SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A (AMENDMENT NO. 1) (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, 2001 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 Identification No.) incorporation or organization) 100 Brandywine Boulevard Newtown, PA 18940 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 267-685-5000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each Exchange on which registered ------------------- ----------------------------------------- None None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share -------------------------------------- (Title of class) 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 the definitive proxy statement incorporated by reference in Part III of this annual report on Form 10-K or any amendment to this annual report on Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant is approximately $116,627,160. 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, 2002. 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, 2002 was 12,267,125. DOCUMENTS INCORPORATED BY REFERENCE Portions of Registrant's definitive Proxy Statement relating to the 2002 Annual Meeting of Shareholders are incorporated by reference into Part III hereof. This amendment to ICT Group, Inc.'s (the "Company") Form 10-K for the fiscal year ended December 31, 2001 amends and modifies the Form 10-K to amend and restate in their entirety the following items: Item 1 of Part I, Item 11 of Part III, Item 14 of Part IV, and the Exhibit Index. Item 1 of Part I is being amended and restated solely to identify the name of the customer that represented 12% of the Company's net revenues in 2001. Item 11 of Part III is being amended and restated to correct the number of options held by each named executive officer and related disclosure and to correct a de minimus typographical error in the base salary reported for Dean J. Kilpatrick, one of our named executive officers. Item 14 of Part IV is being amended and restated to correct incorporation by reference notations and to add an omitted exhibit. PART I Item 1. Business. ICT Group, Inc. (the "Company" or "ICT") is a leading global provider of integrated customer relationship management (CRM) solutions. The Company provides integrated sales, marketing and customer care solutions designed to help its clients identify, acquire, retain, service, measure, and maximize the lifetime value of their customer relationships. ICT's comprehensive, balanced mix of outsourced CRM solutions includes inbound and outbound sales, up-selling/cross-selling, customer care and retention and technical support/help desk services as well as full-service marketing research, including telephone interviewing, coding and analysis as well as database design and marketing analysis. ICT also offers a comprehensive suite of CRM technologies on a hosted basis, for use by clients at their own in-house facilities, or on a co-sourced basis, in conjunction with its fully compatible, Web-enabled customer contact centers. These include: automatic call distribution (ACD), contact management, automated e-mail management and processing, sales force and marketing automation, interactive voice response services, alert notification and Web self-help for the delivery of consistent, quality customer care in a multi-channel environment. Industry Overview: The CRM services market includes traditional activities such as inbound and outbound telesales and customer care, e-business support and marketing services including market research and database marketing and analysis. Customer contact center outsourcing has evolved significantly in recent years. Competitive pressures, advancements in technology and an accelerating trend toward outsourcing customer care has resulted in the demand for more complex, interactive and multi-channel CRM solutions. Outsourced CRM service providers are now expected to serve more as a business "partner," offering clients value-added contact center strategies rather than traditional commodity-based sales and service applications. ICT is ahead of the competition in responding to this trend and has already expanded its portfolio of value-added services to include niche, industry-specialized sales, customer care and marketing support services designed to improve clients' profitability and maximize their per-customer revenue. As an example, ICT recently introduced Direct Response Medical Detailing (DrMD(SM)), a data modeling, multi-channel detailing program designed to influence prescribing activity and increase pharmaceutical clients' ROI for certain prescription products. ICT Approach: ICT believes that it has distinguished itself in the CRM solutions industry by having a balanced growth strategy, vertical market and customer-centric focus, comprehensive portfolio of services, and substantial resources to support future expansion. The Company continues to expand its worldwide network of state-of-the- 1 art CRM contact centers in order to deliver globally integrated, multi-channel CRM sales and service solutions to meet the specific needs of its large, multinational clients. With extensive experience providing outsourced sales, marketing and customer care services, the Company is well-positioned for continued success in a large and growing market. By leveraging its strong management team, proven business model, global infrastructure, CRM operating and technology investments, and expertise in target industries, ICT intends to advance its leadership position as a global supplier of integrated CRM solutions. The Company also plans to: . Introduce additional cost-effective, off-shore CRM solutions . Continue investing in its outsourced customer care services . Further develop its value-added marketing services . Deepen relationships with existing customers . Further expand its international presence Strategy The Company's growth strategy includes the following key elements: . Expand Value-Added Services. The Company will continue to complement its core telesolutions expertise with additional value-added services, such as database marketing, research and consulting services, as well as a complete suite of comprehensive CRM services. The Company's goal is to offer a robust, integrated suite of telesolutions, e-solutions and market solutions to help its clients maximize the lifetime value of their customer relationships. . 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 suppliers such as Aspect Communications Corporation, Siebel Systems, Inc., Oracle and Cisco. . 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 to customers in the United States, Europe, Latin America, Canada and Australia. ICT intends to expand its operations in these areas, as well as others. . Focus on Industry Specialization. Management 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, management believes that this specialization will enable it to attract new clients because of its industry expertise. . 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 management believes it was 2 among the first to offer fully automated CRM services, collaborative web browsing services and to implement predictive dialing equipment. . 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. ICT's Services ICT delivers its telesolution, e-solution and market solution CRM services through two business segments that are supported by the Company-wide marketing, sales, systems and corporate units. ICT's sales force and operating units are organized into a series of industry sectors focused on selling and supporting 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. Domestic CRM Services Traditional teleservices, as well as marketing, research and consulting services, and ongoing customer care services are offered in the United States through the Company's Domestic CRM Services segment, which is comprised of the following business units. ICT TeleServices. ICT TeleServices provides telesales support activities primarily for clients in the insurance, financial services, telecommunications, information services, energy services and media industries. 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, 2001, 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. This unit is staffed by dedicated personnel to meet the sophisticated product and customer profiles of specific clients. As of December 31, 2001, ICT Medical Marketing Services operated a dedicated contact center in Langhorne, Pennsylvania. ICT Research and Database Marketing Services. This business unit provides businesses across a wide range of industries with value added market research and database marketing services. This unit 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, 2001, ICT Research Services conducted surveys from centers in Depew, New York and Conway, Arkansas. Customer Care Management Services. This business unit was established to pursue outsourcing opportunities for 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, 2001, this business unit operated contact centers in Lakeland, Florida, Langhorne, Pennsylvania, and Spokane, 3 Washington. International CRM Services The Company offers 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 business units: ICT Eurotel. Eurotel provides pan-European, multilingual teleservices and customer care services to Europe from its contact centers in Athlone, Ireland, 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. ICT Canada provides service representatives who are fluent in French and English. As of December 31, 2001, ICT Canada has contact centers located in Miramichi, Moncton and Riverview, New Brunswick, Canada; Halifax, New Glasgow and Sydney, Nova Scotia, Canada; and Cornerbrook and Carbonear, Newfoundland, Canada. ICT Australia. This unit was formed in 1999 to provide telemarketing services for multinational companies in the Pacific Rim. As of December 31, 2001, ICT Australia operated a contact center in Sydney, Australia. Contact Center Facilities The following table lists the Company's contact center facilities as of December 31, 2001: - -------------------------------------------------------------------------------- Locations - -------------------------------------------------------------------------------- Conway, AR; Morrilton, AR; Newark, DE; Fort Lauderdale, FL; Lakeland, FL; Miami, FL; Louisville, KY; Calais, ME; Lewiston, ME; Oxford, ME; Pittsfield, ME; Wilton, ME; Amherst, NY; Depew, NY; Lancaster, OH; Allentown, PA; Bensalem, PA; Bloomsburg, PA; Burnham, PA; Dubois, PA; Langhorne, PA (2); Lockhaven, PA; Trevose, PA; Chesapeake, VA; Christiansburg, VA; Norfolk, VA; Spokane, WA; Falling Waters, WV; Martinsburg, WV; Parkersburg, WV; Westover, WV; Carbonear, Newfoundland, Canada, Cornerbrook, Newfoundland, Canada; Halifax, Nova Scotia, Canada; Miramichi, New Brunswick, Canada; Moncton, New Brunswick, Canada; New Glasgow, Nova Scotia, Canada; Riverview, New Brunswick, Canada; Sydney, Nova Scotia, Canada; Athlone, Ireland; Dublin, Ireland; London, U.K.; and Sydney, Australia. - -------------------------------------------------------------------------------- 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 2001, business within the insurance and financial services industries accounted for 62% of the Company's revenues. The industries 4 targeted by the Company and the principal services provided are described below. Insurance ICT works with large consumer insurance companies to market and provide sales and 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 2001, the Company sold approximately 1.6 million insurance policies on behalf of its clients. ICT employs approximately 400 agents licensed in life, A&H and P&C, including bilingual agents, in the U.S. and Canada. The Company has a full-service agent licensing and a continuing education department, which enables the Company and its agents to obtain licenses in 48 states and 8 Canadian provinces and to maintain their compliance with insurance regulations. Significant insurance clients in 2001 include, but are not limited to, Aegon, Prudential, Canadian Premier LIC and Sears Life Alliance. 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. ICT's Financial Marketing Services operations offers 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 2001 are Chase, Fleet, Discover, Capital One, Washington Mutual and Wells Fargo. 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 2001 include, but are not limited to, Verizon, Integretel, and Rogers Wireless/AT&T. 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, health insurance companies, 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 services 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 care service. Clients in this category in 2001 include Pfizer, Blue Cross/Blue Shield and Therasense. Information Technology ICT provides sophisticated marketing resources primarily for inbound applications on behalf of clients in the computer software and hardware industries. These applications include, but are not limited to, customer service, first-level customer technical support and customer retention. ICT's clients frequently integrate outbound and inbound call campaigns, seeking to achieve favorable compounding results. Information technology clients in 2001 include, but are not limited to, AOL and AOL Canada. 5 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 $81 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 companies and among the first to implement predictive dialing equipment for outbound telemarketing and market research and to provide collaborative web browsing services. The Company utilizes a scalable set of UNIX and NT 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 and NT processors are used for inbound contact centers while predictive dialing systems, networked to UNIX and NT 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 and NT processors provide centralized list management, data consolidation, report generation and interfaces with client order processing systems. ICT Group uses a series of 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 list management system ("LMS") as well as Siebel's Contact Management system. The use of the Siebel suite applications as well as Oracle's database management system provides a scalable and robust suite of applications to support our client's business needs. Continued deployment of the Siebel vertical market offerings and thin client solutions will be a focus for ICT. 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 program. Access to this data allows ICT and its clients to identify potential campaign shortfalls and to immediately modify or enhance the program. 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 geographically centralized locations 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. ICT continued this commitment to excellence by piloting digital recording for verification purposes in one of its inbound centers. As a result of this implementation, digital recording was rolled out to all other inbound sales programs. As with outbound data, inbound sales data will be consolidated into the existing 6 Central Verification Center. The Company's commitment to providing quality service is further illustrated by its 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 were 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. As part of the setup of each client program, 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 22, 2002, ICT employed approximately 10,900 people, of which approximately 10,300 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 a base service charge and separate charges for ancillary services. Services are generally 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 incentives based on completed sales. ICT's Customer Care Management Services unit typically enter into longer term, contractual relationships that may contain provisions for early contract terminations. 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, 2001, ICT provided direct sales and customer service to approximately 130 clients. The Company's largest client in recent years has been Aegon Life Insurance Company, which accounted for approximately 17% of the Company's net revenues in 2001. On March 18, 2002, the Company announced that it would no longer provide outbound telesales services to Aegon in North America. The Company currently anticipates that the revenue reduction associated with this announcement will be approximately $10 to $12 million, with the wind down commencing in the second quarter. The Company intends to continue providing Aegon with telesales and customer service support in Europe and Australia and customer service support in North America. One other client, Capital One Corporation, accounted for 12% of the Company's net revenues in 2001. Competition The CRM services industry is very 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 Corporation. The Company competes with numerous independent firms, some of which are as large or larger than ICT, as well as the in-house 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 hosted CRM offerings. 7 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. Management 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 Activity at the state level regarding laws that impact the teleservices industry has intensified over the past several years. States have enacted a variety of laws regulating marketing via telephone. Do Not Call Lists, restricted hours or days, registration, request to continue solicitation and no rebuttal laws are common in many states. At this writing twenty states have enacted Do Not Call legislation. ICT Group, Inc. complies with all of these laws. The Quality Assurance department is responsible for compliance. Participation on the Direct Marketing Association and the American Telemarketing Associates Legislative Committees ensure timely notification of proposed legislation. PART III Item 11. Executive Compensation. Summary of Cash and Certain other Compensation The following table sets forth for the years ended December 31, 2001, 2000, and 1999 compensation paid by the Company to its Chief Executive Officer and the four other most highly compensated executive officers of the Company for the year ended December 31, 2001. Summary Compensation Table Long Term Annual Compensation Compensation ---------------------- --------------- Securities Underlying All Other Name and Principal Position Year Salary Bonus Options/SARs(4) Compensation(1) - --------------------------- ---- -------- -------- --------------- --------------- John J. Brennan................................... 2001 $498,010 $324,828 28,200(2) $92,439 Chairman, President and Chief Executive Officer 2000 $435,151 $ 56,785 44,000(3) $64,638 1999 $414,299 $ 0 58,800 $73,621 John L. Magee..................................... 2001 $249,231 $151,212 7,400(2) $ 5,818 President, ICT North American Services 2000 $209,808 $ 54,275 19,500(3) $ 5,168 1999 $199,846 $ 92,790 12,800 $ 4,918 John D. Campbell 2001 $204,712 $171,856 8,900(2) $ 4,212 President, ICT Group Sales 2000 $189,808 $ 67,707 25,200(3) $ 5,627 1999 $179,846 $111,780 16,700 $ 5,037 Dean J. Kilpatrick................................ 2001 $183,615 $130,214 7,300(2) $ 4,432 President, ICT Marketing Services................. 2000 $164,769 $ 67,532 16,200(3) $ 5,282 1999 $152,954 $ 59,174 9,800 $ 5,032 Timothy F. Kowalski............................... 2001 $209,808 $115,419 5,400(2) $ 5,440 President, CRM Technology Ventures and Senior Vice 2000 $190,250 $ 32,960 39,600(3) $ 4,486 President Corporate Planning 1999 $147,905 $ 36,210 5,800 $ 4,216 ________ (1) Includes for 2001: (i) Company contributions of $3,400, $3,400, $3,400, $3,400 and $3,400 to the Company's 401(k) tax-qualified employee savings and retirement plan on behalf of Mr. Brennan, Mr. Magee, Mr. Campbell, Mr. Kilpatrick and Mr. Kowalski, respectively, (ii) premiums paid by the Company in the amount of $1,032, $360, $360, $1,032 and $240, for group term life insurance on behalf of Mr. Brennan, Mr. Magee, Mr. Campbell, Mr. Kilpatrick and Mr. Kowalski, respectively; (iii) premiums paid by the Company in the amount of $51,138, $558 and $452 for life insurance on behalf of Mr. Brennan, Mr. Magee and Mr. Campbell, respectively; (iv) Company contributions of $24,685, $1,500 and $1,800 to the Company's non-qualified employee savings and retirement plan on behalf of Mr. Brennan, Mr. Magee and Mr. Kowalski, respectively, and (v) lease payments paid by the Company in the amount of $12,184 for an automobile leased on behalf of Mr. Brennan. (2) These options were granted in 2001 as bonus compensation for the employee's performance during 2000. (3) These options for Mr. Brennan, Mr. Magee, Mr. Campbell and Mr. Kilpatrick were granted in 2000 as bonus compensation for their performance during 1999. 9,600 of the options for Mr. Kowalski were granted in 2000 as bonus compensation for his performance during 1999. (4) The Company formed iCT ConnectedTouch LLC ("ConnectedTouch") in February 2000 as a Pennsylvania limited liability company and wholly-owned subsidiary of the Company. The Company owned 10,000,000 interests ("Interests") in ConnectedTouch, constituting all of the issued and outstanding Interests in ConnectedTouch. In May 2000, ConnectedTouch adopted a 2000 Equity Compensation Plan (the "2000 ConnectedTouch Equity Plan") pursuant to which ConnectedTouch reserved for issuance options to purchase up to 2,000,000 Interests in ConnectedTouch. The 2000 ConnectedTouch Equity 9 Plan permitted the issuance of these options to employees of the Company and ConnectedTouch and to members of the board of directors of the Company and ConnectedTouch. On October 19, 2000, Messrs. John J. Brennan, John L. Magee, John D. Campbell, Dean J. Kilpatrick and Timothy F. Kowalski were granted options under the 2000 ConnectedTouch Equity Plan to purchase Interests in ConnectedTouch in the amounts of 250,000, 40,000, 80,000, 40,000 and 150,000 Interests, respectively. In November 2001, ConnectedTouch was merged into the Company and the 2000 ConnectedTouch Equity Plan and the options to purchase Interests granted thereunder were terminated without compensation. Stock Options The following table sets forth certain information concerning grants of stock options made during 2001 to the persons named in the Summary Compensation Table. OPTION GRANTS IN THE LAST FISCAL YEAR Potential Realizable Value Number of % of Total at Assumed Annual Rates Securities Options of Stock Price Appreciation Underlying Granted to Exercise for Option Term (5 years)(1) Options Employees Price Expiration ---------------------------- Name Granted(2) In Fiscal Year ($/share) Date 5% 10% - ---- ---------- -------------- --------- ---------- ------- -------- John J. Brennan......... 28,200 9% $8.75 2/6/2011 $68,172 $150,643 John L. Magee........... 7,400 2% $8.75 2/6/2011 $17,889 $ 39,531 John D. Campbell........ 8,900 3% $8.75 2/6/2011 $21,515 $ 47,543 Dean J. Kilpatrick...... 7,300 2% $8.75 2/6/2011 $17,647 $ 38,996 Timothy F. Kowalski..... 5,400 2% $8.75 2/6/2011 $13,054 $ 28,847 - -------- (1) The dollar amounts under these columns are the result of calculations at 5% and 10% rates set by the Securities and Exchange Commission and are not intended to forecast possible future appreciation of the price of the Common Stock. The Company did not use an alternative formula for a grant date valuation. The Company is not aware of any formula that will determine with reasonable accuracy a present value based on future unknown or volatile factors. (2) The Company owned 10,000,000 Interests in ConnectedTouch constituting all of the issued and outstanding Interests in ConnectedTouch. On October 19, 2000, Messrs. John J. Brennan, John L. Magee, John D. Campbell, Dean Kilpatrick, and Timothy F. Kowalski were granted options to purchase Interests in ConnectedTouch in the amounts of 250,000, 40,000, 80,000, 40,000, and 150,000 Interests respectively, representing 26%, 4%, 8%, 4%, and 16% respectively of the total options granted to employees of the Company and ConnectedTouch during 2000. These options were issued at an exercise price of $0.30 per Interest, the fair market value of the Interests at the time of grant as determined by an independent financial advisor experienced in such matters. These options became exercisable in full only if ConnectedTouch completed an initial public offering of its stock within ten (10) years after the date of grant and expired if no such public offering was completed within that time period. The potential realizable value of these options at the five percent (5%) assumed annual rate of price appreciation as used in footnote (1) above was $20,721 for John J. Brennan, $3,315 for John L. Magee, $6,631 for John D. Campbell, $3,315 for Dean J. Kilpatrick, and $12,433 for Timothy F. Kowalski, and at a ten percent (10%) assumed annual rate of price appreciation was $45,788 for John J. Brennan, $7,326 for John L. Magee, $14,652 for John D. Campbell, $7,326 for Dean J. Kilpatrick, and $27,473 for Timothy F. Kowalski. In November 2001, ConnectedTouch was merged into the Company and the 2000 ConnectedTouch Equity Plan and the options to purchase Interests granted thereunder were terminated without compensation. 10 The following table summarizes option exercises during 2001 and the value of vested and unvested options for the persons named in the Summary Compensation Table at December 31, 2001. Aggregated Option Exercises in Last Year and Year-End Option Values Number of Unexercised Value of Unexercised Options at In-the-Money Options at December 31, 2001 December 31, 2001(1) - - ------------------------- ------------------------- Shares Acquired on Value Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable - ---- ----------- -------- ----------- ------------- ----------- ------------- John J. Brennan......... -- -- 189,550 57,850 $2,512,828 $605,926 John L. Magee........... 20,000 $269,351 223,400 18,500 $3,912,160 $180,420 John D. Campbell........ -- -- 114,250 23,450 $1,809,554 $228,857 Dean J. Kilpatrick...... 100 $ 1,398 44,900 16,025 $ 622,861 $155,238 Timothy F. Kowalski..... 26,600 $223,604 8,650 31,550 $ 71,194 $344,589 - -------- (1) Values calculated using the closing market price of $18.61 per share of the Company's Common Stock on December 31, 2001 and the per share exercise price of the individual's options. Non-Qualified Deferred Compensation Plan In October 1999, the Company adopted a Non-Qualified Deferred Compensation Plan (the "Deferred Compensation Plan") for certain employees, under which deferrals commenced as of April 2000. The Deferred Compensation Plan allows participating employees to defer a portion of their compensation on a pre-tax basis. Pursuant to an amendment to the Deferred Compensation Plan effective January 1, 2001, the Company currently makes a matching contribution to the account of each participant in an amount equal to ten percent (10%) of the amount of such participant's deferral under the Deferred Compensation Plan. The contributions from this match vest in the employee's account ratably over a period of three (3) years measured from the employee's first day of employment with the Company. Employees are fully vested in the amounts they defer, but withdrawals are not permitted until the termination of the Deferred Compensation Plan, or the termination, disability or death of the participating employee. Other withdrawals are permitted for unforeseeable emergencies only. Employment Agreements In May 1996, the Company entered into an employment agreement with John J. Brennan as President and Chief Executive Officer. The agreement had a three-year term that ended April 30, 1999, but the term renews automatically for successive three-year periods unless either party gives written notice of termination at least 180 days prior to the expiration date, or unless earlier terminated as provided therein. Mr. Brennan's employment agreement was renewed on May 1, 1999 for an additional three-year term. The agreement initially provided for a base salary of $364,000, which is increased by a minimum of 5% each year, and may not be decreased below the then current level. The board of directors, in its sole discretion, may award incentive bonuses in the form of cash and/or stock to Mr. Brennan, who will be eligible each year for a minimum bonus in an amount equal to his then current salary. If Mr. Brennan is terminated by the Company for other than willful misconduct, or terminates his employment for "good reason," then the Company is required to maintain its obligations under the agreement through the later of (i) the expiration of the then current term of the agreement (or the expiration of the next renewal term if there are less than 180 days remaining in the current term and no notice of termination was given prior thereto), or (ii) 24 months from the date of termination. Mr. Brennan may terminate his employment 11 agreement for "good reason" upon 30 days' written notice if there has been a reduction in his salary or benefits, a substantial change in his duties or a change of control. A change of control is defined as the decrease below 50% of the combined voting power of the Common Stock held by John J. Brennan and Donald P. Brennan and their children and grandchildren. In April 1987, the Company entered into an employment agreement with John L. Magee that provided for a base salary of $70,000 per year. Mr. Magee's employment agreement provides for his salary, which currently is $265,000, to be reviewed annually by the board of directors. His employment agreement had an initial term of three years, but is renewed automatically each year for an additional one-year term unless either party to the agreement terminates prior to the end of the renewal term. The agreement was renewed on January 1, 2002 for an additional one-year term. The Company may terminate the employment agreement at any time, with or without cause. The employment agreement contains severance provisions that, if triggered, entitle Mr. Magee to monthly severance payments in an amount equal to his then-current monthly salary for a period of 12 months. The severance payments are triggered by the occurrence of any of the following events: termination of employment by the Company without cause, cessation of business operations in a business in which Mr. Magee is employed; a merger, consolidation or acquisition of the Company; the filing by the Company of a voluntary petition in bankruptcy; or the filing of an involuntary petition in bankruptcy against the Company which is not dismissed within 60 days. In addition, if Mr. Magee terminates his employment upon 90 days' prior written notice, in certain circumstances, the Company would be required to continue to pay him his regular base salary for a period of 90 days. In October 1987, John D. Campbell entered into an employment agreement with the Company that provided for a base salary of $43,200 per year. Mr. Campbell's employment agreement had an initial term of one year, but renews automatically each year for an additional one-year term unless either party terminates prior to the end of the renewal term. Mr. Campbell's employment agreement was renewed on January 1, 2002 for an additional one-year term. Mr. Campbell's current base salary is $215,000. In May 1995, the Company entered into an employment agreement with Dean J. Kilpatrick that provided for a base salary of $115,000 per year. Mr. Kilpatrick's employment agreement had an initial term of one year and renews automatically for consecutive one-year periods unless terminated within 90 days prior to the expiration of the then-current term. Mr. Kilpatrick's current base salary is $192,500. In July 1997, the Company entered into an employment agreement with Timothy F. Kowalski that provided for a base salary of $135,000 per year. Mr. Kowalski's employment agreement had an initial term of one year and renews automatically for consecutive one-year periods unless either party terminates prior to the end of the renewal term. Mr. Kowalski's base salary is currently $215,000 per annum. The employment agreements discussed above contain non-tampering, non-disclosure, non-solicitation and confidentiality provisions. Although the employment agreements restrict the employee from interfering with the Company's current, former or potential customers, none contain a provision restricting a terminated employee's ability to work for a competitor of the Company. Compensation of Directors The non-employee directors are paid directors' fees of $2,500 for each quarterly Board meeting and each special Board meeting attended in person or by telephone and $500 for any other telephonic Board meeting attended. The Chairman of the Audit Committee and the Chairman of the Compensation Committee each receive $1,000 for each committee meeting attended and the other members of the Audit Committee and the Compensation Committee receive $500 for each committee meeting attended. The non-employee directors are also paid an annual fee of $10,000. In addition, directors are reimbursed for expenses incurred in connection with attendance at Board and committee meetings. Under the Company's 1996 Non-Employee Directors Plan, as amended in May 2000, each non-employee director receives, upon initial election to the Board, an option to purchase 10,000 shares of Common Stock. 12 These initial options are exercisable with respect to fifty percent (50%) of the shares on the date of grant and become exercisable with respect to the remaining fifty percent (50%) of the shares on the first anniversary of the date of grant if the director continues to be a member of the board of directors through that date. These initial options have an exercise price equal to the fair market value of the Common Stock on the date of grant and expire ten years after issuance. In addition, each non-employee director is granted an option to purchase 2,500 shares of Common Stock on the date of each annual meeting; these options vest on the first anniversary of the date of grant if the director continues to be a member of the board of directors through that date, have an exercise price equal to the fair market value of the Common Stock on the date of grant and expire ten years after issuance. Under the 2000 ConnectedTouch Equity Plan, on October 19, 2000, each non-employee director of the Company was granted an option to purchase 10,000 Interests in ConnectedTouch at an exercise price of $0.30 per Interest, the fair market value of such an Interest on the date of grant as determined by an independent financial advisor. These options vested in full only if ConnectedTouch completed an initial public offering of its stock within ten years after the date of grant and expired if no such public offering was completed within that time period. In November 2001, ConnectedTouch was merged into the Company and the ConnectedTouch Equity Plan and the options to purchase Interests granted thereunder, including those granted to non-employee directors, were terminated without compensation. 13 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. Exhibit No. Description ---------- ----------- 3.1 Amended and Restated Articles of Incorporation of the Company (Filed as Exhibit 3.1 to Amendment No. 2 to the Company's Registration Statement on Form S-1 on June 4, 1996 (Registration No. 333-4150)) 3.2 Amended and Restated Bylaws of the Company (Filed as Exhibit 3.2 to Amendment No. 2 to the Company's Registration Statement on Form S-1 on June 4, 1996 (Registration No. 333-4150)) 9.1 Amended and Restated Voting Trust Agreement among John J. Brennan, Donald P. Brennan and the Company, dated October 16, 2000 (Filed as Exhibit 99.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000) 14 10.1 ICT Group, Inc. 1987 Stock Option Plan (Filed as Exhibit 10.1 to the Company's Registration Statement on Form S-1 on April 26, 1996 (Registration No. 333-4150))+ 10.2 Amendment 1996-1 to the ICT Group, Inc. 1987 Stock Option Plan (Filed as Exhibit 10.1 to Amendment No. 2 to the Company's Registration Statement on Form S-1 on June 4, 1996 (Registration No. 333-4150))+ 10.3 ICT Group, Inc. Equity Incentive Plan (Filed as Exhibit 10.2 to the Company's Registration Statement on Form S-1 on April 26, 1996 (Registration No. 333-4150))+ 10.4 ICT Group, Inc. 1996 Equity Compensation Plan (Filed as Exhibit 10.3 to Amendment No. 2 to the Company's Registration Statement on Form S-1 on June 4, 1996 (Registration No. 333-4150))+ 10.5 ICT Group, Inc. 1996 Non-Employee Directors Plan (Filed as Exhibit 10.4 to Amendment No. 2 to the Company's Registration Statement on Form S-1 on June 4, 1996 (Registration No. 333-4150))+ 10.6 ICT Group, Inc. Non-Qualified Deferred Compensation Plan (Filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999)+ 10.7 Form of Voting Agreement between the Company and certain option holders (Filed as Exhibit 10.13 to the Company's Registration Statement on Form S-1 on April 26, 1996 (Registration No. 333-4150)) 10.8 Amended and Restated Shareholders Agreement among John J. Brennan, Donald P. Brennan, the Company and certain family trusts, dated October 16, 2000 (Filed as Exhibit 99.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000) 10.9 Employment Agreement between John J. Brennan and the Company, dated May 8, 1996 (Filed as Exhibit 10.5 to Amendment No. 2 to the Company's Registration Statement on Form S-1 on June 4, 1996 (Registration No. 333-4150))+ 10.10 Employment Agreement between John L. Magee and the Company, dated April 1, 1987 (Filed as Exhibit 10.7 to the Company's Registration Statement on Form S-1 on April 26, 1996 (Registration No. 333-4150))+ 10.11 Employment Agreement between John D. Campbell and the Company, dated October 1, 1987 (Filed as Exhibit 10.8 to the Company's Registration Statement on Form S-1 on April 26, 1996 (Registration No. 333-4150)+ 10.12 Employment Agreement between Vincent A. Paccapaniccia and the Company, dated August 24, 1998 (Filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998)+ 10.13 Employment Agreement between Timothy F. Kowalski and the Company, dated July 7, 1997 (Filed as Exhibit 10.17 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999)+ 10.14 Amendment to Employment Agreement between Vincent A. Paccapaniccia and the Company, dated January 2, 2002*+ 10.15 Employment Agreement between Vincent M. Dadamo and the Company, dated May 29, 1999 (Filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999)+ 15 10.16 Employment Agreement between Pam Goyke and the Company, dated September 11, 2000 (Filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000)+ 10.17 Employment Agreement between Dean Kilpatrick and the Company, dated May 5, 1995 (Filed as Exhibit 10.22 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000)+ 10.18 Amendment to Employment Agreement between Vincent M. Dadamo and the Company, dated January 2, 2002*+ 10.19 Credit Agreement dated as of April 25, 2001 among the Company, certain subsidiaries of the Company, Bank of America, N.A., Fleet National Bank, Sovereign Bank, LaSalle Bank National Association, and Bank Leumi USA (Filed as Exhibit 99.1 to the Company's Quarterly Report on Form 10-Q for the quarter ending March 31, 2001) 10.20 Lease Agreement between Brandywine Operating Partnership, L.P., dated January 23, 2001 (Filed as Exhibit 10.23 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000) 10.22 Amendment to Employment Agreement between Dean Kilpatrick and the Company, January 2, 2002*+ 10.24 Employment Agreement between Robert Mannarino and the Company, dated June 18, 2001*+ 21 List of Subsidiaries* 23 Consent of Independent Public Accountants* 99.1 Letter Regarding Arthur Andersen LLP* --------- * Previously filed. + Compensation plans and arrangements for executives and others. 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. Date: May 16, 2002 By /s/ John J. Brennan ------------------------------ John J. Brennan Chairman and Chief Executive Officer EXHIBIT INDEX ------------- Exhibit No. Description ----------- ----------- 10.14 Amendment to Employment Agreement between Vincent A. Paccapaniccia and the Company, dated January 2, 2002* 10.18 Amendment to Employment Agreement between Vincent M. Dadamo and the Company, dated January 2, 2002* 10.22 Amendment to Employment Agreement between Dean Kilpatrick and the Company, January 2, 2002* 10.24 Employment Agreement between Robert Mannarino and the Company, dated June 18, 2001* 21 List of Subsidiaries* 23 Consent of Independent Public Accountants* 99.1 Letter Regarding Arthur Andersen LLP* _____________ * Previously filed.