2)(A) (Optional). An Employer may select to limit the percentage of a Participant's Deferral Contributions that are eligible for the Matching Contributions specified in (b)(1) to a certain percentage of his/her eligible Compensation. Example: An Employer wants to match 50% of each dollar contributed to the Plan as Deferral Contributions but only on the first six percent of a Participant's eligible Compensation. A Participant's eligible Compensation for one payroll is $1,000 and he contributes 10% of it into the Plan as Deferral Contributions. The Matching Contribution will be limited to $30 [($1,000 of Compensation) x (6% limit) = $60, $60 x 50% = $30]. If an Employer directs Fidelity to establish a Basic Employee Deferral Contribution and a Supplemental Employee Deferral Contribution source for contributions made pursuant to Section 1.05(b) on the Fidelity Participant Recordkeeping System and the Employer elects a percentage limit on Matching Contributions then the match must be computed based upon each period. A Basic Deferral Contribution represents the portion. of a Participant's Deferral Contributions that will be matched by the Employer. A Supplemental Deferral Contribution represents the portion of a Participant's Deferral Contributions that will not be matched by the Employer. (b)(2)(B) (Optional). An Employer may select to limit the total Matching Contributions to a fixed dollar amount. Note: An Employer may select (2)(A), (2)(B) or both (2)(A) and (2)(B). If the latter is selected then the Matching Contributions will be limited to whichever limit occurs first, either the percentage of Compensation in (A) or the fixed dollar amount in (B). 4/11/94 (b) [ ] Matching Contributions (1) The Employer shall make a Matching Contribution on behalf of each Participant in an amount equal to the following percentage of a Participant's Deferral Contributions during the Plan Year (check one): (A) [ ] 50% (B) [ ] 100% (C) [ ] ______ % (D) [ ] (Tiered Match) ______ % of the first _____ % of the Participant's Compensation contributed to the Plan, ______% of the next ______ % of the Participant's Compensation contributed to the Plan, ______ % of the next ______ % of the Participant's Compensation contributed to the Plan. (E) [ ] The percentage declared for the year, if any, by a Board of Directors' resolution. (F) [ ] Other: _________________________________________ ________________________________________________ ________________________________________________ (2) [ ] Matching Contribution Limits (check the appropriate box(es)): (A) [ ] Deferral Contributions in excess of ______ % of the Participant's Compensation for the period in question shall not be considered for Matching Contributions. Note: If the Employer elects a percentage limit in (A) above and requests the Trustee to account separately for matched and unmatched Deferral Contributions, the Matching Contributions allocated to each Participant must be computed, and the percentage limit applied, based upon each period. (B) [ ] Matching Contributions for each Participant for each Plan Year shall be limited to $_____________ . 4/11/94 4 Instructions - Page 5 (b)(3)(Select one or more options.) If a Matching Contribution is selected in Section 1.05(b)(1) then the Employer must select one of the Options (A through D) listed in this section. An Employer may specify that a Participant must satisfy certain conditions during a Plan Year to be eligible to receive Matching Contributions. The Employer may require a Participant to be employed on the last day of the Plan Year (Option (A)) and/or either earn at least 500 hours of service during the Plan Year (Option (B)) or earn at least 1,000 hours of service during the Plan Year (Option (C)). Matching Contributions made pursuant to (A), (B), or (C) are referred to as conditional contributions and must be funded after Plan Year end Participants who die, become disabled or retire during the Plan Year must meet the requirement(s) selected, if any, to receive Matching Contributions on their Deferral Contributions. Note: Conditional Matching Contributions elected in Option (A), (B), or (C) that are funded during the Plan Year will be treated as unconditional Matching Contributions. Additionally, if an Employer has been making unconditional Matching Contributions and elects Option (A), (B), or (C) during a Plan Year then such option will not become effective until the first day of the next Plan Year. 1.06. DISTRIBUTION DATES: You may select the date or dates after which a Participant may elect to receive a distribution of his accounts from the Plan in one of the forms selected under Section 1.10. A Participant must elect the time and form of payment when the Deferral Contribution election is made. If the Participant does not elect a time and form of payment, then amounts will be paid in a lump sum at the earliest date selected under Section 1.06. You must select at least one of the following options. (a) (Optional). An Employer may select age 65 (Option (1)), any other age between 55 and 64 (Option (2)), or the later of a specified age between 55 and 65 and the fifth anniversary of the date the Participant commenced employment (Option (3)). A Participant is not required to retire once he/she attains normal retirement age. (Select one option). (b) (Optional). Specify the early retirement age and required years of service, if applicable. (c) (Optional). A Participant may elect to receive his accounts upon termination of employment with the Employer. 4/11/94 (3) Eligibility Requirement(s) for Matching Contributions A Participant who makes Deferral Contributions during the Plan Year under Section 1.05(a) shall be entitled to Matching Contributions for that Plan Year if the Participant satisfies the following requirements) (Check the appropriate box(es). Options (B) and (C) may not be elected together): (A) [ ] Is employed by the Employer on the last day of the Plan Year. (B) [ ] Earns at least 500 Hours of Service during the Plan Year. (C) [ ] Earns at least 1,000 Hours of Service during the Plan Year. (D) [ ] No requirements. Note: If option (A), (B) or (C) above is selected then Matching Contributions can only be made by the Employer after the Plan Year ends. Any Matching Contribution made before Plan Year end shall not be subject to the eligibility requirements of this Section 1.05(b)(3)). 1.06 DISTRIBUTION DATES A Participant may elect to receive a distribution or commence distributions from his Account pursuant to Section 8.02 upon the following date(s) (check the appropriate box(es). If Option (c) is elected, then options (a) and (b) may not be elected): (a) [ x ] Attainment of Normal Retirement Age. Normal Retirement Age under the Plan is (check one): (1) [ x ] age 65. (2) [ ] age ______ (specify from 55 through 64). (3) [ ] later of the age _______ (can not exceed 65) or the fifth anniversary of the Participant's Commencement Date. (b) [ ] Attainment of Early Retirement Age. Early Retirement Age is the first day of the month after the Participant attains age _____ (specify 55 ______ Years of Service for Vesting. (c) [ x ] Termination of employment with the Employer. 4/11/94 5 Instructions - Page 6 1.07. VESTING SCHEDULE: (a) Vesting refers to the nonforfeitable interest of a Participant in Matching Contributions and the earnings thereon. A Participant is always 10096 vested in Employee Deferral Contributions and the earnings thereon. Vesting under the CPR Select Plan is based upon the elapsed-time method that is defined under "Years of Service for Vesting" in Section 2.01(a)(27) of the Plan Document. Participant Years of Service for vesting Matching Contributions includes all years of service subject to any such exclusion in Section 1.07(b). Amounts which are not fully vested when a Participant terminates employment will not be distributed to the Participant. (Select one.) An Employer electing Matching Contributions in Section 1.05(b) must select only one of the Vesting Schedules listed in Options (1) through (8). An Employer may create its own vesting schedule by inserting the elected vesting percentage in the blanks in (7) or electing (8) and attaching a separate page setting forth the vesting schedule. (b) (Optional). Years of Service for Participant vesting includes all Years of Service for an Employee except an Employer may elect to exclude service prior to the Effective Date of a new plan (Option (1)) or prior to the original Effective Date of a pre-existing plan (Option (2)). (c) (Optional). Insert the events that will cause a complete forfeiture of a Participant's Matching Contributions (such as theft, violation of a non-compete agreement, etc. . . . ). Amounts deferred under the CPR Select Plan are generally subject to FICA taxes (including the OASDI portion on the amount not in excess of the Social Security wage base, and the hospital Insurance portion on the entire amount) at the time the services are performed. However, if the Matching Contributions are subject to a vesting schedule or are subject to forfeiture, the amount of the Matching Contributions will be subject to FICA as of the later of when the services are performed or when there is no substantial risk of forfeiture of the rights to such amount. 4/11/94 1.07 VESTING SCHEDULE (a) The Participant's vested percentage in Matching Contributions elected in Section 1.05(b) shall be based upon the schedule(s) selected below. (1) [ x ] N/A - No Matching Contributions (2) [ ] 100% Vesting immediately (3) [ ] 3 year cliff (see C below) (4) [ ] 5 year cliff (see D below) (5) [ ] 6 year graduated (see E below) (6) [ ] 7 year graduated (see F below) (7) [ ] G below (8) [ ] Other (Attachment "B") Years of Vesting Schedule Service for Vesting C D E F G ---------------------------------------------------- 0 0% 0% 0% 0% _ 1 0% 0% 0% 0% _ 2 0% 0% 20% 0% _ 3 100% 0% 40% 20% _ 4 100% 0% 60% 40% _ 5 100% 100% 80% 60% _ 6 100% 100% 100% 80% _ 7 100% 100% 100% 100% 100% (b) [ ] Years of Service for Vesting shall exclude (check one): (1) [ ] for new plans, service prior to the Effective Date as defined in Section 1.01(e)(1). (2) [ ] for existing plans converting from another plan document, service prior to the original Effective Date as defined in Section 1.01(e)(2). (c) [ ] A Participant will forfeit his Matching Contributions upon the occurrence of the following event(s): --------------------------------------------------------- --------------------------------------------------------- --------------------------------------------------------- 4/11/94 6 Instructions - Page 7 (d) (Optional). Inset the events, if any, which result in 10096 Vesting other than completion of the required years of service under the Vesting Schedule selected in Section 1.07(a). 1.08. PREDECESSOR EMPLOYER SERVICE: (Optional). An Employer may elect to include an Employee's Years of Service with any predecessor employer(s) listed in (a) through (d) for vesting purposes. 1.09. HARDSHIP WITHDRAWALS (Select one option): (a) (Optional) An Employer may elect to make hardship withdrawals available with a set minimum. A Participant may request a hardship withdrawal from his/her Account subject to the discretion of the Employer. You should consult your attorney and/or accountant for assistance on permissible hardship withdrawals. (b) An Employer may elect not to make hardship withdrawals available by selecting this option. 1.10. DISTRIBUTIONS: Distributions from the Plan will be paid to a Participant either in lump sum (Option (a)) or in systematic installment withdrawals not to exceed 10 years (Option (b)). Distributions will be made on or after termination of employment with the Employer, as permitted under Section 1.06 and as elected by the Participant at the time the Deferral Contribution election was made. If the Participant does not elect a time and form of payment, his amounts will be paid in a lump sum at the earliest date selected under Section 1.06. An Employer who converted from another plan document that allowed a Participant the right to receive his/her distribution from the Plan in a lump sum and/or installment option(s) must select the same option in this section. (Select one or both options) 4/11/94 (d) A Participant will be 100% vested in his Matching Contributions upon (check the appropriate box(es), if any): (1) [ ] Normal Retirement Age (as defined in Section 1.06(a)). (2) [ ] Early Retirement Age (as defined in Section 1.06(b)). (3) [ ] Death 1.08 PREDECESSOR EMPLOYER SERVICE [ ] Service for purposes of vesting in Section 1.07(a) shall include service with the following employer(s): (a) ____________________________________________ (b) ____________________________________________ (c) ____________________________________________ (d) ____________________________________________ 1.09 HARDSHIP WITHDRAWALS Participant withdrawals for hardship prior to termination of employment (check one): (a) [ x ] will be allowed in accordance with Section 7.07, subject to a $10,000 minimum amount. (Must be at least $1,000). (b) [ ] will not be allowed 1.10 DISTRIBUTIONS Subject to Articles 7 and 8, distributions under the Plan will be paid (check the appropriate box(es)): (a) [ x ] as a lump sum. (b) [ x ] under a systematic withdrawal plan (installments) not to exceed 10 years. 4/11/94 Instructions - Page 8 1.11. INVESTMENT DECISIONS. This section permits the Employer to designate who directs the selection of investments (Employer, Participants or both) and the Fidelity Mutual Funds in which Participant Accounts shall be treated as invested and reinvested. (Select one option from (a) and complete Option (b).) (a)(1) An Employer may direct all Participant account balances between/among the available Fidelity Funds offered under the Plan by electing Option (1). The Employer is responsible for sending Fidelity written direction for any exchanges between/among available Funds based upon procedures established by Fidelity. (a)(2) An Employer may allow each Participant to direct his/her entire account balance between/among the available Fidelity Funds offered under the Plan by selecting Option (2). (A Participant's spouse or a third party may not direct Participant account balances.) Each Participant should receive a prospectus in accordance with Securities and Exchange Commission requirements before investing money in any Fidelity Mutual Fund to Service Agreement. (a)(3) An Employer may direct Employer Matching Contributions and allow a Participant to direct his/her remaining account balances between/among the available Fidelity Funds by selecting Option (3). The Employer and Participant must select from the available Funds listed in Option (b). The Employer must provide Fidelity with written instructions for the investment of Participant accounts that it will direct between/among Fidelity Funds. (b) The Employer may only select Fidelity Funds offered under the CPR Select Plan. An additional recordkeeping fee will be charged for each Fidelity Fund selected in excess of five (5). This document includes two (2) identical signature pages. An authorized officer (if the Employer is incorporated) or an authorized individual(s) (if the Employer is unincorporated) must sign pages 10 and 11 and return page 10 to Fidelity. Only one authorized signature is required to execute this Adoption Agreement, unless the Employer's corporate policy mandates two authorized signatures. The Employer should take the appropriate Board of Director's action to adopt the CPR Select Plan. THIS AGREEMENT SHOULD BE REVIEWED BY YOUR ATTORNEY AND/OR ACCOUNTANT BEFORE IT IS EXECUTED. 4/11/94 1.11 INVESTMENT DECISIONS (a) Investment Directions Investments in which the Accounts of Participants shall be treated as invested and reinvested shall be directed (check one): (1) [ x ] by the Employer among the options listed in (b) below. (2) [ ] by each Participant among the options listed in (b) below. (3) [ ] by each Participant with respect to Deferral Contributions and by the Employer with respect to Employer Matching Contributions. The Employer must direct the Employer Matching Contributions among the same investment options made available for Participant directed sources listed in (b) below. (b) Plan Investment Options Participant Accounts will be treated as invested among the Fidelity Funds listed below pursuant to Participant and/or Employer directions. Fund Name Fund Number --------- ----------- (1) Retirement Money Mkt. Port. 630 --------------------------- (2) Investment Grade Bond Fund 026 -------------------------- (3) Puritan Fund 004 ------------ (4) Equity Income Fund 023 ------------------ (5) Fidelity Fund 003 ------------- (6) Fidelity Magellan Fund 021 ---------------------- (7) Agressive Growth Fund 324 --------------------- (8) Diversified Intl Fund 325 --------------------- (9) Freedom Retirement Income 369 thru 373 ------------------------- (10) Fidelity Contra Fund 022 -------------------- Note: An additional annual recordkeeping fee will be charged for each fund in excess of TEN funds. 4/11/94 8 Note: The method and frequency for change of investments will be determined under the rules applicable to the selected funds. Information will be provided regarding expenses, if any, for changes in investment options. 1.12 RELIANCE ON PLAN An adopting Employer may not rely solely on this Plan to ensure that the Plan is "unfunded and maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees" and exempt from Parts 2 through 4 of Title I of the Employee Retirement Income Security Act of 1974 with respect to the Employer's particular situation. This Agreement must be reviewed by your attorney and/or accountant before it is executed. This Adoption Agreement may be used only in conjunction with the CORPORATEplan for Retirement Select Basic Plan Document. 4/11/94 9 EXECUTION PAGE (Fidelity's Copy) IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be executed this 20 day of December , 1999. Employer ICT Group, Inc. By /s/ Anne Beeson Title Vice President, Human Resources Employer By Title 4/11/94 10 EXECUTION PAGE (Employer's Copy) IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be executed this 20 day of December , 1999. Employer ICT Group, Inc. By /s/ Anne Beeson Title Vice President, Human Resources Employer By Title 4/11/94 11 Attachment A Pursuant to Section 1.03(a), the following are the Employees who are eligible to participate in the Plan: Class 1 Maximum Deferral 20% to a maximum deferral - ------------------------------------------- amount of $80,000 John J. Brennan ###-##-#### Chief Executive Officer Class 2 Maximum Deferral 20% to a maximum deferral - ------------------------------------------- amount of $80,000 To be hired Chief Operating Officer Class 3 Maximum Deferral 20% to a maximum deferral - ------------------------------------------- amount of $40,000 Dean Kilpatrick ###-##-#### President, Marketing Services John D. Campbell ###-##-#### President, Sales John L. Magee 153-44-5267 President, Teleservices John McCabe ###-##-#### President, International Services Maurice J. Kerins ###-##-#### President, Management Services Timothy Kowalski ###-##-#### Sr. Vice President, Systems & Technology; CIO Vincent M. Dadamo ###-##-#### Sr. Vice President, Legal Counsel Vincent Paccapaniccia ###-##-#### Sr. Vice President, Finance & Admin; CFO Class 4 Maximum Deferral 10% to a maximum deferral - ------------------------------------------- amount of $15,000 All employees with title of Vice President or above not listed in Class 1, 2, or 3 above. Employer /s/ Anne Beeson By ICT Group, Inc. Title V.P. Human Resources Date 2/11/2000 Note: The Employer must revise Attachment A to add employees as they become eligible or delete employees who are no longer eligible. Attachment A Pursuant to Section 1.03(a), the following are the Employees who are eligible to participate in the Plan: Employer By Title Date Note: The Employer must revise Attachment A to add employees as they become eligible or delete employees who are no longer eligible. 4/11/94 12 Attachment A Pursuant to Section 1.03(a), the following are the Employees who are eligible to participate in the Plan: Class 1 Maximum Deferral 40% - ------------------------------------------- John J. Brennan ###-##-#### Chief Executive Officer Class 2 Maximum Deferral 20% - ------------------------------------------- Dean Kilpatrick ###-##-#### President, Marketing Services John D. Campbell ###-##-#### President, Sales John L. Magee 153-44-5267 President, Teleservices John McCabe ###-##-#### President, International Services Maurice J. Kerins ###-##-#### President, Management Services Timothy Kowalski ###-##-#### Sr. Vice President, Systems & Technology; CIO Vincent M. Dadamo ###-##-#### Sr. Vice President, Legal Counsel Vincent Paccapaniccia ###-##-#### Sr. Vice President, Finance & Admin; CFO Class 3 Maximum Deferral 10% - ------------------------------------------- All employees with title of Vice President or above not listed in Class 1 or 2 above Employer ICT Group, Inc. By /s/ Anne Beeson Title Vice President, Human Resources Date December 20, 1999 Note: The Employer must revise Attachment A to add employees as they become eligible or delete employees who are no longer eligible. 4/11/94 12 AMENDMENT NO. 1 TO THE CORPORATE PLAN FOR RETIREMENT SELECT PLAN WHEREAS, the ICT Group, Inc. (the "Employer") intends to establish the Corporate Plan for Retirement Select Plan (the "Plan") which consists of an Adoption Agreement and a Basic Plan Document; and WHEREAS, the Employer desires to make certain changes to the Plan to more fully evidence the intent of the parties; and WHEREAS, Article 9.01 of the Plan authorizes the Employer to amend the Plan. NOW, THEREFORE, the Plan is hereby amended effective as of the effective date of the Plan: AMENDMENTS TO THE ADOPTION AGREEMENT 1. Section 1.03(b): --------------- Section 1.03(b) and any corresponding references throughout the Plan are hereby deleted. 2. Section 1.04 ------------ Section 1.04 and any corresponding references throughout the Plan are hereby deleted. 3. Section 1.05(a): --------------- Section 1.05(a) is hereby amended in its entirety to read as follows: "(a) Deferral Contributions. The Employer shall make a Deferral Contribution in accordance with Section 4.01 on behalf of each Participant who has an executed salary reduction agreement in effect with the Employer for the Plan Year (or portion of the Plan Year) in question, not to exceed for a Participant the applicable percentage of Compensation set forth in the table below for that Plan Year. Participant Category Maximum Percentage for Plan Year -------------------- -------------------------------- Class 1 20% of compensation to a maximum deferral of $80,000 Class 2 20% of compensation to a maximum deferral of $80,000 Class 3 20% of compensation to a maximum deferral of $40,000 Class 4 10% of compensation to a maximum deferral of $15,000 4. Section 105(b)(3): ----------------- The first sentence of Section 105(b)(3) is hereby amended to read as follows: "A Participant who makes Deferral Contributions during the Plan Year under Section 1.05(a) shall be eligible for Matching Contributions for that Plan Year if the Participant satisfies the following requirements(s) (Check the appropriate box(es)." 5. Section 1.06: ------------ Section 1.06 is hereby amended in its entirety to read as follows: "Distributions shall commence from a Participant's Account in accordance with Articles 7 and 8 of the Plan following the earliest of the following dates: (a) Participant's termination from employment with the Employer (b) Participant's attainment of Normal Retirement Age (c) A Change in Control (d) Termination of the Plan (e) Participant's entitlement to receive long-term disability benefits, as determined pursuant to the terms of the applicable long-term disability insurance plan maintained by the Employer (f) Participant's death" 6. Section 1.09: ------------- Section 1.09 and any corresponding references throughout the Plan are hereby deleted. AMENDMENTS TO THE BASIC PLAN DOCUMENT 7. Article 2.01(a): --------------- Article 2.01(a)(5) and 2.01(a)(6) of the Basic Plan Document are hereby redesignated as 2.01(a)(6) and 2.01(a)(7). 8. Article 2.01(a)(5) Change of Control: ------------------------------------- Article 2.01(a) is hereby amended by adding the following subsection 2.01(a)(5) to read as follows: "'Change in Control' shall mean the occurrence of any of the following events, each of which shall be determined independently of the others: (i) any Person (as defined below) becomes a "beneficial owner," as such term is used in Rule 13d-3 promulgated under the Exchange Act, of 50% or more (as determined by the Administrator) of the Employer's stock entitled to vote in the election of directors. For purposes of this Plan, the term "Person" is used as such term is used in Sections 13(d) and 14(d) of the Exchange Act; provided, however that, unless the Administrator determines to the contrary, the term shall not include (A) the Employer, any trustee or other fiduciary holding securities under an employee benefit plan of the Employer, or any corporation owned, directly or indirectly, by the shareholders of the Employer in substantially the same proportions as their ownership of stock of the Employer; or (B) John J. Brennan and Donald P. Brennan, their issue and/or their heirs, executors, administrators and successors (but excluding a successor as a result of a sale for value); or (C) the Continuing Directors (as defined below), individually or to the extent that they act or agree to act in concert; (ii) individuals who are Continuing Directors cease to constitute a majority of the members of the Board of Directors of the Employer (the "Board") ("Continuing Directors" for this purpose being the members of the Board on the date of adoption of this Plan, provided that any person becoming a member of the Board subsequent to such date whose election or nomination for election was supported by two-thirds of the directors who then comprised the Continuing Directors shall be considered to be an Continuing Director); (iii) shareholders of the Employer adopt a plan of complete or substantial liquidation or an agreement providing for the distribution of all or substantially all of its assets; (iv) Employer is party to a merger, consolidation, other form of business combination or a sale of all or substantially all of its assets, unless the business of the Employer is continued following any such transaction by a resulting entity (which may be, but need not be, the Employer) and the shareholders of the Employer immediately prior to such transaction (the "Prior Shareholders") hold, directly or indirectly, at least fifty-one percent (51 %) of the voting power of the resulting entity (there being excluded from the voting power held by the Prior Shareholders, but not from the total voting power of the resulting entity, any voting power received by Affiliates of a party to the transaction (other than the Employer) in their capacities as shareholders of the Employer); provided, however, that a merger or consolidation effected to implement a recapitalization of the Employer (or similar transaction) in which no person acquires more than ten percent of the combined voting power of the Employer's then outstanding securities shall not constitute a Change in Control; or (v) there is a Change of Control of the Employer of a nature that would be required to be reported in response to item 1(a) of Current Report on Form 8-K or item 6(e) of Schedule 14A of Regulation 14A or any similar item, schedule or form under the Exchange Act, as in effect at the time of the change, whether or not the Employer is then subject to such reporting requirement. 9. Article 2.01(a)(7) Compensation: ------------------------------- Article 2.01(a)(6) is hereby amended in its entirety to read as follows: "'Compensation' shall mean for purposes of Article 4 (Contributions) wages as defined in Section 3401(a) of the Code and all other payments of compensation to a Participant by the Employer (in the course on the Employer's trade or business) for which the Employer is required to furnish the Participant, a written statement under Sections 6041(d) and 6051(a)(3) of the Code, excluding overtime pay, the value of qualified or non-qualified stock options granted to a Participant by the Employer, reimbursements or other expense allowances, fringe benefits (cash and non-cash), moving expenses, deferred compensation, and welfare benefits (to include any payments in the nature of severance pay). For purposes of Article 4 (Contributions), Compensation shall also include amounts that are not includable in the gross income of the Participant under a salary reduction agreement by reason of the application of Sections 125, 402(a)(8), 402(h), or 403(b) of the Code, provided however, that to the extent an amount has been deferred pursuant to such a salary reduction agreement, such amount may not be deferred into this Plan. Compensation shall be determined without regard to any rules under Section 3401(a) of the Code that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Section 3401(a)(2) of the Code.)" 10. Article 2.01(a)(7) Earned Income: -------------------------------- Article 2.01(a)(7) and any corresponding references throughout the Plan are hereby deleted. 11. Article 2.01(a)(8) through 2.01(a)(12) of the Basic Plan Document are redesignated as Article 2.01(a)(9) through 2.01(a)(13). 12. Article 2.01(a)(8): ------------------ Article 2.01(a) is hereby amended by adding the following subsection 2.01(a)(8) to read as follows: "'Eligible Employee' means an Employee set forth on Attachment A who has completed sixty (60) days of service with the Employer. Where presently used in the Plan, the current terms 'eligible Employee' and 'eligible Employee as defined in Section 1.03(a)' shall hereafter be deemed 'Eligible Employee'" 13. Article 2.0l(a)(9) Employee: --------------------------- Article 2.01(a)(9) is hereby amended in its entirety to read as follows: "'Employee' means an employee of an Employer who is a member of a 'select group of management or highly compensated employees' who are not subject to the funding rules of Title I of ERISA." 14. Article 2.01(a)(13) through 2.01(a)(15) of the Basic Plan Document are redesignated as Article 2.01(a)(15) through 2.01(a)(17). 15. Article 2.01(a)(14) Financial Hardship: -------------------------------------- "'Financial Hardship' means a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of his dependent; or the loss of Participant's property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The circumstances that will constitute an unforeseeable emergency will depend upon the facts of each case, as determined by the Administrator. To the extent such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise; or by liquidation of the Participant's assets, provided that the liquidation would not itself cause severe financial hardship, a withdrawal for Financial Hardship shall not be granted under the Plan." 16. Article 2.010(15) Normal Retirement Date: ---------------------------------------- Article 2.01(a)(15) is hereby amended in its entirety to read as follows: "'Normal Retirement Age' means age 65. 17. Article 2.01(a)(16) Owner-Employee: ---------------------------------- Article 2.01(a)(16) and any corresponding references throughout the Plan are hereby deleted. 18. Article 2.01(a)(17) through 2.01(a)(21) of the Basic Plan Document are redesignated as Article 2.01(a)(18) through 2.01(a)(22). 19. Article 2.01(a)(22) Self-Employed Individuals: --------------------------------------------- Article 2.01(a)(22) and any corresponding references throughout the Plan are hereby deleted. 20. Article 2.01(a)(23) Trust: ------------------------- Article 2.01(a)(23) is hereby amended in its entirety to read as follows: "'Trust' means the trust established by the Employer." 21. Article 3.01. Date of Participation: ----------------------------------- Article 3.01 is hereby amended in its entirety to read as follows: "In the first year in which an Employee becomes eligible to participate in the Plan, the Employee may elect to commence Deferral Contributions, as set forth in Section 4.01, within thirty (30) days after first becoming an Eligible Employee. If, with respect to such first Plan Year, an Eligible Employee does not timely file an election to participate, then the Eligible Employee may elect to commence participation in the Plan effective January 1 of a subsequent Plan Year by filing an election pursuant to Section 4.01 prior to the beginning of such subsequent Plan Year." 22. Article 4.01. Deferral Contributions: ------------------------------------ The first sentence of Article 4.01 is hereby amended to read as follows: "Each Eligible Employee may elect to execute a salary reduction agreement with the Employer to reduce his Compensation by a specified percentage not exceeding the percentage set forth in Section 1.05(a) and equal to a whole number multiple of one (1) percent." 23. Article 7.01. Normal or Earl Retirement: --------------------------------------- Article 7.01 is hereby amended in its entirety to read as follows: "7.01. Vesting. A Participant is 100% vested in the Deferral -------- Contributions made in accordance with Section 4.01. Each Participant shall have a nonforfeitable interest in the Matching Contributions in his Account in accordance with the vesting schedule set forth in Section 1.07." 24. Article 7.03. Other Termination of Employment: --------------------------------------------- Article 7.03 is hereby amended in its entirety to read as follows: "7.03. Valuation of Account. The benefit payable to a Participant or Beneficiary following the occurrence of a distribution event set forth in Section 1.06, shall be calculated as follows: (i) the vested percentages) of the value of the Matching Contributions to his Account, as adjusted for income, expense, gain, or loss, such percentages) determined in accordance with the vesting schedules) selected by the Employer in Section 1.07, and (ii) the value of the Deferral Contributions to his Account as adjusted for income, expense, gain or loss. A Participant's Account shall be valued on the valuation date immediately preceding or coincident with the date of distribution. The amount payable under this Section 7.03 will be subject to the provisions of Section 7.06 and will be distributed in accordance with Article 8. 25. Article 7.07. Hardship Withdrawals: ----------------------------------- Article 7.07. is hereby amended in its entirety to read as follows: "Subject to the provisions of Article 8, a Participant may apply to the Administrator to make a withdrawal from his Account if such withdrawal is made on account of a Financial Hardship. The minimum amount of a hardship withdrawal is $10,000. A Participant shall be limited to a maximum of two (2) withdrawals on account of Financial Hardship per Plan Year." 26. Article 8. Distribution of Benefits Payable After Termination of Service. ---------------------------------------------------------------- Article 8 is hereby amended in its entirety to read as follows: 8.01 Distribution of Benefits to Participants and Beneficiaries. (a) Participants. ------------ (i) At the time the Participant makes a deferral election for a Plan Year, the Participant will determine the method of distribution with respect to the deferrals for such Plan Year as permitted in Section 1.10. If the Participant does not elect a method of distribution, the Participant shall be deemed to have elected a lump sum distribution. The distribution of a Participant's Account shall be made in accordance with the elections on file with the Administrator as of the date distribution commences, pursuant to Section 1.06. (ii) Distributions under a systematic withdrawal plan must be made in substantially equal annual, or more frequent, installments, in cash, over a period certain which does not extend beyond 10 years. The period certain specified in a Participant's first deferral election specifying distribution under a systematic withdrawal plan shall apply to all subsequent election of distributions under a systematic withdrawal plan made by the Participant. (b) Beneficiaries. ------------- Distributions to a Beneficiary under the Plan shall be made in a lump sum, notwithstanding that the Participant to whom the Beneficiary relates had elected an installment method of distribution for some or part of his Account. In the instance where the Participant dies after commencing installment distributions, the Beneficiary shall receive a lump sum distribution of the remaining value of the Participant's Account. 8.02 Time of Distribution. Distribution of a Participant's account shall commence within ninety (90) days following the occurrence of a distribution event set forth in Section 1.06. 8.03 Notice to Trustee. The Administrator shall send written notification to the Trustee whenever a Participant or Beneficiary is entitled to receive benefits under the Plan. The Administrator's notice shall indicate the form, amount and frequency of benefits that such Participant or Beneficiary shall receive. 27. Article 9.01. Amendment by Employer: ----------------------------------- Article 9.01 is hereby amended in its entirety to read as follows: "The Employer reserves the authority to amend the Plan, to include both the Adoption Agreement and the Basic Plan Document, at any time and for any reason by resolution of its board of directors. An executed copy of each such amendment shall be filed with the Trustee as soon as practicable after its adoption. Such changes are to be effective on the effective date of such amended Adoption Agreement and/or the Basic Plan Document. Any such change notwithstanding, no Participant's Account shall be reduced by such change below the amount to which the Participant would have been entitled if he had voluntarily left the employ of the Employer immediately prior to the date of the change." 28. Article 9.03. Termination. -------------------------- Article 9.03 is hereby amended in its entirety to read as follows: "The Employer has adopted the Plan with the intention and expectation that the Plan will be continued indefinitely. However, the Employer has no obligation or liability whatsoever to maintain the Plan for any particular length of time and may discontinue or suspend contributions under the Plan or terminate the Plan at any time and for any reason without any liability hereunder for such discontinuance or termination. Notwithstanding the foregoing, the Plan shall automatically terminate upon the occurrence of any of the following events, as determined by the Administrator: (a) the Employer incurs three (3) consecutive quarterly losses, (b) the equity value of Employer falls below $10 million, or (c) there is a Change in Control of the Employer. Coincident with the termination of the Plan, the Employer shall deliver written notice to the Trustees and distribution of Participant Accounts should commence in accordance with the provisions of the Plan." 29. In all other respects the Plan is hereby ratified and confirmed. IN WITNESS WHEREOF, the Employer has caused this Amendment to be executed this 11th day of February , 2000. ATTEST: ICT GROUP, INC. BY: /s/ Anne Beeson - ------------------------- VP Human Resources TRUST AGREEMENT Between ICT Group, Inc. [Sponsor] and FIDELITY MANAGEMENT TRUST COMPANY [Trustee] Dated as of December 20, 1999 IMPORTANT NOTE This Trust Agreement may only be used in conjunction with the CORPORATEpIan for Retirement Select Plan Adoption Agreement and Basic Plan Document. An Employer may not rely solely on said documents to ensure that the Plan is "unfunded and maintained primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees" and exempt from parts 2 through 4 of Title I of the Employee Retirement Income Security Act of 1974 with respect to the Employer's particular situation. Fidelity Management Trust Company, its affiliates and employees may not provide you with legal advice in connection with the execution of this document. This document should be reviewed by your attorney and/or accountant prior to execution. 4/11/94 TABLE OF CONTENTS Section Page SECTION 1. 1.Trust........................................................1 (a) Establishment ........................................1 (b) Grantor Trust ........................................1 (c) Trust Assets .........................................1 (d) Non-Assignment .......................................1 SECTION 2. 2. Payments to Sponsor SECTION 3. 3. Disbursements ..............................................2 (a) Directions from Administrator ........................2 (b) Limitations ..........................................2 SECTION 4. 4. Investment of Trust (a) Selection of Investment Options ......................2 (b) Available Investment Options .........................2 (c) Investment Direction .................................3 (d) Mutual Funds .........................................3 (e) Trustee Powers .......................................4 SECTION 5 ........................................................5 5. Recordkeeping and Administrative Services to be Performed (a) General...............................................5 (b) Accounts .............................................5 (c) Inspection and Audit..................................5 (d) Effect of Plan Amendment..............................5 (e) Returns, Reports and Information SECTION 6 6. Compensation and Expenses...................................6 SECTION 7 7. Directions and Indemnification..............................6 (a) Identity of Administrator ............................6 (b) Directions from Administrator ........................6 (c) Directions from Sponsor ..............................6 (d) Indemnification ......................................7 (e) Survival .............................................7 SECTION 8 8. Resignation or Removal if Trustee...........................7 (a) Resignation . ........................................7 (b) Removal. .............................................7 SECTION 9 9. Successor Trustee...........................................7 (a) Appointment ..........................................7 (b) Acceptance ...........................................7 (c) Corporate Action .....................................8 SECTION 10 10. Termination................................................8 SECTION 11 11. Resignation, Removal, and Termination Notices..............8 4/11/94 SECTION 12 12. Duration ..................................................8 SECTION 13 13. Insolvency of Sponsor .....................................8 SECTION 14 14. Amendment or Modification .................................9 SECTION 15 15. General ..................................................10 (a) Performance by Trustee, its Agents or Affiliates.....10 (b) Entire Agreement.....................................10 (c) Waiver...............................................10 (d) Successors and Assigns...............................10 (e) Partial Invalidity...................................10 (f) Section Headings.....................................10 SECTION 16 16. Governing Law ............................................11 (a) Massachusetts Law Controls...........................11 (b) Trust Agreement Controls.............................11 4/11/94 TRUST AGREEMENT, dated as of the 20 day of December , 1999, between _______________________ a ____________________corporation, having an office at 800 Town Center Drive, Langhorne, PA (the "Sponsor"), and FIDELITY MANAGEMENT TRUST COMPANY, a Massachusetts trust company, having an office at 82 Devonshire Street, Boston, Massachusetts 02109 (the "Trustee"). WITNESSETH: WHEREAS, the Sponsor is the sponsor of the ICT Group Non-Qualified Executive Retirement Plan (the "Plan"); and WHEREAS, the Sponsor wishes to establish an irrevocable trust and to contribute to the trust assets that shall be held therein, subject to the claims of Sponsor's creditors in the event of Sponsor's Insolvency, as herein defined, until paid to Plan participants and their beneficiaries in such manner and at such times as specified in the Plan; and WHEREAS, it is the intention of the sponsor that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974 ("ERISA"); and WHEREAS, it is the intention of the Sponsor to make contributions to the trust to provide itself with a source of funds to assist it in the meeting of its liabilities under the Plan; and WHEREAS, the trustee is willing to hold and invest the aforesaid plan assets in trust among several investment options selected by the Sponsor; and WHEREAS, the Sponsor wishes to have the Trustee perform certain ministerial recordkeeping and administrative functions under the Plan; and WHEREAS, the Employer or such other individual named in the Plan is the Administrator of the plan; and WHEREAS, the Trustee is willing to perform recordkeeping and administrative services for the Plan if the services are purely ministerial in nature and are provided within a framework of plan provisions, guidelines and interpretations conveyed in writing to the Trustee by the Administrator. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements set forth below, the Sponsor and the Trustee agree as follows: 4/11/94 SECTION 1. 1. Trust. (a) Establishment. The Sponsor hereby establishes a trust (hereinafter the "Trust"), With the Trustee. The Trust shall consist of an initial contribution of money or other properly acceptable to the Trustee in its sole discretion, made by the Sponsor or transferred from a previous trustee under the Plan, such additional sums of money as shall from time to time be delivered to the Trustee under the Plan, all investments made therewith and proceeds thereof, and all earnings and profits thereon, less the payments that are made by the Trustee as provided herein, without distinction between principal and income. The Trustee hereby accepts the Trust on the terms and conditions set forth in this Agreement. In accepting this Trust, the Trustee shall be accountable for the assets received by it, subject to the terms and conditions of this Agreement. (b) Grantor Trust The Trust is intended to be a grantor trust, of which the Sponsor is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. (c) Trust Assets. The principal of the Trust, and any earnings thereon shall be held separate and apart from other funds of the Sponsor and shall be used exclusively for the uses and purposes of Plan participants and general creditors as herein set forth. Plan participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plan and this Trust Agreement shall be mere unsecured contractual rights of Plan participants and their beneficiaries against the Sponsor. Any assets held by the Trust will be subject to the claims of the Sponsor's general creditors under federal and state law in the event of Insolvency, as defined in Section 13(a). (d) Non-Assignment. Benefit payments to Plan participants and their beneficiaries funded under this Trust may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered, or subjected to attachment, garnishment, levy, execution, or other legal or equitable process. 4/11/94 SECTION 2. 2. Payments to Sponsor. Except as provided under Section 13, the Sponsor shall have no right to retain or divert to others any of the Trust assets before all payment of benefits have been made to the participants and their beneficiaries pursuant to the terms of the Plan. SECTION 3. 3. Disbursements. (a) Directions from Administrator. The Trustee shall disburse monies to the Sponsor for benefit payments in the amounts that the Administrator directs from time to time in writing. The Trustee shall have no responsibility to ascertain any direction's compliance with the terms of the Plan or of any applicable law. The Trustee shall not be responsible for making benefit payments to participants under the Plan, nor shall the Trustee be responsible for any Social Security or Federal, State or local income tax reporting or withholding with respect to such Plan benefits. (b) Limitations. The Trustee shall not be required to make any disbursement in excess of the net realizable value of the assets of the Trust at the time of the disbursement. The Trustee shall not be required to make any disbursement in cash unless the Administrator has provided a written direction as to the assets to be converted to cash for the purpose of making the disbursement. SECTION 4. 4. Investment of Trust (a) Selection of Investment Options. The Trustee shall have no responsibility for the selection of investment options under the Trust and shall not render investment advice to any person in connection with the selection of such options. (b) Available Investment Options. In accordance with Section 1.14 of the Plan, the Sponsor shall direct the Trustee as to the investment options available under the Trust provided, however, that the Trustee shall not be considered a fiduciary with investment discretion. The Sponsor may add additional investment options with the consent of the Trustee and upon amendment of the Plan. 4/11/94 (c) Investment Direction. In order to provide for an accumulation of assets comparable to the contractual liabilities accruing under the Plan, the Sponsor may direct the Trustee in writing to invest the assets held in the Trust to correspond to the hypothetical investments made for Participants under the Plan. Such directions may be made by Plan participants by use of the telephone exchange system maintained for such purposes by the Trustee or its agent. In the event that the Trustee fails to receive a proper direction from the Sponsor or from Participants, the assets in question shall be invested in Fidelity Retirement Money Market Fund, or such other fund designated by the Sponsor for this purpose, until the Trustee receives a proper direction. (d) Mutual Funds. The Sponsor hereby acknowledges that it has received from the Trustee a copy of the prospectus for each Mutual Fund selected by the Sponsor as a Plan investment option. Trust investment in Mutual Funds shall be subject to the following limitations: (i) Execution of Purchases and Sales. Purchase and sales of Mutual Funds (other than for Exchanges) shall be made on the date on which the Trustee receives from the Sponsor in good order all information and documentation necessary to accurately effect such purchases and sales (or in the case of a purchase, the subsequent date on which the Trustee has received a wire transfer of funds necessary to make such purchase). Exchanges of Mutual Funds shall be made on the same business day that the Trustee receives a proper direction if received before 4:00 p.m. eastern time; if the direction is received after 4:00 p.m. eastern time, the exchange shall be made the following day. (ii) Voting. At the time of mailing of notice of each annual or special stockholders' meeting of any Mutual Fund, the Trustee shall `send a copy of the notice and all proxy solicitation materials to each Plan participant who has shares of the Mutual Fund credited to the participant's account, together with a voting direction form for return to the Trustee or its designee. The participant shall have the right to direct the Trustee as to the manner in which the Trustee is to vote the shares credited to the participant's accounts (both vested and unvested). The Trustee shall vote the shares as directed by the participant. The Trustee shall not vote shares for which it has received no directions from the participant. During the participant recordkeeping reconciliation ("transition") period, the Sponsor shall have the right to direct the Trustee as to the manner in which the Trustee is to vote the shares of the Mutual Funds in the Trust. With respect to all rights other than the right to vote, the Trustee shall follow the directions of the participant and if no such directions are received, the directions of the Sponsor. The Trustee shall have no duty to solicit directions from participants or the Sponsor. 4/11/94 3 (e) Trustee Powers. The Trustee shall have the following powers and authority: (i) Subject to paragraphs (b), (c) and (d) of this Section 4, to sell, exchange, convey, transfer, or otherwise dispose of any property held in the Trust, by private contract or at public auction. No person dealing with the Trustee shall be bound to see to the application of the purchase money or other property delivered to the Trustee or to inquire into the validity, expediency, or propriety of any such sale or other disposition. (ii) To cause any securities or other property held as part of the Trust to be registered in the Trustee's own name, in the name of one or more of its nominees, or in the Trustee's account with the Depository Trust Company of New York and to hold any investments in bearer form, but the books and records of the Trustee shall at all times show that all such investments are part of the Trust. (iii) To keep that portion of the Trust in cash or cash balances as the Sponsor or Administrator may, from time to time, deem to be in the best interest of the Trust. (iv) To make, execute, acknowledge, and deliver any and all documents of transfer or conveyance and to carry out the powers herein granted. (v) To settle, compromise, or submit to arbitration any claims, debts, or damages due to or arising from the Trust; to commence or defend suits or legal or administrative proceedings; to represent the Trust in all suits and legal and administrative hearings; and to pay all reasonable expenses arising from any such action, from the Trust if not paid by the Sponsor. (vi) To employ legal, accounting, clerical, and other assistance as may be required in carrying out the provisions of this Agreement and to pay their reasonable expenses and compensation from the Trust if not paid by the Sponsor. (vii) To do all other acts although not specifically mentioned herein, as the Trustee may deem necessary to carry out any of the foregoing powers and the purposes of the Trust. Notwithstanding any powers granted to Trustee pursuant to this Trust Agreement or to applicable law, Trustee shall not have any power that could give this trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of Section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code. 4/11/94 4 SECTION 5. 5. Recordkeeping and Administrative Services to be Performed (a) General The Trustee shall perform those recordkeeping and administrative functions described in the CORPORATEplan for Retirement Select Plan Service Agreement between the Trustee and the Sponsor ("Service Agreement"). (b) Accounts. The Trustee shall keep accurate accounts of all investments, receipts, disbursements, and other transactions hereunder and shall report the value of the assets held in the Trust as of the last day of each fiscal quarter of the Plan and, if not on the last day of a fiscal quarter, the date on which the Trustee resigns or is removed as provided in Section 8 of this Agreement or is terminated as provided in Section 10 (the "Reporting Date"). Within thirty (30) days following each Reporting Date or within sixty (60) days in the case of a Reporting date caused by the resignation or removal of the Trustee, or the termination of this Agreement, the Trustee shall file with the Administrator a written account setting forth all investments, receipts, disbursements, and other transactions effected by the Trustee between the Reporting Date and the prior Reporting Date, and setting forth the value of the Trust as of the Reporting date. Except as otherwise required under applicable law, upon the expiration of six (6) months from the date of filing such account with the Administrator, the Trustee shall have no liability or further accountability to anyone with respect to the propriety of its acts or transactions shown in such account, except with respect to such acts or transactions as to which the Sponsor shall within such six (6) month period file with the Trustee written objections. (c) Inspection and Audit All records generated by the Trustee in accordance with paragraphs (a) and (b) shall be open to inspection and audit, during the Trustee's regular business hours prior to the termination of this Agreement, by the Administrator or any person designated by the Administrator. Upon the resignation or removal of the Trustee or the termination of this Agreement, the Trustee shall provide to the Administrator, at no expense to the Sponsor, in the format regularly provided to the Administrator, a statement of each participant's accounts as of the resignation, removal, or termination, and the Trustee shall provide to the Administrator or the Plan's new recordkeeper such further records as are reasonable, at the Sponsor's expense. (d) Effect of Plan Amendment The Trustee's provision of the recordkeeping and administrative services set forth in this Section 5 shall be conditioned on the Sponsor delivering to the Trustee a copy of any amendment to the Plan as soon as administratively feasible following the amendment's adoption, and on the Administrator providing the Trustee on a timely basis with all the information the Administrator deems necessary for the Trustee to perform the recordkeeping and administrative services and such other information as the Trustee may reasonably request. 4/11/94 (e) Returns, Reports and Information The Administrator shall be responsible for the preparation and filing of all returns, reports, and information required of the Trust or Plan by law including but not limited to any annual fiduciary tax return. The Trustee shall provide the Administrator with such information as the Administrator may reasonably request to make these filings. The Administrator shall also be responsible for making any disclosures to participants required by law. SECTION 6. 6. Compensation and Expenses. As consideration for its services, the Trustee shall be entitled to the fees computed and billed in accordance with the Service Agreement. All expenses of the Trustee relating directly to the acquisition and disposition of investments constituting part of the Trust, and all taxes of any kind whatsoever that may be levied or assessed under existing or future laws upon or in respect of the Trust or the income thereof, shall be a charge against and paid from the appropriate Plan participants' accounts SECTION 7. 7. Directions and Indemnification (a) Identity of Administrator. The Trustee shall be fully protected in relying on the fact that the Administrator under the Plan is the individual or persons named as such above or such other individuals or persons as the Sponsor may notify the Trustee in writing. (b) Directions from Administrator. Whenever the Administrator provides a direction to the Trustee, the Trustee shall not be liable for any loss, or by reason of any breach, arising from the direction if the direction is contained in a writing (or is oral and immediately confirmed in written) signed by any individual whose name and signature have been submitted (and not withdrawn) in writing to the Trustee in the Service Agreement provided the Trustee reasonably believes the signature of the individual to be genuine. Such direction may be made via EDT in accordance with procedures agreed to by the Administrator and the Trustee; provided, however, that the Trustee shall be fully protected in relying on such direction as if it were a direction made in writing by the Administrator. The Trustee shall have no responsibility to ascertain any direction's (i) accuracy, (ii) compliance with the terms of the Plan or any applicable law, or (iii) effect for tax purposes or otherwise. (c) Directions from Sponsor The Trustee shall not be liable for any loss which arises from the Sponsor's exercise or nonexercise of rights under Section 4 over the assets in a participant's account. 4/11/64 (d) Indemnification. The Sponsor shall indemnify the Trustee against, and hold the Trustee harmless from, any and all loss, damage, penalty, liability, cost, and expense, including without limitation, reasonable attorneys' fees and disbursements, that may be incurred by, imposed upon, or asserted against the Trustee by reason of any claim, regulatory proceeding or litigation arising from any act done or omitted to be done by any individual or person with respect to the Plan or Trust, excepting only any and all loss, etc., arising solely from the Trustee's negligence or bad faith. (e) Survival. The provisions of this Section 7 shall survive the termination of this Agreement. SECTION 8. 8. Resignation or Removal if Trustee. (a) Resignation. The Trustee may resign at any time upon sixty (60) days' notice in writing to the Sponsor, unless a shorter period of notice is agreed upon by the Sponsor. (b) Removal. The Sponsor may remove the Trustee at anytime upon sixty (60) days' notice in writing to the Trustee, unless a shorter period of notice is agreed upon by the Trustee. SECTION 9. 9. Successor Trustee. (a) Appointment If the office of Trustee becomes vacant for any reason, the Sponsor may in writing appoint a successor trustee under this Agreement. The successor trustee shall have all of the rights, powers, privileges, obligations, duties, liabilities, and immunities granted to the Trustee under this Agreement. The successor trustee and predecessor trustee shall not be liable for the acts or omissions of the other with respect to the Trust. (b) Acceptance. When the successor trustee accepts its appointment under this Agreement, title to and possession of the Trust assets shall immediately vest in the successor trustee without any further action on the part of the predecessor trustee. The predecessor trustee shall execute all instruments and do all acts that reasonably may be necessary or reasonably may be requested in writing by the Sponsor or the successor trustee to vest title to all Trust assets in the successor trustee or to deliver all Trust assets to the successor trustee. 4/11/94 (c) Corporate Action. Any successor of the Trustee or successor trustee, through sale or transfer of the business or trust department of the Trustee or successor trustee, or through reorganization, consolidation, or merger, or any similar transaction, shall, upon consummation of the transaction, become the successor trustee under the Agreement. SECTION 10. 10. Termination. This Agreement may be terminated at any time by the Sponsor upon sixty (60) days' notice in writing to the Trustee. On the date of the termination of this Agreement, .the Trustee shall forthwith transfer and deliver to such -individual or entity as the Sponsor shall designate, all cash and assets then constituting the Trust. If, by the termination date, the Sponsor has not notified the Trustee in writing as to whom the assets and cash are to be transferred and delivered, the Trustee may bring an appropriate action or proceeding for leave to deposit the assets and cash in a court of competent jurisdiction. The Trustee shall be reimbursed by the Sponsor for all costs and expenses of the action or proceeding including, without limitation, reasonable attorneys' fees and disbursements. SECTION 11. 11. Resignation, Removal, and Termination Notices. All notices of resignation, removal, or termination under this Agreement must be in writing and mailed to the party to which the notice is being given by certified or registered mail, return receipt requested, to the Sponsor at the address designated in the Service Agreement, and to the Trustee at the aforementioned address or to such other addresses as the parties have notified each other of in the foregoing manner. SECTION 12. 12. Duration. This Trust shall continue in effect without limit as to time, subject, however, to the provisions of this Agreement relating to amendment, modification, and termination thereof. SECTION. 13. 13. Insolvency of Sponsor (a) Trustee shall cease disbursement of funds for payment of benefits to Plan participants and their beneficiaries if the Sponsor is Insolvent. Sponsor shall be considered "Insolvent" for purposes of this Trust Agreement if (i) Sponsor is unable to pay its debts as they become due or (ii) Sponsor is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. 4/11/94 8 (b) All times during the continuance of this Trust, the principal and income of the Trust shall be subject to claims of general creditors of the Sponsor under federal and state Law as set forth below. (i) The Board of Directors and the Chief Executive Officer of the Sponsor shall have the duty to inform Trustee in writing of Sponsor's Insolvency. If a person claiming to be a creditor of the Sponsor alleges in writing to trustee that Sponsor has become Insolvent, Trustee shall determine whether Sponsor is Insolvent and pending such determination, Trustee shall discontinue disbursements for payment of benefits to Plan participants or their beneficiaries. (ii) Unless Trustee has actual knowledge of Sponsor's Insolvency, or has received notice from Sponsor or a person claiming to be a creditor alleging that Company is Insolvent, Trustee shall have no duty to inquire whether Sponsor is Insolvent. Trustee may in all events rely on such evidence concerning Sponsor's solvency as may be furnished to Trustee and that provides Trustee with a reasonable basis for making a determination concerning Sponsor's solvency. (iii) If any time Trustee has determined that Sponsor is Insolvent, Trustee shall discontinue disbursements for payments to Plan participants or their beneficiaries and shall hold the assets of the Trust for the benefit of Sponsor's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of Plan participants or their beneficiaries to pursue their rights as general creditors of Sponsor with respect to benefits due under the Plan or otherwise. (iv) Trustee shall resume disbursement for the payment of benefits to Plan participants or their beneficiaries in accordance with Section 2 of this Trust Agreement only after Trustee has determined that Sponsor is not Insolvent (or is no longer Insolvent). (c) Provided that there are sufficient assets, if Trustee discontinues the payment of benefits from the Trust pursuant to (a) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Plan participants or their beneficiaries under the terms of the Plan for the period of such discontinuance, less the aggregate amount of any payments made to Plan participants or their beneficiaries by Sponsor in lieu of the payments provided for hereunder during any such period of discontinuance. SECTION 14. 14. Amendment or Modification This agreement may be amended or modified at any time and from time to time only by an instrument executed by both the Sponsor and the Trustee. 4/11/94 9 SECTION 16. 16. Governing Law. (a) Massachusetts Law Controls. This Agreement is being made in the Commonwealth of Massachusetts, and the Trust shall be administered as a Massachusetts trust. The validity, construction, effect and administration of this Agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts, except to the extent those laws are superseded under Section 514 of ERISA. (b) Trust Agreement Controls. The Trustee is not a party to the Plan, and in the event of any conflict between the provisions of the Plan and the provisions of this Agreement, the provisions of this Agreement shall control. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the day and year first above written. [SPONSOR] Attest: By /s/ Anne Beeson - VP Human Resources ------------------------------------ ----------------------------- [Title] [Title] FIDELITY MANAGEMENT TRUST COMPANY [TRUSTEE] By ----------------------------------- [Title] 4/11/94 11 AMENDMENT NO. 1 TO THE TRUST AGREEMENT BETWEEN ICT GROUP, INC. [EMPLOYER] AND THE FIDELITY MANAGEMENT TRUST COMPANY [TRUSTEE] WHEREAS, the Employer and the Trustee intend to establish the above-referenced trust agreement ("Trust Agreement"); and WHEREAS, the Employer desires to make certain changes to the Trust Agreement to more fully evidence the intent of the parties; and WHEREAS, Section 14 of the Trust Agreement authorizes amendment of the Trust Agreement by an instrument executed by both the Employer and the Trustee. NOW, THEREFORE, the Trust Agreement is hereby amended effective as of the effective date of the Trust Agreement: 1. Amendment to the first "whereas clause" of the Trust Agreement: --------------------------------------------------------------- The first "whereas clause" of the Trust Agreement is hereby deleted in its entirety and replaced with the new following "whereas clause": "Whereas, the Employer is the sponsor of the ICT GROUP CORPORATE PLAN FOR RETIREMENT SELECT PLAN (the 'Plan'); and" 2. Amendment to the second "whereas clause" of the Trust Agreement: ---------------------------------------------------------------- The second "whereas clause" of the Trust Agreement is hereby amended in its entirety to read as follows: "WHEREAS, the Employer wishes to establish a rabbi trust and to contribute to the trust assets that shall be held therein, subject to the claim's of the Employer's creditors in the event of Employer's Insolvency, as herein defined, until paid to Plan participants and their beneficiaries in such manner and at such times as specified in the Plan; and" 3. Global reference change: ----------------------- DSB:671720.2 Except as used in the first "whereas clause" under 1. above, the word "Sponsor" wherever used in the Trust Agreement is hereby deleted and replaced with "Employer." 4. Section 1.1: ----------- Section 1.1 of the Plan is hereby amended by adding the following new Section 1.1(b) to read as follows: "(b) Trust The Trust hereby established shall become irrevocable upon resolution of the board of directors of the Employer." 5. Sections 1.1(b) through 1.1(d) of the Trust Agreement are redesignated as Sections 1.1(c) through l.l (e). 6. Section 4(a): ------------ Section 4(a) of the Trust Agreement is hereby deleted in its entirety and replaced with the following new Section 4(a): "To the extent the Trustee is not directed in accordance with Section 4(b), below, the Trustee shall have authority to invest and select investment options within the investment guidelines established by the Employer. The Trustee shall have no responsibility to render investment advice to any person in connection with the selection of the investment options under the Trust." 7. Section 4 (b): ------------- The first sentence of Section 4(b) of the Trust Agreement is hereby deleted and replaced with the following sentence: "The Employer shall direct the Trustee as to the investment options available under Section 1.11(b) of the Plan, and to the extent so directed, the Trustee shall not be considered a fiduciary with investment discretion." 8. Section 4(e)(v): --------------- Section 4(e)(v) is hereby amended in its entirety to read as follows: DSB:670720.2 2 "Subject to the prior authorization from the Employer, to (i) settle, compromise, or submit to arbitration any claims, debts, or damages due to or arising from the Trust; (ii) commence or defend suits or legal or administrative proceedings; (iii) represent the Trust in all suits and legal and administrative hearings; and (iv) pay all reasonable expenses arising from any such action, from the Trust." 9. Section 4(e)(vi): ---------------- Section 4(e)(v) is hereby amended in its entirety to read as follows: "To employ legal, accounting, clerical, and other assistance as may be required in carrying out the provisions of this Agreement and, subject to the prior approval from the Employer, to pay their reasonable expenses and compensation from the Trust." 10. Section 7(d): ------------ Section 7(d) is hereby amended in its entirety to read as follows: "(d) Indemnification. (i) The Employer shall indemnify the Trustee against and hold the Trustee harmless from, any and all loss, damage, penalty, liability, cost, and expense, including without limitation, reasonable attorneys' fees and disbursements, that may be incurred by, imposed upon, or asserted against the Trustee by reason of any claim, regulatory proceeding or litigation arising from any act done or omitted to be done by any individual or person with respect to the Plan or Trust, excepting only any and all loss, etc., arising solely from the Trustee's negligence or bad faith or for which the Trustee is required to indemnify the Plan and the Employer as set forth in Section 7(d)(ii) below. (ii) The Trustee shall indemnify the Plan and the Employer against, and hold the Plan and the Employer harmless from, any and all loss, damage, penalty, liability, cost, and expense, including without limitation, reasonable attorneys' fees and disbursements, that may be incurred by, imposed upon, or asserted against the Plan or the Employer by reason of any claim, regulatory proceeding or DSB:670720.2 3 litigation arising from grossly negligent, reckless, fraudulent or unlawful acts of the Trustee or its delegates." 11. In all other respects, the Trust Agreement is hereby ratified and confirmed. 4 EX-21 6 EXHIBIT 21 EXHIBIT 21 LIST OF SUBSIDIARIES
Name of Subsidiary State/Country of Incorporation/Organization - ------------------ ------------------------------------------- ICT/Canada Marketing, Inc. Canada Eurotel Marketing Limited Ireland Harvest Resources, Inc. Delaware Yardley Enterprises, Inc. Delaware ICT Australia Pty. Ltd. Australia iCT ConnectedTouch.com, LLC Pennsylvania
EX-23 7 EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into the Company's previously filed Form S-8 Registration Statement (File No. 333-32623) filed with the Securities and Exchange Commission on August 1, 1997 and Form S-8 Registration Statement (File No. 333-56187) filed with the Securities and Exchange Commission on June 5, 1998. ARTHUR ANDERSEN LLP Philadelphia, Pa. March 27, 2000 EX-27 8 FINANCIAL DATA SCHEDULE
5 0001013149 ICT GROUP, INC. 1,000 U.S. DOLLARS 12-MOS 12-MOS DEC-31-1999 DEC-31-1998 JAN-01-1999 JAN-01-1998 DEC-31-1999 DEC-31-1998 1 1 12,239 14,255 0 0 28,796 26,344 0 0 0 0 44,191 42,352 56,205 47,558 26,784 18,924 78,073 75,876 17,424 15,258 0 0 0 0 0 0 118 116 50,222 45,669 78,073 75,876 0 0 153,049 120,982 0 0 84,390 69,588 60,080 47,012 0 0 801 406 7,778 3,976 3,033 1,549 4,745 2,427 0 0 0 0 0 0 4,745 2,427 0.40 0.21 0.39 0.20
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