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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 6, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MELITA INTERNATIONAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
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GEORGIA 3661 58-1378534
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
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5051 PEACHTREE CORNERS CIRCLE
NORCROSS, GEORGIA 30092-2500
(770) 239-4000
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
---------------------
J. NEIL SMITH
PRESIDENT AND CHIEF OPERATING OFFICER
MELITA INTERNATIONAL CORPORATION
5051 PEACHTREE CORNERS CIRCLE
NORCROSS, GEORGIA 30092-2500
(770) 239-4000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
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COPIES TO:
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JOHN FRANKLIN SMITH, ESQ. MARK G. BORDEN, ESQ.
LARRY W. SHACKELFORD, ESQ. BRENT B. SILER, ESQ.
MORRIS, MANNING & MARTIN, L.L.P. HALE AND DORR LLP
1600 ATLANTA FINANCIAL CENTER 1455 PENNSYLVANIA AVENUE, N.W.
3343 PEACHTREE ROAD, N.E. WASHINGTON, D.C. 20004
ATLANTA, GEORGIA 30326 (202) 942-8400
(404) 233-7000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement is declared effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
---------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES REGISTERED PRICE(1) REGISTRATION FEE
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Common Stock, no par value................................ $35,000,000 $10,606.06
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(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(o) under the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 6, 1997
3,500,000 SHARES
MELITA(R) INTERNATIONAL LOGO
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by the
Company. Prior to this offering, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price of the Common Stock will be between $ and $ per share.
See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price. Application has been made to have
the Common Stock approved for listing on the Nasdaq National Market under the
symbol "MELI."
SEE "RISK FACTORS" COMMENCING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Price to Underwriting Proceeds to
Public Discount(1) Company(2)
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Per Share............... $ $ $
Total(3)................ $ $ $
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(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company, estimated at $ .
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 525,000 additional shares of Common Stock solely to cover
over-allotments, if any. If the Underwriters exercise this option in full,
the Price to Public will total $ , the Underwriting Discount will
total $ and the Proceeds to Company will total $ . See
"Underwriting."
The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that delivery of the
certificates representing such shares will be made against payment therefor at
the office of Montgomery Securities on or about , 1997.
------------------------
MONTGOMERY SECURITIES
, 1997
<PAGE> 3
---------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OFFERED HEREBY, INCLUDING THE ENTRY OF STABILIZING BIDS, SYNDICATE COVERING
TRANSACTIONS OR THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 4
[ARTWORK/DIAGRAMS DEPICTED IN PROSPECTUS]
1. Inside front page (fold-out) portrays the following:
Center: Photograph of a Call Center agent and a customer speaking over the
telephone illustrating the Company's concept of "People To People
Communication." Arrows to the top, left, bottom and right of the photograph
point to additional diagrams.
Top: Arrow extending from central photograph points to the word
"Applications." Above and to the left of "Applications" is a list of the
CTI applications: MPACT, PowerPACT and ActionPACT. Above and to the right
of "Applications," the Company's Megellan application is listed.
Right: Arrow extending from central photograph points to the words "System
Management" which are superimposed over a picture of five overlapping
screens generated by PhoneFrame CS Command Post Desktop.
Bottom: Arrow extending from central photograph points to the text:
"Applications and solutions for customer communications:
- Comprehensive Call Center Solutions
- Build and Improve Customer Relationships
- Increase Agent Productivity
- Reduce Operating Costs"
Left: Arrow extending from central photograph points to the word
"Technology." To the immediate left of "Technology" is a diagram of the
Company's call center system.
2. Graphic on page 29 of the prospectus in the "Business" section is labeled
"PhoneFrame CS Architecture." The center portion of the graphic depicts a
bar labeled "Local Area Network." Below the Local Area Network bar are
drawings representing a customer's host computing center, the Company's
call processor, the Company's Universal Switch components, the customer's
PBX/ACD and a "cloud" labeled "PSTN" (public switch telephone network).
Each of these components are linked to the Local Area Network. The
Universal Switch, PBX/ACD and PSTN are linked together.
Above the Local Area Network bar are drawings representing the Company's
Universal Workstations and corresponding telephone sets, the Company's
Command Post Windows NT and the Company's Universal Server RISC/6000
Sybase. The telephone sets are connected to the PBX/ACD with a dotted line.
The Command Post and the Universal Server each are connected to the Local
Area Network.
3. Inside (second to) back page graphics portray a screen generated by the
Company's Magellan product. The screen is labeled "Magellan Application
Interpreter." The text appearing above the picture of the screen is as
follows:
"Provides agent with information, not just data....
Magellan(TM) navigates multiple corporate data sources and presents
needed information in a Single System Image View(TM). Solutions from basic
"screen pops" to sophisticated customer interaction applications can be created
and modified on-the-fly without programming. Magellan(TM) allows applications to
be developed and deployed quickly, making agents more efficient by presenting
them with the information needed to make timely and informed decisions."
The image of the "Magellan Application Interpreter" screen is enhanced by text
that highlights Magellan's features as follows:
- Employs script windows to bring together text and real-time
data from multiple resources.
- Customer data may be entered with the click of a mouse.
- Customizes on-line help functions.
- Displays talk time with the call gauge.
- Programmable action buttons for background applications.
- Buttons may be customized to display specific actions and
reactions.
- Imports visual elements in graphic boxes.
4. Inside back page is captioned:
"Melita's Command Post(TM) graphical desktop lets supervisors monitor
call center activity at a glance." Graphics portray a screen generated by
the Company's PhoneFrame(R) CS product. The screen is labeled "Production
Monitoring." Features of the screen are highlighted by the following text:
" - Call List Display Panel. Displays status of active calling
lists.
- The Tool Bar. Brings up different productivity views to
monitor and control the activity of a call center.
- Agent Status Legend. User defined legends to choose conditions
or calling states.
- ViewPort Display Area. Real time production monitoring of
agent status using customized floor plans.
- Trunk State Display Panel. Graphically depicts enabled and
disabled trunk states."
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the Combined Financial Statements and
Notes thereto, appearing elsewhere in this Prospectus.
THE COMPANY
Melita International Corporation ("Melita" or the "Company") is a leading
provider of customer contact and call management systems that enable businesses
to automate call center activities and enhance their telephony-based customer
interaction. The Company's principal product, PhoneFrame CS, is used by
organizations to increase agent productivity, reduce the costs of call center
operations and enhance revenue-generating capabilities for a broad range of
activities, including debt collection, telemarketing and customer service.
PhoneFrame CS is an innovative, comprehensive call center solution based on
client/server software that integrates with industry standard computing and
telephony infrastructures. The Company's customers include leading organizations
in industries such as banking, financial services, retail, communications and
others, where businesses are engaged in frequent telephone contact with
customers or prospects.
In many industries, customer retention costs are significantly lower than
the costs of customer acquisition. Consequently, many businesses have come to
view long-term customer relationships as a key corporate asset and a source of
competitive advantage. To build customer loyalty, organizations are leveraging
available customer information by disseminating this information to employees
responsible for customer interaction in order to enhance the quality of each
customer contact. In addition, organizations recognize that telephony-based
interaction has become an increasingly effective means of customer contact as
telecommunications costs have decreased and enabling technology such as
computer/telephony integration ("CTI") has emerged to automate the customer
interaction process.
According to industry sources, the CTI, outbound call management and
automatic call distribution market segments of the worldwide call center systems
market aggregated $2.8 billion in 1996 and are expected to grow at a compound
annual growth rate of 19% to $6.7 billion by 2001. The Company's primary target
markets, CTI and outbound call management, were approximately $1.3 billion
worldwide in 1996 and are together expected to grow at a compound annual growth
rate of approximately 28% to $4.4 billion by 2001.
The Company provides comprehensive solutions to the call center industry
based on a scaleable client/server software architecture capable of supporting
installations with more than 500 simultaneous users on a single server.
PhoneFrame CS provides comprehensive functionality and a user-friendly
application development environment designed to provide increased agent
productivity, lower telecommunication costs and low nuisance call rates. The
Company's software allows call center system managers to control and monitor
call center activity at a glance, providing call flow script creation and
editing, call campaign configuration, resource definition and management, and
system management and reporting capabilities. The Company's products also
provide enhanced interaction with customers through front-end applications which
utilize real-time access to information to guide call center agents through each
step of the customer interaction process. The Company's call management solution
leverages existing investments in call center, information and telephony
systems.
The Company currently has over 500 systems in operation worldwide. Selected
customers include AirTouch Communications, Inc., BancOne Services Corporation,
Barclays Bank PLC, Citicorp, Credicard SA Brazil, Dun & Bradstreet Corporation,
Grupo Financiero, Bancomer, S.A. de C.V., J.C. Penney Company, National
Westminster Bank and Snyder Communications, Inc. The Company sells its products
through a direct sales force in the United States, Canada and the United
Kingdom. In 1996, the Company derived approximately 21.0% of its total revenues
from sales outside the United States. International distribution is largely
through direct sales and value-added resellers ("VARs").
---------------------
Melita International Corporation is a Georgia corporation organized in
1979. Unless the context otherwise requires, references in this Prospectus to
"Melita" or the "Company" refer to Melita International Corporation and its
combined affiliates, Melita Europe Limited and Inventions, Inc. The Company's
principal executive offices are located at 5051 Peachtree Corners Circle,
Norcross, Georgia 30092-2500, and its telephone number is (770) 239-4000.
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THE OFFERING
Common Stock offered by the Company.... 3,500,000 shares
Common Stock to be outstanding after
the offering........................... 14,643,395 shares(1)
Use of proceeds........................ For (i) repayment of notes payable
to the Company's principal
shareholder, (ii) payment of
undistributed S corporation earnings
and (iii) general corporate purposes
and working capital.
Proposed Nasdaq National Market
symbol................................. MELI
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(1) Excludes an aggregate of 1,600,000 shares of Common Stock reserved for
issuance under the 1992 Stock Option Plan, the 1997 Stock Option Plan and
the Stock Purchase Plan (as defined herein), of which 1,106,097 shares were
subject to options outstanding as of the date of this Prospectus at a
weighted average exercise price of $3.42 per share. See
"Management -- Employee Benefit Plans" and Note 6 of the Notes to Combined
Financial Statements.
SUMMARY COMBINED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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YEAR ENDED DECEMBER 31,
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1992 1993 1994 1995 1996
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STATEMENT OF OPERATIONS DATA:
Total revenues................................... $24,703 $24,668 $27,156 $35,282 $47,540
Gross margin..................................... 16,059 16,563 17,592 21,270 29,183
Income from operations........................... 3,178 3,649 2,600 4,661 7,348
Pro forma net income (1)......................... $ 2,157 $ 2,356 $ 1,508 $ 2,955 $ 4,782
Pro forma net income per common and common
equivalent share............................... $ 0.42
Pro forma weighted average number of common and
common equivalent shares outstanding(2)........ 11,395
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DECEMBER 31, 1996
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PRO FORMA
ACTUAL PRO FORMA(3) AS ADJUSTED(4)
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BALANCE SHEET DATA:
Working capital (deficit).................................. $ 8,124 $(5,403) $
Total assets............................................... 27,069 18,281
Long-term debt, net of current portion..................... -- --
Shareholders' equity (deficit)............................. 10,872 (2,655)
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(1) Upon the effective date of this offering, the Company will terminate its
status as an S corporation. Thereafter, the Company will be subject to
federal and state corporate income taxes. Pro forma net income is presented
as if the Company had been subject to corporate income taxes for all periods
presented. See "Termination of S Corporation Status and Related
Distributions" and Notes 1 and 3 of the Notes to Combined Financial
Statements.
(2) See Note 1 of the Notes to Combined Financial Statements.
(3) Pro forma to give effect to the following: (i) the issuance of 3,143,395
shares of Common Stock in connection with the combination (the
"Combination") of the Company, Melita Europe Limited ("Melita Europe") and
Inventions, Inc. ("Inventions"), which will occur concurrently with the
effective date of this offering, (ii) the distribution subsequent to
December 31, 1996 of undistributed S corporation earnings of $14.4 million
(the "Distribution"), which included a cash distribution of $1.5 million and
the issuance of notes payable (the "1997 Notes") of $12.9 million, together
with the related accrual of interest of $200,000 (the "Interest Accrual")
(iii) the inclusion of current deferred tax assets of $1.1 million due to
the termination of the S corporation status (the "Deferred Tax Adjustment")
and (iv) the
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repayment at the closing of this offering of a note payable to the
principal shareholder (the "1992 Note") with a principal balance of $2.6
million and the 1997 Notes (the "Note Repayment"). See "Termination of S
Corporation Status and Related Distributions," " Use of Proceeds,"
"Capitalization," "Certain Transactions" and Notes 2, 3 and 8 of the Notes
to Combined Financial Statements.
(4) Pro forma as adjusted to give effect to the sale by the Company of the
3,500,000 shares of Common Stock offered hereby at an assumed initial public
offering price of $ per share and the receipt of the estimated net
proceeds therefrom. See "Use of Proceeds," "Capitalization."
FORWARD-LOOKING STATEMENTS
Information contained in this Prospectus includes "forward-looking
statements" that are based largely on the Company's current expectations and are
subject to a number of risks and uncertainties. The Company faces many risks and
uncertainties, including those described in this Prospectus under the caption
"Risk Factors." Because of these many risks and uncertainties, the Company's
actual results may differ materially from any results presented in or implied by
the forward-looking statements included in this Prospectus.
---------------------
Except as otherwise noted, all information in this Prospectus (i) assumes
no exercise of the Underwriters' over-allotment option, (ii) gives effect to the
recapitalization of the Company's Common Stock whereby each share of the
Company's outstanding Voting Common Stock and Non-Voting Common Stock (each
having no par value per share) will be converted into 1/100 of a share of voting
Common Stock, no par value per share ("Common Stock") and (iii) gives effect to
the Combination (as defined in footnote 3 above). The recapitalization and the
Combination will be effected contemporaneously with the effectiveness of this
offering. See "Certain Transactions," "Underwriting" and Note 9 of the Notes to
Combined Financial Statements.
Cancel Dial(R), Melita(R), PhoneFrame(R), Universal Access(R), Universal
Server(R) and Universal Switch(R) are registered trademarks or service marks of
the Company. ActionPACT(TM), Customer Care(SM), PhoneFrame Command Post(TM),
Magellan(TM), MPACT(TM), PowerPACT(TM), Qflow(TM), Single System Image View(TM),
Universal Workstation(TM) and UTP(TM) are trademarks or service marks of the
Company. This Prospectus also includes trademarks, service marks and trade names
of other companies.
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RISK FACTORS
Prospective investors should consider carefully the following factors, in
addition to the other information contained in this Prospectus, in evaluating
the Company and its business before purchasing shares of Common Stock offered
hereby.
DEPENDENCE ON SINGLE PRODUCT LINE; RISKS ASSOCIATED WITH SERVICING THE MARKET
FOR CALL CENTER SOLUTIONS
The Company currently derives substantially all of its revenues from sales
of its PhoneFrame CS product and related services. PhoneFrame CS was introduced
in early 1995, and the Company expects that this product and related services
will continue to account for a substantial portion of the Company's revenues for
the foreseeable future. Although the Company intends to enhance these products
and develop related products, the Company expects to continue to focus on
providing call center systems as its primary line of business. As a result, any
factor adversely affecting the market for call center systems in general, or the
PhoneFrame CS product in particular, could adversely affect the Company's
business, financial condition and results of operations. The market for call
center systems is intensely competitive, highly fragmented and subject to rapid
change. The Company's future success will depend on continued growth in the
market for call center systems, and there can be no assurance that this market
will continue to grow. If this market fails to grow or grows more slowly than
the Company currently anticipates, the Company's business, financial condition
and results of operations would be materially adversely affected.
RELIANCE ON SIGNIFICANT CUSTOMERS
The Company has derived and believes that it will continue to derive a
significant portion of its revenues in any period from a limited number of large
corporate clients. During 1996, the Company's five largest customers accounted
for approximately 26.6% of the Company's total revenues. In 1995, the Company's
five largest customers accounted for approximately 25.0% of its total revenues.
Although the specific customers may change from period to period, the Company
expects that large sales to a limited number of customers will continue to
account for a significant percentage of its revenues in any particular period
for the foreseeable future. Therefore, the loss, deferral or cancellation of an
order could have a significant impact on the Company's operating results in a
particular quarter. There can be no assurance that its current customers will
place additional orders, or that the Company will obtain orders of similar
magnitude from other customers. The loss of any major customer or any reduction,
delay in or cancellation of orders by any such customer or the failure of the
Company to market successfully to new customers could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Customers."
POTENTIAL VARIABILITY OF QUARTERLY FINANCIAL RESULTS
The Company's revenues and operating results could vary substantially from
quarter to quarter. Among the factors that could cause these variations are
changes in the demand for the Company's products, the level of product and price
competition, the length of the Company's sales process, the size and timing of
individual transactions, the mix of products and services sold, software defects
and other product quality problems, any delay in or cancellation of customer
installations, the Company's success in expanding its direct sales force and
indirect distribution channels, the timing of new product introductions and
enhancements by the Company or its competitors, customer order deferrals in
anticipation of enhancements or new products offered by the Company or its
competitors, commercial strategies adopted by competitors, changes in foreign
currency exchange rates, customers' fiscal constraints, the Company's ability to
control costs and general economic conditions. In addition, a limited number of
relatively large customer orders has accounted for and is likely to continue to
account for a substantial portion of the Company's total revenues in any
particular quarter. Sales of the Company's software products generally involve a
significant commitment of management attention and resources by prospective
customers. Accordingly the Company's sales process is often lengthy and subject
to delays associated with the long approval process that accompanies significant
customer initiatives or capital expenditures. The Company's sales cycle, from
initial trial to complete installation, varies substantially from customer to
customer. Because the Company's staffing and operating expenses are based on
anticipated revenue levels and a high percentage of the Company's costs are
fixed in the short term, variations between
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anticipated order dates and actual order dates, as well as nonrecurring or
unanticipated large orders, can cause significant variations in the Company's
operating results from quarter to quarter. As a result of the foregoing factors,
the Company's operating results for a future quarter may be below the
expectations of securities analysts and investors. In such event, the market
price of the Company's Common Stock likely will be adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Quarterly Results of Operations."
LIMITED PREDICTABILITY OF SALES DUE TO LENGTHY SALES PROCESS
The sale of the Company's products generally requires the Company to
provide a significant level of education to prospective customers regarding the
use and benefits of the Company's products. In addition, implementation of the
Company's products involves a significant commitment of resources by prospective
customers and is commonly associated with substantial integration efforts which
may be performed by the Company or the customer. For these and other reasons,
the length of time between the date of initial contact with the potential
customer and the installation and use of the Company's products is typically six
months or more, and may be subject to delays over which the Company has little
or no control. The Company's implementation cycle could be lengthened in the
future by increases in the size and complexity of its installations. Delay in or
cancellation of sales could have a material adverse effect on the Company's
business, financial condition and results of operations, and could cause the
Company's operating results to vary significantly from quarter to quarter. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Quarterly Results of Operations."
COMPETITION
The market for the Company's products is intensely competitive, fragmented
and subject to rapid change. Because the Company's principal products are call
management systems, which include both software applications and hardware, the
Company competes with a variety of companies which provide these components
independently or as an integrated system. The Company's primary competitors in
the field of integrated inbound/outbound call management systems are Davox
Corporation ("Davox"), EIS International, Inc. ("EIS") and Mosaix International,
Inc. ("Mosaix"). The Company competes primarily against Davox and Mosaix in the
collections segment of the outbound call management systems market, and against
EIS in the telemarketing and telesales segments of the inbound/outbound call
management systems market. The Company also competes in the CTI segment of the
market, where principal competitors include AnswerSoft, Inc., Genesys
Telecommunications Laboratories, Inc., Nabnasset Corporation and Brock
International, Inc., among others. The Company may face additional competition
from PBX/ACD vendors, other telecommunications equipment providers,
telecommunications service providers, computer hardware and software vendors and
others. The Company generally faces competition from one or more of its
principal competitors on major installations and believes that price is a major
factor considered by its prospective customers. Increased competition has
contributed significantly to price reductions and the Company expects these
price reductions to continue. In addition, increased competition may result in
reduced operating margins and loss of market share, either of which could
materially adversely affect the Company's business, financial condition and
results of operations. Many of the Company's current and potential competitors
have significantly greater financial, technical, marketing and other resources
than the Company. As a result, they may be able to respond more quickly to new
or emerging technologies and changes in customer requirements, or to devote
greater resources to the development, promotion and sale of their products than
could the Company. There can be no assurance that the Company will be able to
compete successfully against current and future competitors or that competitive
pressures faced by the Company will not materially adversely affect its
business, financial condition and results of operations. See
"Business -- Competition."
CONTROL BY PRINCIPAL SHAREHOLDER
Upon completion of this offering, Aleksander Szlam, the Company's Chairman
of the Board, Chief Executive Officer and principal shareholder, will
beneficially own approximately 76.1% of the outstanding shares of Common Stock
(73.5% if the Underwriters' over-allotment option is exercised in full).
Accordingly,
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Mr. Szlam will be in a position to control the Company through his ability to
control any election of members of the Board of Directors, as well as any
decision whether to merge or sell the assets of the Company, to adopt, amend or
repeal the Company's Amended and Restated Articles of Incorporation and Bylaws,
or to take other actions requiring the vote or consent of the Company's
shareholders. This concentration of ownership could also discourage bids for the
shares of Common Stock at a premium to, or create a depressive effect on, the
market price of the Common Stock. See "Principal Shareholders" and "Description
of Capital Stock."
COMPETITIVE MARKET FOR PERSONNEL
The future success of the Company's growth strategy will depend to a
significant extent on its ability to attract, train, motivate and retain highly
skilled professionals, particularly software developers, sales and marketing
personnel and other senior technical personnel. An inability to hire such
additional qualified personnel could impair the Company's ability to adequately
manage and complete its existing sales and to bid for, obtain and implement new
sales. Further, the Company must train and manage its growing employee base,
requiring an increase in the level of responsibility for both existing and new
management personnel. There can be no assurance that the management personnel
and systems currently in place will be adequate or that the Company will be able
to assimilate new employees successfully. Highly skilled employees with the
education and training required by the Company are in high demand. Accordingly,
there can be no assurance that the Company will be successful in attracting or
retaining current or future employees. See "Business -- Employees."
RISKS ASSOCIATED WITH TECHNOLOGICAL ADVANCES; NECESSITY OF DEVELOPING NEW
PRODUCTS
The market for call center systems is subject to rapid technological
change, changing customer needs, frequent new product introductions and evolving
industry standards that may render existing products and services obsolete. As a
result, the Company's position in this market could be eroded rapidly by
unforeseen changes in customer requirements for application features, functions
and technologies. The Company's growth and future operating results will depend
in part upon its ability to enhance existing applications and develop and
introduce new applications that meet or exceed technological advances in the
marketplace, that meet changing customer requirements, that respond to
competitive products and that achieve market acceptance. The Company's product
development and testing efforts are expected to require substantial investments
by the Company. There can be no assurance the Company will possess sufficient
resources to make these necessary investments. The Company has in the past
experienced delays both in developing new products and customizing existing
products, and there can be no assurance that the Company will not experience
difficulties that could cause such delays in the future. In addition, there can
be no assurance that such products will meet the requirements of the marketplace
and achieve market acceptance, or that the Company's current or future products
will conform to industry standards. If the Company is unable, for technological
or other reasons, to develop and introduce new and enhanced products in a timely
manner, the Company's business, financial condition and results of operations
could be materially adversely affected.
MANAGEMENT OF GROWTH
The Company has recently experienced significant growth in revenue,
operations and personnel. Continued growth will place significant demands on its
management and other resources. In particular, the Company will have to continue
to increase the number of its personnel, particularly skilled technical,
marketing and management personnel, and continue to develop and improve its
operational, financial, communications and other internal systems. The Company's
inability to manage its growth effectively could have a material adverse effect
on the quality of the Company's services and projects, its ability to attract
and retain key personnel, its business prospects and its results of operations
and financial condition. The Company is currently in the process of implementing
a new help-desk information system to upgrade its automated customer support
capability. No assurance can be given that the implementation of this system
will not result in disruptions to the Company's business. In addition, the
Company is in the process of implementing a plan to decentralize its sales and
support functions throughout existing and planned regional offices. There can be
no assurance that the Company will be successful in implementing this
decentralization plan or managing the
8
<PAGE> 11
transition without disruptions in the sales and support functions or that the
new decentralized sales and support organization will be effective. Any
disruptions resulting from the implementation of the help-desk information
system or the decentralization plan, or the failure to implement these changes
in a timely manner, could have a material adverse effect on the Company's
business, results of operations and financial condition. See
"Business -- Employees" and "Management -- Executive Officers and Directors."
INTERNATIONAL OPERATIONS
Revenue from sales outside the United States in 1994, 1995 and 1996
accounted for 20.9%, 22.5% and 21.0%, respectively, of the Company's total
revenues. International operations are subject to inherent risks, including the
impact of possible recessionary environments in economies outside the United
States, changes in legal and regulatory requirements including those relating to
telemarketing activities, changes in tariffs, seasonality of sales, costs of
localizing products for foreign markets, longer accounts receivable collection
periods and greater difficulty in accounts receivable collection, difficulties
and costs of staffing and managing foreign operations, reduced protection for
intellectual property rights in some countries, potentially adverse tax
consequences and political and economic instability. There can be no assurance
that the Company will be able to sustain or increase international revenue, or
that the factors listed above will not have a material adverse impact on the
Company's international operations. While the Company's expenses incurred in
foreign countries typically are denominated in the local currencies, revenues
generated by the Company's international sales typically are paid in U.S.
dollars or British pounds. Accordingly, while exposure to currency fluctuations
to date has been insignificant, there can be no assurance that fluctuations in
currency exchange rates in the future will not have a material adverse impact on
the Company's international operations. The Company currently does not engage in
currency hedging activities.
A significant element of the Company's business strategy is to continue
expansion of its operations in international markets. This expansion has
required and will continue to require significant management attention and
financial resources to develop international sales channels. Because of the
difficulty in penetrating new markets, there can be no assurance that the
Company will be able to maintain or increase international revenues. To the
extent that the Company is unable to do so, the Company's financial condition
and results of operations could be materially adversely affected. See
"Business -- Strategy."
RISK OF SOFTWARE DEFECTS; DEPENDENCE ON THIRD-PARTY SOFTWARE
Software products as complex as those offered by the Company may contain
errors that may be detected at any point in the products' life cycles. The
Company has, in the past, discovered software errors in certain of its products
and has experienced delays in shipment of products during the period required to
correct these errors. In particular, the call center environment is
characterized by a wide variety of standard and non-standard configurations that
make pre-release testing for programming or compatibility errors very difficult
and time consuming. There can be no assurance that, despite extensive testing by
the Company and by current and potential customers, errors will not be found,
resulting in a loss of, or delay in, market acceptance and sales, diversion of
development resources, injury to the Company's reputation or increased service
and warranty cost, any of which could have a material adverse affect on the
Company's business, financial condition and results of operations. Certain
software used in the Company's products is licensed by the Company from third
parties. There can be no assurance that the Company will continue to be able to
resell this software under its licenses or, if any licensor terminates its
agreement with the Company, that the Company will be able to develop or
otherwise procure replacement software from another supplier on a timely basis
or on commercially reasonable terms. In addition, such third-party software may
contain errors that would be difficult for the Company to detect and correct.
POTENTIAL LIABILITY TO CLIENTS
The Company's products may be critical to the operations of its clients'
businesses and provide benefits that may be difficult to quantify. Any failure
in a Company product or a client's system could result in a claim
9
<PAGE> 12
for substantial damages against the Company, regardless of the Company's
responsibility for such failure. Although the Company attempts to limit
contractually its liability for damages arising from product failures or
negligent acts or omissions, there can be no assurance the limitations of
liability set forth in its contracts will be enforceable in all instances or
would otherwise protect the Company from liability for damages. Although the
Company maintains general liability insurance coverage, including coverage for
product liability and errors or omissions, there can be no assurance that such
coverage will continue to be available on reasonable terms or will be available
in sufficient amounts to cover one or more large claims, or that the insurer
will not disclaim coverage as to any future claim. The successful assertion of
one or more large claims against the Company that exceed available insurance
coverage or changes in the Company's insurance policies, including premium
increases or the imposition of large deductible or co-insurance requirements,
could adversely affect the Company's results of operations and financial
condition.
RISKS ASSOCIATED WITH POSSIBLE ACQUISITIONS
The Company may in the future engage in selective acquisitions of
businesses that are complementary to those of the Company. While the Company has
from time to time in the past considered acquisition opportunities, it has never
acquired a significant business and has no existing agreements or commitments to
effect any acquisition. Accordingly, there can be no assurance that the Company
will be able to identify suitable acquisition candidates available for sale at
reasonable prices, consummate any acquisition or successfully integrate any
acquired business into the Company's operations. Further, acquisitions may
involve a number of additional risks, including diversion of management's
attention, failure to retain key acquired personnel, unanticipated events or
circumstances and legal liabilities, some or all of which could have a material
adverse effect on the Company's results of operations and financial condition.
Problems with an acquired business could have a material adverse impact on the
performance of the Company as a whole. The Company expects to finance any future
acquisitions with the proceeds of this offering as well as with possible debt
financing, the issuance of equity securities (common or preferred stock) or a
combination of the foregoing. There can be no assurance that the Company will be
able to arrange adequate financing on acceptable terms. If the Company were to
proceed with one or more significant future acquisitions in which the
consideration consisted of cash, a substantial portion of the Company's
available cash (possibly including a portion of the proceeds of this offering)
could be used to consummate the acquisitions. If the Company were to consummate
one or more significant acquisitions in which the consideration consisted of
stock, shareholders of the Company could suffer significant dilution of their
interests in the Company. Many business acquisitions must be accounted for as a
purchase. Most of the businesses that might become attractive acquisition
candidates for the Company are likely to have significant intangible assets and
acquisition of these businesses, if accounted for as a purchase, would typically
result in substantial goodwill amortization charges to the Company, reducing
future earnings. In addition, such acquisitions could involve non-recurring
acquisition-related charges, such as the write-off or write-down of software
development costs or other intangible items.
TERMINATION OF S CORPORATION STATUS AND SUBSTANTIAL DISTRIBUTION OF OFFERING
PROCEEDS TO CURRENT SHAREHOLDERS; OTHER BENEFITS TO PRINCIPAL SHAREHOLDER
Since September 1, 1988, the Company has been treated for federal income
tax purposes as an S corporation under the Internal Revenue Code of 1986, as
amended (the "Code"). Upon the effective date of this offering (the "Termination
Date"), the Company will terminate its status as an S corporation under the Code
and thereafter will be subject to federal and state income taxes.
The Company will use a substantial portion of the proceeds of this offering
to make the following payments to its principal shareholder: (i) repayment of
the 1992 Note and the 1997 Notes, aggregating approximately $15.4 million, and
(ii) a distribution of accumulated 1997 S corporation earnings. Purchasers of
Common Stock in this offering will not receive any portion of the S corporation
distribution. See "Termination of S Corporation Status and Related
Distributions," "Use of Proceeds," "Certain Transactions" and Note 3 of the
Notes to Combined Financial Statements.
10
<PAGE> 13
REGULATORY ENVIRONMENT
Certain uses of outbound call processing systems are regulated by federal,
state and foreign laws and regulations. While the Company's systems are
generally designed to operate in compliance with these laws and regulations
through the use of appropriate calling lists and calling campaign time
parameters, compliance with these laws and regulations may limit the usefulness
of the Company's products to its customers and potential customers, and these
laws and regulations could therefore adversely affect demand for the Company's
products. In addition, there can be no assurance that future legislation or
regulatory activity further restricting telephone practices, if enacted, would
not adversely affect the Company. See "Business -- Regulatory Environment."
INTELLECTUAL PROPERTY RIGHTS
The Company relies on a combination of patent, copyright, trade secret and
trademark laws, confidentiality procedures and contractual provisions to protect
its proprietary rights in its products and technology. There can be no
assurance, however, that these measures will be adequate to protect its trade
secrets and proprietary technology. Further, the Company may be subject to
additional risks as it enters into transactions in countries where intellectual
property laws are not well developed or are poorly enforced. Legal protections
of the Company's rights may be ineffective in such countries. Litigation to
defend and enforce the Company's intellectual property rights could result in
substantial costs and diversion of resources and could have a material adverse
effect on the Company's business, financial condition and results of operations,
regardless of the final outcome of such litigation. Despite the Company's
efforts to safeguard and maintain its proprietary rights both in the United
States and abroad, there can be no assurance that the Company will be successful
in doing so or that the steps taken by the Company in this regard will be
adequate to deter misappropriation or independent third-party development of the
Company's technology or to prevent an unauthorized third party from copying or
otherwise obtaining and using the Company's products or technology. There can be
no assurance that others will not independently develop similar technologies or
duplicate any technology developed by the Company. Any such events could have a
material adverse affect on the Company's business, financial condition and
results of operations.
The Company has entered into agreements with certain of its distributors
giving them a limited, non-exclusive right to use portions of the Company's
source code to create foreign language versions of the Company's products for
distribution in foreign markets. In addition, the Company has entered into
agreements with a small number of its customers requiring the Company to place
its source code in escrow. These escrow arrangements typically provide that
these customers have a limited, non-exclusive right to use such code in the
event that there is a bankruptcy proceeding by or against the Company, if the
Company ceases to do business or if the Company fails to meet its support
obligations. These arrangements may increase the likelihood of misappropriation
by third parties.
As the number of call management software applications in the industry
increases and the functionality of these products further overlaps, software
development companies like the Company may increasingly become subject to claims
of infringement or misappropriation of the intellectual property rights of
others. Although the Company believes that its software components and other
intellectual property do not infringe on the intellectual property rights of
others, including those of this competitor, there can be no assurance that such
a claim will not be asserted against the Company in the future, that assertion
of such claims will not result in litigation or that the Company would prevail
in such litigation or be able to obtain a license for the use of any infringed
intellectual property from a third party on commercially reasonable terms.
Furthermore, litigation, regardless of its outcome, could result in substantial
cost to the Company, divert management's attention from the Company's operations
and delay customer purchasing decisions. Any infringement claim or litigation
11
<PAGE> 14
against the Company could, therefore, have a material adverse effect on the
Company's results of operations and financial condition. See
"Business -- Proprietary Rights."
DEPENDENCE ON KEY PERSONNEL
The Company's success will depend in large part upon the continued
availability of the services of Aleksander Szlam, the Company's Chairman and
Chief Executive Officer, and J. Neil Smith, the Company's President and Chief
Operating Officer. Although the Company has employment agreements with Mr. Szlam
and Mr. Smith, these agreements do not obligate either of them to continue his
employment with the Company. There can be no assurance that the Company will be
able to retain the services of Messrs. Szlam and Smith. The Company does not
maintain key man life insurance on Mr. Szlam or Mr. Smith. The loss of the
services of one or both of them would have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management."
BROAD MANAGEMENT DISCRETION AS TO USE OF PROCEEDS
A substantial portion of the net proceeds to be received by the Company in
connection with this offering is allocated to working capital and general
corporate purposes. Accordingly, management will have broad discretion with
respect to the expenditure of such proceeds. Purchasers of shares of Common
Stock offered hereby will be entrusting their funds to the Company's management,
upon whose judgment they must depend, with limited information concerning the
specific working capital requirements and general corporate purposes to which
the funds will ultimately be applied. See "Use of Proceeds."
CERTAIN ANTI-TAKEOVER PROVISIONS
The Board of Directors has authority to issue up to 20,000,000 shares of
preferred stock and to fix the rights, preferences, privileges and restrictions,
including voting rights, of the preferred stock without further vote or action
by the Company's shareholders. The rights of the holders of the Common Stock
will be subject to, and may be adversely affected by, the rights of the holders
of preferred stock that may be issued in the future. While the Company has no
present intention to issue shares of preferred stock, such issuance could have
the effect of making it more difficult for a third party to acquire a majority
of the outstanding voting stock of the Company. In addition, the Company's
Amended and Restated Articles of Incorporation and Bylaws contain provisions
that may discourage proposals or bids to acquire the Company. The Company's
Amended and Restated Articles of Incorporation provide that, commencing with the
1997 Annual Meeting of the Company's shareholders, the Board of Directors will
be divided into three classes, as nearly equal in size as possible, with
staggered three-year terms. These provisions could have the effect of making it
more difficult for a third party to acquire control of the Company, discourage
proposals or bids to acquire control of the Company and adversely affect
prevailing market prices for the Common Stock. See "Description of Capital
Stock -- Certain Articles of Incorporation and Bylaw Provisions" and "Certain
Provisions of Georgia Law."
SHARES ELIGIBLE FOR FUTURE SALE
Upon the closing of this offering, the Company will have 14,643,395 shares
of Common Stock outstanding. The 3,500,000 shares of Common Stock sold in this
offering will be freely tradable without restriction or limitation under the
Securities Act of 1933, as amended (the "Securities Act"), except for shares
purchased by "affiliates" (as defined under the Securities Act). The remaining
11,143,395 shares of Common Stock will become eligible for sale beginning in
February 1998 subject to the volume and other limitations of Rule 144 under the
Securities Act. All of the officers, directors and existing shareholders of the
Company are subject to lock-up agreements under which they have agreed not to
sell or otherwise dispose of any of their shares for a period of 180 days after
the date of this Prospectus without the prior written consent of Montgomery
Securities. Upon completion of this offering, the Company will have 1,600,000
shares of Common Stock reserved for issuance under its stock plans, of which
1,106,097 shares are subject to outstanding options. Promptly following the
completion of this offering, the Company intends to file one or more
registration statements on Form S-8 to register these shares. Sales of
substantial amounts of Common Stock in the public markets, pursuant to Rule 144
or otherwise, or the availability of such shares for sale could
12
<PAGE> 15
adversely affect the prevailing market prices for the Common Stock and impair
the Company's ability to raise additional capital through the sale of equity
securities in the future should it desire to do so. See "Management -- Employee
Benefit Plans" and "Shares Eligible for Future Sale."
NO PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock. Although the Company has made application for the quotation of the Common
Stock on the Nasdaq National Market, there can be no assurance that an active
trading market will develop or be sustained after the offering. The initial
public offering price of the Common Stock offered hereby will be determined by
negotiation between the Company and the Representatives of the Underwriters and
may bear no relationship to the market price of the Common Stock after the
offering. The market price of the Common Stock could be subject to significant
fluctuations in response to variations in quarterly operating results and other
factors. In addition, the securities markets have experienced significant price
and volume fluctuations from time to time that have often been unrelated or
disproportionate to the operating performance of particular companies. These
broad fluctuations may adversely affect the market price of the Common Stock.
See "Underwriting."
DILUTION
The purchasers of the Common Stock offered hereby will experience immediate
and significant dilution in the pro forma net tangible book value of the Common
Stock from the initial public offering price. See "Dilution."
13
<PAGE> 16
TERMINATION OF S CORPORATION STATUS AND RELATED DISTRIBUTIONS
Since September 1, 1988, the Company has elected to operate under
Subchapter S of the Code and comparable provisions of certain state income tax
laws. An S corporation generally is not subject to income tax at the corporate
level (with certain exceptions under state income tax laws). Instead, the S
corporation's income generally passes through to shareholders and is taxed on
their personal income tax returns. As a result, the Company's earnings have been
taxed for federal and state income tax purposes, with certain exceptions,
directly to the existing shareholders of the Company.
Upon the effective date of this offering (the "Termination Date"), the
Company will terminate its status as an S corporation under the Code. All
undistributed S corporation earnings through the Termination Date will be
distributed to the Company's principal shareholder using a portion of the net
proceeds of this offering. At December 31, 1996, the undistributed S corporation
earnings of the Company were estimated to be $14.4 million. Subsequent to
December 31, 1996, the Company distributed these amounts to its principal
shareholder, including a distribution of $1.5 million in cash and the issuance
of the 1997 Notes having an aggregate principal amount of $12.9 million. The
1997 Notes bear interest at a rate equal to the applicable federal rate under
the Code (approximately 7%) and will accrue interest of approximately $200,000
through the expected Termination Date. The 1997 Notes will be repaid in full
using a portion of the proceeds of this offering. The Company expects to
accumulate additional earnings from January 1, 1997 to the Termination Date. The
Company currently estimates that such additional earnings will be between
$ million and $ million, although the actual amount of such earnings
may vary significantly. These accumulated earnings will be distributed to the
principal shareholder using a portion of the net proceeds of this offering. The
actual amount of this distribution will be reduced to the extent additional
distributions of 1997 accumulated earnings are made by the Company to the
principal shareholder prior to the Termination Date with other corporate funds.
The principal shareholder has agreed to indemnify the Company should its
status as an S Corporation during any portion of the period for which it claimed
such status in federal or state income tax filings ever be successfully
challenged. See "Risk Factors -- Termination of S Corporation Status and
Substantial Distribution of Offering Proceeds to Current Shareholders; Other
Benefits to Principal Shareholder," "Use of Proceeds" and "Certain
Transactions."
In connection with the termination of its S corporation status, the Company
will report an increase in earnings which will be recognized in the quarter
during which the Termination Date occurs with the addition of approximately $1.1
million in deferred tax assets.
14
<PAGE> 17
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,500,000 shares of
Common Stock offered hereby are estimated to be approximately $ million
($ million if the Underwriters' over-allotment option is exercised in full),
assuming an initial public offering price of $ per share and after
deducting estimated underwriting discounts and estimated expenses payable by the
Company in connection with the offering.
From the net proceeds of the offering, the Company will make the following
payments to its principal shareholder: (i) repayment of the $12.9 million
principal balance of the 1997 Notes, together with accrued interest thereon
which the Company estimates will then be $200,000, (ii) repayment of the 1992
Note, which the Company expects will then have a principal balance of $2.3
million, and (iii) a distribution of all accumulated S corporation earnings for
the period from January 1, 1997 through the effective date. The Company
currently estimates that such accumulated earnings will be between $ million
and $ million, although the actual amount of such earnings may vary
significantly. The actual amount of this distribution will be reduced to the
extent any prior distributions of 1997 accumulated earnings are made by the
Company to its principal shareholder. See "Termination of S Corporation Status
and Related Distributions" and "Certain Transactions."
The remainder of the net proceeds will be used for working capital and
other general corporate purposes. Such purposes may include possible
acquisitions of, or investments in, businesses and technologies that are
complementary to those of the Company. The Company has no specific agreements,
commitments or understandings with respect to any such acquisitions or
investments. Pending application of the net proceeds as described above, the
Company intends to invest the net proceeds in short-term, interest-bearing
securities. See "Risk Factors -- Broad Management Discretion as to Use of
Proceeds."
DIVIDEND POLICY
The Company historically has made substantial distributions to its
shareholders related to its S corporation status and the resulting tax payment
obligations imposed on its shareholders, including a total of $10.2 million
since January 1, 1995. Other than the distribution to be made to the Company's
Pre-Offering Shareholders described under "Termination of S Corporation Status
and Related Distributions," the Company does not intend to declare or pay cash
dividends in the foreseeable future. Management anticipates that all earnings
and other cash resources of the Company, if any, will be retained by the Company
for investment in its business.
15
<PAGE> 18
CAPITALIZATION
The following table sets forth the short-term indebtedness and
capitalization of the Company at December 31, 1996 on an actual, pro forma and
pro forma as adjusted basis. This table should be read in conjunction with the
Company's Combined Financial Statements and Notes thereto.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------------
PRO PRO FORMA
ACTUAL FORMA(1) AS ADJUSTED(2)
------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long term debt........................... $ 2,644 $ 19 $ 19
======= ======= ======
Long-term debt, net of current portion...................... $ -- $ -- $ --
Shareholders' equity:
Preferred stock:
Melita International Corporation, no par value,
20,000,000 shares authorized(3), no shares issued or
outstanding.......................................... -- -- --
Common stock:
Melita International Corporation, no par value;
100,000,000 shares authorized(3); 8,000,000 shares
issued and outstanding, actual; 11,143,395 shares
issued and outstanding, pro forma; shares issued and
outstanding, pro forma as adjusted(4)................ 2 69
Melita Europe Limited, L1 par value; 50,000 shares
authorized; 31,128 shares issued and outstanding
actual; no shares issued or outstanding pro forma or
pro forma as adjusted................................ 46 -- --
Inventions, Inc., $5 par value; 100 shares authorized;
100 shares issued and outstanding actual; no shares
issued or outstanding pro forma or pro forma as
adjusted............................................. 1 -- --
Additional paid-in capital................................ 20 --
Cumulative foreign currency translation adjustment........ 35 35
Retained earnings......................................... 10,768 (2,571)
------- ------- ------
Total shareholders' equity........................ 10,872 (2,467)
------- ------- ------
Total capitalization......................... $10,872 $(2,467) $
======= ======= ======
</TABLE>
- ---------------
(1) Pro forma to give effect to (i) the issuance of 3,143,395 shares of Common
Stock in connection with the Combination, (ii) the Distribution and
Interest Accrual, (iii) the Deferred Tax Adjustment and (iv) the Note
Repayment. See "Termination of S Corporation Status and Related
Distributions," "Use of Proceeds," "Certain Transactions" and Notes 2, 3
and 8 of the Notes to Combined Financial Statements included elsewhere in
this prospectus.
(2) Pro forma as adjusted to give effect to the sale by the Company of the
3,500,000 shares of Common Stock offered hereby at an assumed initial
public offering price of $ per share and the receipt of the
estimated net proceeds therefrom. See "Use of Proceeds."
(3) Gives effect to an amendment to the Company's Articles of Incorporation to
be filed after December 31, 1996 to increase its authorized capital stock.
(4) Actual, pro forma and pro forma as adjusted shares issued and outstanding
exclude an aggregate of 1,600,000 shares of Common Stock reserved for
issuance under the 1992 Stock Option Plan, the 1997 Stock Option Plan and
the Stock Purchase Plan, of which 1,106,097 shares were subject to options
outstanding as of the date of this Prospectus at a weighted average
exercise price of $3.42 per share. See "Management -- Employee Benefit
Plans" and Note 6 of the Notes to Combined Financial Statements.
16
<PAGE> 19
DILUTION
The net tangible book value of the Common Stock as of December 31, 1996 was
approximately $10.9 million or $1.35 per share. The pro forma net tangible book
deficit of the Common Stock as of December 31, 1996 was approximately $(2.5
million) or $(.24) per share. The pro forma net tangible book deficit per share
represents the excess of the Company's total liabilities over total tangible
assets, divided by the total number of shares of Common Stock outstanding, after
giving effect to the Combination, the Distribution and the Deferred Tax
Adjustment.
After giving effect to the sale by the Company of the 3,500,000 shares of
Common Stock offered hereby at an assumed initial public offering price of
$ per share, and the receipt of the estimated net proceeds therefrom, the
pro forma net tangible book value of the Company (total tangible assets less
total liabilities) as of December 31, 1996 would have been approximately
$ million, or $ per share. This represents an immediate increase in
pro forma net tangible book value of $ per share to existing shareholders
and an immediate dilution in pro forma net tangible book value of $ per
share to purchasers of Common Stock in this offering, as illustrated in the
following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share....................... $
--------
Net tangible book value per share as of December 31,
1996................................................... $ 1.35
Decrease per share attributable to pro forma
adjustments............................................ 1.59
--------
Pro forma net tangible book deficit per share as of
December 31, 1996...................................... (.24)
Increase per share attributable to new investors..........
--------
Pro forma net tangible book value per share as of December 31, 1996
after the offering.................................................. $
--------
Dilution per share to new investors................................... $
========
</TABLE>
The following table sets forth, as of December 31, 1996, on a pro forma
basis after giving effect to the issuance of shares of Common Stock in
connection with the Combination, the number of shares of Common Stock issued by
the Company and the total consideration and the average price per share paid by
the existing shareholders and new investors, assuming the sale by the Company of
3,500,000 shares of Common Stock at an assumed initial public offering price of
$ per share, and before deducting the estimated underwriting discount and
estimated offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders....... 11,143,395 76.1% $69,000 % $0.01
New investors............... 3,500,000 23.9 $
---------- ----- ------- -----
Total............. 14,643,395 100.0% $ 100.0%
========== ===== ======= =====
</TABLE>
Assuming full exercise of the Underwriters' over-allotment option, the
percentage of shares held by existing shareholders would be 73.5% of the total
number of shares of Common Stock to be outstanding after the offering, and the
number of shares held by new investors would be increased to 4,025,000 shares,
or 26.5% of the total number of shares of Common Stock to be outstanding after
the offering. See "Principal Shareholders."
Following the closing of this offering, the Company will have outstanding
options to acquire approximately 1,106,097 shares of Common Stock at exercise
prices ranging from $2.75 to $5.50 per share and a weighted average exercise
price of $3.42 per share. The exercise of these options would have the effect of
increasing the net tangible book value dilution to new investors in this
offering.
17
<PAGE> 20
SELECTED COMBINED FINANCIAL DATA
The selected combined financial data of the Company set forth below should
be read in conjunction with the Combined Financial Statements of the Company,
including the Notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The combined statement of
operations data for the years ended December 31, 1994, 1995 and 1996 and the
combined balance sheet data as of December 31, 1995 and 1996 are derived from,
and are qualified by reference to, the combined financial statements audited by
Arthur Andersen LLP and included elsewhere in this Prospectus. The combined
statement of operations data for the years ended December 31, 1992 and 1993 and
the combined balance sheet data as of December 31, 1992, 1993 and 1994 are
derived from unaudited combined financial statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Product................................................... $19,047 $17,709 $18,186 $24,620 $32,077
Service................................................... 5,656 6,959 8,970 10,662 15,463
------- ------- ------- ------- -------
Total revenues...................................... 24,703 24,668 27,156 35,282 47,540
Cost of revenues:
Product................................................... 5,298 5,181 6,310 8,730 11,494
Service................................................... 3,346 2,924 3,254 5,282 6,863
------- ------- ------- ------- -------
Total cost of revenues.............................. 8,644 8,105 9,564 14,012 18,357
------- ------- ------- ------- -------
Gross margin................................................ 16,059 16,563 17,592 21,270 29,183
Operating expenses:
Research and development.................................. 3,784 3,386 3,660 4,050 5,070
Selling, general and administrative....................... 9,097 9,528 11,332 12,559 16,765
------- ------- ------- ------- -------
Total operating expenses............................ 12,881 12,914 14,992 16,609 21,835
------- ------- ------- ------- -------
Income from operations...................................... 3,178 3,649 2,600 4,661 7,348
Other income (expense), net................................. 216 186 46 88 261
------- ------- ------- ------- -------
Income before income taxes.................................. 3,394 3,835 2,646 4,749 7,609
Income tax provision (benefit).............................. (19) 25 (26) -- --
------- ------- ------- ------- -------
Net income before pro forma income tax provision............ 3,413 3,810 2,672 4,749 7,609
Pro forma income taxes(1)................................... 1,256 1,454 1,164 1,794 2,827
------- ------- ------- ------- -------
Pro forma net income(1)..................................... $ 2,157 $ 2,356 $ 1,508 $ 2,955 $ 4,782
======= ======= ======= ======= =======
Pro forma net income per common and common equivalent
share..................................................... $0.42
=======
Pro forma weighted average common and common equivalent
shares outstanding(2)..................................... 11,395
=======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
----------------------------------------------- DECEMBER 31,
1992 1993 1994 1995 1996 1996(3)
------- ------- ------- ------- ------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................................. $ 7,831 $ 8,955 $ 8,594 $ 6,904 $ 8,124 $(5,403)
Total assets.............................................. 13,076 15,679 17,635 20,928 27,069 18,281
Long-term debt, net of current portion.................... 3,176 3,111 3,068 2,644 -- --
Total shareholders' equity (deficit)...................... 6,143 7,385 7,103 6,657 10,872 (2,655)
</TABLE>
- ---------------
(1) Upon the effective date of this offering, the Company will terminate its
status as an S corporation. Thereafter, the Company will be subject to
federal and state income taxes. Pro forma net income is presented as if the
Company had been subject to corporate income taxes for all periods
presented. See "Termination of S Corporation Status and Related
Distributions," and Notes 1 and 3 of the Notes to Combined Financial
Statements.
(2) See Note 1 of the Notes to Combined Financial Statements.
(3) Presented on a pro forma basis to give effect to (i) the issuance of
3,143,395 shares of Common Stock in connection with the Combination, (ii)
the Distribution and Interest Accrual, (iii) the Deferred Tax Adjustment
and (iv) the Note Repayment. See "Termination of S Corporation Status and
Related Distributions," "Use of Proceeds," "Capitalization," "Certain
Transactions" and Notes 2, 3 and 8 of the Notes to Combined Financial
Statements.
18
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Melita is a leading provider of customer contact and call center systems
that enable customers to operate efficient call centers. The Company's principal
product, PhoneFrame CS, is an integrated system comprised of both hardware and
software based on open, client/server architecture. Melita offers periodic
ongoing maintenance support of its products. The Company also offers fee-based
installation, training and consulting services. Historically, the Company has
internally generated the funds necessary for its growth through profits and cash
provided by operating activities.
In 1988, the Company introduced its first call management solution, which
was DOS-based, driving revenue growth from $10.4 million to $24.7 million during
the period from 1989 to 1992. The Company introduced Stacatto, a UNIX-based
client/server version of its call center software, in 1992. Due to the slow
market acceptance of client/server call center solutions, the Company's revenues
were relatively flat from 1992 to 1994. In 1994, the Company introduced
Interlude, a more open, scaleable and standards-based version of the product,
and in 1995 the Company made significant additions to its management team, sales
and marketing efforts and installation and support capabilities, which
contributed to growth of 29.9% in total revenues from 1994 to 1995.
The Company's revenues are derived primarily from two sources: (i) product
license fees for the use of the Company's software products and revenues from
sales of related computer and telephony hardware to utilize the software and
(ii) service fees for ongoing system support, maintenance, installation,
training and consulting services. The Company recognizes product revenue upon
shipment of the product and when the Company has no significant obligations yet
to be satisfied. Revenues from maintenance contracts are recognized ratably over
the term of the support period. Revenues from consulting, installation and
training services are recognized as the services are performed.
Cost of product revenues primarily includes cost of material and assembly
of components for products shipped, together with salaries and benefits of
production personnel. Cost of service revenues consists primarily of salaries
and benefits of customer support and field service personnel. Cost of service
revenues includes related operating costs such as training, computer support and
travel costs. The Company contracts with third parties to provide maintenance on
hardware provided as part of the Company's systems.
Research and development expenses primarily consist of salaries and
benefits of engineering personnel involved with software and voice processing
technology development. Also included are costs for subcontracted development
projects and expendable equipment purchases.
Selling, general and administrative expenses consist primarily of salaries,
commissions and benefits of sales, marketing, administrative, finance and human
resources personnel. Also included are marketing expenditures, travel, rent and
other costs.
Total revenues from sales outside the United States accounted for 20.9%,
22.5%, and 21.0% of the Company's total revenues for 1994, 1995 and 1996,
respectively. The Company relies on VARs to sell, install and support its
products in countries outside of the United States, Canada and the United
Kingdom. The Company's international revenues are primarily denominated in U.S.
dollars or British pounds. The Company's expenses incurred in foreign countries
are typically denominated in local currencies. The Company has recognized
foreign exchange gains (losses) of approximately $31,000, $(2,000) and $162,000
in 1994, 1995 and 1996, respectively. There can be no assurance that future
fluctuations in currency exchange rates will not have a material adverse impact
on the Company's future international operations.
19
<PAGE> 22
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data as a
percentage of total revenues for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Net revenues:
Product................................................... 67.0% 69.8% 67.5%
Service................................................... 33.0 30.2 32.5
----- ----- -----
Total revenues.................................... 100.0 100.0 100.0
----- ----- -----
Cost of revenues:
Product................................................... 23.2 24.7 24.2
Service................................................... 12.0 15.0 14.4
----- ----- -----
Total cost of revenues............................ 35.2 39.7 38.6
----- ----- -----
Gross margin................................................ 64.8 60.3 61.4
----- ----- -----
Operating expenses:
Research and development.................................. 13.5 11.5 10.7
Selling, general and administrative....................... 41.7 35.6 35.2
----- ----- -----
Total operating expenses.......................... 55.2 47.1 45.9
----- ----- -----
Income from operations...................................... 9.6 13.2 15.5
Other income (expense), net................................. 0.2 0.3 0.5
----- ----- -----
Income before income taxes.................................. 9.8 13.5 16.0
Income tax benefit.......................................... 0.1 -- --
----- ----- -----
Net income before pro forma income taxes.................... 9.9 13.5 16.0
----- ----- -----
Pro forma income taxes...................................... 4.3 5.1 6.0
----- ----- -----
Pro forma net income........................................ 5.6% 8.4% 10.0%
===== ===== =====
</TABLE>
The following table sets forth, for each component of net revenues, the
cost of such revenues as a percentage of such revenues for the periods
indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Cost of product revenues.................................... 34.7% 35.5% 35.8%
Cost of service revenues.................................... 36.3% 49.5% 44.4%
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenues. Total revenues increased 34.7% to $47.5 million in 1996 from
$35.3 million in 1995. Revenues from product sales increased 30.3% to $32.1
million in 1996, or 67.5% of total revenues, from $24.6 million in 1995, or
69.8% of total revenues. The increase in product revenues was due to strong
demand for the Company's PhoneFrame CS product introduced in the first half of
1995, increased sales and marketing efforts and the introduction of Magellan CS
in the fourth quarter of 1996. Service revenues increased 45.0% to $15.5 million
in 1996, or 32.5% of total revenues, from $10.7 million in 1995, or 30.2% of
total revenues. Service revenues increased primarily due to an increase in the
number of contractual maintenance agreements and, to a lesser degree, from
revenues generated by installation and training.
Cost of Revenues. Total cost of revenues was $18.4 million in 1996,
representing a 31.0% increase over total cost of revenues of $14.0 million in
1995. Total cost of revenues represented 38.6% and 39.7% of total revenues in
1996 and 1995, respectively. Cost of product revenues was $11.5 million in 1996,
or 35.8% of product revenues, increasing by 31.7% from $8.7 million in 1995, or
35.5% of product revenues. Cost of product revenues increased slightly as a
percentage of product revenues due to lower per unit sales prices, which were
partially offset by product cost reductions. Cost of service revenues was $6.9
million in 1996, or
20
<PAGE> 23
44.4% of service revenues, increasing by 29.9% from $5.3 million in 1995, or
49.5% of service revenues. The cost of service revenues increased as the Company
hired additional support and installation staff to support the increased sales
volume. Cost of service revenues, as a percentage of service revenues, decreased
5.1 percentage points due to operational efficiencies, reduced third-party
maintenance fees for field support of computer equipment resold by the Company
and improved features within the software to facilitate the installation
process.
Research and Development. The Company's research and development expenses
increased by 25.2% to $5.1 million in 1996, or 10.7% of total revenues, from
$4.1 million in 1995, or 11.5% of total revenues. The increase resulted
primarily from the addition of developers to support the Company's new product
development efforts, which resulted in the release of PhoneFrame CS 2.0 and
Magellan CS in 1996. Research and development expenses decreased as a percentage
of total revenues in 1996 due to the growth in total revenues in 1996.
Selling, General and Administrative. Selling, general and administrative
expenses were $16.8 million in 1996, representing a 33.5% increase over selling,
general and administrative expenses of $12.6 million in 1995. The increase was
the result of an increase in sales commissions corresponding to an increase in
revenues and additional staff hired to support the higher sales levels in 1996.
Selling, general and administrative expenses were 35.2% and 35.6% of total
revenues in 1996 and 1995, respectively.
Income from Operations. As a result of the foregoing factors, income from
operations was $7.3 million in 1996, representing a 57.6% increase over income
from operations of $4.7 million in 1995. Operating income increased as a
percentage of total revenues from 13.2% in 1995 to 15.5% in 1996.
Other Income, Net. Other income, net increased to $261,000 in 1996 from
$88,000 in 1995. The increase was primarily attributable to foreign exchange
gains, as the British pound strengthened against the U.S. dollar.
Pro Forma Income Taxes. Pro forma income taxes were $2.8 million in 1996
as compared to $1.8 million in 1995, as a result of the Company's increased net
income before income taxes in 1996. The Company's pro forma effective tax rate
was 37.2% in 1996, compared to 37.8% in 1995.
Pro Forma Net Income. Pro forma net income was $4.8 million in 1996,
representing a 61.8% increase over pro forma net income of $3.0 million in 1995.
As a percentage of total revenues, pro forma net income increased from 8.4% in
1995 to 10.0% in 1996.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenues. Total revenues increased 29.9% to $35.3 million in 1995 from
$27.2 million in 1994. Revenues from product sales increased 35.4% to $24.6
million in 1995, or 69.8% of total revenues, from $18.2 million in 1994, or
67.0% of total revenues. The increase in product revenues was due to increased
sales volume attributable primarily to demand for the Company's first release of
PhoneFrame CS introduced in 1995. Service revenues increased 18.9% to $10.7
million in 1995, or 30.2% of total revenues, from $9.0 million in 1994, or 33.0%
of total revenues. Service revenues increased primarily due to an increase in
the number of contractual maintenance agreements and, to a lesser degree, from
revenues generated by installation of systems and upgrading, but declined as a
percentage of total revenues due to the timing of product sales.
Cost of Revenues. Total cost of revenues was $14.0 million in 1995,
representing a 46.5% increase over total cost of revenues of $9.6 million in
1994. Total cost of revenues represented 39.7% and 35.2% of total revenues in
1995 and 1994, respectively. Cost of product revenues was $8.7 million in 1995,
or 35.5% of product revenues, increasing by 38.4% from $6.3 million in 1994, or
34.7% of product revenues. Cost of service revenues was $5.3 million in 1995, or
49.5% of service revenues, increasing by 62.3% from $3.3 million in 1994, or
36.3% of service revenues. The cost of service revenues increased as the Company
hired additional support and installation staff to support the increased sales
volume. Cost of service revenues, as a percentage of service revenues, increased
13.2 percentage points, as the Company increased its customer service and field
service support groups by over 31.0% to improve the Company's level of service
and, to a lesser degree, an increase in the cost of third-party maintenance for
field support of computer equipment resold by the Company.
21
<PAGE> 24
Research and Development. The Company's research and development expenses
increased by 10.7% to $4.1 million in 1995, or 11.5% of total revenues, from
$3.7 million in 1994, or 13.5% of total revenues. The increase in expenditures
resulted from the addition of developers to support the Company's new product
development efforts. Research and development expenses decreased as a percentage
of total revenues in 1995.
Selling, General and Administrative. Selling, general and administrative
expenses were $12.6 million in 1995, representing a 10.8% increase over selling,
general and administrative expenses of $11.3 million in 1994. The increase was
the result of the increase in sales commissions corresponding to an increase in
revenues and additional personnel hired to support the higher sales levels in
1995. Selling, general and administrative expenses were 35.6% and 41.7% of total
revenues in 1995 and 1994, respectively. Selling, general and administrative
expenses decreased as a percentage of total revenues primarily as a result of
cost containment initiatives in general and administrative expenses.
Income from Operations. As a result of the foregoing factors, income from
operations was $4.7 million in 1995, representing a 79.2% increase over income
from operations of $2.6 million in 1994. Operating income increased as a
percentage of total revenues from 9.6% in 1994 to 13.2% in 1995.
Other Income, Net. Other income, net increased to $88,000 in 1995 from
$46,000 in 1994. The increase was primarily attributable to increased interest
income due to the Company's higher average investment balances.
Pro Forma Income Taxes. Pro forma income taxes were $1.8 million in 1995
as compared to $1.2 million in 1994, as a result of the Company's increased net
income before income taxes in 1995. The Company's pro forma effective tax rate
was 37.8% in 1995, compared to 43.6% in 1994, due to non-deductible foreign
losses in 1994.
Pro Forma Net Income. Pro forma net income was $3.0 million in 1995,
representing a 96.0% increase over pro forma net income of $1.5 million in 1994.
As a percentage of total revenues, pro forma net income increased from 5.6% in
1994 to 8.4% for 1995.
22
<PAGE> 25
QUARTERLY RESULTS OF OPERATIONS
The following table presents certain unaudited quarterly statement of
operations data for each of the last eight quarters. This information is derived
from unaudited combined financial statements and, in the opinion of management,
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of that information. The results of operations
for any quarter are not necessarily indicative of the results to be expected for
any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------
1995 1996
-------------------------------------- --------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31
------- ------- -------- ------- ------- ------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues:
Product............................... $5,698 $5,198 $6,051 $ 7,673 $ 7,691 $ 8,108 $ 7,428 $ 8,850
Service............................... 2,191 2,467 2,729 3,275 3,330 3,778 4,161 4,194
------ ------ ------ ------- ------- ------- ------- -------
Total revenues................. 7,889 7,665 8,780 10,948 11,021 11,886 11,589 13,044
------ ------ ------ ------- ------- ------- ------- -------
Cost of revenues:
Product............................... 1,867 1,905 2,471 2,487 2,449 2,990 2,660 3,395
Service............................... 1,010 1,037 1,260 1,975 1,439 1,733 1,902 1,789
------ ------ ------ ------- ------- ------- ------- -------
Total cost of revenues......... 2,877 2,942 3,731 4,462 3,888 4,723 4,562 5,184
------ ------ ------ ------- ------- ------- ------- -------
Gross margin............................ 5,012 4,723 5,049 6,486 7,133 7,163 7,027 7,860
------ ------ ------ ------- ------- ------- ------- -------
Operating expenses:
Research and development.............. 1,024 885 901 1,240 945 1,151 1,409 1,565
Selling, general and administrative... 2,842 2,998 3,072 3,647 4,137 3,992 4,212 4,424
------ ------ ------ ------- ------- ------- ------- -------
Total operating expenses....... 3,866 3,883 3,973 4,887 5,082 5,143 5,621 5,989
------ ------ ------ ------- ------- ------- ------- -------
Income from operations.................. 1,146 840 1,076 1,599 2,051 2,020 1,406 1,871
Other income (expense), net............. (1) 34 41 14 (11) 54 20 198
------ ------ ------ ------- ------- ------- ------- -------
Income before pro forma income taxes.... 1,145 874 1,117 1,613 2,040 2,074 1,426 2,069
Income tax benefit...................... -- -- -- -- -- -- -- --
------ ------ ------ ------- ------- ------- ------- -------
Net income before income taxes.......... 1,145 874 1,117 1,613 2,040 2,074 1,426 2,069
Pro forma income taxes.................. 432 330 422 610 762 775 517 773
------ ------ ------ ------- ------- ------- ------- -------
Pro forma net income.................... $ 713 $ 544 $ 695 $ 1,003 $ 1,278 $ 1,299 $ 909 $ 1,296
====== ====== ====== ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------
1995 1996
-------------------------------------- --------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31
------- ------- -------- ------- ------- ------- -------- -------
(AS A PERCENTAGE OF TOTAL NET REVENUES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues:
Product............................... 72.2% 67.7% 68.9% 70.1% 69.8% 68.2% 64.1% 67.8%
Service............................... 27.8 32.3 31.1 29.9 30.2 31.8 35.9 32.2
------ ------ ------ ------- ------- ------- ------- -------
Total revenues................. 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
------ ------ ------ ------- ------- ------- ------- -------
Cost of revenues:
Product............................... 23.7 24.9 28.1 22.7 22.2 25.2 23.0 26.0
Service............................... 12.8 13.6 14.4 18.0 13.1 14.6 16.4 13.7
------ ------ ------ ------- ------- ------- ------- -------
Total cost of revenues......... 36.5 38.5 42.5 40.7 35.3 39.8 39.4 39.7
------ ------ ------ ------- ------- ------- ------- -------
Gross margin............................ 63.5 61.5 57.5 59.3 64.7 60.2 60.6 60.3
------ ------ ------ ------- ------- ------- ------- -------
Operating expenses:
Research and development.............. 13.0 11.5 10.3 11.3 8.6 9.7 12.2 12.0
Selling, general and administrative... 36.0 39.6 35.0 33.0 37.5 33.6 36.3 33.9
------ ------ ------ ------- ------- ------- ------- -------
Total operating expenses....... 49.0 51.1 45.3 44.3 46.1 43.3 48.5 45.9
------ ------ ------ ------- ------- ------- ------- -------
Income from operations.................. 14.5 10.4 12.2 15.0 18.6 16.9 12.1 14.4
Other income (expense), net............. -- 0.4 0.5 0.1 (0.1) 0.5 0.2 1.5
------ ------ ------ ------- ------- ------- ------- -------
Income before pro forma income taxes.... 14.5 10.8 12.7 15.1 18.5 17.4 12.3 15.9
Income tax benefit...................... -- -- -- -- -- -- -- --
Net income before income taxes.......... 14.5 10.8 12.7 15.1 18.5 17.4 12.3 15.9
Pro forma income taxes.................. 5.5 4.1 4.8 5.7 6.9 6.5 4.5 5.9
------ ------ ------ ------- ------- ------- ------- -------
Pro forma net income.................... 9.0% 6.7% 7.9% 9.4% 11.6% 10.9% 7.8% 10.0%
====== ====== ====== ======= ======= ======= ======= =======
</TABLE>
23
<PAGE> 26
The Company's revenues and operating results could vary substantially from
quarter to quarter. Among the factors that could cause these variations are
changes in the demand for the Company's products, the level of product and price
competition, the length of the Company's sales process, the size and timing of
individual transactions, the mix of products and services sold, software defects
and other product quality problems, any delay in or cancellation of customer
installations, the Company's success in expanding its direct sales force and
indirect distribution channels, the timing of new product introductions and
enhancements by the Company or its competitors, customer order deferrals in
anticipation of enhancements or new products offered by the Company or its
competitors, commercial strategies adopted by competitors, changes in foreign
currency exchange rates, customers' fiscal constraints, the Company's ability to
control costs and general economic conditions. In addition, a limited number of
relatively large customer orders has accounted for and is likely to continue to
account for a substantial portion of the Company's total revenues in any
particular quarter. Sales of the Company's software products generally involve a
significant commitment of management attention and resources by prospective
customers. Accordingly the Company's sales process is often lengthy and subject
to delays associated with the long approval process that accompanies significant
customer initiatives or capital expenditures. The Company's sales cycle, from
initial trial to complete installation, varies substantially from customer to
customer. Because the Company's staffing and operating expenses are based on
anticipated revenue levels and a high percentage of the Company's costs are
fixed in the short term, variations between anticipated order dates and actual
order dates, as well as nonrecurring or unanticipated large orders, can cause
significant variations in the Company's operating results from quarter to
quarter. See "Risk Factors -- Variability of Quarterly Financial Results."
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations to date primarily through internally
generated cash flow.
The Company's operating activities generated cash of $5.1 million in 1994,
$7.5 million in 1995 and $9.3 million in 1996. In 1996, the Company's cash was
generated by operating activities and an increase in customer deposits,
partially offset by an increase in accounts receivable. Both customer deposits
and accounts receivables increased due to the Company's increased business
volume.
The Company's investing activities used cash of $800,000 in 1994, $1.7
million in 1995 and $1.5 million in 1996. The Company's use of cash was
primarily for the purchase of capital equipment to support the Company's growth.
The Company's financing activities used cash of $3.0 million in 1994, $5.2
million in 1995 and $3.8 million in 1996. The primary use of cash was
distributions to the Company's shareholders.
As of December 31, 1996, the Company had working capital of $8.1 million.
Cash and cash equivalents were $9.8 million. The Company estimates that it will
incur capital expenditures of approximately $2.0 million in 1997, of which
$800,000 will be incurred to complete an upgrade of the internal Customer Care
Center. The Company anticipates that its existing cash balances and funds
anticipated to be generated from operations, combined with the net proceeds from
this offering and interest thereon, will be adequate to satisfy its working
capital requirements for its current and planned operations for at least the
next twelve months.
NEW ACCOUNTING PRONOUNCEMENTS
In October of 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting
for the Impairment of Long-Lived Assets to Be Disposed of." The Company's
adoption of SFAS No. 121 in the first quarter of 1996 did not have a significant
impact on the Company's combined financial statements.
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123 ("SFAS 123") which establishes a fair value based method for accounting
for stock-based compensation plans. With respect to stock options granted to
employees, SFAS 123 permits companies to continue using the accounting method
promulgated by the Accounting Principals Board Opinion No. 25 ("APB 25"),
"Accounting for Stock Issued to Employees," to measure compensation or,
alternatively, to adopt the fair value based method prescribed by
24
<PAGE> 27
SFAS 123. If the APB 25 method is continued, pro forma footnote disclosures are
required as if SFAS 123 accounting provisions were followed. Management has
determined not to adopt the SFAS 123 accounting recognition provisions.
Accordingly, SFAS 123 will not have any impact on the Company's financial
statements, except for the addition of the required footnote disclosures. See
Note 6 of the Notes to Combined Financial Statements.
The American Institute of Certified Public Accountants has issued an
exposure draft to amend the provisions of Statement of Position 91-1, "Software
Revenue Recognition." The adoption of the standards in the current version of
the exposure draft would not be expected to have a significant impact on the
Company's combined financial statements.
25
<PAGE> 28
BUSINESS
OVERVIEW
Melita International Corporation is a leading provider of customer contact
and call management systems that enable businesses to automate call center
activities and enhance their telephony-based customer interaction. The Company's
principal product, PhoneFrame CS, is used by organizations to increase agent
productivity, reduce the costs of call center operations and enhance revenue
generating capabilities for a broad range of activities, including debt
collection, telemarketing and customer service. PhoneFrame CS is a comprehensive
call center solution based on client/server software that integrates with
industry standard computer and telephony hardware. The Company's customers
include leading organizations in industries such as banking, financial services,
retail, communications and others, where businesses are engaged in frequent
telephone contact with customers or prospects.
The Company currently has over 500 systems in operation worldwide. Selected
customers include AirTouch Communications, Inc., BancOne Services Corporation,
Barclays Bank PLC, Citicorp, Credicard SA Brazil, Dun & Bradstreet Corporation,
Grupo Financiero Bancomer, S.A de C.V., J.C. Penney Company, National
Westminster Bank and Snyder Communications, Inc. The Company sells its products
through a direct sales force in the United States, Canada and the United
Kingdom. In 1996, the Company derived approximately 21.0% of its total revenues
from sales outside the United States. International distribution is largely
through direct sales and VARs.
INDUSTRY BACKGROUND
Long-term customer relationships are critical to the success of businesses
operating in an increasingly competitive global marketplace. As customers become
more sophisticated and demanding in the level of service they require,
businesses are striving to develop and improve customer relationships as a means
to distinguish their products and services. This effort requires businesses to
use every opportunity to interact with customers, from marketing and sales
activities to post-sales service, support and collections. Effective customer
interaction can build customer loyalty, which in turn can lead to reduced
customer retention costs and increased revenue potential. As organizations seek
to improve the quality of their interaction with customers across the
enterprise, the use of information systems to facilitate this interaction has
become a core competency.
In recent years, telephony-based customer interaction has become a more
effective means of communication for organizations. Increased usage of
telephony-based customer interaction has been facilitated by decreasing
telecommunications costs, the proliferation of toll-free telephone numbers and
the introduction of new enabling technologies, such as computer/telephony
integration("CTI"). CTI automates the generation and management of
telephony-based customer contacts while providing real-time access to
computer-based information resources. This automation is provided by call
centers that consist of specialized software and hardware that integrate
telephony platforms and computer systems.
According to industry sources, the CTI, outbound call management and
automatic call distribution market segments of the worldwide call center systems
market aggregated $2.8 billion in 1996 and are expected to grow at a compound
annual growth rate of 19% to $6.7 billion by 2001. The Company's primary target
markets, CTI and outbound call management, were approximately $1.3 billion
worldwide in 1996 and are together expected to grow at a compound annual growth
rate of approximately 28% to $4.4 billion by 2001.
Call centers enable agents to process a steady flow of outbound or inbound
telephone contacts relating to products or services. Call centers generally
consist of supervisor and agent workstations linked to a central telephone
switch and computer system. Call centers historically have focused either on
conducting outbound calls, for functions such as collections and product sales,
or managing inbound calls, for functions such as product support, order
processing and customer service. Inbound call centers utilize an interactive
voice response ("IVR") unit and an automatic call distribution ("ACD") system
that together screen and route incoming calls through the call center. Outbound
call centers incorporate predictive dialing software to automate outbound
dialing. Increasingly, call center applications feature dynamic inbound/outbound
or
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"blended" functionality which permits agents to be automatically switched
between inbound and outbound calls as inbound call demand varies. Common
examples of outbound call center applications include debt collection for banks,
finance companies and large retailers, credit card marketing and customer
support activities such as customer surveys. According to industry sources,
collections and telemarketing software applications accounted for 80% of all
outbound call center software application revenues worldwide in 1996.
A key objective of organizations operating outbound call centers is
maximizing the time spent by agents on the telephone with customers or potential
customers while minimizing the "nuisance call" rate. A nuisance call is a live
contact which the call management system must either put on hold or disconnect
because no agent is available. High nuisance call rates caused by overdialing
result in high telecommunications costs and poor customer relations. Call center
systems which utilize sophisticated predictive dialing software can minimize the
nuisance call rate while maintaining high agent productivity. The Company
believes that this capability is essential to organizations operating call
centers.
Call center systems were originally developed as centralized,
mainframe-based information systems, which offered a platform to enable the
automation of many functions, including inbound call distribution, outbound
dialing, and limited database management. These systems were expensive, provided
limited functionality and productivity and were generally closed and
proprietary. With the advent of distributed computing environments, call center
systems have been developed which utilize CTI and the flexibility and openness
of client/server architectures. These developments have allowed companies to
incorporate leading hardware and software products from multiple vendors, have
significantly reduced the cost of implementation and have increased system
functionality and flexibility.
Call centers have evolved into a core competency for businesses engaged in
frequent telephone contacts with customers or prospects. In order to maximize
the return on their call center investment, businesses require call center
solutions that: (i) provide call center agents with the tools needed to
effectively manage interaction with their customers; (ii) provide agents
transparent access to information across the enterprise; (iii) guide agents
through a complex set of customer interaction scenarios; (iv) fully integrate
existing information and telephone systems; (v) are adaptable to the changing
needs of particular businesses and applications; (vi) are scaleable to support
large volumes of calls; and (vii) permit the gathering of valuable information
concerning customer needs, buying patterns and demographics. Customer-focused
organizations are seeking call center solutions which provide state-of-the-art
functionality while remaining adaptable to emerging technologies.
THE MELITA SOLUTION
Melita provides customer contact and call management systems that automate
outbound or blended call centers, enabling its customers to enhance
telephony-based customer interaction. The Company's principal product,
PhoneFrame CS, is a scaleable, integrated software and hardware solution based
on a distributed client/server architecture capable of supporting installations
with more than 500 simultaneous users on a single server. PhoneFrame CS provides
comprehensive functionality and a user-friendly application development
environment enabling organizations to conduct effective telephone calling
programs for a broad range of activities, including debt collection,
telemarketing and customer service. The Melita solution provides:
- High agent productivity, low nuisance call rates and low
telecommunications costs through patented predictive dialing and
inbound/outbound call blending functionality;
- Enhanced agent interaction with customers through front-end software
applications which utilize real-time access to information to guide agents
through each step of the customer interaction;
- Dynamic campaign development, deployment and modification through
powerful, easy-to-use script generation and application development
software.
- The ability to leverage existing investment in call center systems and
adapt to emerging technologies through an open, scaleable, distributed
client/server architecture.
The Company believes that a critical element of the comprehensive solutions
it provides is its underlying philosophy of Customer Care. The Company's
products represent a critical link between the business
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enterprise and its customers, providing the business with a solution that allows
it to provide the best customer care. The Company's Customer Care philosophy
focuses on enhancing the quality of people-to-people communication and is
reflected in all facets of the Company's operations. The Company has
incorporated features into its existing products which reflect this philosophy,
including its patented predictive dialing features, Cancel Dial and dynamic
inbound/outbound call blending functionality. As part of its commitment to
Customer Care, the Company intends to continue to develop and introduce new
products and features to improve the ability of a business to interact with its
customers.
STRATEGY
The Company's objective is to be a leading provider of customer contact and
call management systems. The Company's strategy to achieve this objective
includes the following key elements:
Leverage Installed Base of Customers: The Company currently targets
customers in the banking, financial services, retail, communications and
service bureau industries. In 1996, 56.6% of the Company's product revenues
were from sales to its existing customer base. The Company will continue to
focus sales and marketing efforts on its installed base of customers. The
Company also intends to continue to leverage its penetration of currently
targeted vertical markets by using its existing customers as a reference
base to gain new customers.
Maintain Technology Leadership: The Company believes it is a
technology leader in the field of call center software and CTI, having
pioneered many of the industry's fundamental call center technologies. The
Company owns 15 U.S. patents, with six additional U.S. patents pending, and
19 related foreign patents covering various processes and technologies
utilized in call management systems. The Company believes that in the
future advanced call management systems will consist primarily of
innovative software utilizing off-the-shelf hardware. As a result, the
Company intends to focus its development efforts on software, with an
emphasis on customer interaction and distributed applications.
Continue to Focus on Providing Comprehensive Call Center
Solutions: The Company provides system design, application configuration
and integration services in conjunction with the installation of its call
center solutions. The Company believes its ability to provide comprehensive
call center systems integration is an important factor in the purchasing
decisions of customers, and it intends to continue its emphasis on
providing these design and integration services.
Continue to Expand Sales and Marketing: The Company intends to pursue
an increased share of the market for call management systems by hiring
additional sales and marketing personnel. The Company plans to open
additional sales offices both domestically and internationally and is
implementing a program aimed at targeted vertical markets. In addition, the
Company is establishing a national account program which is intended to
focus sales and marketing efforts on large, multinational corporations.
Increase Penetration of International Markets: In 1996, the Company
generated 21.0% of its total revenues from sales outside the United States
and has 26 employees dedicated to its international operations. The Company
currently has relationships with 10 VARs in Europe, Latin America and the
Pacific Rim. The Company intends to leverage these relationships in
selected international markets to enhance its revenue base. The Company
also intends to expand its international operations through hiring
additional personnel, opening new offices and forming additional
relationships with VARs in Latin America and the Pacific Rim.
Pursue Adjacent Markets: The Company has developed a leadership
position in the collections segment of the outbound call management systems
market. In 1996, approximately 80% of the Company's total revenues were
attributable to systems sold for collections applications, with the
remainder attributed primarily to telemarketing and telesales applications.
The Company recently introduced Magellan CS which leverages the existing
dynamic inbound/outbound functionality of PhoneFrame CS to target
applications in telemarketing and telesales. The Company seeks to leverage
its existing dynamic inbound/outbound functionality to gain market share in
the overall call management systems market. The Company believes the
distinction between inbound and outbound call management
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systems will diminish and that it is well positioned to provide both
inbound and outbound call management solutions.
PRODUCTS
The Company's principal product, PhoneFrame CS, is an integrated suite of
client/server software applications and hardware that provides outbound and
blended call management solutions. PhoneFrame CS software components are based
on open standards, allowing integration with varied and complex user
environments.
PhoneFrame CS is sold to organizations that operate outbound and blended
call centers. These call centers require solutions that integrate with existing
communication and information systems including mainframe-based information
systems, local area networks, agent workstations and PBX/ACDs. Utilizing
customer records residing in an organization's existing databases, PhoneFrame CS
automates customer contacts and guides agents through the customer interaction
process.
ARCHITECTURE OVERVIEW CHART
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The key components of PhoneFrame CS are the Universal Server, Command Post,
Universal Workstation and the Universal Switch.
<TABLE>
<CAPTION>
<S> <C> <C>
PHONEFRAME CS
PRODUCT COMPONENT DESCRIPTION
UNIVERSAL SERVER Server software that controls and coordinates system operation. Used to
manage calling list data, call attempt and contact history, agent profiles,
time zone and area code data, call processing, agent and supervisor
activity.
PLATFORM: IBM RISC/6000, AIX operating system, Sybase database
COMMAND POST Suite of software applications used by system managers to configure,
operate, monitor and report on system activities utilizing an interactive
GUI.
PLATFORM: Pentium PC, Windows NT
UNIVERSAL WORKSTATION Client-based software which runs on the agent workstation and manages the
client session with the UNIVERSAL SERVER for each call routed to the agent
workstation. The UNIVERSAL WORKSTATION utilizes one of the following
options:
UNIVERSAL ACCESS Software that controls screen presentation and data manipulation and allows
the agent to work within an enterprise information system.
MTACCESS Software that runs in the background and interacts with screen presentation
and data manipulation applications provided by the existing enterprise
information systems.
MAGELLAN CS Software that controls Windows GUI screen presentation on the agent
workstation. Provides read/write access to data in customer's existing
systems. Additionally, MAGELLAN BUILDER, which resides on the COMMAND POST
or a dedicated PC, facilitates development of customer interaction and call
flow applications featuring an interactive GUI.
PLATFORM: PC, Windows 3.1, 95 and NT
UNIVERSAL SWITCH Proprietary switching component of the system. Interfaces with existing
telephony equipment or directly with PSTN using digital or analog
interfaces.
CALL PROCESSOR PC-based SWITCH and VOICE PROCESSOR controller and client-based software
interface to UNIVERSAL SERVER.
VOICE PROCESSOR Software that performs call progress analysis and call characterization for
each call attempt (e.g., busy signal, ringback signal, fax machine, modem,
voicemail, answering machine, live contact). Also provides voice messaging
services for inbound and outbound applications.
PLATFORM: PC, Dialogic voice processing cards
SWITCH High speed, real-time digital switching matrix.
PLATFORM: Motorola 68030 CPU, VME-Bus, OS/9 operating system
MPACT Software option for the Universal Server that communicates with leading
PBX/ACDs through CTI links, using one or both of the following:
PowerPACT Software option that provides ability to use an existing PBX/ACD for
switching and/or call progress analysis in place of the Voice Processor and
Switch.
ActionPACT Software option that monitors service levels on a call center's ACD via its
CTI links and dynamically and automatically move agents from outbound
applications to inbound applications and vice versa.
</TABLE>
The Universal Server software is the heart of each PhoneFrame CS system,
providing centralized control for the operation and management of the system. It
integrates a Sybase database to provide calling list management, and to store
operational data for real-time and historical reporting. TCP/IP is used as the
transport protocol for communication with all client components of the system.
The Universal Server also
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includes software that facilitates integration with popular user platforms to
perform extended functions such as real-time calling list data acquisition,
dynamic call blending, Internet callback and enterprise reporting.
The Command Post is a suite of software applications used for call flow
script creation and editing, call campaign configuration, resource definition
and management, agent and production monitoring and system reporting. Command
Post runs on Windows NT and consists of software modules that automate the
operation and monitoring of the system. Builder is used to automate data
exchange with user databases and create calling campaigns. QFlow is used to
implement user-defined strategies for calling campaigns based on real-time
events such as time of day, hit rate and list penetration. Production Monitoring
provides an interactive graphical representation of the call center that allows
managers to access, monitor and control system resources such as agents and
trunks. The Report Scheduler automates the generation of system reports. Reports
can be written in any Windows SQL-based report writer.
The Company's Universal Workstation is client-based software which runs on
the agent workstation, and is available in three different software options:
Universal Access, MTAccess and Magellan CS. Each option supports Microsoft's
Dynamic Data Exchange ("DDE") and industry standard Enhanced High Level Language
Application Programming Interface ("EHLLAPI") for exchanging information with
external applications. Each Universal Workstation software option meets
different needs for agent workstation functionality.
Universal Access for Windows and Universal Access for OS/2 manage the
client session with the Universal Server for each call routed to an agent
workstation and provide basic information about the called party, including
customer identification or account number. Universal Access facilitates
automated access to other enterprise information systems and can be configured
to toggle between applications.
MTAccess interfaces with screen presentation and data manipulation
applications software provided by the customer. Similar to the Universal Access
options, MTAccess manages the client session with the Universal Server for each
call routed to the agent workstation. Initial contact information about the
called party is provided to the agent through the customer's application.
Magellan CS is the Company's recently introduced Universal Workstation
software. Magellan CS consists of two components, Magellan Interpreter and
Magellan Builder. Magellan Builder allows system managers to create and
dynamically modify call flow applications, complete with many features of a
Windows GUI, such as buttons and checklists, without any programming. Magellan
Interpreter provides agents with a composite view of enterprise-wide customer
information through a Windows GUI. Agent interaction with customers is guided by
Magellan CS applications, which provide agents with the customer information
necessary to make timely, informed customer interaction decisions. Magellan CS
supports EHLLAPI, DDE, object linking and embedding ("OLE"), open database
connectivity ("ODBC"), telephony application programming interface ("TAPI") and
telephony services application programming interface ("TSAPI") for accessing
customers' information and telephony systems. Additionally, through the use of
resource files, Magellan CS has been designed to facilitate localization for
international deployment.
The Universal Switch is the Company's proprietary switching platform that
interfaces with existing telephone equipment or directly with the Public
Switched Telephone Network ("PSTN") using digital and analog interfaces. All
inbound and outbound calls can be processed through the Universal Switch, which
performs two major functions: call processing and switching. The Call Processor
serves as the controller and client software interface to the Universal Server.
The Voice Processor performs all telephone call processing including call
progress analysis, which determines the type of call result that has been
achieved. Call progress analysis utilizes a digital signal processing algorithm
which detects various tone and voice patterns including busy signals, ringback
signals, fax machines, modems, voice mail and answering machines as well as live
contacts. The Voice Processor also provides voice messaging services for inbound
and outbound applications. The Switch performs high speed switching to connect
live contacts to the next available, appropriate agent in real time.
The Company's MPACT software option enables PhoneFrame CS to be integrated
with industry leading PBX/ACDs through the use of CTI links. PowerPACT allows
PhoneFrame CS to use a customer's existing
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PBX/ACD in place of the Switch and Voice Processor components. The Voice
Processor, in conjunction with PowerPACT software, can provide call progress
analysis for PBX/ACDs that do not provide this functionality. ActionPACT
provides the ability for PhoneFrame CS to monitor service levels on a call
center's PBX/ACD via its CTI link and dynamically and automatically move agents
from outbound applications to inbound applications and vice versa. PowerPACT and
ActionPACT allow users to leverage their investment in installed PBX/ACD
equipment.
SERVICES
A significant portion of the Company's revenues is derived from on-going
system support, maintenance, installation, training, customization and
consulting services. Upon purchase of a system, customers generally enter into a
maintenance agreement covering on-going system support and software upgrades.
These agreements can have a duration of up to five years. In addition, the
Company provides installation, training, customization and consulting services
during the implementation process. For additional fees, the Company will from
time to time provide additional training or consulting services at the
customer's request.
The Customer Care Group consists of the Customer Care Center ("CCC"), the
Technical Assistance Center ("TAC"), the Applications Integration Engineers and
the Training and Customer Education Division. The CCC provides 24 x 7 customer
support by telephone. The TAC provides high level technical support, coordinates
new product development and beta tests, and provides additional expert support
for the other groups within the service function. The Applications Integration
Engineers provide configuration, scripting, reconfiguration, custom application
development and other special customer services. The Training and Customer
Education Division develops documentation for installation and support of the
Company's products, provides on-site and off-site training to customers through
an array of classes, and offers consulting services. Introductory training
classes are provided as part of each initial system purchase and advanced
classes are provided for additional fees. As of January 31, 1997, the Customer
Care Group employed a total of 72 employees.
The Field Implementation Services Group has responsibility for systems
design, sales support, implementation and project management and serves as the
customer installation liaison. The Field Implementation Services Group is
divided into three regional divisions covering the United States and Canada, and
one international division. International support is also provided by technical
support personnel located in the United Kingdom and the Company's international
VARs. As of January 31, 1997, this group employed a total of 38 employees.
The Company contracts with IBM to provide local hardware support in the
United States and Canada, and can dispatch local personnel from IBM national
service centers to address hardware issues.
SALES AND MARKETING
The Company sells its products primarily through a direct sales channel and
through VARs. Sales in the United States, Canada and the United Kingdom are
conducted primarily through direct channels. Distribution in other countries is
conducted through a combination of direct sales and VARs. The Company has sales
offices located in Atlanta, Boston, Dallas, Los Angeles, Philadelphia, Salt Lake
City, White Plains, London and Toronto.
The Company's marketing activities include product management, product
marketing, direct marketing, public relations, press and analyst communications,
event support and management of the Company's Web site. The Company's Business
Development Group is responsible for developing joint marketing and co-
development relationships with call center industry suppliers. The Company is
also implementing a program aimed at specific vertical markets. In addition, the
Company is establishing a national account program which is intended to focus
sales and marketing efforts on large, multinational corporations.
As of January 1, 1997, the Company's sales personnel, including the Sales,
Marketing, Product Management and Business Development groups consisted of 54
employees worldwide.
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The Company's customers independently operate domestic and international
User Groups, which have approximately 300 and 35 members, respectively. The
domestic User Group was formed in 1990, and is managed by an independent board
of directors that coordinate User Group activity. The international User Group
was formed in 1991. Activities of both the domestic and international User
Groups include an annual User Group conference. Additionally, the domestic User
Group conducts regional User Group meetings typically focused on common
applications and call center opportunities. The 1996 annual domestic User Group
conference was attended by approximately 260 people. Although the Company is not
a sponsor of the User Group conferences, it generally sends Company employees
who conduct seminars, product demonstrations and training sessions.
CUSTOMERS
The Company's call management solutions are used by organizations in a
broad range of industries. Since the introduction of PhoneFrame CS in 1995, the
Company has licensed its software for use on over 5,000 agent workstations and
has shipped over 100 systems. The Company's top five customers accounted for
25.0% of the Company's total revenues in 1995. The Company's top five customers
accounted for 26.6% of the Company's total revenues in 1996. Although specific
customers may change from period to period, the Company expects that large sales
to a limited number of customers will continue to account for a significant
percentage of its revenues in any particular period for the foreseeable future.
The following table sets forth certain of the Company's customers who have
purchased $200,000 or more in products and services from the Company during the
two year period ended December 31, 1996:
<TABLE>
<CAPTION>
CUSTOMERS APPLICATIONS
--------- ------------
<S> <C> <C>
BANKING
BancOne Services Corporation Citicorp Collections
Banco Popular de Puerto Rico Credicard SA Brazil Telemarketing
Grupo Financiero Bancomer, S.A. de C.V. First USA Bank Customer Service
Barclays Bank PLC (UK) Marine Midland Bank Fraud Detection
Chemical Bank National Westminster Bank
Chevy Chase, FSB Royal Bank of Canada
FINANCIAL SERVICES
Americredit Financial Services, Inc. Green Tree Financial Collections
AmSouth Consumer Collections Corporation Telemarketing
Countrywide Collections Guardian National Acceptance Customer Service
Countrywide Funding Corporation Prospect Outreach
Dun & Bradstreet Corporation Intuition, Inc. Marketing
Strong Capital Management, Inc. Business Information Surveys
RETAIL
Circuit City Stores, Inc. J.C. Penney Company, Inc. Collections
Eagle Managed Care Mercantile Stores Company, Inc. Telemarketing
Financial Management Control The Foschini Group (PTY),
Hudson's Bay Company Limited
COMMUNICATIONS
AirTouch Communications, Inc.
Comcast Cellular Communications
Continental Cablevision of
Broward County, FL
IDT Corporation
Telemarketing
Collections
Customer Service
Customer Welcome
Campaigns
SERVICE BUREAU
The Call Centre Ltd. (UK) Snyder Communications, Inc. Collections
Decisions Group Ltd. (UK) Works & Lentz, Inc. Telemarketing
National Action Financial Services, Inc. Customer Service
Fundraising
Sales
Loan Servicing
Appointment Scheduling
</TABLE>
TECHNOLOGY, RESEARCH AND PRODUCT DEVELOPMENT
The Company intends to continue investment in research and development to
maintain its position as a leader in call center technology. The Company has
developed a client/server software architecture that
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<PAGE> 36
facilitates the deployment, configuration and interoperability of its call
center solutions. The design of the system provides three core sets of services:
(i) user interface presentation and navigation, (ii) server-based system
management services, and (iii) telephone call processing services, including the
Company's patented predictive dialing and dynamic call blending features. The
Company's products are based on an open architecture and industry standards and
provide seamless integration with third-party systems or customers' existing
technology infrastructure. The Company will seek to develop future products that
adhere to existing and emerging standards.
The presentation and navigation components of the software have been
implemented using Windows GUI guidelines. Usability labs and focus groups are
used to define interface requirements and verify ease of use. TCP/IP is used as
the transport layer for all client/server communication. Adherence to Winsock
and other standards facilitates integration with third-party desktop
applications and protocol stacks. The Company is working to broaden the
incorporation of Simple Network Management Protocol ("SNMP") into its product
architecture to facilitate enterprise-wide network management for both computer
and telephony components.
The Company's telephony hardware and software have been designed using
industry standards and the Company intends to continue this approach. The
Company's systems use standard analog and digital connectivity to
telecommunications equipment and services. The Company's newest generation of
agent workstation software, Magellan CS, supports the evolving telephony
application program interfaces TAPI and TSAPI, and future products are expected
to support those interfaces as well. CTI links to various PBX/ACDs are often
proprietary and the Company therefore uses various interfaces such as CallPath,
CallBridge, ASAI, Meridian Link and the Application Bridge to facilitate
integration with various switching platforms.
Magellan CS, released in 1996, and Magellan SA, which the Company currently
plans to release in 1997, have been developed using object oriented methods and
technology. Magellan SA is a version of the Company's Magellan CS product that
will provide the functionality of Magellan CS to call center systems not
employing PhoneFrame CS. The Company expects Magellan SA will be used for a
variety of call center applications, including inbound applications, in which an
outbound call management system is not necessary or is already installed.
Magellan SA is intended to allow system managers to develop applications which
present a uniform Windows GUI independent of the application. Each application
can be developed by the system manager with scripting, data processing and
presentation and telephony services specific to the application while providing
agents with a consistent presentation. Like Magellan CS, Magellan SA will
support EHLLAPI, DDE, OLE, ODBC, TAPI and TSAPI for access to customers'
information and telephony systems.
The Company is currently developing the Universal Telephony Platform
("UTP"), a new subsystem which incorporates the functionality of a telephony
switch and voice processor. The UTP has been designed using the Common Object
Request Broker Architecture ("CORBA") to support distributed objects in an open
systems environment. UTP runs on Windows NT and uses off-the-shelf voice
processing components. Asynchronous Transfer Mode ("ATM") technology is used to
link multiple UTP components across standard ATM networks, providing seamless,
multi-site resource allocation, management and utilization. SNMP is used to
provide standards based network management.
As of January 31, 1997, the Company's research and development and quality
assurance staffs consisted of 42 employees. The Company's total expenses for
research and development for 1994, 1995 and 1996 were $3.7 million, $4.1
million, and $5.1 million, respectively. The Company anticipates that it will
continue to commit substantial resources to research and development in the
future. See "Risk Factors -- Risks Associated with Technological Advances;
Necessity of Developing New Products."
COMPETITION
The market for the Company's products is intensely competitive, fragmented
and subject to rapid change. Because the Company's principal products are call
center systems, which include both software applications and hardware, the
Company competes with a variety of companies which provide these components
independently or as an integrated system. The Company's principal competitors in
the field of integrated inbound/outbound call management systems are Davox, EIS
and Mosaix. The Company competes primarily against Davox and Mosaix in the
collections segment of the call management systems market, and against EIS
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in the telemarketing and telesales segments of the call management systems
market. The Company also competes in the CTI segment of the market, where
principal competitors include AnswerSoft, Inc., Genesys Telecommunications
Laboratories, Inc., Nabnasset Corporation and Brock International, Inc., among
others. The Company may face additional competition from PBX/ACD vendors, other
telecommunications equipment providers, telecommunications service providers,
computer hardware and software vendors and others. The Company generally faces
competition from one or more of its principal competitors on major installations
and believes that price is a major factor considered by its prospective
customers. Many of the Company's current and potential competitors have
significantly greater financial, technical, marketing and other resources than
the Company. As a result, they may be able to respond more quickly to new or
emerging technologies and changes in customer requirements, or to devote more
resources to the development, promotion and sales of products than the Company.
Competition from these or other sources could result in price reductions and
loss of market share which could materially adversely affect the Company's
business, financial condition and results of operations.
The Company believes that the primary competitive factors affecting its
markets include product features such as flexibility, scalability,
interoperability, functionality and ease of use, as well as reputation, quality,
performance, price and customer service and support. See "Risk
Factors -- Competition."
REGULATORY ENVIRONMENT
Certain uses of outbound call management systems are regulated by federal,
state and foreign law. The Federal Telephone Consumer Protection Act (the
"TCPA") prohibits the use of automatic dialing equipment to call emergency
telephone lines, health care and similar facility patient telephone lines, and
telephone lines where the called party is charged for incoming calls, such as
those used by pager and cellular phone services. The TCPA prohibits use of such
equipment to engage two or more lines of a multi-line business simultaneously.
Among other things, the TCPA required the Federal Communications Commission
("FCC") to create regulations protecting residential telephone subscribers from
unwanted telephone solicitations. The rules adopted by the FCC require that
telemarketers maintain a company-specific "do-not-call list" which contains the
names and numbers of residential subscribers who do not want to receive calls.
An entity which has an "established business relationship" with a party it calls
and tax-exempt nonprofit organizations are exempt from do-not-call lists. The
rules also require that telemarketers may call consumers only after 8 a.m. and
before 9 p.m., local time. Certain states have enacted similar laws limiting
access to telephone subscribers who object to receiving solicitations. Fair Debt
Collection Practices Act ("FDCPA") limits communication by certain debt
collectors with consumers only after 8:00 a.m. and before 9:00 p.m., local time,
and not at the consumer's place of business. Many of the Company's customers are
exempt from the FDCPA. Although compliance with these laws may limit the
potential use of the Company's products in some respects, the Company's systems
can be programmed to operate automatically in full compliance with these laws
through the use of appropriate calling lists and calling campaign time
parameters. There can be no assurance, however, that future legislation further
restricting telephone solicitation practices, if enacted, would not adversely
affect the Company. See "Risk Factors -- Regulatory Environment."
PROPRIETARY RIGHTS
The Company relies on a combination of patent, copyright, trade secret and
trademark laws, confidentiality procedures and contractual provisions to protect
its proprietary rights in its products and technology. The Company holds 15
United States patents, with six additional U.S. patents pending, and 19 related
foreign patents, including several patents covering various processes and
technologies utilized in call management systems. These patents cover the
Company's proprietary implementations of features such as inbound/outbound call
blending, call progress analysis, screen pops of the called person's account
information and Cancel Dial. The Company also has a number of pending patent
applications on call technology innovations for which patents have not issued.
In many cases, the Company has also received or applied for patents in other
countries covering the innovations covered by existing patents or patent
applications. With certain exceptions, the Company historically has not actively
pursued infringements of these patents. There can be no assurance that any
future attempt by the Company to enforce its patents would be successful or
would result in royalties which exceed the cost of such enforcement efforts, or
that the Company will be able
35
<PAGE> 38
to detect all instances of infringement. The Company generally enters into
confidentiality agreements with its employees, consultants, clients and
potential clients and limits access to, and distribution of, its proprietary
information. The Company maintains trademarks and service marks to identify its
products, development tools and service offerings and relies upon trademark and
trade dress laws to protect its proprietary rights in these marks.
The Company has entered into agreements with certain of its distributors
giving them a limited, non-exclusive right to use portions of the Company's
source code to create foreign language versions of the Company's products for
distribution in foreign markets. In addition, the Company has entered into
agreements with a small number of its customers requiring the Company to place
its source code in escrow. These escrow arrangements typically provide that
these customers have a limited, non-exclusive right to use such code in the
event that there is a bankruptcy proceeding by or against the Company, if the
Company ceases to do business or if the Company fails to meet its support
obligations. These arrangements may increase the likelihood of misappropriation
by third parties.
The Company may be subject to additional risks as it enters into
transactions in countries where intellectual property laws are not well
developed or are poorly enforced. Legal protections of the Company's rights may
be ineffective in such countries. Litigation to defend and enforce the Company's
intellectual property rights could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business,
financial condition and results of operations, regardless of the final outcome
of such litigation. Despite the Company's efforts to safeguard and maintain its
proprietary rights both in the United States and abroad, there can be no
assurance that the Company will be successful in doing so, or that the steps
taken by the Company in this regard will be adequate to deter misappropriation
or independent third-party development of the Company's technology or to prevent
an unauthorized third party from copying or otherwise obtaining and using the
Company's products or technology. Any such events could have a material adverse
effect on the Company's business, financial condition and results of operations.
As the number of call center software applications in the industry
increases and the functionality of these products further overlaps, software
development companies similar to the Company may increasingly become subject to
claims of infringement or misappropriation of the intellectual property rights
of others. Although the Company believes that its software components and other
intellectual property do not infringe on the intellectual property rights of
others, there can be no assurance that such a claim will not be asserted against
the Company in the future, that assertion of such claims will not result in
litigation or that the Company would prevail in such litigation or be able to
obtain a license for the use of any infringed intellectual property from a third
party on commercially reasonable terms. Furthermore, litigation, regardless of
its outcome, could result in substantial cost to the Company and divert
management's attention from the Company's operations. Any infringement claim or
litigation against the Company could, therefore, have a materially adverse
affect on the Company's results of operations and financial condition.
EMPLOYEES
As of January 31, 1997, the Company had 236 full-time employees, of which
215 were based in the United States and 21 were based in other countries. None
of the employees of the Company is covered by a collectively bargaining
agreement. The Company considers its relations with its employees to be good.
The Company believes its future success will depend in large part on its
ability to recruit and retain qualified employees, especially experienced
software engineering personnel. The competition for such personnel is intense,
and there can be no assurance that the Company will be successful in retaining
or recruiting key personnel. See "Risk Factors -- Competitive Market for
Personnel."
PROPERTIES
The Company's principal administrative, sales, marketing, support, and
research and development facility is located in 100,000 square feet of modern
office space in Norcross, Georgia. This facility is leased to the Company
through 2005, and approximately 75% of the space is presently actively utilized.
The facility is
36
<PAGE> 39
owned by a partnership controlled by the Company's Chairman of the Board, Chief
Executive Officer and principal shareholder. See "Certain Transactions."
The Company also leases space for seven sales and support centers located
throughout the United States and in London. Management believes its current
facilities are adequate to meet its needs through the next twelve months and
that, if required, suitable additional or alternative space will be available to
accommodate expansion of the Company's operations on commercially reasonable
terms.
LEGAL PROCEEDINGS
One of the Company's customers has filed suit in the Circuit Court for Knox
County, Tennessee asserting, among other things, that the Company misrepresented
the functionality of its products and breached its contract with the customer
for delivery of its products and claiming not less than $2.0 million in damages.
The Company intends to vigorously defend this action and, based upon information
currently available, believes that the action will not have a material impact on
the Company. However, because the proceedings are at a preliminary stage and
discovery has not yet begun, the Company cannot predict the ultimate outcome of
this suit and there can be no assurance that the Company will be successful in
the proceedings.
37
<PAGE> 40
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Aleksander Szlam............... 45 Chairman of the Board and Chief Executive Officer
J. Neil Smith.................. 56 President, Chief Operating Officer and Director
Mark B. Adams.................. 45 Vice President -- Finance, Chief Financial
Officer
William K. Dumont.............. 47 Vice President -- Sales
Lee H. Davies.................. 53 Vice President -- Operations
Dean A. Trumbull............... 36 Vice President -- Advanced Technology
John A. Lamb................... 44 Vice President -- New Business Development
A. Scott Anderson.............. 41 Vice President -- International
John M. Goodeve-Docker......... 49 Managing Director of Melita Europe
Dan K. Lowring................. 36 Director -- Finance, Secretary and Treasurer
</TABLE>
Aleksander Szlam founded the Company in 1979 and has served as Chairman of
the Board and Chief Executive Officer of the Company since its inception. Mr.
Szlam also has served as Chairman of the Board, President and Chief Executive
Officer of Inventions since 1987, and Chairman of the Board of Melita Europe
since 1991. Prior to founding Melita, Mr. Szlam worked as a design engineer and
scientist at Lockheed Corporation, NCR and Solid State Systems.
J. Neil Smith has served as President, Chief Operating Officer and a
director of the Company since January 1995. Prior to joining the Company, Mr.
Smith served as Chairman of the Board, President and Chief Executive Officer of
American Technical Services Group, Inc., a systems integration company, from
1987 to 1994.
Mark B. Adams has served as Vice President -- Finance and Chief Financial
Officer of the Company since September 1996. From 1993 to 1996, Mr. Adams served
as Executive Vice President, Finance and Chief Financial Officer of INITIAL
Contract Services, a building services company. From 1989 to 1993, Mr. Adams
served as Vice President, Finance for Suntory Water Group, a consumer products
company. Mr. Adams is a member of the American Institute of Certified Public
Accountants and is a Certified Public Accountant in the State of Georgia.
William K. Dumont has served as Vice President -- Sales of the Company
since December 1996. From 1994 to 1996, Mr. Dumont served as Regional Manager
for Octel Communications Corporation, and from 1990 to 1994 he served as
Regional Vice President of VMX, Inc., both of which are voice processing
companies.
Lee H. Davies has served as Vice President -- Operations of the Company
since September 1995. Prior to joining the Company, Mr. Davies served as Vice
President of Sales, Marketing and Customer Support for Aristacom International,
Inc., an inbound call center software company, from 1994 to 1995. From 1991 to
1994, Mr. Davies served as a marketing director for Digital Equipment
Corporation.
Dean A. Trumbull has served as Vice President -- Advanced Technology of the
Company since October 1994. Prior to joining the Company, Mr. Trumbull served as
a software engineering project leader and call processing group manager for
Intecom, Inc., a telecommunications corporation, from 1983 to 1994, and, during
1994, as Software Development Manager for its multimedia software subsidiary,
Incitz Incorporated.
John A. Lamb has served as Vice President -- New Business Development of
the Company since September 1996, and was Director of Special Projects of the
Company from February 1996 to September 1996. From January 1995 to November
1995, he was Vice President, Research and Development of Microhelp, Inc., a
software development company. From 1990 to 1995, he held various positions in
the sales and engineering departments of the Company.
38
<PAGE> 41
A. Scott Anderson has served as Vice President -- International of the
Company since February 1997. From 1995 to 1997, Mr. Anderson served as Senior
Vice President -- International Sales of S2 Systems, Inc., a software subsidiary
of Stratus Computer, Inc., a data communications software and development
services company. He served as Director of International Sales of S2 Systems
during 1995. Prior to that time, he was Director of International Operations of
BellSouth Systems Integration, a division of BellSouth Enterprises, from 1992
until its acquisition by S2 Systems in 1994.
John M. Goodeve-Docker has served as Managing Director of Melita Europe
since June 1995. He served as Deputy Managing Director for Melita Europe from
January 1994 to June 1995 and as Business Development Director from November
1992 to December 1993. Prior to joining the Company, Mr. Goodeve-Docker served
as General Manager of Trend Communications Ltd., an information technology data
communications manufacturer and distributor in the U.K., from 1991 to 1992.
Dan K. Lowring has served as Director -- Finance of the Company since July
1993, and as Secretary and Treasurer of the Company since January 1997. From
March 1993 to July 1993, he served as Controller of the Company, and from
October 1990 to March 1993 he served as Manager, Finance of the Company.
The Company intends to add at least two independent members to its Board of
Directors within 90 days after the date of this Prospectus. It will be necessary
for the Company to appoint these directors within the 90 day time period in
order to maintain its Nasdaq National Market listing. Failure to appoint two
such directors could result in a delisting of the Common Stock from the Nasdaq
National Market.
Beginning with the 1997 annual meeting of shareholders, the Board of
Directors will be divided into three classes, Class I, Class II and Class III,
each of whose members will serve for a staggered three-year term. At each annual
meeting of shareholders, after the 1997 annual meeting, a class of directors
will be elected for a three-year term to succeed the directors of the same class
whose terms are then expiring. The terms of the initial Class I, Class II and
Class III directors will expire upon the election and qualification of successor
directors at the annual meeting of shareholders held following the end of
calendar years 1997, 1998 and 1999, respectively. See "Management -- Agreements
with Employees" and "Description of Capital Stock -- Certain Provisions of
Articles of Incorporation and Bylaws."
There are no family relationships between any of the directors or executive
officers of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors intends to establish an Executive
Committee, an Audit Committee and a Compensation Committee. The Executive
Committee will be empowered to exercise all authority of the Board of Directors
of the Company, except as limited by the Georgia Business Corporation Code
("GBCC"). Under Georgia law, the Executive Committee may not, among other
things, approve or propose to shareholders actions required to be approved by
shareholders, fill vacancies on the Board of Directors, amend the articles of
incorporation or bylaws or approve a plan of merger. The Company expects that
the Executive Committee will include Messrs. Szlam and Smith. The Audit
Committee will be responsible for recommending independent auditors, reviewing
with the independent auditors the scope and results of the audit engagement,
monitoring the Company's financial policies and control procedures, and
reviewing and monitoring the provisions of nonaudit services by the Company's
auditors. The Compensation Committee will be responsible for reviewing and
recommending salaries, bonuses and other compensation for the Company's
executive officers. The Compensation Committee also will be responsible for
administering the Company's stock option and stock purchase plans and for
establishing the terms and conditions of all stock options and purchase rights
granted under these plans. At least two of the new independent directors will be
appointed to each of the Audit and Compensation Committees at the time they are
elected to the Board of the Directors of the Company.
DIRECTOR COMPENSATION
Prior to this offering, no member of the Board of Directors of the Company
received compensation for service on the Board. Following the consummation of
the offering, the Company expects to pay the non-employee directors an annual
retainer for serving on the Board of Directors, plus fees for each board meeting
attended and each committee meeting attended which is held independently of a
board meeting.
39
<PAGE> 42
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued by
the Company in 1996 for its Chief Executive Officer and the four other most
highly compensated executive officers of the Company in 1996 (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION NUMBER OF
---------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS(1) COMPENSATION OPTIONS COMPENSATION
--------------------------- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Aleksander Szlam...................... $300,001 $154,502 $86,040(2) -- --
Chairman of the Board and
Chief Executive Officer
J. Neil Smith......................... 220,399 82,500 --(3) -- --
President and Chief Operating
Officer
Lee H. Davies......................... 127,211 13,320 --(3) -- --
Vice President -- Operations
Dean A. Trumbull...................... 110,816 20,000 --(3) 40,000 --
Vice President -- Advanced
Technology
John M. Goodeve-Docker................ 85,333 32,000 18,576(4) -- $ 3,040(5)
Managing Director of Melita Europe
</TABLE>
- ---------------
(1) Bonuses awarded and paid in 1996 were based upon 1995 performance.
(2) Includes the value of the non-business use of two automobiles provided by
the Company and reimbursement of the associated income taxes in the
aggregate amount of $64,068, health and life insurance premiums and
reimbursement of the associated income taxes in the aggregate amount of
$13,623, auto insurance premiums and reimbursement of the associated income
taxes in the aggregate amount of $6,308, and ad valorem tax payments and
reimbursement of the associated income taxes in the aggregate amount of
$2,041.
(3) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), other compensation in the form of perquisites and other
personal benefits has been omitted because such perquisites and other
personal benefits constituted less than the lesser of $50,000 or 10% of the
total annual salary and bonus for the Named Executive Officer for such
year.
(4) Consists of the value of the non-business use of an automobile provided by
the Company.
(5) Consists of a retirement savings contribution of $3,040 paid by the Company.
40
<PAGE> 43
The following table sets forth all individual grants of stock options
during the year ended December 31, 1996, to each of the Named Executive
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENT OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OR OPTION TERM(2)
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
- ---- ---------- ---------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Aleksander Szlam............. -- -- -- -- -- --
J. Neil Smith................ -- -- -- -- -- --
Lee H. Davies................ -- -- -- -- -- --
Dean A. Trumbull............. 40,000(1) 23.9% $4.07 1/1/03 $102,384 $259,461
John M. Goodeve-Docker....... -- -- -- -- -- --
</TABLE>
- ---------------
(1) This option was granted with an exercise price equal to the fair market
value of the Common Stock on the date of grant as determined by the Board
of Directors. The option is a nonqualified stock option, vests over five
years and has a seven-year term.
(2) The potential realizable value is calculated based on the seven-year term of
the option at the time of its grant. It is calculated by assuming that the
stock price on the date of grant ($4.07) appreciates at the indicated
annual rate, compounded annually for the entire term of the option. The
actual realizable value of the options based on the price to the public in
the offering will substantially exceed the potential realizable value shown
in the table.
The following table summarizes the value of the outstanding options held by
the Named Executive Officers at December 31, 1996. No options were exercised by
the Named Executive Officers during the year ended December 31, 1996.
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT FISCAL
AT FISCAL YEAR-END YEAR-END(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Aleksander Szlam........................... -- -- -- --
J. Neil Smith.............................. -- 450,000 -- $1,165,500
Lee H. Davies.............................. -- -- -- --
Dean A. Trumbull........................... -- 40,000 -- 57,200
John M. Goodeve-Docker..................... -- -- -- --
</TABLE>
- ---------------
(1) Based on the estimated fair market value of the Company's Common Stock as of
December 31, 1996, of $5.50 per share, less the exercise price payable upon
exercise of such options. Such estimated fair market value as of December
31, 1996, is substantially lower than the initial public offering price per
share in this offering.
EMPLOYEE BENEFIT PLANS
1997 Stock Option Plan
The Company's 1997 Stock Option Plan (the "1997 Stock Option Plan") became
effective on February 6, 1997. The aggregate number of shares reserved for
issuance under the 1997 Stock Option Plan is 1,350,000 shares, less the number
of shares issued pursuant to the Company's 1992 Discounted Stock Option Plan.
The purpose of the 1997 Stock Option Plan is to provide incentives for key
employees, officers, consultants and directors to promote the success of the
Company, and to enhance the Company's ability to attract and retain the services
of such persons. Options granted under the 1997 Stock Option Plan may be
41
<PAGE> 44
either options intended to qualify as "incentive stock options" under Section
422 of the Code or nonqualified stock options.
As of February 28, 1997, options to purchase 125,000 shares of Common Stock
were outstanding under the 1997 Stock Option Plan at a weighted average exercise
price of $5.50 per share and no shares of Common Stock have been issued upon
exercise of options granted under the 1997 Stock Option Plan.
1992 Discounted Stock Option Plan
The Company's 1992 Discounted Stock Option Plan (the "1992 Stock Option
Plan") became effective on June 4, 1992. The aggregate number of shares reserved
for issuance under the 1992 Stock Option Plan is 1,000,000 shares. The purpose
of the 1992 Stock Option Plan is to provide incentives for key employees to
promote the success of the Company, and to enhance the Company's ability to
attract and retain the services of such persons. Options granted under the 1992
Stock Option Plan are not intended to qualify as "incentive stock options" under
Section 422 of the Code. Options granted under the 1992 Stock Option Plan vest
over a period of time specified in the relevant option agreement, and will first
become exercisable as to the vested portion 14 months after the closing of this
offering.
As of February 28, 1997, options to purchase 981,097 shares of Common Stock
were outstanding under the 1992 Stock Option Plan at a weighted average exercise
price of $3.16 per share and no shares of Common Stock have been issued upon
exercise of options granted under the 1992 Stock Option Plan.
Employee Stock Purchase Plan
The Company adopted an Employee Stock Purchase Plan (the "Stock Purchase
Plan") on March 1, 1997, to become effective on the closing of this offering. A
total of 250,000 shares of the Company's Common Stock have been reserved for
issuance under the Stock Purchase Plan. The Stock Purchase Plan is intended to
qualify under sec. 423 of the Code. An employee electing to participate in the
Stock Purchase Plan must authorize on a semi-annual basis a stated dollar amount
or percentage of the employee's regular pay (not to exceed 10%) to be deducted
by the Company from the employee's pay. The price at which employees may
purchase Common Stock is 85% of the closing price of the Common Stock on the
Nasdaq National Market on the first day of the semi-annual period or the last
day of the semi-annual period, whichever is lower. An employee may not sell
shares of Common Stock purchased under the Stock Purchase Plan until the later
of: (i) 180 days after the closing of this offering; or (ii) the first day of
the second semi-annual period following the semi-annual period in which the
right to purchase such shares was granted. Employees of the Company who have
completed six full months of service with the Company and whose customary
employment is more than 20 hours per week for more than nine months per calendar
year are eligible to participate in the Stock Purchase Plan. An employee may not
be granted an option under the Stock Purchase Plan if after the granting of the
option such employee would be deemed to own 5% or more of the combined voting
power or value of all classes of stock of the Company. As of March 1, 1997,
approximately 240 employees are eligible to participate in the Stock Purchase
Plan. The Stock Purchase Plan will be administered by the Compensation Committee
of the Board of Directors.
401(k) Profit Sharing Plan
The Company maintains a 401(k) Profit Sharing Plan (the "401(k) Plan")
which is intended to be a tax-qualified defined contribution plan under Section
401(k) of the Code. In general, all U.S. employees of the Company who have
completed six months of service are eligible to participate. The 401(k) Plan
includes a salary deferral arrangement pursuant to which participants may
contribute, subject to certain Code limitations, a maximum of 15% of their
salary on a pre-tax basis, with a maximum deferral of $9,500. Subject to certain
Code limitations, the Company may make a matching contribution at the discretion
of the Board of Directors. In 1996, the Company's matching contribution was 40%
of each participant's contribution up to 6% of the participant's salary, for an
aggregate contribution of $119,000. A separate account is maintained for each
participant in the 401(k) Plan. The portion of a participant's account
attributable to his or her own contributions is 100% vested. The portion of the
account attributable to Company contributions (including matching contributions)
vests ratably over the next six years of service with the Company. Distributions
from
42
<PAGE> 45
the 401(k) Plan may be made in the form of a lump-sum payment in cash or
property or in the form of an annuity.
AGREEMENTS WITH EMPLOYEES
Principal employees of the Company, including executive officers, are
required to sign an agreement with the Company restricting the ability of the
employee to compete with the Company during his or her employment and for a
period of one year thereafter, restricting solicitation of customers and
employees following employment with the Company, and providing for ownership and
assignment of intellectual property rights to the Company.
Mr. Szlam has entered into a two-year employment agreement with the Company
which commences on the effective date of this offering. Pursuant to the
agreement, Mr. Szlam is entitled to receive an annual base salary of $300,000,
and is entitled to annual bonuses of at least $160,000. Mr. Szlam's employment
under the agreement automatically renews for additional two-year terms unless
the Company or Mr. Szlam cancels such renewal by giving three months' prior
written notice. Under the terms of the agreement, Mr. Szlam has agreed to assign
to the Company all patents, copyrights and other intellectual property developed
by him during the course of his employment by the Company. In addition, Mr.
Szlam has agreed not to solicit the customers or employees of the Company or to
compete with the Company for two years following any termination of his
employment.
Mr. Smith has entered into an employment agreement with the Company which
commences on the effective date of this offering and terminates on July 31,
1999. Pursuant to the agreement, Mr. Smith is entitled to receive an annual base
salary of $225,000, and is entitled to annual bonuses of up to $100,000 at the
discretion of the Board. Mr. Smith's employment under the agreement
automatically renews for additional two-year terms unless the Company or Mr.
Smith cancels such renewal by giving three months' prior written notice. If Mr.
Smith's employment is terminated by the Company other than for cause, he will be
entitled to severance pay equal to one year's salary. If Mr. Smith terminates
his employment following a material diminishment of the duties, salary, location
or authority of his position, he will be entitled, subject to Board of Directors
review, to severance pay equal to one year of salary. All options currently held
by Mr. Smith will vest upon completion of this offering, but will not be
exercisable until beginning 14 months after completion of this offering.
Notwithstanding the foregoing, if Mr. Smith voluntarily resigns his positions
with the Company without the Company's consent, his right to exercise his
current options will be forfeited with respect to one-fourth of his options for
each full year which the resignation occurs prior to July 1, 2000. Under the
terms of the agreement, Mr. Smith has agreed to assign to the Company all
patents, copyrights and other intellectual property developed by him during the
course of his employment by the Company. In addition, Mr. Smith has agreed not
to solicit the customers or employees of the Company or to compete with the
Company for two years following any termination of his employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, compensation of executive officers of the Company was
determined by Mr. Szlam, Chairman of the Board and Chief Executive Officer of
the Company. See "Certain Transactions" for information concerning certain
transactions and relationships between the Company and Mr. Szlam. Simultaneously
with the expansion of the Board of Directors following the completion of this
offering, the Company will establish a Compensation Committee to review the
performance of executive officers, establish overall employee compensation
policies and recommend to the Board of Directors major compensation programs. No
voting member of the Compensation Committee will be an executive officer of the
Company. Messrs. Szlam and Smith will be ex officio members of the Compensation
Committee.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Upon the closing of this offering, the Company's Amended and Restated
Articles of Incorporation will provide that the liability of the directors for
monetary damages shall be limited to the fullest extent permissible under
Georgia law. Under Georgia law, liability of a director cannot be limited for
(i) any
43
<PAGE> 46
appropriation, in violation of his duties, of any business opportunity of the
Company, (ii) acts or omissions which involve intentional misconduct or a
knowing violation of law, (iii) any liability under Section 14-2-832 of the
GBCC, which relates to unlawful payments of dividends and unlawful stock
repurchases and redemptions, or (iv) any transaction from which he derived an
improper personal benefit. This limitation of liability will not affect the
availability of injunctive relief or other equitable remedies.
Upon the closing of this offering, the Company's Amended and Restated
Bylaws will provide that the Company shall indemnify each of its officers,
directors, employees and agents to the extent that he is or was a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative by
reason of the fact that such person is or was a director, officer, employee or
agent of the Company, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement in connection with such action, suit or
proceeding; provided, however, that no indemnification shall be made for (i) any
appropriation, in violation of his duties, of any business opportunity of the
Company, (ii) acts or omissions which involve intentional misconduct or a
knowing violation of law, (iii) any liability under Section 14-2-832 of the
GBCC, which relates to unlawful payments of dividends and unlawful stock
repurchases and redemptions, or (iv) any transaction from which he derived an
improper personal benefit.
The Company intends to provide directors and officers liability insurance
coverage to its directors and officers following this offering.
44
<PAGE> 47
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of February 28, 1997, and
as adjusted to reflect the sale by the Company of the shares offered hereby, by
(i) each director of the Company; (ii) each of the Named Executive Officers;
(iii) each shareholder known by the Company to be the beneficial owner of more
than 5% of the Company's Common Stock; and (iv) all executive officers and
directors as a group. Except as otherwise noted, the persons or entities named
in the table have sole voting and investment power with respect to all the
shares of Common Stock beneficially owned by them, subject to community property
laws where applicable.
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON STOCK
OUTSTANDING
NUMBER OF SHARES --------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED OFFERING OFFERING
--------------------------------------- ---------------- -------- --------
<S> <C> <C> <C>
Aleksander Szlam (2)...................................... 11,143,395 100.0% 76.1%
J. Neil Smith (3)......................................... -- -- --
Lee H. Davies (4)......................................... 5,000 * *
Dean A. Trumbull (5)...................................... -- -- --
John M. Goodeve-Docker (6)................................ 5,000 * *
All executive officers and directors as a group (10
persons)(7)............................................. 11,163,395 100.0% 76.1%
</TABLE>
- ---------------
* Less than 1%.
(1) Except as set forth herein, the street address of the named beneficial owner
is c/o Melita International Corporation, 5051 Peachtree Corners Circle,
Norcross, Georgia 30092-2500.
(2) Consists of 11,143,395 shares held by a limited partnership controlled by
Mr. Szlam.
(3) Excludes 450,000 shares issuable pursuant to currently vested options
exercisable beginning 14 months after the closing of this offering, subject
to certain acceleration and defeasance provisions. See "Agreements with
Employees."
(4) Includes 5,000 shares issuable pursuant to currently exercisable options.
(5) Excludes 10,000 shares issuable pursuant to currently vested options
exercisable beginning 14 months after the closing of this offering.
(6) Includes 5,000 shares issuable pursuant to currently exercisable options.
(7) Includes 11,143,395 shares held by a limited partnership controlled by Mr.
Szlam and 20,000 shares issuable pursuant to currently exercisable options.
Excludes 460,000 shares issuable pursuant to currently vested options
exercisable beginning 14 months after the closing of this offering.
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<PAGE> 48
CERTAIN TRANSACTIONS
RELATED PARTY TRANSACTIONS
In August 1994, the Company entered into a lease agreement with an
unrelated party to lease its headquarters facility commencing April 1995. The
agreement provides for annual lease payments ranging from $542,000 to $636,000
per year over a ten-year term. In November 1995, Mr. Szlam, the Company's
Chairman of the Board, Chief Executive Officer and principal shareholder,
purchased the facility through a limited liability company controlled by Mr.
Szlam and his wife. The limited liability company now rents the facility to the
Company under the terms of the original lease. Rent expense paid to the limited
liability company was $60,000 and $543,000 in 1995 and 1996, respectively.
During 1994, the Company paid $325,000 in research and development fees to
an entity owned by Mr. Szlam's brother-in-law.
The Board of Directors of the Company has adopted a resolution whereby all
future transactions, including any loans from the Company to its officers,
directors, principal shareholders or affiliates, will be approved by a majority
of the Board of Directors, including a majority of the independent and
disinterested members of the Board of Directors, if required by law, or a
majority of the disinterested shareholders, and will be on terms no less
favorable to the Company than could be obtained from unaffiliated third parties.
COMBINATION OF MELITA EUROPE AND INVENTIONS
Upon the effective date of this offering, the Company will acquire Melita
Europe and Inventions by share exchanges with their existing shareholders, which
are Mr. Szlam, a limited partnership controlled by Mr. Szlam and a trust
controlled by his spouse. The Company will issue a total of 3,143,395 shares of
its Common Stock to the shareholders of Melita Europe and Inventions in such
share exchanges. The exchange ratios and number of shares issued in the share
exchanges were based on relative valuations of the Company, Melita Europe and
Inventions determined by an independent appraisal firm.
S CORPORATION DISTRIBUTION AND TERMINATION OF S CORPORATION STATUS
Upon the Termination Date, the Company will terminate its status as an S
corporation under the Code. All undistributed S corporation earnings through the
Termination Date will be distributed to the Company's principal shareholder
using a portion of the net proceeds of this offering. See "Termination of S
Corporation Status and Related Distributions," "-- Repayment of Shareholder
Notes" below and Notes 1 and 3 of the Notes to Combined Financial Statements.
REPAYMENT OF SHAREHOLDER NOTES
In connection with a June 19, 1992 distribution of S corporation
accumulated earnings, Melita issued a note payable (the "1992 Note") to Mr.
Szlam in the principal amount of $3.0 million. The note bears interest at a rate
equal to the prime rate plus 1% per annum, and the outstanding principal balance
of this note as of March 1, 1997, was $2.4 million. Interest on the note is
payable monthly, and principal is payable in 16 equal quarterly installments
beginning July 1, 1996. The note contains an acceleration provision at the
option of the shareholder upon certain designated changes in ownership, which
was triggered by changes in the capital structure in February 1997. The largest
amount outstanding under this note during 1996 was $3.0 million.
In connection with a February 7, 1997 distribution of S corporation
earnings accumulated through December 31, 1996, Melita and Inventions issued
notes payable (the "1997 Notes") to Mr. Szlam. These two notes have an aggregate
principal amount of $12.9 million. Each of the notes bears interest at the
minimum rate required to avoid imputation of interest using the applicable
federal rate under the Code. The outstanding principal balance on these notes as
of March 1, 1997, was $12.9 million, and the largest aggregate amount
outstanding under these notes during the period from issuance to March 1, 1997
was $13.1 million. Payment of these notes is due in full upon demand.
The 1992 Note and 1997 Notes will be repaid in full with a portion of the
net proceeds of this offering.
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<PAGE> 49
TAX INDEMNIFICATION AGREEMENT
Melita and Inventions have entered into Tax Indemnification Agreements with
their existing shareholders prior to this offering providing for, among other
things, the indemnification of the Company by such shareholders for any federal
and state income taxes (including interest) incurred by the Company if for any
reason the Company is deemed to be treated as a C corporation during any period
for which it reported its earnings to the taxing authorities as an S
corporation. The Tax Indemnification Agreements further provide for the
cross-indemnification of the Company and of each existing shareholder for
certain additional taxes (including interest and, in the case of existing
shareholders, penalties) resulting from the Company's operations during the
period in which it was an S corporation.
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<PAGE> 50
DESCRIPTION OF CAPITAL STOCK
Upon the effectiveness of this offering, the Company's authorized capital
stock will consist of 100,000,000 shares of Common Stock, no par value per
share, and 20,000,000 shares of preferred stock, no par value per share. As of
March 1, 1997, after giving effect to the issuance of 3,143,395 shares of Common
Stock in connection with the Combination, the Company had issued and outstanding
11,143,395 shares of Common Stock held by three stockholders of record. The
following description of the capital stock of the Company is a summary and is
qualified in its entirety by the provisions of the Company's Amended and
Restated Articles of Incorporation and Amended and Restated Bylaws, copies of
which have been filed as exhibits to the Registration Statement of which this
Prospectus is a part.
COMMON STOCK
Holders of shares of Common Stock are entitled to one vote per share for
the election of directors and on all matters to be submitted to a vote of the
Company's shareholders. The Common Stock does not have cumulative voting rights,
and, as a result, the holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election and the holders of the remaining shares will not be able
to elect any directors. Subject to the rights of any holders of preferred stock
which may be issued in the future, the holders of shares of Common Stock are
entitled to share ratably in such dividends as may be declared by the Board of
Directors and paid by the Company out of funds legally available therefor. In
the event of dissolution, liquidation or winding up of the Company, holders of
shares of Common Stock are entitled to share ratably in all assets remaining
after payment of all liabilities and liquidation preferences, if any. Holders of
shares of Common Stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of Common Stock are, and the shares of
Common Stock to be issued by the Company in connection with this offering will
be, duly authorized, validly issued, fully paid and nonassessable. The rights of
holders of Common Stock will be subject to, and may be adversely affected by,
the rights, privileges and preferences of the holders of any shares of preferred
stock that the Company may designate and issue in the future.
PREFERRED STOCK
The Board of Directors is authorized, subject to certain limitations
prescribed by law, without further shareholder approval, to issue from time to
time up to an aggregate of 20,000,000 shares of preferred stock in one or more
series and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions on the shares of each such series
thereof, including the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption (including sinking fund provisions),
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designations of such series. The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change of control of the Company. There are no outstanding shares of preferred
stock, and no series have been designated. The Company does not currently have
any intention to designate or issue any preferred stock.
CERTAIN PROVISIONS OF ARTICLES OF INCORPORATION AND BYLAWS
The Amended and Restated Bylaws provide that special meetings of
shareholders may be called only by (i) the Board of Directors, (ii) the Chairman
of the Board of Directors (if one is so appointed), (iii) the President of the
Company or (iv) holders of not less than 50% of all votes entitled to be cast on
any issue proposed to be considered at the proposed special meeting. The Amended
and Restated Bylaws permit removal of directors only for cause. The Amended and
Restated Articles of Incorporation also provide for a classified Board of
Directors. See "Management -- Directors and Executive Officers."
The Company's Amended and Restated Bylaws establish an advance notice
procedure for the nomination of candidates for election as directors and other
shareholder proposals to be considered at shareholders meetings, other than by
or at the direction of the Board of Directors or other designated parties.
Notice of shareholder proposals and director nominations must be given timely in
writing to the Secretary of the Company before the meeting at which such matters
are to be acted upon or directors are to be elected. Such
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<PAGE> 51
notice, to be timely, must be received at the principal executive offices of the
Company not less than 60 days before the date of the meeting at which the
director(s) are to be elected or the proposal is to be considered; however, if
less than 70 days notice or prior public disclosure of the date of the scheduled
meeting is given or made, notice by the shareholder, to be timely, must be
delivered or received not later than the close of business on the tenth day
following the earlier of the day on which notice of the date of the meeting is
mailed to shareholders or public disclosure of the date of such meeting is made.
Notice to the Company from a shareholder who intends to present a proposal
or to nominate a person for election as a director at a shareholders' meeting
must contain certain information about the shareholder giving such notice and,
in the case of director nominations, all information that would be required to
be included in a proxy statement soliciting proxies for the election of the
proposed nominee (including such person's written consent to serve as a director
if so elected). If the chairman of the meeting determines that a shareholder's
proposal or nomination is not made in accordance with the procedures set forth
in the Amended and Restated Bylaws, such proposal or nomination, at the
direction of such presiding officer, may be disregarded. The notice requirement
for shareholder proposals contained in the Amended and Restated Bylaws does not
restrict a shareholder's right to include proposals in the Company's annual
proxy materials pursuant to rules promulgated under the Securities Exchange Act
of 1934, as amended.
The Amended and Restated Bylaws provide that directors may be removed only
for cause and only by the affirmative vote, at any annual or special meeting of
the shareholders, of not less than 66 2/3% of the total number of votes of then
outstanding shares of capital stock of the Company that are entitled to vote
generally in the election of directors, voting together as a single class, but
only if notice of such proposed removal was contained in the notice of such
meeting. "For cause" means (i) misconduct as a director of the Company or any
subsidiary of the Company which involves dishonesty with respect to a material
corporate activity or material corporate assets, or (ii) conviction of an
offense punishable by one or more years of imprisonment (other than minor
regulatory infractions and traffic violations which do not materially and
adversely affect the Company). The Board of Directors shall have the power to
increase or decrease the authorized number of directors, with or without
shareholder approval. Newly created directorships resulting from any increase in
the number of directors or any vacancy on the Board of Directors may be filled
by the affirmative vote of a majority of the remaining directors then in office
or, if not filled by the directors, by the shareholders.
In discharging the duties of their respective positions and in determining
what is believed to be in the best interest of the Company, the Board of
Directors, and individual directors, in addition to considering the effects of
any action on the Company or is shareholders, may, to the extent permitted by
applicable Georgia law, consider the interests of the employees, customers,
suppliers and creditors of the Company and its subsidiaries, the communities in
which offices or other establishments of the Company and its subsidiaries are
located, and all other factors such directors may consider pertinent; provided,
however, that this provision of the Company's Amended and Restated Articles of
Incorporation solely grants discretionary authority to the directors and no
constituency shall be deemed to have been given any right to consideration
thereby.
The preceding provisions of the Amended and Restated Articles of
Incorporation and Bylaws may be changed only upon the affirmative vote of
holders of at least a 66 2/3% of the outstanding shares of Common Stock.
The provisions of the Amended and Restated Articles of Incorporation and
Bylaws summarized in the preceding five paragraphs and the provisions of the
GBCC described under "Certain Provisions of Georgia Law," contain provisions
that may have the effect of delaying, deferring or preventing a non-negotiated
merger or other business combination involving the Company. These provisions are
intended to encourage any person interested in acquiring the Company to
negotiate with and obtain the approval of the Board of Directors in connection
with the transaction. Certain of these provisions may, however, discourage a
future acquisition of the Company not approved by the Board of Directors in
which shareholders might receive an attractive value for their shares or that a
substantial number or even a majority of the Company's shareholders might
believe to be in their best interest. As a result, shareholders who desire to
participate in such a transaction may not have the opportunity to do so. Such
provisions could also discourage bids for the Common Stock at a premium to the
prevailing market price, as well as create a depressive effect on the market
price of the Common Stock.
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CERTAIN PROVISIONS OF GEORGIA LAW
Georgia Business Combination Statute. The Company has elected in its
Bylaws to be subject to provisions of the GBCC prohibiting various "business
combinations" involving "interested shareholders" for a period of five years
after the shareholder becomes an interested shareholder of the Company. Such
provisions prohibit any business combination with an interested shareholder
unless either (i) prior to such time, the Board of Directors approves either the
business combination or the transaction by which such shareholder became an
interested shareholder, (ii) in the transaction that resulted in the shareholder
becoming an interested shareholder, the interested shareholder became the
beneficial owner of at least 90% of the outstanding voting stock of the Company
which was not held by directors, officers, affiliates thereof, subsidiaries or
certain employee stock option plans of the Company, or (iii) subsequent to
becoming an interested shareholder, such shareholder acquired additional shares
resulting in such shareholder owning at least 90% of the outstanding voting
stock of the Company and the business combination is approved by a majority of
the disinterested shareholders' shares not held by directors, officers,
affiliates thereof, subsidiaries or certain employee stock option plans of the
Company. Under the relevant provisions of the GBCC, a "business combination" is
defined to include, among other things, (i) any merger, consolidation, share
exchange or any sale, transfer or other disposition (or series of related sales
or transfers) of assets of the Company having an aggregate book value of 10% or
more of the Company's net assets (measured as of the end of the most recent
fiscal quarter), with an interested shareholder of the Company or any other
corporation which is or, after giving effect to such business combination,
becomes an affiliate of any such interested shareholder, (ii) the liquidation or
dissolution of the Company, (iii) the receipt by an interested shareholder of
any benefit from any loan, advance, guarantee, pledge, tax credit or other
financial benefit from the Company, other than in the ordinary course of
business and (iv) certain other transactions involving the issuance or
reclassification of securities of the Company which produce the result that 5%
or more of the total equity shares of the Company, or of any class or series
thereof, is owned by an interested shareholder. An "interested shareholder" is
defined by the GBCC to include any person or entity that, together with its
affiliates, beneficially owns or has the right to own 10% or more of the
outstanding voting shares of the Company, or any person that is an affiliate of
the Company and has, at any time within the preceding two-year period, been the
beneficial owner of 10% or more of the outstanding voting shares of the Company.
The restrictions on business combinations shall not apply to any person who was
an interested shareholder before the adoption of the Bylaw which made the
provisions applicable to the Company nor to any persons who subsequently become
interested shareholders inadvertently, subsequently divest sufficient shares so
that the shareholder ceases to be an interested shareholder and would not, at
any time within the five-year period immediately before a business combination
involving the shareholder, have been an interested shareholder but for the
inadvertent acquisition.
Georgia Fair Price Statute. The Company has elected in its Bylaws to be
subject to the "Fair Price" provisions of the GBCC. These provisions require
that a "business combination" with an "interested shareholder" be (a)
unanimously approved by "continuing directors" who must constitute at least
three members of the board of directors at the time of such approval, or (b)
recommended by at least two-thirds of the "continuing directors" and approved by
a majority of the shareholders excluding the "interested shareholder," unless
certain standards regarding the consideration paid to shareholders in the
transaction are met. Subject to certain exceptions, a "business combination"
includes (i) any merger or consolidation of the corporation or a subsidiary of
the Company; (ii) any share exchange; (iii) any sale, lease, transfer, or other
disposition of assets of the Company or its subsidiary occurring within a 12
month period and having an aggregate book value equal to 10% or more of the net
assets of the Company; (iv) any transaction that results in the issuance or
transfer by the Company of any stock of the Company or the subsidiary
representing 5% or more of the total market value of the outstanding stock of
the Company to any interested shareholder within a 12 month period, except
pursuant to a transaction that effects a pro rata distribution to all
shareholders of the Company; (v) the adoption of any plan or proposal for the
liquidation or dissolution of the corporation in which anything other than cash
will be received by an interested shareholder; and (vi)any transaction occurring
within a 12 month period involving the Company or a subsidiary of the Company
that has the effect of increasing by 5% or more the proportionate share of the
stock of any class or series of the Company or the subsidiary that is directly
or beneficially owned by the interested shareholder. An "interested shareholder"
is
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<PAGE> 53
defined the same as it is defined in the Georgia Business Combination Statute. A
"continuing director" includes any director who is not an affiliate or associate
of an interested shareholder or any board approved successor of such a director
who is not an affiliate or associate of an interested shareholder.
The Fair Price provisions do not restrict a business combination if: (a)
the aggregate amount of the cash, and fair market value of any non-cash
property, measured five days before the consummation date, to be received per
share by the shareholders is at least equal to the highest of: (i) the highest
per share price, including brokerage commissions, transfer taxes, and soliciting
dealers' fees, paid by the interested shareholder for any shares of the same
class or series acquired by it within two years preceding the announcement date
or in the transaction in which it became an interested shareholder; (ii) the
higher of the fair market value per share as determined on the announcement date
or the determination date; or (iii) in the case of shares other than common
shares, the highest amount per share to which preferred shareholders are
entitled in the event of liquidation, dissolution, or winding up of the
corporation, provided that subparagraph (iii) shall only be applicable if the
interested shareholder acquired the shares within the two year period
immediately preceding the announcement date; and (b) shareholders receive cash
or the form of consideration used in the past by the interested shareholder to
purchase the largest number of shares of such class or series. Further, subject
to exceptions, prior to the time the business combination with the interested
shareholder takes place, without the approval of the board of directors, there
must have been: (i) no failure to declare and pay full dividends on the
Company's outstanding preferred shares; (ii) no reduction in the annual rate of
dividends paid on common shares except as to reflect any subdivision of the
shares; (iii) an increase in the annual rate of dividends to reflect any
reclassification of shares; and (iv) not more than a 1% increase in the
interested shareholder's ownership of any of the Company's stock in any 12 month
period. An interested shareholder may not receive a direct or indirect benefit,
except proportionately as a shareholder, of any loans, advances, guarantees,
pledges, or other financial assistance or any tax credits or other tax
advantages provided by the corporation or its subsidiaries, either in
anticipation of or in connection with such business combination or otherwise.
LISTING
Application has been made to include the Company's Common Stock on the
Nasdaq National Market under the trading symbol "MELI."
TRANSFER AGENT AND REGISTRAR
The transfer agent for the Company's Common Stock is .
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the securities
of the Company.
Upon completion of this offering, the Company will have outstanding
14,643,395 shares of Common Stock (assuming no exercise of the underwriters'
over-allotment option or options outstanding under the Company's stock option
plans). Of these shares, the 3,500,000 shares sold in this offering will be
freely tradable without restriction or further registration under the Securities
Act, unless they are purchased by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act (which sales would be subject to
certain limitations and restrictions described below). The remaining 11,143,395
shares of Common Stock may be sold in the public market beginning in February
1998, subject to the volume and other limitations of Rule 144 promulgated under
the Securities Act. The holders of all of these remaining shares have executed
180-day lock-up agreements with Montgomery Securities. See "Underwriting."
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned shares for a least one year (including the holding
period of any prior owner except an affiliate) is entitled to sell in "brokers'
transactions" or to market makers, within any three-month period a number of
shares that does not exceed the greater of (i) one percent of the number of
shares of Common Stock then outstanding (approximately 146,500 shares
immediately after this offering) or (ii) the average weekly trading volume in
the Common Stock during the four calendar weeks preceding the required filing of
a Form 144 with respect to such sale. Sales under Rule 144 are subject to the
availability of current public information about the Company. Under Rule 144(k),
a person who is not deemed to have been an affiliate of the Company at any time
during the 90 days preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least two years, is entitled to sell such shares
without having to comply with the manner of sale, public information, volume
limitation or notice filing provisions of Rule 144. Under Rule 701 under the
Securities Act, persons who purchase shares upon exercise of options granted
prior to this offering are entitled to sell such shares 90 days after this
offering in reliance on Rule 144, without having to comply with the holding
period requirements of Rule 144 and, in the case of non-affiliates, without
having to comply with the volume limitation or notice filing provisions of Rule
144.
After the completion of this offering, the Company intends to file one or
more Registration Statements on Form S-8 under the Securities Act to register an
aggregate of 1,600,000 shares of Common Stock reserved for issuance under the
1992 Stock Option Plan, the 1997 Stock Option Plan and the Stock Purchase Plan.
After the date of such filing, if not otherwise subject to a lock-up agreement,
shares purchased pursuant to these plans generally would be available for resale
in the public market. The Company has granted options under such plans to
purchase an aggregate of 1,106,097 shares of which options to purchase an
aggregate of 20,000 shares are currently exercisable. See
"Management -- Employee Benefit Plans."
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UNDERWRITING
The underwriters named below, represented by Montgomery Securities (the
"Representative"), have severally agreed, subject to the terms and conditions
set forth in the Underwriting Agreement, to purchase from the Company the number
of shares of Common Stock indicated below opposite their respective names at the
initial public offering price less the underwriting discount set forth on the
cover page of this Prospectus. The Underwriting Agreement provides that the
obligations of the Underwriters are subject to certain conditions precedent and
that the Underwriters are committed to purchase all of the shares, if any are
purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Montgomery Securities.......................................
---------
Total............................................. 3,500,000
=========
</TABLE>
The Representative has advised the Company that the Underwriters propose
initially to offer the Common Stock to the public on the terms set forth on the
cover page of this Prospectus. The Underwriters may allow to selected dealers a
concession of not more than $ per share; and the Underwriters may
allow, and such dealers may reallow, a concession of not more than $
per share to certain other dealers. After the initial public offering, the
offering price and other selling terms may be changed by the Representative. The
Common Stock is offered subject to receipt and acceptance by the Underwriters
and to certain other conditions, including the right to reject orders in whole
or in part.
The Company has granted the Underwriters an option, exercisable during the
30-day period after the date of this Prospectus, to purchase up to a maximum of
525,000 additional shares of Common Stock to cover over-allotments, if any, at
the same price per share as the initial shares to be purchased by the
Underwriters. To the extent the Underwriters exercise this option, each of the
Underwriters will be committed, subject to certain conditions, to purchase such
additional shares in approximately the same proportion as set forth in the above
table. The Underwriters may purchase such shares only to cover over-allotments
made in connection with this offering.
The holders of all of the Company's Common Stock, who immediately following
the offering (assuming no exercise of the over-allotment option) collectively
will beneficially own 11,143,395 shares of Common Stock, and each of the
Company's officers and directors, have agreed that for a period of 180 days
after the date of this Prospectus they will not, without the prior written
consent of Montgomery Securities, directly or indirectly, sell, offer, contract
or grant an option to sell, pledge, transfer, except with respect to certain
transfers to family members or trusts for the benefit of family members,
establish an open put equivalent position or otherwise dispose of any shares of
Common Stock, options or warrants to acquire shares of Common Stock or
securities convertible into or exchangeable or exercisable for shares of Common
Stock, or publicly announce the intention to do any of the foregoing. In
addition, the Company has agreed that for a period of 180 days after the date of
this Prospectus it will not, without the consent of Montgomery Securities,
directly or indirectly, sell, offer, contract or grant an option to sell,
pledge, transfer or otherwise dispose of, or announce the offering of, or file
any registration statement under the Securities Act in respect of, any shares of
Common Stock, options or warrants to acquire shares of Common Stock or
securities convertible into or exchangeable or exercisable for shares of Common
Stock, or publicly announce the intention to do any of the
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foregoing, except for shares of Common Stock offered hereby and shares issued
pursuant to the 1992 Stock Option Plan, the 1997 Stock Option Plan or the Stock
Purchase Plan. See "Management -- Employee Benefit Plans" and "Shares Eligible
for Future Sale."
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act, or will contribute to payments the Underwriters may be required
to make in respect thereof.
Certain persons participating in this offering may engage in transactions,
including stabilizing bids, syndicate covering transactions or the imposition of
penalty bids, which may involve the purchase of Common Stock of the Company on
the Nasdaq National Market or otherwise. Such transactions may stabilize or
maintain the market price of the Common Stock at a level above that which might
otherwise prevail in the open market and, if commenced, may be discontinued at
any time.
The Representative has advised the Company that the Underwriters do not
expect to make sales of Common Stock offered by this Prospectus to accounts over
which they exercise discretionary authority in excess of 5% of this offering.
Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial offering price will be determined through
negotiations between the Company and the Representative. Among the factors to be
considered in such negotiations will be the history of and prospects for the
Company and the industry in which the Company competes, an assessment of the
Company's management, the Company's past and present operations and financial
performance, its past and present earnings and the trend of such earnings, the
prospects for future earnings of the Company, the present state of the Company's
development, the general condition of the securities markets at the time of the
offering and the market prices of publicly traded common stocks of comparable
companies in recent periods.
LEGAL MATTERS
The validity of the issuance of the shares of the Common Stock offered
hereby will be passed upon for the Company by Morris, Manning & Martin, L.L.P.,
Atlanta, Georgia. Certain legal matters in connection with this offering will be
passed upon for the Underwriters by Hale and Dorr LLP, Washington, D.C.
EXPERTS
The combined financial statements included in this prospectus and elsewhere
in the Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as set forth in their reports. In those reports,
that firm states that with respect to Melita Europe its opinion is based on the
reports of other independent public accountants, namely BDO Stoy Hayward. The
financial statements referred to above have been included herein in reliance
upon the authority of those firms as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all
amendments, schedules and exhibits thereto, the "Registration Statement") under
the Securities Act with respect to the shares of Common Stock offered hereby.
This Prospectus, which constitutes a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document are not necessarily complete, and in each instance, reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference. The Registration Statement and the exhibits and schedules
thereto may be inspected without charge at the public reference facilities
maintained by the Commission in Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and
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at the following regional offices of the Commission: Seven World Trade Center,
Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, Room 1024, at prescribed rates. In
addition, the Company is required to file electronic versions of these documents
with the Commission through the Commissions Electronic Data Gathering, Analysis,
and Retrieval (EDGAR) system. The Commission maintains a World Wide Web Site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
The Company intends to furnish to its shareholders annual reports
containing consolidated financial statements audited by an independent public
accounting firm and quarterly reports for the first three quarters of each
fiscal year containing unaudited interim financial information.
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MELITA INTERNATIONAL CORPORATION
MELITA EUROPE LIMITED AND INVENTIONS, INC.
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COMBINED FINANCIAL STATEMENTS:
Report of Independent Public Accountants -- Arthur Andersen
LLP....................................................... F-2
Report of the Auditors -- BDO Stoy Hayward.................. F-3
Combined Balance Sheets as of December 31, 1995 and 1996.... F-4
Combined Statements of Operations for the three years in the
period ended December 31, 1996............................ F-5
Combined Statements of Shareholders' Equity for the three
years in the period ended December 31, 1996............... F-6
Combined Statements of Cash Flows for the three years in the
period ended December 31, 1996............................ F-7
Notes to Combined Financial Statements...................... F-8
</TABLE>
F-1
<PAGE> 59
After the stock recapitalization transaction discussed in Note 9 to the
combined financial statements of Melita International Corporation, Melita Europe
Limited and Inventions, Inc. is effected, we expect to be in a position to
render the following audit report.
ARTHUR ANDERSEN LLP
February 28, 1997
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Melita International Corporation,
Melita Europe Limited and
Inventions, Inc.:
We have audited the accompanying combined balance sheets of MELITA
INTERNATIONAL CORPORATION (a Georgia corporation), MELITA EUROPE LIMITED (a
private limited company organized in the United Kingdom) and INVENTIONS, INC. (a
Georgia corporation) (collectively the "Company") as of December 31, 1995 and
1996 and the related combined statements of operations, shareholders' equity,
and cash flows for the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of Melita Europe Limited,
which statements reflect total assets of 8% and 12% at December 31, 1995 and
1996, respectively, and total revenues of 5%, 9%, and 9% of the combined totals
for the three years in the period ended December 31, 1996, respectively. Those
statements were audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it relates to the amounts included for the entity,
is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits, the financial statements referred to
above present fairly, in all material respects, the combined financial position
of Melita International Corporation, Melita Europe Limited and Inventions, Inc.
as of December 31, 1995 and 1996 and the combined results of their operations
and their cash flows for the three years in the period ended December 31, 1996
in conformity with generally accepted accounting principles.
Atlanta, Georgia
F-2
<PAGE> 60
MELITA EUROPE LIMITED
REPORT OF THE AUDITORS
To the shareholders of Melita Europe Limited:
We have audited the financial statements of Melita Europe Limited for the
three years ended 31 December 1996.
Respective responsibilities of directors and auditors
The Company's directors are responsible for the preparation of the
financial statements. It is our responsibility to form an independent opinion,
based on our audits, on those statements and to report our opinion to you.
Basis of opinion
We conducted our audits in accordance with Auditing Standards issued by the
Auditing Practices Board. The results of the audits would not have been
materially different had the audits been conducted in accordance with Generally
Accepted Auditing Standards in the United States. An audit includes examination,
on a test basis, of evidence relevant to the amounts and disclosures in the
financial statements. It also includes an assessment of the significant
estimates and judgements made by the directors in the preparation of the
financial statements, and of whether the accounting policies are appropriate to
the Company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audits so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion the financial statements and including those for the years
ended 31 December 1994 and 1995 as previously audited by us, give a true and
fair view of the state of the Company's affairs as at 31 December 1996 and of
its profit for the three years ended 31 December 1996 and have been properly
prepared in accordance with the Companies Act 1985.
BDO Stoy Hayward
Chartered Accountants
and Registered Auditors
Ewell, Epsom, Surrey
28 February 1997
F-3
<PAGE> 61
MELITA INTERNATIONAL CORPORATION,
MELITA EUROPE LIMITED AND INVENTIONS, INC.
COMBINED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31,
1995 1996 1996 (NOTE 8)
------- ------- --------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 5,959 $ 9,849 $ 0
Accounts receivable, net of allowance for doubtful
accounts of $331 and $487 in 1995 and 1996,
respectively............................................ 9,203 11,860 11,860
Inventories............................................... 3,027 2,442 2,442
Deferred taxes............................................ 0 0 1,061
Prepaid expenses and other................................ 342 170 170
------- ------- -------
Total current assets............................... 18,531 24,321 15,533
------- ------- -------
Property and equipment, at cost:
Furniture and fixtures.................................... 1,341 1,361 1,361
Equipment................................................. 4,255 5,476 5,476
Leasehold improvements.................................... 166 343 343
------- ------- -------
Total property and equipment....................... 5,762 7,180 7,180
Less accumulated depreciation and amortization............ 3,423 4,456 4,456
------- ------- -------
Net property and equipment......................... 2,339 2,724 2,724
------- ------- -------
Other assets................................................ 58 24 24
------- ------- -------
$20,928 $27,069 $18,281
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdraft............................................ $ 0 $ 0 $ 7,176
Accounts payable.......................................... 2,763 2,429 2,429
Accrued liabilities....................................... 3,416 4,210 4,398
Deferred revenue.......................................... 2,593 3,065 3,065
Customer deposits......................................... 2,432 3,849 3,849
Current maturities of note payable to shareholder (Note
2)...................................................... 375 2,625 0
Current maturities of capital lease obligations (Note
5)...................................................... 48 19 19
------- ------- -------
Total current liabilities.......................... 11,627 16,197 20,936
------- ------- -------
Note payable to shareholder, net of current maturities (Note
2)........................................................ 2,625 0 0
------- ------- -------
Capital lease obligations, net of current maturities (Note
5)........................................................ 19 0 0
------- ------- -------
Commitments and contingencies (Note 5)
Shareholders' equity:
Preferred stock:
Melita International Corporation, no par value;
20,000,000 shares authorized, no shares issued and
outstanding in 1995, 1996 and 1996 pro forma.......... 0 0 0
Common stock:
Melita International Corporation, no par value;
100,000,000 shares authorized, 8,000,000 shares issued
and outstanding in 1995 and 1996, and 11,143,395
shares issued and outstanding 1996 pro forma.......... 2 2 69
Melita Europe Limited, L1 par value; 50,000 shares
authorized, 31,328 shares issued and outstanding in
1995 and 1996, no shares issued and outstanding pro
forma................................................. 46 46 0
Inventions, Inc., $5 par value; 100 shares authorized,
100 shares issued and outstanding in 1995 and 1996, no
shares issued and outstanding pro forma............... 1 1 0
Additional paid-in capital................................ 20 20 0
Cumulative foreign currency translation adjustment........ 5 35 35
Retained earnings (deficit)............................... 6,583 10,768 (2,759)
------- ------- -------
Total shareholders' equity (deficit)............... 6,657 10,872 (2,655)
------- ------- -------
$20,928 $27,069 $18,281
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
F-4
<PAGE> 62
MELITA INTERNATIONAL CORPORATION,
MELITA EUROPE LIMITED AND INVENTIONS, INC.
COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
Net revenues:
Product................................................... $18,186 $24,620 $32,077
Service................................................... 8,970 10,662 15,463
------- ------- -------
Total revenues.................................... 27,156 35,282 47,540
------- ------- -------
Cost of revenues:
Product................................................... 6,310 8,730 11,494
Service................................................... 3,254 5,282 6,863
------- ------- -------
Total cost of revenues............................ 9,564 14,012 18,357
------- ------- -------
Gross margin................................................ 17,592 21,270 29,183
------- ------- -------
Operating expenses:
Research and development.................................. 3,660 4,050 5,070
Selling, general, and administrative...................... 11,332 12,559 16,765
------- ------- -------
Total operating expenses.......................... 14,992 16,609 21,835
------- ------- -------
Income from operations...................................... 2,600 4,661 7,348
Other income (expense), net................................. 46 88 261
------- ------- -------
Income before income taxes.................................. 2,646 4,749 7,609
Income tax benefit.......................................... 26 0 0
------- ------- -------
Net income before pro forma income taxes.................... 2,672 4,749 7,609
Pro forma income taxes...................................... 1,164 1,794 2,827
------- ------- -------
Pro forma net income........................................ $ 1,508 $ 2,955 $ 4,782
======= ======= =======
Pro forma net income per common and common equivalent
share..................................................... $ 0.42
=======
Pro forma weighted average common and common equivalent
shares outstanding........................................ 11,395
=======
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-5
<PAGE> 63
MELITA INTERNATIONAL CORPORATION,
MELITA EUROPE LIMITED AND INVENTIONS, INC.
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------------------------------
MELITA CUMULATIVE
INTERNATIONAL MELITA EUROPE FOREIGN
PREFERRED STOCK CORPORATION LIMITED INVENTIONS, INC. ADDITIONAL CURRENCY
--------------- ------------------ --------------- ----------------- PAID-IN TRANSLATION
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL ADJUSTMENT
------ ------ --------- ------ ------ ------ ------- ------- ---------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1993.................. 0 $0 8,000,000 $2 31,328 $46 100 $1 $20 $ 8
Net income before pro
forma income
taxes............... 0 0 0 0 0 0 0 0 0 0
Distributions to
shareholders........ 0 0 0 0 0 0 0 0 0 0
Foreign currency
translation
adjustment.......... 0 0 0 0 0 0 0 0 0 (3)
-- -- --------- -- ------ --- --- -- --- ---
Balance, December 31,
1994.................. 0 0 8,000,000 2 31,328 46 100 1 20 5
Net income before pro
forma income
taxes............... 0 0 0 0 0 0 0 0 0 0
Distributions to
shareholders........ 0 0 0 0 0 0 0 0 0 0
Foreign currency
translation
adjustment.......... 0 0 0 0 0 0 0 0 0 0
-- -- --------- -- ------ --- --- -- --- ---
Balance, December 31,
1995.................. 0 0 8,000,000 2 31,328 46 100 1 20 5
Net income before pro
forma income
taxes............... 0 0 0 0 0 0 0 0 0 0
Distributions to
shareholders........ 0 0 0 0 0 0 0 0 0 0
Foreign currency
translation
adjustment.......... 0 0 0 0 0 0 0 0 0 30
-- -- --------- -- ------ --- --- -- --- ---
Balance, December 31,
1996.................. 0 $0 8,000,000 $2 31,328 $46 100 $1 $20 $35
== == ========= == ====== === === == === ===
<CAPTION>
RETAINED
EARNINGS TOTAL
--------- -------
<S> <C> <C>
Balance, December 31,
1993.................. $ 7,282 $ 7,359
Net income before pro
forma income
taxes............... 2,672 2,672
Distributions to
shareholders........ (2,924) (2,924)
Foreign currency
translation
adjustment.......... 0 (3)
------- -------
Balance, December 31,
1994.................. 7,030 7,104
Net income before pro
forma income
taxes............... 4,749 4,749
Distributions to
shareholders........ (5,196) (5,196)
Foreign currency
translation
adjustment.......... 0 0
------- -------
Balance, December 31,
1995.................. 6,583 6,657
Net income before pro
forma income
taxes............... 7,609 7,609
Distributions to
shareholders........ (3,424) (3,424)
Foreign currency
translation
adjustment.......... 0 30
------- -------
Balance, December 31,
1996.................. $10,768 $10,872
======= =======
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-6
<PAGE> 64
MELITA INTERNATIONAL CORPORATION,
MELITA EUROPE LIMITED AND INVENTIONS, INC.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Pro forma net income...................................... $ 1,508 $ 2,955 $ 4,782
------- ------- -------
Adjustments to reconcile pro forma net income to net cash
provided by operating activities:
Pro forma income taxes................................. 1,164 1,794 2,827
Depreciation and amortization.......................... 768 997 1,141
(Gain) loss on sale of property and equipment.......... 0 (51) 6
Changes in assets and liabilities:
Accounts receivable.................................. 130 (1,095) (2,657)
Inventories.......................................... (355) (990) 585
Prepaid expenses and other assets.................... (405) 165 172
Accounts payable..................................... 154 1,595 (334)
Accrued liabilities.................................. 178 161 794
Deferred revenue..................................... 996 607 472
Customer deposits.................................... 975 1,416 1,417
Other, net........................................... (51) (18) 63
------- ------- -------
Total adjustments................................. 3,554 4,581 4,486
------- ------- -------
Net cash provided by operating activities......... 5,062 7,536 9,268
------- ------- -------
Cash flows from investing activities:
Purchases of property and equipment....................... (783) (1,879) (1,531)
Proceeds from sale of property and equipment.............. 0 132 0
------- ------- -------
Net cash used in investing activities............. (783) (1,747) (1,531)
------- ------- -------
Cash flows from financing activities:
Repayment of capital lease obligations.................... (65) (40) (48)
Repayment of note payable to shareholder.................. 0 0 (375)
Distributions to shareholders............................. (2,924) (5,196) (3,424)
------- ------- -------
Net cash used in financing activities............. (2,989) (5,236) (3,847)
------- ------- -------
Net change in cash and cash equivalents..................... 1,290 553 3,890
Cash and cash equivalents, beginning of year................ 4,116 5,406 5,959
------- ------- -------
Cash and cash equivalents, end of year...................... $ 5,406 $ 5,959 $ 9,849
======= ======= =======
Cash paid for interest during the year...................... $ 265 $ 302 $ 279
======= ======= =======
Income taxes paid........................................... $ 0 $ 29 $ 0
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-7
<PAGE> 65
MELITA INTERNATIONAL CORPORATION,
MELITA EUROPE LIMITED AND INVENTIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Melita International Corporation ("Melita"), Melita Europe Limited ("Melita
Europe"), and Inventions, Inc. ("Inventions") (collectively, the "Company") are
effectively owned and controlled by related individuals. The Company is a
provider of integrated call management systems that enable customers to operate
efficient call centers. The Company's principal product, PhoneFrame CS, is an
integrated system comprised of both hardware and software. Melita offers
periodic ongoing maintenance support of its products. The Company also offers
fee-based installation, training and consulting services. The Company markets
its products worldwide through direct sales forces and through distributors in
Europe, Latin America and Asia (Note 7).
The Company is planning an initial public offering (the "Offering") of its
common stock. In connection with the planned Offering, the Company will convert
from an S corporation to a C corporation and Melita Europe and Inventions will
be combined into Melita (Note 8).
BASIS OF COMBINATION
The policy of the Company is to present combined financial statements
including the accounts of Melita, Melita Europe and Inventions, since all are
under common control. All significant intercompany accounts and transactions
have been eliminated in combination.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash or cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Cost includes raw materials, labor and overhead. Market is defined as
replacement cost for work in progress and purchased parts and net realizable
value for finished goods.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and are depreciated primarily
using an accelerated depreciation method over the following estimated useful
lives:
<TABLE>
<S> <C>
Furniture and fixtures Five to seven years
Equipment Three to five years
Leasehold improvements Remaining life of lease
</TABLE>
INCOME TAXES
Melita and Inventions are organized as S corporations under the Internal
Revenue Code and, therefore, are not subject to federal income taxes. The income
or loss of Melita and Inventions is included in the shareholders' individual
federal and state tax returns, and as such, no provision for income taxes is
recorded in the accompanying combined statements of operations. The Company has
historically made distributions to cover the shareholders' anticipated tax
liability.
The accompanying combined financial statements reflect a provision for
income taxes on a pro forma basis as if the Company were liable for federal and
state income taxes as a taxable corporate entity throughout
F-8
<PAGE> 66
MELITA INTERNATIONAL CORPORATION,
MELITA EUROPE LIMITED AND INVENTIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
the years presented. The pro forma income tax provision has been computed by
applying the Company's anticipated statutory tax rate to pretax income, adjusted
for permanent tax differences (Note 3).
FOREIGN CURRENCY TRANSLATION
The financial statements of Melita Europe are translated into U.S. dollars
in accordance with Statement of Financial Accounting Standards ("SFAS") No. 52,
"Foreign Currency Translation." Net assets of Melita Europe are translated at
the current rates of exchange. Income and expense items are translated at the
average exchange rate for the year. The resulting translation adjustments are
recorded in shareholders' equity. The Company has recognized foreign exchange
gains (losses) of approximately $31,000, $(2,000) and $162,000 in 1994, 1995 and
1996, respectively.
REVENUE RECOGNITION
The Company generates product revenues primarily from its principal
product, PhoneFrame CS, an integrated system comprised of both hardware and
software. The Company's service revenues are generated from maintenance
contracts which include support, parts and labor and software update rights.
Service revenues also include fee-based installation, training and consulting
services.
The Company recognizes product revenues upon shipment of the product and
when the Company has no significant obligations yet to be satisfied. The
Company's sales contracts provide for certain payment terms normally based upon
signing the contract, customer receipt of the product, and commencement of
operation of the customer's system.
Revenues from maintenance contracts are recognized ratably over the term of
the contractual support period which ranges up to 5 years. If maintenance is
included in the original integrated product contract, such amounts are unbundled
from the license fee based on the value established by independent sale of such
maintenance to customers. Consulting revenues are primarily related to
implementation services performed under separate service arrangements related to
the installation of the Company's hardware and software products. Revenues from
consulting, installation and training services are recognized as the services
are performed.
Deferred revenues primarily relate to products that have not yet been
delivered and maintenance services which have been paid by the customers prior
to the performance of those services. Deferred revenue amounted to $2,593,000
and $3,065,000 at December 31, 1995 and 1996, respectively.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
Research and development expenditures are charged to expense as incurred.
The system software delivers the functionality and controls the hardware
components. Computer software development costs of the system software products
are charged to research and development expense until technological feasibility
is established, after which remaining software production costs are capitalized
in accordance with SFAS No. 86, "Accounting for Costs of Computer Software to be
Sold, Leased, or Otherwise Marketed." The Company has defined technological
feasibility of its products as the point in time at which the Company has a
working model of the related product, which is when the product has achieved
"beta" status. Historically, the development costs incurred during the period
between the achievement of beta status by a product and the point at which the
product is available for general release to customers have not been material.
Accordingly, the Company has concluded that the amount of development costs
capitalizable under the provisions of SFAS No. 86 was not material to the
financial statements for the years ended December 31, 1994, 1995 and 1996.
Therefore, the Company has charged all software development costs to expense as
incurred for the years ended December 31, 1994, 1995 and 1996.
F-9
<PAGE> 67
MELITA INTERNATIONAL CORPORATION,
MELITA EUROPE LIMITED AND INVENTIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
WARRANTY COSTS
The Company generally warranties its products for 90 days and provides for
estimated warranty costs upon shipment of such products. Warranty costs have not
been and are not anticipated to be significant.
CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk with respect to accounts receivable are
limited due to the wide variety of customers and markets for which the Company's
services are provided as well as their dispersion across many different
geographic areas. As a result, as of December 31, 1995 and 1996, the Company did
not consider itself to have any significant concentrations of credit risk.
During 1996, the Company's five largest customers accounted for approximately
26.6% of the Company's total revenues. In 1995, the Company's five largest
customers accounted for approximately 25.0% of its total revenues. Although the
particular customers may change from period to period, the Company expects that
large sales to a limited number of customers will continue to account for a
significant percentage of its revenues in any particular period for the
foreseeable future.
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, the
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.
PRO FORMA NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Pro forma net income per common and common equivalent share is computed
using the weighted average number of shares of common stock and dilutive common
stock equivalent shares ("CSEs") from stock options using the treasury stock
method. Additionally, the weighted average common and common equivalent shares
outstanding reflect the shares issued as a result of the combination of Melita,
Melita Europe and Inventions and the effects of the stock recapitalization
discussed in Note 8 as if the events occurred at the beginning of the period.
Pursuant to the Securities and Exchange Commission Staff Accounting Bulletins,
common stock and CSEs issued at prices below the expected public offering price
during the 12-month period prior to filing of the registration statement in
connection with the Company's planned Offering have been included in the
calculation as if they were outstanding for all periods presented prior to the
Offering, regardless of whether they are dilutive.
Historical net income per share has not been presented in view of the S
corporation status in prior periods and the anticipated change in capital
structure upon closing of the planned Offering.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The book values of accounts receivable, accounts payable and other
financial instruments approximate their fair values principally because of the
short-term maturities of these instruments. The fair value of the Company's
long-term debt is estimated based on the current rates offered to the Company
for debt of similar terms and maturities. Under this method, the Company's fair
value of long-term debt was not significantly different than the stated value at
December 31, 1995 and 1996.
F-10
<PAGE> 68
MELITA INTERNATIONAL CORPORATION,
MELITA EUROPE LIMITED AND INVENTIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
ACCRUED LIABILITIES
Accrued liabilities include the following as of December 31, 1995 and 1996
(in thousands):
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Accrued salaries and wages.................................. $1,666 $2,437
Other current liabilities................................... 1,193 807
Accrued royalties........................................... 293 689
Accrued rent................................................ 264 277
------ ------
Total accrued liabilities......................... $3,416 $4,210
====== ======
</TABLE>
NEW ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." The Company's adoption of SFAS No. 121 in the first
quarter of 1996 did not have a significant impact on the Company's combined
financial statements.
The American Institute of Certified Public Accountants has issued an
exposure draft to amend the provisions of Statement of Position 91-1, "Software
Revenue Recognition." The adoption of the standards in the current version of
the exposure draft would not be expected to have a significant impact on the
Company's combined financial statements.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial
statements to conform to the current year presentation.
2. NOTE PAYABLE TO SHAREHOLDER
Note payable to shareholder is as follows as of December 31, 1995 and 1996
(in thousands):
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Note payable to shareholder; due in equal quarterly
installments of $187,500 beginning July 1, 1996, interest
payable monthly at the prime rate plus 1% (9.25% at
December 31, 1996)........................................ $3,000 $2,625
Less current maturities..................................... 375 2,625
------ ------
Note payable to shareholder, net of current maturities...... $2,625 $ 0
====== ======
</TABLE>
Interest paid to shareholder was $251,000, $294,000 and $271,000 for the
years ended December 31, 1994, 1995 and 1996, respectively.
The note payable to shareholder contains an acceleration provision at the
option of the shareholder upon certain changes in capital structure, as defined.
As a result of the stock recapitalization discussed in Note 9, that right became
exercisable. The note has therefore been classified as current at December 31,
1996 as a result of the acceleration option.
3. INCOME TAXES
In connection with the planned Offering, the Company will convert from an S
corporation to a C corporation and, accordingly, will be subject to future
federal and state income taxes. Upon conversion to
F-11
<PAGE> 69
MELITA INTERNATIONAL CORPORATION,
MELITA EUROPE LIMITED AND INVENTIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
C corporation status, the Company will record deferred taxes for which it will
be responsible following termination of S corporation status. The assets below
will be reflected on the balance sheet of the Company with a corresponding
non-recurring income amount in the statement of operations at the completion of
the Offering. The components of the pro forma total deferred tax assets as of
December 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
Deferred tax assets:
Deferred revenue.......................................... $ 321
Other accrued liabilities................................. 198
Allowance for doubtful accounts........................... 171
Accrued commissions....................................... 115
Accrued rent.............................................. 105
Depreciation.............................................. 95
Inventory................................................. 56
------
Total deferred tax assets......................... $1,061
======
</TABLE>
The following summarizes the components of the pro forma income tax
provision for the years ended December 31, 1994, 1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Current domestic taxes:
Federal................................................ $ 664 $1,572 $2,775
State.................................................. 78 185 326
Foreign taxes............................................ (9) 2 (75)
Deferred taxes........................................... 431 35 (199)
------ ------ ------
$1,164 $1,794 $2,827
====== ====== ======
</TABLE>
A reconciliation from the federal statutory rate to the pro forma tax
provision for the years ended December 31, 1994, 1995 and 1996 is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory federal tax rate................................. 34.0% 34.0% 34.0%
State income taxes, net of federal tax benefit............. 4.0 4.0 4.0
Foreign operations......................................... 4.0 (0.9) (1.3)
Other...................................................... 1.6 0.7 0.5
---- ---- ----
43.6% 37.8% 37.2%
==== ==== ====
</TABLE>
The Company's effective tax rate is affected by the income or loss at
Melita Europe. Melita Europe incurred a loss in fiscal 1994 and had income in
1995 and 1996. This effect is included above as foreign operations. The
Company's net operating loss carryforwards are immaterial at December 31, 1996.
4. BENEFIT PLAN
Melita has a profit-sharing plan (the "Plan") for substantially all Melita
employees meeting the eligibility requirements as defined in the plan agreement.
The Plan provides for annual contributions by Melita at the discretion of the
board of directors. The Plan also contains a 401(k) feature which allows
participants to contribute up to 15% of their eligible compensation, as defined,
and provides for discretionary employer matching contributions. Total
contributions by Melita to the Plan were $92,000, $90,000 and $119,000 for
fiscal 1994, 1995 and 1996, respectively.
F-12
<PAGE> 70
MELITA INTERNATIONAL CORPORATION,
MELITA EUROPE LIMITED AND INVENTIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
5. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
At December 31, 1996, the present value of future minimum capital lease
payments and future minimum operating lease payments (including leases with
related parties) under noncancelable operating leases were as follows (in
thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1997........................................................ $19 $ 659
1998........................................................ 0 628
1999........................................................ 0 624
2000........................................................ 0 581
2001........................................................ 0 589
Thereafter.................................................. 0 2,369
--- ------
Total future minimum lease payments............... 19 $5,450
======
Less amounts representing interest.......................... 0
---
Present value of future minimum lease payments.............. $19
===
</TABLE>
The Company's capital and operating leases are primarily for equipment and
rental of facilities. Total rental expense for operating leases was $840,000,
$728,000 and $751,000 in fiscal 1994, 1995 and 1996, respectively.
In August 1994, the Company entered into a lease agreement with an
unrelated party to lease land and buildings commencing April 1995. The agreement
provides for annual rentals of approximately $542,000 to $636,000 per year over
a ten-year term. In November 1995, the Company's majority shareholder purchased
the land and buildings and now rents them to the Company under the terms of the
original lease. Rent expense paid to the shareholder was $60,000 and $543,000 in
fiscal 1995 and 1996, respectively.
LEGAL PROCEEDINGS
Many of the Company's installations involve products that are critical to
the operations of its clients' businesses. Any failure in a Company product
could result in a claim for substantial damages against the Company, regardless
of the Company's responsibility for such failure. Although the Company attempts
to limit contractually its liability for damages arising from product failures
or negligent acts or omissions, there can be no assurance the limitations of
liability set forth in its contracts will be enforceable in all instances.
One of the Company's customers has filed suit in the Circuit Court for Knox
County, Tennessee asserting, among other things, that the Company misrepresented
the functionality of its products and breached its contract with the customer
for delivery of its products and claiming not less than $2.0 million in damages.
The Company intends to vigorously defend this action and, based upon information
currently available, believes that the action will not have a material impact on
the Company. However, because the proceedings are at a preliminary stage and
discovery has not yet begun, the Company cannot predict the ultimate outcome of
this suit and there can be no assurance that the Company will be successful in
the proceedings. In management's opinion, the ultimate resolution of this matter
will not have a material adverse effect on the Company's combined financial
position, liquidity or results of operations.
The Company is subject to other legal proceedings and claims which have
arisen in the ordinary course of business. In the opinion of management, the
amount of potential liability with respect to these actions will not materially
affect the financial position or results of operations of the Company.
F-13
<PAGE> 71
MELITA INTERNATIONAL CORPORATION,
MELITA EUROPE LIMITED AND INVENTIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
RELATED-PARTY TRANSACTIONS
During 1994, the Company incurred and paid $325,000 in research and
development fees to a related party (through family relationship). The Company
did not incur these fees in 1995 or 1996.
6. STOCK OPTION PLANS
During 1992, the Company approved a stock option plan for key employees for
which 640,000 shares of common stock were authorized for use in the plan. During
1995, the number of authorized shares was increased to 1,000,000 shares of
common stock. Options under the plan are granted at estimated fair market value
as determined by the board of directors and are exercisable 14 months after an
initial public offering or ratably over a three-year period beginning seven
years from the plan initiation date, but in no case can the exercise period
continue beyond 10 years. Options granted vest ratably over a four- or five-year
employment period. The Company reserves the right to purchase vested options at
the then-estimated fair market value, less the applicable exercise price prior
to the date of an initial public offering. During 1994, 1995 and 1996, the
Company purchased 22,311, 44,294 and 30,250, respectively, vested but
unexercisable options held by terminated employees for $3,570, $2,658 and
$39,774, respectively. Cash paid to repurchase options is expensed as incurred.
Activity for the stock option plan is as follows:
<TABLE>
<CAPTION>
OPTION
OPTIONS PRICE
-------- -----------
<S> <C> <C>
Options outstanding at December 31, 1993.................... 303,848 $2.75-$2.96
Granted................................................... 36,375 2.91
Exercised................................................. 0
Forfeited/repurchased..................................... (58,098) 2.75- 2.96
--------
Outstanding at December 31, 1994............................ 282,125 2.75- 2.96
Granted................................................... 740,525 2.81- 3.00
Exercised................................................. 0
Forfeited/repurchased..................................... (161,200) 2.81
--------
Outstanding at December 31, 1995............................ 861,450 2.75- 3.00
Granted................................................... 133,785 4.07
Exercised................................................. 0
Forfeited/repurchased..................................... (57,463) 2.75- 4.07
--------
Outstanding at December 31, 1996............................ 937,772 2.75- 4.07
========
Exercisable at December 31, 1996............................ 0
========
</TABLE>
At December 31, 1996, options to purchase 62,228 shares were available for
future grant and no shares were exercisable due to the stock option plan
provision for the exercise date noted above. On February 6, 1997, the Company
granted options to purchase an aggregate of 43,325 shares of common stock at
$5.50 per share under the 1992 stock option plan.
During 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation" which defines a fair value-based
method of accounting for an employee stock option plan or similar equity
instrument. However, it also allows an entity to continue to measure
compensation cost for those plans using the method of accounting prescribed by
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees." Entities electing to remain with the accounting in APB
F-14
<PAGE> 72
MELITA INTERNATIONAL CORPORATION,
MELITA EUROPE LIMITED AND INVENTIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
No. 25 must make pro forma disclosures of net income and, if presented, earnings
per share, as if the fair value-based method of accounting defined in the
statement had been applied.
The Company has elected to account for its stock-based compensation plan
under APB No. 25; however, the Company has computed for pro forma disclosure
purposes the value of all options granted during 1995 and 1996 using the
Black-Scholes option pricing model as prescribed by SFAS No. 123 using the
following weighted average assumptions used for grants in 1995 and 1996:
<TABLE>
<S> <C>
Risk-free interest rate..................................... 5.4%-7.8%
Expected dividend yield..................................... 0
Expected lives.............................................. 4-5 years
Expected volatility......................................... 65%
</TABLE>
The total value of the options granted during the years ended December 31,
1995 and 1996 were computed as approximately $996,000 and $264,000,
respectively, which would be amortized over the vesting period of the options.
If the Company had accounted for these plans in accordance with SFAS No. 123,
the Company's reported pro forma net income and pro forma net income per share
for the years ended December 31, 1995 and 1996 would have decreased to the
following pro forma amounts (in thousands):
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Pro forma net income:
As reported in the financial statements................... $2,955 $4,782
Pro forma in accordance with SFAS No. 123................. 2,867 4,581
Pro forma net income per common and common equivalent share
As reported in the financial statements................... -- .42
Pro forma in accordance with SFAS No. 123................. -- .40
</TABLE>
1997 STOCK OPTION PLAN
On February 6, 1997, the Company approved the 1997 Stock Option Plan (the
"1997 Plan") for which 1,350,000 shares of common stock were authorized for
issuance less any options issued under the 1992 stock option plan. Options under
the 1997 Plan are granted at the estimated fair market value and are exercisable
based on the specific terms of the stock option grant, but in no case can extend
beyond ten years past the date of grant. The options vest primarily over a
four-year period subject to acceleration upon the achievement of certain
performance measures. On February 6, 1997, the Company issued options to
purchase an aggregate of 125,000 shares of common stock at $5.50 per share under
the 1997 Plan. As of February 28, 1997, 20,000 options were exercisable under
the 1997 Plan.
7. SEGMENT AND GEOGRAPHIC INFORMATION
The Company is a multinational corporation with operations in the United
States and the United Kingdom.
F-15
<PAGE> 73
MELITA INTERNATIONAL CORPORATION,
MELITA EUROPE LIMITED AND INVENTIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following represents total revenues, net income and total assets of the
following countries representing over 10% of the combined totals for the years
ended or as of December 31, 1994, 1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
United States:
Total revenues............................................ $21,483 $27,356 $37,568
Net income................................................ 3,093 4,624 7,157
Total assets.............................................. 16,704 19,305 23,799
United Kingdom:
Total revenues............................................ $ 1,309 $ 3,252 $ 4,292
Net (loss) income......................................... (421) 125 452
Total assets.............................................. 931 1,623 3,270
Other:
Total revenues............................................ $ 4,364 $ 4,674 $ 5,680
</TABLE>
8. SUBSEQUENT EVENTS
INITIAL PUBLIC OFFERING
In the second quarter of 1997, the Company is planning an initial public
offering of its common stock. There can be no assurance that the Offering will
be completed. Prior to the Offering, the Company will pay a cash distribution to
shareholders equal to the amount of undistributed S corporation earnings for
both Melita and Inventions from September 1, 1988 through the date of the
Offering.
COMBINATION
Concurrent with the Offering, the shareholders of Melita Europe and
Inventions will contribute their respective shares in exchange for 3,143,395
shares of Melita. The combination will be treated similar to a pooling of
interest and no step-up in basis will be recorded as the entities involved are
under common control.
UNAUDITED PRO FORMA INFORMATION
The accompanying unaudited pro forma combined balance sheet as of December
31, 1996 is based on the Company's historical balance sheet as of December 31,
1996, as adjusted to reflect (i) the combination of Melita, Melita Europe and
Inventions through the issuance of 3,143,395 shares of Melita's no par value
common stock (post recapitalization and reverse stock split), (ii) the effects
on historical retained earnings of a planned cash distribution to shareholders
of the undistributed S corporation earnings at December 31, 1996 and accrued
interest thereon discussed below, (iii) the payment of the note payable to
shareholder of $2,625,000 and (iv) the recording of current deferred tax assets
of approximately $1,061,000 as a result of the change in corporate filing status
upon the consummation of the offering discussed in Note 3. The pro forma
information does not give effect to the proceeds to the Company of the Offering.
Using a portion of the proceeds of the Offering and other funds, the
Company intends to distribute to the pre-offering shareholders all undistributed
S corporation earnings from September 1, 1988 to the effective date of the
Offering. At December 31, 1996, the undistributed S corporation earnings of the
Company were estimated to be approximately $14,400,000. Subsequent to year end,
the Company distributed these amounts to the principal shareholders in the form
of approximately $1,500,000 in cash and two notes having an aggregate principal
amount of approximately $12,900,000. The notes carry an interest rate equal to
the applicable federal rate under the Internal Revenue Code, (approximately 7%
at February 7, 1997). The principal amount of the notes, together with the
accrued interest on the notes through the effective date of the
F-16
<PAGE> 74
MELITA INTERNATIONAL CORPORATION,
MELITA EUROPE LIMITED AND INVENTIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Offering (estimated to be approximately $200,000), will be repaid using a
portion of the proceeds of the Offering. The Company expects to accumulate
additional earnings from January 1, 1997 to the effective date of the Offering
which will also be distributed to the pre-offering shareholders.
9. STOCK RECAPITALIZATION
On February 7, 1997, the Company and Inventions recapitalized their
authorized, issued, and outstanding common stock by declaring a stock dividend
of 99 shares of nonvoting common stock with respect to each outstanding share of
voting common stock. In connection with the stock dividend, the Company amended
its articles of incorporation to increase its authorized capital stock to
2,000,000,000 shares, consisting of 20,000,000 shares of voting common stock and
1,980,000,000 shares of nonvoting common stock and Inventions amended its
articles of incorporation to increase its authorized capital stock to 10,000
shares, consisting of 100 shares of voting common stock and 9,900 shares of
nonvoting common stock. Concurrently with the effective date of the Offering,
the Company will effect a 100 to 1 reverse stock split to return the number of
authorized, issued, and outstanding shares to the original number of shares.
Accordingly, the financial statements reflect the capitalization of the Company
as if the stock dividend and the reverse stock split occurred at the beginning
of each period presented.
Additionally, upon completion of this Offering, the Company's authorized
capital stock will consist of 100,000,000 shares of common stock, no par value
per share, and 20,000,000 shares of preferred stock, no par value per share.
F-17
<PAGE> 75
======================================================
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations in connection with this
offering other than those contained in this Prospectus, and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company or the Underwriters. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any
securities other than the shares of Common Stock to which it relates or an offer
to, or a solicitation of, any person in any jurisdiction in which such an offer
or solicitation would be unlawful. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company or that the
information contained herein is correct as of any time subsequent to the date
hereof.
----------------------------
TABLE OF CONTENTS
----------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Termination of S Corporation Status
and Related Distributions........... 14
Use of Proceeds....................... 15
Dividend Policy....................... 15
Capitalization........................ 16
Dilution.............................. 17
Selected Combined Financial Data...... 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
Business.............................. 26
Management............................ 38
Principal Shareholders................ 45
Certain Transactions.................. 46
Description of Capital Stock.......... 48
Shares Eligible for Future Sale....... 52
Underwriting.......................... 53
Legal Matters......................... 54
Experts............................... 54
Additional Information................ 54
Index to Combined Financial
Statements.......................... F-1
</TABLE>
----------------------------
Until , 1997 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.
======================================================
======================================================
3,500,000 SHARES
MELITA(R) INTERNATIONAL LOGO
COMMON STOCK
------------------------
PROSPECTUS
------------------------
MONTGOMERY SECURITIES
, 1997
======================================================
<PAGE> 76
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $10,606
National Association of Securities Dealers, Inc. fee........ 4,000
Nasdaq National Market listing fee.......................... *
Accountants' fees and expenses.............................. *
Legal fees and expenses..................................... *
Blue Sky fees and expenses.................................. *
Transfer Agent's fees and expenses.......................... *
Printing and engraving expenses............................. *
Miscellaneous............................................... *
-------
Total Expenses.................................... *
=======
</TABLE>
- ---------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Amended and Restated Bylaws provide that the Company shall
indemnify each of its officers, directors, employees and agents to the extent
that he or she is or was a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that such person
is or was a director, officer, employee or agent of the Company, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement in connection with such action, suit or proceeding; provided,
however, that no indemnification shall be made for (i) any appropriation, in
violation of his duties, of any business opportunity of the Company, (ii) acts
or omissions which involve intentional misconduct or a knowing violation of law,
(iii) any liability under Section 14-2-832 of the GBCC, which relates to
unlawful payments of dividends and unlawful stock repurchases and redemptions,
or (iv) any transaction from which he or she derived an improper personal
benefit.
Section 8 of the Underwriting Agreement filed as Exhibit 1.1 hereto also
contains certain provisions pursuant to which certain officers, directors and
controlling persons of the Company may be entitled to be indemnified by the
Underwriters named therein.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the Registrant has issued the securities set
forth below which were not registered under the Securities Act.
In connection with the Company's acquisition of all of the outstanding
shares of Melita Europe and Inventions by share exchange, upon the effective
date of this offering the Company will issue a total of 3,143,395 shares of its
Common Stock to the former shareholders of Melita Europe and Inventions.
The Registrant has issued stock options for an aggregate of 1,659,485
shares of its Common Stock under the 1992 Stock Option Plan and the 1997 Stock
Option Plan. Options for an aggregate of 1,106,097 shares are currently
outstanding at a weighted average exercise price of $3.42 per share.
No underwriters were engaged in connection with any of the foregoing
issuances of securities. The sale and issuance of shares listed above were
exempt from registration under the Securities Act by virtue of Sections 3(a),
3(b) and 4(a) of the Securities Act and in reliance on Rule 701 and Regulation D
promulgated thereunder.
II-1
<PAGE> 77
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. The following is a list of exhibits filed as part of the
Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S> <C>
1.1* -- Form of Underwriting Agreement.
2.1* -- Share Exchange Agreement by and between the Registrant and
the shareholders of Melita Europe Limited.
2.2* -- Share Exchange Agreement by and between the Registrant and
the shareholders of Inventions, Inc.
3.1 -- Restated Articles of Incorporation of the Registrant dated
June 4, 1992, as amended February 7, 1997.
3.2 -- Bylaws of the Registrant.
3.3 -- Form of Amended and Restated Articles of Incorporation of
the Registrant, to be effective upon the effectiveness of
this offering.
3.4 -- Form of Amended and Restated Bylaws of the Registrant, to be
effective upon the effectiveness of this offering.
4.1 -- See Exhibits 3.3 and 3.4 for provisions of the Amended and
Restated Articles of Incorporation and Amended and Restated
Bylaws of the Registrant defining rights of the holders of
Common Stock of the Registrant.
4.2 -- Specimen Stock Certificate.
5.1* -- Opinion of Morris, Manning & Martin, L.L.P., Counsel to the
Registrant, as to the legality of the shares being
registered.
10.1 -- Lease Agreement between the Registrant and 5051 Peachtree
Corners Circle, L.L.C.
10.2 -- 1992 Stock Option Plan effective June 4, 1992, as amended
March 1, 1997.
10.3 -- 1997 Stock Option Plan effective February 6, 1997.
10.4 -- Employee Stock Purchase Plan adopted March 1, 1997.
10.5 -- 401(k) Profit Sharing Plan as amended effective January 1,
1993.
10.6 -- Employment Agreement between the Registrant and Aleksander
Szlam dated March 5, 1997.
10.7 -- Employment Agreement between the Registrant and J. Neil
Smith dated March 5, 1997.
10.8 -- Form of Tax Indemnification Agreement between the Registrant
and certain shareholders of the Registrant.
10.9 -- Form of Tax Indemnification Agreement between Inventions,
Inc. and certain shareholders of Inventions, Inc.
10.10 -- $3,000,000 Note of the Registrant in favor of Aleksander
Szlam dated June 19, 1992.
11.1 -- Statement re: Computation of Per Share Earnings.
21.1 -- List of Subsidiaries.
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of BDO Stoy Hayward.
23.3* -- Consent of Morris, Manning & Martin, L.L.P. (included in
Exhibit 5.1).
24.1 -- Powers of Attorney (included on signature page).
27.1 -- Financial Data Schedule. (For SEC use only)
99.1 -- Report of Independent Public Accountants on Financial
Statement Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedules: Schedule II -- Valuation and Qualifying
Accounts.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
II-2
<PAGE> 78
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(c) The Registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.
(ii) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 79
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta, State of Georgia
on the 6th day of March, 1997.
Melita International Corporation
By: /s/ ALEKSANDER SZLAM
------------------------------------
Aleksander Szlam
Chairman of the Board and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Aleksander Szlam and J. Neil Smith, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and any subsequent registration
statements pursuant to Rule 462 under the Securities Act and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each of said attorney-in-fact
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ALEKSANDER SZLAM Chairman of the Board and Chief March 6, 1997
- ----------------------------------------------------- Executive Officer (Principal
Aleksander Szlam Executive Officer)
/s/ J. NEIL SMITH Director March 6, 1997
- -----------------------------------------------------
J. Neil Smith
/s/ MARK B. ADAMS Vice President -- Finance and March 6, 1997
- ----------------------------------------------------- Chief Financial Officer
Mark B. Adams (Principal Financial and
Accounting Officer)
</TABLE>
II-4
<PAGE> 80
SCHEDULE II
MELITA INTERNATIONAL CORPORATION
MELITA EUROPE LIMITED AND INVENTIONS, INC.
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
CHARGED
BALANCE AT TO COSTS BALANCE
BEGINNING AND AT END
CLASSIFICATION OF YEAR EXPENSES DEDUCTIONS(1) OF YEAR
-------------- ---------- -------- ------------- --------
<S> <C> <C> <C> <C>
1994
Allowance for doubtful accounts............. $200,000 $146,000 116,000 $230,000
Allowance for inventory obsolescence........ 40,000 40,000 64,000 16,000
1995
Allowance for doubtful accounts............. 230,000 117,000 16,000 331,000
Allowance for inventory obsolescence........ 16,000 130,000 -- 146,000
1996
Allowance for doubtful accounts............. 331,000 260,000 104,000 487,000
Allowance for inventory obsolescence........ 146,000 831,000 492,000 485,000
</TABLE>
- ---------------
(1) Represents amounts written off
<PAGE> 1
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION OF
MELITA INTERNATIONAL CORPORATION
I.
The name of the Corporation is Melita International Corporation.
II.
A. The total number of shares of capital stock that the
Corporation shall be authorized to issue is Twenty Million (20,000,000) shares
of no par value common stock ("Common Stock").
B. Each share of Common Stock shall be identical in all respects
and for all purposes and entitled to one vote per share in all proceedings in
which action may or is required to be taken by the stockholders of the
Corporation.
III.
The registered office of the Corporation shall be at Powell,
Goldstein, Frazer & Murphy, 191 Peachtree Street, N.E., 16th Floor, Atlanta,
Georgia 30303, in Fulton County. The registered agent of the Corporation at
such address shall be Scott Hobby.
IV.
The mailing address of the principal office of the principal office of
the Corporation is Melita International Corporation, Corporate Headquarters,
6630 Bay Circle Norcross, Georgia 30071.
V.
No director shall have any personal liability to the Corporation or to
its shareholders for monetary damages for breach of duty of care of other duty
as director, by reason of any act or omission occurring subsequent to the date
when this provision becomes effective, except that this provision shall not
eliminate or limit the liability of a director for (a) any appropriation, in
violation of his or her duties, of any business opportunity of the Corporation;
(b) acts or omissions
<PAGE> 2
which involve intentional misconduct or a knowing violation of law; (c)
liabilities of a director imposed by Section 14-2-832 of the Georgia Business
Corporation Code; or (d) any transaction from which the director derived an
improper personal benefit.
VI.
Any action required by law or by the Bylaws of the Corporation to be
taken at a meeting of the shareholders of the Corporation, and any action which
may be taken at a meeting of the shareholders, may be taken without a meeting
if a written consent, setting forth the action so taken, shall be signed by
persons entitled to vote at a meeting those shares having sufficient voting
power to cast not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote were present and voted. Notice of such action without a meeting by less
than unanimous written consent shall be given within ten (1) [sic] days of the
taking of such action to those shareholders of record on the date when the
written consent if first executed and whose shares were not represented on the
written consent.
VII.
The incorporator of the Corporation was Aleksander Szlam, who was then
located at 1256 Woods Mill Drive Southeast, Marietta, Georgia 30067.
VIII.
These Restated Articles of Incorporation amend the original Articles
of Incorporation of the Corporation by superseding and replacing the original
Articles of Incorporation in their entirety. Each amendment to the original
Articles of Incorporation was duly approved by the Board of Directors of the
Corporation and by the shareholders of the Corporation in accordance with
Section 14-2-1003 of the Georgia Business Corporation Code.
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<PAGE> 3
IN WITNESS WHEREOF, Melita International Corporation has caused these
Restated Articles of Incorporation to be executed by its duly authorized
officer as of this 4th day of June, 1992.
MELITA INTERNATIONAL CORPORATION
BY: /S/ ALEKSANDER SZLAM
------------------------------
TITLE: CHIEF EXECUTIVE OFFICER
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<PAGE> 4
ARTICLES OF AMENDMENT
TO
RESTATED ARTICLES OF INCORPORATION
OF
MELITA INTERNATIONAL CORPORATION
Pursuant to section 14-2-1006 of the Georgia Business Corporation Code
(the "Code"), Melita International Corporation, a Georgia corporation, hereby
amends its Restated Articles of Incorporation as follows:
Article II is hereby amended to read in its entirety as follows:
Article II
A. The Corporation shall have two classes of stock: Voting
Common Stock ("Voting Stock") and Non-Voting Common Stock ("Non-Voting Stock").
B. The total number of shares of capital stock that the
Corporation is authorized to issue is Two Billion (2,000,000,000) shares, which
shall consist of Twenty Million (20,000,000) shares of Voting Stock, no par
value per share, and One Billion Nine Hundred Eighty Million (1,980,000,000)
shares of Non-Voting Stock, no par value per share.
C. The designations and the powers, preferences, limitations and
relative rights of the voting stock and the non-voting stock (collectively
referred to as "common stock") are as follows:
1. Common Stock Classes Pari Passu.
Except as set forth in Section C.2. Below, the Voting Stock
and the Non-Voting Stock shall be equal in all respects and treated as a single
class of common, including without limitation participating equally in any
dividends, distributions in liquidation and other payments, and in any
subdivisions and combinations of securities.
<PAGE> 5
2. Voting rights.
(a) The holders of Voting Stock shall be entitled to vote
on each matter on which the shareholders of the Corporation shall be entitled
to vote, and each holder of Voting Stock shall be entitled to one vote for each
share of such stock held by such holder.
(b) The holders of Non-Voting Stock shall not have any
voting rights, except as otherwise required by applicable law, in which case
holders of Non-Voting Stock shall vote (at the rate of one vote per share of
Non-Voting stock held) as a single class on such matter unless otherwise
required by law.
IN WITNESS WHEREOF, the undersigned duly authorized officer of the
Corporation has executed these Articles of Amendment to Restated Articles of
Incorporation on the 7th day of February, 1997.
/s/ Aleksander Szlam
---------------------------------------
Aleksander Szlam,
Chairman of the Board and
Chief Executive Officer
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<PAGE> 1
EXHIBIT 3.2
BY LAWS
OF
MELITA INTERNATIONAL CORPORATION
ARTICLE I
OFFICES
The corporation shall at all times maintain a registered office in the
State of Georgia and a registered agent at that address but may have other
offices located within or outside the State of Georgia as the Board of
Directors may determine.
ARTICLE II
SHAREHOLDERS' MEETINGS
2.1 Annual Meeting. A meeting of shareholders of the Corporation
shall be held annually, within five (5) months of the end of each fiscal year
of the Corporation. The annual meeting shall be held at such time and place
and on such date as the Directors shall determine from time to time and as
shall be specified in the notice of the meeting.
2.2 Special Meetings. Special meetings of the shareholders may be
called at any time by the Chief Executive Officer or any holder or holders of
as much a twenty-five percent of the outstanding capital stock of the
corporation. Special meetings shall be held at such a time and place and on
such date as shall be specified in the notice of the meeting.
2.3 Place. Annual or special meetings of shareholders may be held
within or without the State of Georgia.
2.4 Notice. Notice of annual or special shareholders meetings
stating place, day and hour of the meeting shall be given in writing not less
than ten nor more than sixty days before the date of the meeting, either mailed
to the last known address or personally given to each shareholder. Notice of a
meeting may be waived by an instrument in writing executed before or after the
meeting. The waiver need not specify the purpose of the meeting or the
business transacted, unless one of the purposes of the meeting concerns a plan
of merger or consolidation, in which event the waiver shall comply with the
further requirements of law concerning such
<PAGE> 2
waivers. Attendance at such meeting in person or by proxy shall constitute a
waiver of notice thereof. Notice of any special meeting of shareholders shall
state the purpose or purposes for which the meeting is called. The notice of
any meeting at which amendments to or restatements of the articles of
incorporation, merger or consolidation of the corporation, or the disposition
of corporate assets requiring shareholder approval are to be considered shall
state such purpose, and further comply with all requirements of law.
2.5 Quorum. At all meetings of shareholders a majority of the
outstanding shares of stock shall constitute a quorum for the transaction of
business, and no resolution or business shall be transacted without the
favorable vote of the holders of a majority of the shares represented at the
meeting and entitled to vote. A lesser number may adjourn from day to day, and
shall announce the time and place to which the meeting is adjourned.
2.6 Action in Lieu of Meeting. Any action to be taken at a
meeting of the shareholders of the corporation, or any action that may be taken
at a meeting of the shareholders, may be taken without a meeting if a consent
in writing setting forth the action so taken shall be signed by the holders of
all of the shares entitled to vote with respect to the subject matter thereof,
or by the holders of such lesser number of shares as may be required in
accordance with any lawful provision of the Articles of Incorporation, and any
further requirements of law pertaining to such consents have been complied
with.
ARTICLE III
DIRECTORS
3.1 Management. Subject to these Bylaws, or any lawful agreement
between the shareholders, the full and entire management of the affairs and
business of the corporation shall be vested in the Board of Directors, which
shall have and may exercise all of the powers that may be exercised or
performed by the corporation.
3.2 Number of Directors. The shareholders shall fix by
resolution the precise number of members of the Board of Directors, provided
that the Board of Directors shall consist of not
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<PAGE> 3
fewer than two (2) nor more than nine (9) members. Directors shall be elected
at each annual meeting of the shareholders and shall serve for a term of one
year and until their successors are elected. A majority of said Directors
shall constitute a quorum for the transaction of business. All resolutions
adopted and all business transacted by the Board of Directors shall require the
affirmative vote of a majority of the Directors present at the meeting.
3.3 Vacancies. The Directors may fill the place of any Director
which may become vacant prior to the expiration of his or her term, such
appointment by the Directors to continue until the expiration of the term of
the Director whose place has become vacant, or may fill any directorship
created by reason of an increase in the number of directors, such appointment
by the Directors to continue for a term of office until the next election of
directors by the shareholders and until the election of the successor.
3.4 Meetings. The Directors shall meet annually, without notice,
following the annual meeting of the shareholders. Special meetings of the
Directors may be called at any time by the Chief Executive Officer or by any
two Directors, on two days' written notice to each Director, which notice shall
specify the time and place of the meeting. Notice of any such meeting may be
waived by an instrument in writing executed before or after the meeting.
Directors may attend and participate in meetings either in person or by means
of conference telephones or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and participation
in a meeting by means of such communication equipment shall constitute presence
in person at any meeting. Attendance in person at such meeting shall
constitute a waiver of notice thereof.
3.5 Action in Lieu of Meeting. Any action to be taken at a
meeting of the Directors, or any action that may be taken at a meeting of the
Directors, may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the Directors and any
further requirements of law pertaining to such consents have been complied
with.
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<PAGE> 4
3.6 Removal. Any Director may be removed from office, with or
without cause, upon the majority vote of the shareholders, at a meeting with
respect to which notice of such purpose is given.
ARTICLE IV
OFFICERS
4.1 General Provisions. The officers of the corporation shall
consist of a Chief Executive Officer, a President, a Secretary and a Treasurer
who shall be elected by the Board of Directors, and such other officers as may
be elected by the Board of Directors or appointed as provided in these Bylaws.
Each officer shall be elected or appointed for a term of office running until
the meeting of the Board of Directors following the next annual meeting of the
shareholders of the corporation, or such other term as provided by resolution
of the Board of Directors or the appointment to office. Each officer shall
serve for the term of office for which he is elected or appointed and until his
or her successor has been elected or appointed and has qualified or his or her
earlier resignation, removal from office or death. Any two or more offices may
be held by the same person.
4.2 Chief Executive Officer. The Chief Executive Officer of the
corporation shall have general and active management of the operation of the
corporation. He or she shall be responsible for the administration of the
corporation, including general supervision of the policies of the corporation
and general and active management of the financial affairs of the corporation,
and shall execute bonds, mortgages or other contracts in the name and on behalf
of the corporation.
4.3 President. The President shall perform such duties and have
such powers as may be delegated by the Chief Executive Officer or the Board of
Directors.
4.4 Secretary. The Secretary shall keep minutes of all meetings
of the shareholders and Directors and have charge of the minute books, stock
books and seal of the corporation and
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<PAGE> 5
shall perform such other duties and have such other powers as may from time to
time be delegated to him or her by the President, the Chief Executive Officer
or the Board of Directors.
4.5 Treasurer. The Treasurer shall be charged with the management
of the financial affairs of the corporation, shall have the power to recommend
action concerning the corporation's affairs to the President or the Chief
Executive Officer, and shall perform such other duties and have such other
powers as may from time to time be delegated to him or her by the President,
the Chief Executive Officer or the Board of Directors.
4.6 Assistant Secretaries and Treasurers. Assistants to the
Secretary and Treasurer may be appointed by the President or the Chief
Executive Officer or elected by the Board of Directors and shall perform such
duties and have such powers as shall be delegated to them by the President, the
Chief Executive or the Board of Directors.
4.7 Vice Presidents. The corporation may have one or more Vice
Presidents, appointed by the President or the Chief Executive Officer, who
shall perform such duties and have such powers as may be delegated by the
President, the Chief Executive Officer or the Board of Directors.
ARTICLE V
CAPITAL STOCK
5.1 Share Certificates. Share certificates shall be numbered in
the order in which they are issued. They shall be signed by the Chief
Executive Officer and the Secretary and the seal of the corporation shall be
affixed thereto. Share certificates shall be kept in a book and shall be
issued in consecutive order therefrom. The name of the person owning the
shares, the number of shares, and the date of issue shall be entered on the
stub of each certificate. Share certificates exchanged or returned shall be
cancelled by the Secretary and placed in their original place in the stock
book.
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<PAGE> 6
5.2 Transfer of Shares. Transfers of shares shall be made on the
stock books of the corporation by the holder in person or by power of attorney,
on surrender of the old certificate for such shares, duly assigned.
5.3 Voting. The holders of the capital stock shall be entitled to
one vote for each share of stock standing in their name.
ARTICLE VI
SEAL
The seal of the corporation shall be in such form as the Board of
Directors may from time to time determine. In the event it is inconvenient to
use such a seal at any time, the signature of the corporation followed by the
word "Seal" enclosed in parentheses or scroll shall be deemed the seal of the
corporation. The seal shall be in the custody of the Secretary and affixed by
the Secretary's assistants on the certificates of stock and other appropriate
papers.
ARTICLE VII
AMENDMENT
These Bylaws may be amended by majority vote of the Board of Directors
of the Corporation or by majority vote of the shareholders, provided that the
shareholders may provide by resolution that any Bylaw provision repealed,
amended, adopted or altered by them may not be repealed, amended, adopted or
altered by the Board of Directors.
ARTICLE VIII
INDEMNIFICATION
Each person who is or was a Director or officer of the Corporation,
and each person who is or was a Director or officer of the Corporation who at
the request of the Corporation is serving or has served as an officer,
Director, partner, joint venturer or trustee of another corporation,
partnership, joint venture, trust or other enterprise shall be indemnified by
the Corporation against those expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement which are allowed to be paid or reimbursed
by the Corporation under the laws of the
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<PAGE> 7
State of Georgia and which are actually and reasonably incurred in connection
with any action, suit, or proceeding, pending or threatened, whether civil,
criminal, administrative or investigative, in which such person may be involved
by reason of his or her being or having been a Director or officer of this
Corporation or of such other enterprises. Such indemnification shall be made
only in accordance with the laws of the State of Georgia and subject to the
conditions prescribed therein.
In any instance where the laws of the State of Georgia permit
indemnification to be provided to persons who are or have been an officer or
Director of the Corporation or who are or have been an officer, Director,
partner, joint venturer or trustee of any such other enterprise only on a
determination that certain specified standards of conduct have been met, upon
application for indemnification by any such person the Corporation shall
promptly cause such determination to be made (i) by the Board of Directors by
majority vote of a quorum consisting of Directors not at the time parties to
the proceeding; (ii) if a quorum cannot be obtained by majority vote of a
committee duly designated by the Board of Directors (in which designation
Directors who are parties may participate), consisting solely of two or more
Directors not at the time parties to the proceeding; (iii) by special legal
counsel selected by the Board of Directors or its committee in the manner
prescribed in (i) or (ii), or if a quorum of the Board of Directors cannot be
obtained under (i), and a committee cannot be designated under (ii), selected
by majority vote of the full Board of Directors (in which selection directors
who are parties may participate); or (iv) by the shareholders, but shares owned
by or voted under the control of directors who are at the time parties to the
proceeding may not be voted on the determination.
As a condition to any such right of indemnification, the Corporation
may require that it be permitted to participate in the defense of any such
action or proceeding through legal counsel designated by the Corporation and at
the expense of the Corporation.
The Corporation may purchase and maintain insurance on behalf of any
such persons whether or not the Corporation would have the power to indemnify
such officers and Directors against any liability under the laws of the State
of Georgia. If any expenses or other amounts are
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<PAGE> 8
paid by way of indemnification, other than by court order, action by
shareholders, or by an insurance carrier, the Corporation shall provide notice
of such payment to the shareholders in accordance with the provisions of the
laws of the State of Georgia.
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<PAGE> 1
EXHIBIT 3.3
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
MELITA INTERNATIONAL CORPORATION
Pursuant to Sections 14-2-1001 and 14-2-1003 of the Georgia Business
Corporation Code, Melita International Corporation hereby amends and restates
its Articles of Incorporation in their entirety and substitutes the following
in lieu thereof:
ARTICLE ONE
NAME
The name of the corporation is Melita International Corporation.
ARTICLE TWO
CAPITALIZATION
The corporation shall have authority, exercisable by its Board of
Directors, to issue up to 100,000,000 shares of common stock, no par value per
share ("Common Stock"), and 20,000,000 shares of preferred stock, no par value
per share ("Preferred Stock"), any part or all of which shares of Preferred
Stock may be established and designated from time to time by the Board of
Directors, in such series and with such preferences, limitations, and relative
rights as may be determined by the Board of Directors.
ARTICLE THREE
STAGGERED BOARD OF DIRECTORS
Effective at the 1997 annual meeting, the Board of Directors shall be
divided into three classes to be known as Class I, Class II and Class III,
which shall be as nearly equal in number as possible. Except in case of death,
resignation, disqualification, or removal, each director shall serve for a term
ending on the date of the third annual meeting of shareholders following the
annual meeting at which the director was elected; provided, however, that each
initial director in Class I shall hold office until the 1998 annual meeting of
shareholders; each initial director in Class II shall hold office until the
1999 annual meeting of shareholders; and each initial director in Class III
shall hold office until the 2000 annual meeting of shareholders. In the event
of any increase or decrease in the authorized number of directors, the newly
created or eliminated directorships resulting from such an increase or decrease
shall be apportioned among the three classes of directors so that the three
classes remain as nearly equal in size as possible; provided, however, that
there shall be no classification of additional directors elected by the Board
of Directors until the next meeting of shareholders called for the purposes of
electing directors, at which meeting the terms of all such additional directors
shall expire, and such additional directors positions, if they are to be
continued, shall be apportioned among the classes of directors and nominees
therefor shall be submitted to the shareholders for their vote.
<PAGE> 2
ARTICLE FOUR
LIMITATION ON DIRECTOR LIABILITY
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for breach of the duty of
care or any other duty as a director, except that such liability shall not be
eliminated for:
(i) any appropriation, in violation of the director's duties, of
any business opportunity of the corporation;
(ii) acts or omissions that involve intentional misconduct or a
knowing violation of law;
(iii) liability under Section 14-2-832 (or any successor provision
or redesignation thereof) of the Georgia Business Corporation Code; and
(iv) any transaction from which the director received an improper
personal benefit.
If at any time the Georgia Business Corporation Code (the "Code") shall
have been amended to authorize the further elimination or limitation of the
liability of a director, then the liability of each director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Code, as
so amended, without further action by the shareholders, unless the provisions
of the Code, as amended, require further action by the shareholders.
Any repeal or modification of the foregoing provisions of this Article Six
shall not adversely affect the elimination or limitation of liability or
alleged liability pursuant hereto of any director of the corporation for or
with respect to any alleged act or omission of the director occurring prior to
such a repeal or modification.
ARTICLE FIVE
SHAREHOLDER ACTION WITHOUT
MEETING BY LESS THAN UNANIMOUS CONSENT
The shareholders, without a meeting, may take any action required or
permitted to be taken at a meeting of the shareholders, if written consent
setting forth the action to be taken is signed by those persons who would be
entitled to vote at a meeting those shares having voting power to cast not less
than the minimum number (or numbers, in the case of voting by classes) of votes
that would be necessary to authorize or take the action at a meeting at which
all shares entitled to vote were present and voted. An action by less than
unanimous consent may not be taken with respect to any election of directors as
to which shareholders would be entitled to cumulative voting.
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<PAGE> 3
ARTICLE SIX
CONSIDERATION OF INTERESTS OF
NON-SHAREHOLDER CONSTITUENCIES
The Board of Directors, any committee of the Board of Directors and any
individual Director, in discharging the duties of their respective positions
and in determining what is believed to be in the best interest of the
Corporation, may in their sole discretion consider the interests of the
employees, customers, suppliers and creditors of the Corporation and its
subsidiaries, the communities in which offices or other establishments of the
Corporation and its subsidiaries are located, and all other factors such
Directors consider pertinent, in addition to considering the effects of any
action on the Corporation and its shareholders. Notwithstanding the foregoing,
this Article Six shall not be deemed to provide any of the foregoing
constituencies any right to be considered in any such discharging of duties or
determination.
ARTICLE SEVEN
AMENDMENTS
Notwithstanding any other provision of these Articles of Incorporation,
the Corporation's Bylaws or law, neither Articles Three, Four, Five or Six
hereof nor this Article Seven may be amended or repealed except upon the
affirmative vote of holders of at least 66 2/3% of the total number of votes of
the then outstanding shares of capital stock of the Company that are entitled
to vote generally in the election of directors, voting together as a single
class.
IN WITNESS WHEREOF, the undersigned executes these Amended and Restated
Articles of Incorporation on _______________, 1997.
____________________________
Aleksander Szlam
Chairman of the Board and Chief
Executive Officer
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<PAGE> 1
EXHIBIT 3.4
AMENDED AND RESTATED BYLAWS
OF
MELITA INTERNATIONAL CORPORATION
TABLE OF CONTENTS
i
<PAGE> 2
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE ONE OFFICE .......................................... 1
1.1 REGISTERED OFFICE AND AGENT ............................. 1
1.2 PRINCIPAL OFFICE ........................................ 1
1.3 OTHER OFFICES ........................................... 1
ARTICLE TWO SHAREHOLDERS' MEETINGS .......................... 1
2.1 PLACE OF MEETINGS ....................................... 1
2.2 ANNUAL MEETINGS ......................................... 2
2.3 SPECIAL MEETINGS ........................................ 2
2.4 NOTICE OF MEETINGS ...................................... 2
2.5 WAIVER OF NOTICE ........................................ 2
2.6 VOTING GROUP; QUORUM; VOTE REQUIRED TO ACT .............. 2
2.7 VOTING OF SHARES ........................................ 3
2.8 PROXIES ................................................. 3
2.9 PRESIDING OFFICER ....................................... 3
2.10 ADJOURNMENTS .......................................... 4
2.11 CONDUCT OF THE MEETING ................................ 4
2.12 ACTION OF SHAREHOLDERS WITHOUT A MEETING .............. 4
2.13 MATTERS CONSIDERED AT ANNUAL MEETINGS ................. 4
ARTICLE THREE BOARD OF DIRECTORS ............................ 5
3.1 GENERAL POWERS .......................................... 5
3.2 NUMBER, ELECTION AND TERM OF OFFICE ..................... 5
3.3 REMOVAL OF DIRECTORS .................................... 5
3.4 VACANCIES ............................................... 6
3.5 COMPENSATION ............................................ 6
3.6 COMMITTEES OF THE BOARD OF DIRECTORS .................... 6
3.7 QUALIFICATION OF DIRECTORS .............................. 6
3.8 CERTAIN NOMINATION REQUIREMENTS ........................ 6
ARTICLE FOUR MEETINGS OF THE BOARD OF DIRECTORS ............. 7
4.1 REGULAR MEETINGS ........................................ 7
4.2 SPECIAL MEETINGS ........................................ 7
4.3 PLACE OF MEETINGS ....................................... 7
4.4 NOTICE OF MEETINGS ...................................... 7
4.5 QUORUM .................................................. 8
4.6 VOTE REQUIRED FOR ACTION ................................ 8
4.7 PARTICIPATION BY CONFERENCE TELEPHONE ................... 8
4.8 ACTION BY DIRECTORS WITHOUT A MEETING ................... 8
4.9 ADJOURNMENTS ............................................ 8
4.10 WAIVER OF NOTICE ...................................... 8
ARTICLE FIVE OFFICERS ....................................... 9
5.1 OFFICES ................................................. 9
5.2 TERM .................................................... 9
5.3 COMPENSATION ............................................ 9
5.4 REMOVAL ................................................. 9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
5.5 CHAIRMAN OF THE BOARD ................................... 9
5.6 CHIEF EXECUTIVE OFFICER ................................. 10
5.7 PRESIDENT ............................................... 10
5.8 VICE PRESIDENTS ......................................... 10
5.9 SECRETARY ............................................... 10
5.10 TREASURER ............................................. 10
ARTICLE SIX DISTRIBUTIONS AND DIVIDENDS ..................... 11
ARTICLE SEVEN SHARES ........................................ 11
7.1 SHARE CERTIFICATES ...................................... 11
7.2 RIGHTS OF CORPORATION WITH RESPECT TO REGISTERED OWNERS . 11
7.3 TRANSFERS OF SHARES .................................... 11
7.4 DUTY OF CORPORATION TO REGISTER TRANSFER ................ 12
7.5 LOST, STOLEN, OR DESTROYED CERTIFICATES ................. 12
7.6 FIXING OF RECORD DATE ................................... 12
7.7 RECORD DATE IF NONE FIXED ............................... 12
ARTICLE EIGHT INDEMNIFICATION ............................... 12
8.1 INDEMNIFICATION OF DIRECTORS ............................ 13
8.2 INDEMNIFICATION OF OTHERS ............................... 13
8.3 OTHER ORGANIZATIONS .................................... 13
8.4 ADVANCES ................................................ 13
8.5 NON-EXCLUSIVITY ......................................... 14
8.6 INSURANCE ............................................... 14
8.7 NOTICE .................................................. 14
8.8 SECURITY ................................................ 14
8.9 AMENDMENT .............................................. 14
8.10 AGREEMENTS ............................................ 15
8.11 CONTINUING BENEFITS ................................... 15
8.12 SUCCESSORS ............................................ 15
8.13 SEVERABILITY .......................................... 15
8.14 ADDITIONAL INDEMNIFICATION ............................ 15
ARTICLE NINE MISCELLANEOUS .................................. 15
9.1 INSPECTION OF BOOKS AND RECORDS ......................... 16
9.2 FISCAL YEAR ............................................. 16
9.3 CORPORATE SEAL .......................................... 16
9.4 ANNUAL STATEMENTS ....................................... 16
9.5 NOTICE .................................................. 16
9.6 ELECTION OF "FAIR PRICE" STATUTE ....................... 17
9.7 ELECTION OF "BUSINESS COMBINATION" STATUTE ............. 17
ARTICLE TEN AMENDMENTS ...................................... 17
</TABLE>
<PAGE> 4
AMENDED AND RESTATED BYLAWS
OF
MELITA INTERNATIONAL CORPORATION
<PAGE> 5
AMENDED AND RESTATED BYLAWS
OF
MELITA INTERNATIONAL CORPORATION
References in these Amended and Restated Bylaws (these "Bylaws") to
"Articles of Incorporation" are to the Articles of Incorporation of MELITA
INTERNATIONAL CORPORATION, a Georgia corporation (the "Corporation"), as
amended and restated from time to time.
All of these Bylaws are subject to contrary provisions, if any, of the
Articles of Incorporation (including provisions designating the preferences,
limitations, and relative rights of any class or series of shares), the Georgia
Business Corporation Code (the "Code"), and other applicable law, as in effect
on and after the effective date of these Bylaws. References in these Bylaws to
"Sections" shall refer to sections of the Bylaws, unless otherwise indicated.
ARTICLE ONE
OFFICE
1.1 REGISTERED OFFICE AND AGENT. The Corporation shall maintain a
registered office and shall have a registered agent whose business office is
the same as the registered office.
1.2 PRINCIPAL OFFICE. The principal office of the Corporation shall be at
the place designated in the Corporation's annual registration with the Georgia
Secretary of State.
1.3 OTHER OFFICES. In addition to its registered office and principal
office, the Corporation may have offices at other locations either in or
outside the State of Georgia.
ARTICLE TWO
SHAREHOLDERS' MEETINGS
2.1 PLACE OF MEETINGS. Meetings of the Corporation's shareholders may be
held at any location inside or outside the State of Georgia designated by the
Board of Directors or any other person or persons who properly call the
meeting, or if the Board of Directors or such other person or persons do not
specify a location, at the Corporation's principal office.
<PAGE> 6
2.2 ANNUAL MEETINGS. The Corporation shall hold an annual meeting of
shareholders, at a time determined by the Board of Directors, to elect
directors and to transact any business that properly may come before the
meeting. The annual meeting may be combined with any other meeting of
shareholders, whether annual or special.
2.3 SPECIAL MEETINGS. Special meetings of shareholders of one or more
classes or series of the Corporation's shares may be called at any time by the
Board of Directors, the Chairman of the Board, the Chief Executive Officer or
the President, and shall be called by the Corporation upon the written request
(in compliance with applicable requirements of the Code) of the holders of
shares representing not less than fifty percent (50%) or more of the votes
entitled to be cast on each issue proposed to be considered at the special
meeting. The business that may be transacted at any special meeting of
shareholders shall be limited to that proposed in the notice of the special
meeting given in accordance with Section 2.4 (including related or incidental
matters that may be necessary or appropriate to effectuate the proposed
business).
2.4 NOTICE OF MEETINGS. In accordance with Section 9.5 and subject to
waiver by a shareholder pursuant to Section 2.5, the Corporation shall give
written notice of the date, time, and place of each annual and special
shareholders' meeting no fewer than 10 days nor more than 60 days before the
meeting date to each shareholder of record entitled to vote at the meeting.
The notice of an annual meeting need not state the purpose of the meeting
unless these Bylaws require otherwise. The notice of a special meeting shall
state the purpose for which the meeting is called. If an annual or special
shareholders' meeting is adjourned to a different date, time, or location, the
Corporation shall give shareholders notice of the new date, time, or location
of the adjourned meeting, unless a quorum of shareholders was present at the
meeting and information regarding the adjournment was announced before the
meeting was adjourned; provided, however, that if a new record date is or must
be fixed in accordance with Section 7.6, the Corporation must give notice of
the adjourned meeting to all shareholders of record as of the new record date
who are entitled to vote at the adjourned meeting.
2.5 WAIVER OF NOTICE. A shareholder may waive any notice required by the
Code, the Articles of Incorporation, or these Bylaws, before or after the date
and time of the matter to which the notice relates, by delivering to the
Corporation a written waiver of notice signed by the shareholder entitled to
the notice. In addition, a shareholder's attendance at a meeting shall be (a)
a waiver of objection to lack of notice or defective notice of the meeting
unless the shareholder at the beginning of the meeting objects to holding the
meeting or transacting business at the meeting, and (b) a waiver of objection
to consideration of a particular matter at the meeting that is not within the
purpose stated in the meeting notice, unless the shareholder objects to
considering the matter when it is presented. Except as otherwise required by
the Code, neither the purpose of nor the business transacted at the meeting
need be specified in any waiver.
2.6 VOTING GROUP; QUORUM; VOTE REQUIRED TO ACT. (a) Unless otherwise
required by the Code or the Articles of Incorporation, all classes or series of
the Corporation's shares entitled to vote generally on a matter shall for that
purpose be considered a single voting group (a "Voting Group"). If either the
Articles of Incorporation or the Code requires separate voting by two or more
Voting Groups on a matter, action on that matter is taken only when voted upon
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each such Voting Group separately. At all meetings of shareholders, any Voting
Group entitled to vote on a matter may take action on the matter only if
a quorum of that Voting Group exists at the meeting, and if a quorum exists,
the Voting Group may take action on the matter notwithstanding the absence of a
quorum of any other Voting Group that may be entitled to vote separately on the
matter. Unless the Articles of Incorporation, these Bylaws, or the Code
provides otherwise, the presence (in person or by proxy) of shares representing
a majority of votes entitled to be cast on a matter by a Voting Group shall
constitute a quorum of that Voting Group with regard to that matter. Once a
share is present at any meeting other than solely to object to holding the
meeting or transacting business at the meeting, the share shall be deemed
present for quorum purposes for the remainder of the meeting and for any
adjournments of that meeting, unless a new record date for the adjourned
meeting is or must be set pursuant to Section 7.6 of these Bylaws.
(b) Except as provided in Section 3.4, if a quorum exists, action on a
matter by a Voting Group is approved by that Voting Group if the votes cast
within the Voting Group favoring the action exceed the votes cast opposing the
action, unless the Articles of Incorporation, a provision of these Bylaws that
has been adopted pursuant to Section 14-2-1021 of the Code (or any successor
provision), or the Code requires a greater number of affirmative votes.
2.7 VOTING OF SHARES. Unless otherwise required by the Code or the
Articles of Incorporation, each outstanding share of any class or series having
voting rights shall be entitled to one vote on each matter that is submitted to
a vote of shareholders.
2.8 PROXIES. A shareholder entitled to vote on a matter may vote in person
or by proxy pursuant to an appointment executed in writing by the shareholder
or by his or her attorney-in-fact. An appointment of a proxy shall be valid
for 11 months from the date of its execution, unless a longer or shorter period
is expressly stated in the proxy.
2.9 PRESIDING OFFICER. Except as otherwise provided in this Section 2.9,
the Chairman of the Board, and in his or her absence or disability the Chief
Executive Officer, and in his or her absence or disability the President, shall
preside at every shareholders' meeting (and any adjournment thereof) as its
chairman, if either of them is present and willing to serve. If neither the
Chairman of the Board, nor the Chief Executive Officer nor the President is
present and willing to serve as chairman of the meeting, and if the Chairman of
the Board has not designated another person who is present and willing to serve,
then a majority of the Corporation's directors present at the meeting shall be
entitled to designate a person to serve as chairman. If no director of the
Corporation is present at the meeting or if a majority of the directors who are
present cannot be established, then a chairman of the meeting shall be selected
by a majority vote of (a) the shares present at the meeting that would be
entitled to vote in an election of directors, or (b) if no such shares are
present at the meeting, then the shares present at the meeting comprising the
Voting Group with the largest number of shares present at the meeting and
entitled to vote on a matter properly proposed to be considered at the meeting.
The chairman of the meeting may designate other persons to assist with the
meeting.
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2.10 ADJOURNMENTS. At any meeting of shareholders (including an adjourned
meeting), a majority of shares of any Voting Group present and entitled to vote
at the meeting (whether or not those shares constitute a quorum) may adjourn
the meeting, but only with respect to that Voting Group, to reconvene at a
specific time and place. If more than one Voting Group is present and entitled
to vote on a matter at the meeting, then the meeting may be continued with
respect to any such Voting Group that does not vote to adjourn as provided
above, and such Voting Group may proceed to vote on any matter to which it is
otherwise entitled to do so; provided, however, that if (a) more than one
Voting Group is required to take action on a matter at the meeting and (b) any
one of those Voting Groups votes to adjourn the meeting (in accordance with the
preceding sentence), then the action shall not be deemed to have been taken
until the requisite vote of any adjourned Voting Group is obtained at its
reconvened meeting. The only business that may be transacted at any reconvened
meeting is business that could have been transacted at the meeting that was
adjourned, unless further notice of the adjourned meeting has been given in
compliance with the requirements for a special meeting that specifies the
additional purpose or purposes for which the meeting is called. Nothing
contained in this Section 2.10 shall be deemed or otherwise construed to limit
any lawful authority of the chairman of a meeting to adjourn the meeting.
2.11 CONDUCT OF THE MEETING. At any meeting of shareholders, the
chairman of the meeting shall be entitled to establish the rules of order
governing the conduct of business at the meeting.
2.12 ACTION OF SHAREHOLDERS WITHOUT A MEETING. Action required or
permitted to be taken at a meeting of shareholders may be taken without a
meeting if the action is taken by all shareholders entitled to vote on the
action or, if permitted by the Articles of Incorporation, by persons who would
be entitled to vote at a meeting shares having voting power to cast the
requisite number of votes (or numbers, in the case of voting by groups) that
would be necessary to authorize or take the action at a meeting at which all
shareholders entitled to vote were present and voted. The action must be
evidenced by one or more written consents describing the action taken, signed
by shareholders entitled to take action without a meeting, and delivered to the
Corporation for inclusion in the minutes or filing with the corporate records.
Where required by Section 14-2-704 or other applicable provision of the Code,
the Corporation shall provide shareholders with written notice of actions taken
without a meeting.
2.13 MATTERS CONSIDERED AT ANNUAL MEETINGS. Notwithstanding anything to
the contrary in these Bylaws, the only business that may be conducted at an
annual meeting of shareholders shall be business brought before the meeting (a)
by or at the direction of the Board of Directors prior to the meeting, (b) by
or at the direction of the Chairman of the Board, the Chief Executive Officer
or the President, or (c) by a shareholder of the Corporation who is entitled to
vote with respect to the business and who complies with the notice procedures
set forth in this Section 2.13. For business to be brought properly before an
annual meeting by a shareholder, the shareholder must have given timely notice
of the business in writing to the Secretary of the Corporation. To be timely,
a shareholder's notice must be delivered or mailed to and received at the
principal offices of the Corporation, not less than 60 days before the date of
the meeting at which the director(s) are to be elected or the proposal is to be
considered;
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however, if less than 70 days notice or prior public disclosure of
the date of the scheduled meeting is given or made, notice by the shareholder,
to be timely, must be delivered or received not later than the close of
business on the tenth day following the earlier of the day on which notice of
the date of the meeting is mailed to shareholders or public disclosure of the
date of such meeting is made. A shareholder's notice to the Secretary shall
set forth a brief description of each matter of business the shareholder
proposes to bring before the meeting and the reasons for conducting that
business at the meeting; the name, as it appears on the Corporation's books,
and address of the shareholder proposing the business; the series or class and
number of shares of the Corporation's capital stock that are beneficially owned
by the shareholder; and any material interest of the shareholder in the
proposed business. The chairman of the meeting shall have the discretion to
declare to the meeting that any business proposed by a shareholder to be
considered at the meeting is out of order and that such business shall not be
transacted at the meeting if (i) the chairman concludes that the matter has
been proposed in a manner inconsistent with this Section 2.13 or (ii) the
chairman concludes that the subject matter of the proposed business is
inappropriate for consideration by the shareholders at the meeting.
ARTICLE THREE
BOARD OF DIRECTORS
3.1 GENERAL POWERS. All corporate powers shall be exercised by or under
the authority of, and the business and affairs of the Corporation shall be
managed by, the Board of Directors, subject to any limitation set forth in the
Articles of Incorporation, in bylaws approved by the shareholders, or in
agreements among all the shareholders that are otherwise lawful.
3.2 NUMBER, ELECTION AND TERM OF OFFICE. The number of directors of the
Corporation shall be fixed by resolution of the Board of Directors or of the
shareholders from time to time and, until otherwise determined, shall be two
(2); provided, however, that no decrease in the number of directors shall
have the effect of shortening the term of an incumbent director. The terms of
the Board of Directors shall be staggered as provided in the Articles of
Incorporation. Despite the expiration of a director's term, he or she shall
continue to serve until his or her successor, if there is to be any, has been
elected and has qualified. Except as provided elsewhere in this Section 3.2
and in Section 3.4, the directors shall be elected at each annual meeting of
shareholders, or at a special meeting of shareholders called for purposes that
include the election of directors, by a plurality of the votes cast by the
shares entitled to vote and present at the meeting.
3.3 REMOVAL OF DIRECTORS. The entire Board of Directors or any individual
director may be removed, only for cause and only by the affirmative vote, at
any annual or special meeting of the shareholders, of not less than 66 2/3% of
the total number of votes of then outstanding shares of capital stock of the
Company that are entitled to vote generally in the election of directors,
voting together as a single class, but only if notice of such proposed removal
was contained in the notice of such meeting. "For cause" means (i) misconduct
as a director of the Corporation or any subsidiary of the Corporation which
involves dishonesty with
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respect to a material corporate activity or material corporate assets, or (ii)
conviction of an offense punishable by one or more years of imprisonment (other
than minor regulatory infractions and traffic violations which do not
materially and adversely affect the Company). A removed director's successor,
if any, may be elected at the same meeting to serve the unexpired term.
3.4 VACANCIES. A vacancy occurring in the Board of Directors may be
filled for the unexpired term, unless the shareholders have elected a
successor, by the affirmative vote of a majority of the remaining directors,
whether or not the remaining directors constitute a quorum; provided, however,
that if the vacant office was held by a director elected by a particular Voting
Group, only the holders of shares of that Voting Group or the remaining
directors elected by that Voting Group shall be entitled to fill the vacancy;
provided further, however, that if the vacant office was held by a director
elected by a particular Voting Group and there is no remaining director elected
by that Voting Group, the other remaining directors or director (elected by
another Voting Group or Groups) may fill the vacancy during an interim period
before the shareholders of the vacated director's Voting Group act to fill the
vacancy. A vacancy or vacancies in the Board of Directors may result from the
death, resignation, disqualification, or removal of any director, or from an
increase in the number of directors.
3.5 COMPENSATION. Directors may receive such compensation for their
services as directors as may be fixed by the Board of Directors from time to
time. A director may also serve the Corporation in one or more capacities
other than that of director and receive compensation for services rendered in
those other capacities.
3.6 COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors may
designate from among its members an executive committee or one or more other
standing or ad hoc committees, each consisting of one or more directors, who
serve at the pleasure of the Board of Directors. Subject to the limitations
imposed by the Code, each committee shall have the authority set forth in the
resolution establishing the committee or in any other resolution of the Board
of Directors specifying, enlarging, or limiting the authority of the committee.
3.7 QUALIFICATION OF DIRECTORS. No person elected to serve as a director
of the Corporation shall assume office and begin serving unless and until duly
qualified to serve, as determined by reference to the Code, the Articles of
Incorporation, and any further eligibility requirements established in these
Bylaws.
3.8 CERTAIN NOMINATION REQUIREMENTS. No person may be nominated for
election as a director at any annual or special meeting of shareholders unless
(a) the nomination has been or is being made pursuant to a recommendation or
approval of the Board of Directors of the Corporation or a properly constituted
committee of the Board of Directors previously delegated authority to recommend
or approve nominees for director; (b) the person is nominated by a shareholder
of the Corporation who is entitled to vote for the election of the nominee at
the subject meeting, and the nominating shareholder has furnished written
notice to the Secretary of the Corporation, at the Corporation's principal
office, not less than 60 days before the date of the meeting at which the
director(s) are to be elected or the proposal is to be considered; however, if
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less than 70 days notice or prior public disclosure of the date of the
scheduled meeting is given or made, notice by the shareholder, to be timely,
must be delivered or received not later than the close of business on the tenth
day following the earlier of the day on which notice of the date of the meeting
is mailed to shareholders or public disclosure of the date of such meeting is
made and the notice (i) sets forth with respect to the person to be nominated
his or her name, age, business and residence addresses, principal business or
occupation during the past five years, any affiliation with or material
interest in the Corporation or any transaction involving the Corporation, and
any affiliation with or material interest in any person or entity having an
interest materially adverse to the Corporation, and (ii) is accompanied by the
sworn or certified statement of the shareholder that the nominee has consented
to being nominated and that the shareholder believes the nominee will stand for
election and will serve if elected; or (c) (i) the person is nominated to
replace a person previously identified as a proposed nominee (in accordance
with the provisions of subpart (b) of this Section 3.8) who has since become
unable or unwilling to be nominated or to serve if elected, (ii) the
shareholder who furnished such previous identification makes the replacement
nomination and delivers to the Secretary of the Corporation (at the time of or
prior to making the replacement nomination) an affidavit or other sworn
statement affirming that the shareholder had no reason to believe the original
nominee would be so unable or unwilling, and (iii) such shareholder also
furnishes in writing to the Secretary of the Corporation (at the time of or
prior to making the replacement nomination) the same type of information about
the replacement nominee as required by subpart (b) of this Section 3.8 to have
been furnished about the original nominee. The chairman of any meeting of
shareholders at which one or more directors are to be elected, for good cause
shown and with proper regard for the orderly conduct of business at the
meeting, may waive in whole or in part the operation of this Section 3.8.
ARTICLE FOUR
MEETINGS OF THE BOARD OF DIRECTORS
4.1 REGULAR MEETINGS. A regular meeting of the Board of Directors shall
be held in conjunction with each annual meeting of shareholders. In addition,
the Board of Directors may, by prior resolution, hold regular meetings at other
times.
4.2 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by or at the request of the Chairman of the Board, the Chief Executive
Officer, the President, or any director in office at that time.
4.3 PLACE OF MEETINGS. Directors may hold their meetings at any place in
or outside the State of Georgia that the Board of Directors may establish from
time to time.
4.4 NOTICE OF MEETINGS. Directors need not be provided with notice of
any regular meeting of the Board of Directors. Unless waived in accordance
with Section 4.10, the Corporation shall give at least two days' notice to each
director of the date, time, and place of each special meeting. Notice of a
meeting shall be deemed to have been given to any director in
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attendance at any prior meeting at which the date, time, and place of the
subsequent meeting was announced.
4.5 QUORUM At meetings of the Board of Directors, the greater of (a) a
majority of the directors then in office, or (b) one-third of the number of
directors fixed in accordance with these Bylaws shall constitute a quorum for
the transaction of business.
4.6 VOTE REQUIRED FOR ACTION. If a quorum is present when a vote is
taken, the vote of a majority of the directors present at the time of the vote
will be the act of the Board of Directors, unless the vote of a greater number
is required by the Code, the Articles of Incorporation, or these Bylaws. A
director who is present at a meeting of the Board of Directors when corporate
action is taken is deemed to have assented to the action taken unless (a) he or
she objects at the beginning of the meeting (or promptly upon his or her
arrival) to holding the meeting or transacting business at it; (b) his or her
dissent or abstention from the action taken is entered in the minutes of the
meeting; or (c) he or she delivers written notice of dissent or abstention to
the presiding officer of the meeting before its adjournment or to the
Corporation immediately after adjournment of the meeting. The right of dissent
or abstention is not available to a director who votes in favor of the action
taken.
4.7 PARTICIPATION BY CONFERENCE TELEPHONE. Members of the Board of
Directors may participate in a meeting of the Board by means of conference
telephone or similar communications equipment through which all persons
participating may hear and speak to each other. Participation in a meeting
pursuant to this Section 4.7 shall constitute presence in person at the
meeting.
4.8 ACTION BY DIRECTORS WITHOUT A MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if a written consent, describing the action taken, is signed
by each director and delivered to the Corporation for inclusion in the minutes
or filing with the corporate records. The consent may be executed in
counterpart, and shall have the same force and effect as a unanimous vote of
the Board of Directors at a duly convened meeting.
4.9 ADJOURNMENTS. A meeting of the Board of Directors, whether or not a
quorum is present, may be adjourned by a majority of the directors present to
reconvene at a specific time and place. It shall not be necessary to give
notice to the directors of the reconvened meeting or of the business to be
transacted, other than by announcement at the meeting that was adjourned,
unless a quorum was not present at the meeting that was adjourned, in which
case notice shall be given to directors in the same manner as for a special
meeting. At any such reconvened meeting at which a quorum is present, any
business may be transacted that could have been transacted at the meeting that
was adjourned.
4.10 WAIVER OF NOTICE. A director may waive any notice required by the
Code, the Articles of Incorporation, or these Bylaws before or after the date
and time of the matter to which the notice relates, by a written waiver signed
by the director and delivered to the Corporation for inclusion in the minutes
or filing with the corporate records. Attendance by a director at a
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meeting shall constitute waiver of notice of the meeting, except where a
director at the beginning of the meeting (or promptly upon his or her arrival)
objects to holding the meeting or to transacting business at the meeting and
does not thereafter vote for or assent to action taken at the meeting.
ARTICLE FIVE
OFFICERS
5.1 OFFICES. The officers of the Corporation shall consist of a
President, a Secretary, and a Treasurer, and may include a Chief Executive
Officer separate from the President, each of whom shall be elected or appointed
by the Board of Directors. The Board of Directors may also elect a Chairman of
the Board from among its members. The Board of Directors from time to time
may, or may authorize the Chief Executive Officer to, create and establish the
duties of other offices and may, or may authorize the Chief Executive Officer
to, elect or appoint, or authorize specific senior officers to appoint, the
persons who shall hold such other offices, including one or more Vice
Presidents (including Executive Vice Presidents, Senior Vice Presidents,
Assistant Vice Presidents, and the like), one or more Assistant Secretaries,
and one or more Assistant Treasurers. Whether or not so provided by the Board
of Directors, the Chairman of the Board or the Chief Executive Officer may
appoint one or more Assistant Secretaries, and one or more Assistant
Treasurers. Any two or more offices may be held by the same person.
5.2 TERM. Each officer shall serve at the pleasure of the Board of
Directors (or, if appointed by the Chief Executive Officer or a senior officer
pursuant to this Article Five, at the pleasure of the Board of Directors, the
Chief Executive Officer, or the senior officer authorized to have appointed the
officer) until his or her death, resignation, or removal, or until his or her
replacement is elected or appointed in accordance with this Article Five.
5.3 COMPENSATION. The compensation of all officers of the Corporation
shall be fixed by the Board of Directors or by a committee or officer appointed
by the Board of Directors. Officers may serve without compensation.
5.4 REMOVAL. All officers (regardless of how elected or appointed) may be
removed, with or without cause, by the Board of Directors, and any officer
appointed by the Chief Executive Officer or another senior officer may also be
removed, with or without cause, by the Chief Executive Officer or by any senior
officer authorized to have appointed the officer to be removed. Removal will
be without prejudice to the contract rights, if any, of the person removed, but
shall be effective notwithstanding any damage claim that may result from
infringement of such contract rights.
5.5 CHAIRMAN OF THE BOARD. The Chairman of the Board (if there be one)
shall preside at and serve as chairman of meetings of the shareholders and of
the Board of Directors (unless another person is selected under Section 2.9 to
act as chairman). The Chairman of the
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Board shall perform other duties and have other authority as may from time to
time be delegated by the Board of Directors.
5.6 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be charged
with the general and active management of the Corporation, shall see that all
orders and resolutions of the Board of Directors are carried into effect, shall
have the authority to select and appoint employees and agents of the
Corporation, and shall, in the absence or disability of the Chairman of the
Board, perform the duties and exercise the powers of the Chairman of the Board.
The Chief Executive Officer shall perform any other duties and have any other
authority as may be delegated from time to time by the Board of Directors, and
shall be subject to the limitations fixed from time to time by the Board of
Directors.
5.7 PRESIDENT. If there shall be no separate Chief Executive Officer of
the Corporation, then the President shall be the chief executive officer of the
Corporation and shall have all the duties and authority given under these
Bylaws to the Chief Executive Officer. The President shall otherwise be the
chief operating officer of the Corporation and shall, subject to the authority
of the Chief Executive Officer, have responsibility for the conduct and general
supervision of the business operations of the Corporation. The President shall
perform such other duties and have such other authority as may from time to
time be delegated by the Board of Directors or the Chief Executive Officer. In
the absence or disability of the Chief Executive Officer, the President shall
perform the duties and exercise the powers of the Chief Executive Officer.
5.8 VICE PRESIDENTS. The Vice President (if there be one) shall, in the
absence or disability of the President, perform the duties and exercise the
powers of the President, whether the duties and powers are specified in these
Bylaws or otherwise. If the Corporation has more than one Vice President, the
one designated by the Board of Directors or the Chief Executive Officer (in
that order of precedence) shall act in the event of the absence or disability
of the President. Vice Presidents shall perform any other duties and have any
other authority as from time to time may be delegated by the Board of
Directors, the Chief Executive Officer, or the President.
5.9 SECRETARY. The Secretary shall be responsible for preparing minutes
of the meetings of shareholders, directors, and committees of directors and for
authenticating records of the Corporation. The Secretary or any Assistant
Secretary shall have authority to give all notices required by law or these
Bylaws. The Secretary shall be responsible for the custody of the corporate
books, records, contracts, and other documents. The Secretary or any Assistant
Secretary may affix the corporate seal to any lawfully executed documents
requiring it, may attest to the signature of any officer of the Corporation,
and shall sign any instrument that requires the Secretary's signature. The
Secretary or any Assistant Secretary shall perform any other duties and have
any other authority as from time to time may be delegated by the Board of
Directors, the Chief Executive Officer, or the President.
5.10 TREASURER. Unless otherwise provided by the Board of Directors, the
Treasurer shall be responsible for the custody of all funds and securities
belonging to the Corporation and
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for the receipt, deposit, or disbursement of these funds and securities
under the direction of the Board of Directors. The Treasurer shall cause full
and true accounts of all receipts and disbursements to be maintained and shall
make reports of these receipts and disbursements to the Board of Directors, the
Chief Executive Officer and President upon request. The Treasurer or Assistant
Treasurer shall perform any other duties and have any other authority as from
time to time may be delegated by the Board of Directors, the Chief Executive
Officer, or the President.
ARTICLE SIX
DISTRIBUTIONS AND DIVIDENDS
Unless the Articles of Incorporation provide otherwise, the Board of
Directors, from time to time in its discretion, may authorize or declare
distributions or share dividends in accordance with the Code.
ARTICLE SEVEN
SHARES
7.1 SHARE CERTIFICATES. The interest of each shareholder in the
Corporation shall be evidenced by a certificate or certificates representing
shares of the Corporation, which shall be in such form as the Board of
Directors from time to time may adopt in accordance with the Code. Share
certificates shall be in registered form and shall indicate the date of issue,
the name of the Corporation, that the Corporation is organized under the laws
of the State of Georgia, the name of the shareholder, and the number and class
of shares and designation of the series, if any, represented by the
certificate. Each certificate shall be signed by the President or a Vice
President (or in lieu thereof, by the Chairman of the Board or Chief Executive
Officer, if there be one) and may be signed by the Secretary or an Assistant
Secretary; provided, however, that where the certificate is signed (either
manually or by facsimile) by a transfer agent, or registered by a registrar,
the signatures of those officers may be facsimiles.
7.2 RIGHTS OF CORPORATION WITH RESPECT TO REGISTERED OWNERS. Prior to due
presentation for transfer of registration of its shares, the Corporation may
treat the registered owner of the shares (or the beneficial owner of the shares
to the extent of any rights granted by a nominee certificate on file with the
Corporation pursuant to any procedure that may be established by the
Corporation in accordance with the Code) as the person exclusively entitled to
vote the shares, to receive any dividend or other distribution with respect to
the shares, and for all other purposes; and the Corporation shall not be bound
to recognize any equitable or other claim to or interest in the shares on the
part of any other person, whether or not it has express or other notice of such
a claim or interest, except as otherwise provided by law.
7.3 TRANSFERS OF SHARES. Transfers of shares shall be made upon the
books of the Corporation kept by the Corporation or by the transfer agent
designated to transfer the shares,
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only upon direction of the person named in the certificate or by an attorney
lawfully constituted in writing. Before a new certificate is issued, the old
certificate shall be surrendered for cancellation or, in the case of a
certificate alleged to have been lost, stolen, or destroyed, the provisions of
Section 7.5 of these Bylaws shall have been complied with.
7.4 DUTY OF CORPORATION TO REGISTER TRANSFER. Notwithstanding any of the
provisions of Section 7.3 of these Bylaws, the Corporation is under a duty to
register the transfer of its shares only if: (a) the share certificate is
endorsed by the appropriate person or persons; (b) reasonable assurance is
given that each required endorsement is genuine and effective; (c) the
Corporation has no duty to inquire into adverse claims or has discharged any
such duty; (d) any applicable law relating to the collection of taxes has been
complied with; (e) the transfer is in fact rightful or is to a bona fide
purchaser; and (f) the transfer is in compliance with applicable provisions of
any transfer restrictions of which the Corporation shall have notice.
7.5 LOST, STOLEN, OR DESTROYED CERTIFICATES. Any person claiming a share
certificate to be lost, stolen, or destroyed shall make an affidavit or
affirmation of this claim in such a manner as the Corporation may require and
shall, if the Corporation requires, give the Corporation a bond of indemnity in
form and amount, and with one or more sureties satisfactory to the Corporation,
as the Corporation may require, whereupon an appropriate new certificate may be
issued in lieu of the one alleged to have been lost, stolen or destroyed.
7.6 FIXING OF RECORD DATE. For the purpose of determining shareholders
(a) entitled to notice of or to vote at any meeting of shareholders or, if
necessary, any adjournment thereof, (b) entitled to receive payment of any
distribution or dividend, or (c) for any other proper purpose, the Board of
Directors may fix in advance a date as the record date. The record date may
not be more than 70 days (and, in the case of a notice to shareholders of a
shareholders' meeting, not less than 10 days) prior to the date on which the
particular action, requiring the determination of shareholders, is to be taken.
A separate record date may be established for each Voting Group entitled to
vote separately on a matter at a meeting. A determination of shareholders of
record entitled to notice of or to vote at a meeting of shareholders shall
apply to any adjournment of the meeting, unless the Board of Directors shall
fix a new record date for the reconvened meeting, which it must do if the
meeting is adjourned to a date more than 120 days after the date fixed for the
original meeting.
7.7 RECORD DATE IF NONE FIXED. If no record date is fixed as provided in
Section 7.6, then the record date for any determination of shareholders that
may be proper or required by law shall be, as appropriate, the date on which
notice of a shareholders' meeting is mailed, the date on which the Board of
Directors adopts a resolution declaring a dividend or authorizing a
distribution, or the date on which any other action is taken that requires a
determination of shareholders.
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ARTICLE EIGHT
INDEMNIFICATION
8.1 INDEMNIFICATION OF DIRECTORS. The Corporation shall indemnify and
hold harmless any director of the Corporation (an "Indemnified Person") who was
or is a party, or is threatened to be made a party, to any threatened, pending
or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, whether formal or informal, including any
action or suit by or in the right of the Corporation (for purposes of this
Article Eight, collectively, a "Proceeding") because he or she is or was a
director, officer, employee, or agent of the Corporation, against any judgment,
settlement, penalty, fine, or reasonable expenses (including, but not limited
to, attorneys' fees and disbursements, court costs, and expert witness fees)
incurred with respect to the Proceeding (for purposes of this Article Eight, a
"Liability"), provided, however, that no indemnification shall be made for:
(a) any appropriation by a director, in violation of the director's duties, of
any business opportunity of the corporation; (b) any acts or omissions of a
director that involve intentional misconduct or a knowing violation of law; (c)
the types of liability set forth in Code Section 14-2-832; or (d) any
transaction from which the director received an improper personal benefit.
8.2 INDEMNIFICATION OF OTHERS. The Board of Directors shall have the
power to cause the Corporation to provide to officers, employees, and agents of
the Corporation all or any part of the right to indemnification permitted for
such persons by appropriate provisions of the Code. Persons to be indemnified
may be identified by position or name, and the right of indemnification may be
different for each of the persons identified. Each officer, employee, or agent
of the Corporation so identified shall be an "Indemnified Person" for purposes
of the provisions of this Article Eight.
8.3 OTHER ORGANIZATIONS. The Corporation shall provide to each director,
and the Board of Directors shall have the power to cause the Corporation to
provide to any officer, employee, or agent, of the Corporation who is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee, or agent of another corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise all or any part of the right to
indemnification and other rights of the type provided under Sections 8.1, 8.2,
8.4, and 8.10 of this Article Eight (subject to the conditions, limitations,
and obligations specified in those Sections) permitted for such persons by
appropriate provisions of the Code. Persons to be indemnified may be
identified by position or name, and the right of indemnification may be
different for each of the persons identified. Each person so identified shall
be an "Indemnified Person" for purposes of the provisions of this Article
Eight.
8.4 ADVANCES. Expenses (including, but not limited to, attorneys' fees
and disbursements, court costs, and expert witness fees) incurred by an
Indemnified Person in defending any Proceeding of the kind described in
Sections 8.1 or 8.3, as to an Indemnified Person who is a director of the
Corporation, or in Sections 8.2 or 8.3, as to other Indemnified Persons, if the
Board of Directors has specified that advancement of expenses be made available
to any such Indemnified Person, shall be paid by the Corporation in advance of
the final disposition of such Proceeding as set forth herein. The Corporation
shall promptly pay the amount of such expenses to the Indemnified Person, but
in no event later than 10 days following the Indemnified Person's delivery to
the Corporation of a written request for an advance pursuant
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to this Section 8.4, together with a reasonable accounting of such expenses;
provided, however, that the Indemnified Person shall furnish the Corporation a
written affirmation of his or her good faith belief that he or she has met the
applicable standard of conduct and a written undertaking and agreement to
repay to the Corporation any advances made pursuant to this Section 8.4 if it
shall be determined that the Indemnified Person is not entitled to be
indemnified by the Corporation for such amounts. The Corporation may make the
advances contemplated by this Section 8.4 regardless of the Indemnified
Person's financial ability to make repayment. Any advances and undertakings to
repay pursuant to this Section 8.4 may be unsecured and interest-free.
8.5 NON-EXCLUSIVITY. Subject to any applicable limitation imposed by the
Code or the Articles of Incorporation, the indemnification and advancement of
expenses provided by or granted pursuant to this Article Eight shall not be
exclusive of any other rights to which a person seeking indemnification or
advancement of expenses may be entitled under any provision of the Articles of
Incorporation, or any Bylaw, resolution, or agreement specifically or in
general terms approved or ratified by the affirmative vote of holders of a
majority of the shares entitled to be voted thereon.
8.6 INSURANCE. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee, or agent of the Corporation, or who, while serving in such a
capacity, is also or was also serving at the request of the Corporation as a
director, officer, trustee, partner, employee, or agent of any corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise,
against any Liability that may be asserted against or incurred by him or her in
any such capacity, or arising out of his or her status as such, whether or not
the Corporation would have the power to indemnify him or her against such
liability under the provisions of this Article Eight.
8.7 NOTICE. If the Corporation indemnifies or advances expenses to a
director under any of Sections 14-2-851 through 14-2-854 of the Code in
connection with a Proceeding by or in the right of the Corporation, the
Corporation shall, to the extent required by Section 14-2-1621 or any other
applicable provision of the Code, report the indemnification or advance in
writing to the shareholders with or before the notice of the next shareholders'
meeting.
8.8 SECURITY. The Corporation may designate certain of its assets as
collateral, provide self-insurance, establish one or more indemnification
trusts, or otherwise secure or facilitate its ability to meet its obligations
under this Article Eight, or under any indemnification agreement or plan of
indemnification adopted and entered into in accordance with the provisions of
this Article Eight, as the Board of Directors deems appropriate.
8.9 AMENDMENT. Any amendment to this Article Eight that limits or
otherwise adversely affects the right of indemnification, advancement of
expenses, or other rights of any Indemnified Person hereunder shall, as to such
Indemnified Person, apply only to Proceedings based on actions, events, or
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omissions (collectively, "Post Amendment Events") occurring after such
amendment and after delivery of notice of such amendment to the Indemnified
Person so affected. Any Indemnified Person shall, as to any Proceeding based
on actions, events, or omissions occurring prior to the date of receipt of such
notice, be entitled to the right of indemnification, advancement of expenses,
and other rights under this Article Eight to the same extent as if such
provisions had continued as part of the Bylaws of the Corporation without such
amendment. This Section 8.9 cannot be altered, amended, or repealed in a
manner effective as to any Indemnified Person (except as to Post Amendment
Events) without the prior written consent of such Indemnified Person.
8.10 AGREEMENTS. The provisions of this Article Eight shall be deemed to
constitute an agreement between the Corporation and each Indemnified Person
hereunder. In addition to the rights provided in this Article Eight, the
Corporation shall have the power, upon authorization by the Board of Directors,
to enter into an agreement or agreements providing to any Indemnified Person
indemnification rights substantially similar to those provided in this Article
Eight.
8.11 CONTINUING BENEFITS. The rights of indemnification and advancement
of expenses permitted or authorized by this Article Eight shall, unless
otherwise provided when such rights are granted or conferred, continue as to a
person who has ceased to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors, and administrators of such
person.
8.12 SUCCESSORS. For purposes of this Article Eight, the term
"Corporation" shall include any corporation, joint venture, trust, partnership,
or unincorporated business association that is the successor to all or
substantially all of the business or assets of this Corporation, as a result of
merger, consolidation, sale, liquidation, or otherwise, and any such successor
shall be liable to the persons indemnified under this Article Eight on the same
terms and conditions and to the same extent as this Corporation.
8.13 SEVERABILITY. Each of the Sections of this Article Eight, and each
of the clauses set forth herein, shall be deemed separate and independent, and
should any part of any such Section or clause be declared invalid or
unenforceable by any court of competent jurisdiction, such invalidity or
unenforceability shall in no way render invalid or unenforceable any other part
thereof or any separate Section or clause of this Article Eight that is not
declared invalid or unenforceable.
8.14 ADDITIONAL INDEMNIFICATION. In addition to the specific
indemnification rights set forth herein, the Corporation shall indemnify each
of its directors and such of its officers as have been designated by the Board
of Directors to the full extent permitted by action of the Board of Directors
without shareholder approval under the Code or other laws of the State of
Georgia as in effect from time to time.
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ARTICLE NINE
MISCELLANEOUS
9.1 INSPECTION OF BOOKS AND RECORDS. The Board of Directors shall have
the power to determine which accounts, books, and records of the Corporation
shall be available for shareholders to inspect or copy, except for those books
and records required by the Code to be made available upon compliance by a
shareholder with applicable requirements, and shall have the power to fix
reasonable rules and regulations (including confidentiality restrictions and
procedures) not in conflict with applicable law for the inspection and copying
of accounts, books, and records that by law or by determination of the Board of
Directors are made available. Unless required by the Code or otherwise
provided by the Board of Directors, a shareholder of the Corporation holding
less than two percent of the total shares of the Corporation then outstanding
shall have no right to inspect the books and records of the Corporation.
9.2 FISCAL YEAR. The Board of Directors is authorized to fix the fiscal
year of the Corporation and to change the fiscal year from time to time as it
deems appropriate.
9.3 CORPORATE SEAL. The corporate seal will be in such form as the Board
of Directors may from time to time determine. The Board of Directors may
authorize the use of one or more facsimile forms of the corporate seal. The
corporate seal need not be used unless its use is required by law, by these
Bylaws, or by the Articles of Incorporation.
9.4 ANNUAL STATEMENTS. Not later than four months after the close of each
fiscal year, and in any case prior to the next annual meeting of shareholders,
the Corporation shall prepare (a) a balance sheet showing in reasonable detail
the financial condition of the Corporation as of the close of its fiscal year,
and (b) a profit and loss statement showing the results of its operations
during its fiscal year. Upon receipt of written request, the Corporation
promptly shall mail to any shareholder of record a copy of the most recent such
balance sheet and profit and loss statement, in such form and with such
information as the Code may require.
9.5 NOTICE. (a) Whenever these Bylaws require notice to be given to any
shareholder or to any director, the notice may be given by mail, in person, by
courier delivery, by telephone, or by telecopier, telegraph, or similar
electronic means. Whenever notice is given to a shareholder or director by
mail, the notice shall be sent by depositing the notice in a post office or
letter box in a postage-prepaid, sealed envelope addressed to the shareholder
or director at his or her address as it appears on the books of the
Corporation. Any such written notice given by mail shall be effective: (i) if
given to shareholders, at the time the same is deposited in the United States
mail; and (ii) in all other cases, at the earliest of (x) when received or when
delivered, properly addressed, to the addressee's last known principal place of
business or residence, (y) five days after its deposit in the mail, as
evidenced by the postmark, if mailed with first-class postage prepaid and
correctly addressed, or (z) on the date shown on the return receipt, if sent by
registered or certified mail, return receipt requested, and the receipt is
signed by or on behalf of the addressee. Whenever notice is given to a
shareholder or director by any means other than mail, the notice shall be
deemed given when received.
(b) In calculating time periods for notice, when a period of time measured
in days, weeks, months, years, or other measurement of time is prescribed for
the exercise of any
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privilege or the discharge of any duty, the first day shall not be counted but
the last day shall be counted.
9.6 ELECTION OF "FAIR PRICE" STATUTE. The provisions of Sections
14-2-1110 through 14-2-1113 of the Code, as they may be amended from time to
time, shall apply to the Corporation, to the extent permitted.
9.7 ELECTION OF "BUSINESS COMBINATION" STATUTE. The provisions of
Section 14-2-1131 through 14-2-1133 of the Code, as they may be amended from
time to time, shall apply to the Corporation, to the extent permitted.
ARTICLE TEN
AMENDMENTS
Except as otherwise provided below or under the Code, the Board of
Directors shall have the power to alter, amend, or repeal these Bylaws or adopt
new Bylaws. Notwithstanding any other provision of these Bylaws, the
Corporation's Articles of Incorporation or law, neither Section 2.3, 2.13, 3.3
or 3.8, nor Article Eight hereof nor this Article Ten may be amended or
repealed except upon the affirmative vote of holders of at least 66 2/3% of the
total number of votes of the then outstanding shares of capital stock of the
Company that are entitled to vote generally in the election of directors,
voting together as a single class. Any Bylaws adopted by the Board of
Directors may be altered, amended, or repealed, and new Bylaws adopted, by the
shareholders. The shareholders may prescribe in adopting any Bylaw or Bylaws
that the Bylaw or Bylaws so adopted shall not be altered, amended, or repealed
by the Board of Directors.
Dated: ______________ __, 1997.
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<PAGE> 1
EXHIBIT 4.2
NUMBER SHARES
MELITA INTERNATIONAL CORPORATION
(Incorporated under the laws of the State of Georgia)
Authorized to Issue 100,000,000 shares of Common Stock, No Par Value
This certifies that____________[Specimen]____________is the registered
holder of ______________________________________shares of the authorized common
stock of Melita International Corporation which are fully paid and
non-assessable and which are transferable only on the books of the Corporation
by the holder hereof in person or by Attorney upon surrender of this
Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate
to be signed by its duly authorized officers and its Corporate Seal to be
hereunto affixed this ____ day of ___________ A.D., 19__
- ------------------------- -------------------------
Secretary President
<PAGE> 1
EXHIBIT 10.1
LEASE
THIS LEASE, made this _____ day of August, 1994, between TECHNOLOGY
PARK/ATLANTA, INC., a Georgia corporation having an office at 40 Technology
Parkway, Suite 300, Norcross, Georgia 30092 (herein called "Lessor"), and MELITA
INTERNATIONAL CORPORATION, a Georgia corporation having an office at 6630 Bay
Circle, Norcross, Georgia 30071 (herein called "Lessee");
WITNESSETH: That,
WHEREAS, Lessor is the owner of that certain tract of land containing
approximately 6.9 acres and described on Exhibit "A", attached hereto and by
this reference incorporated herein and made a part hereof (herein called the
"Land) on which Lessor proposes to construct a building as hereinafter provided
(herein called the "Building"); and
WHEREAS, Lessee wishes to lease from Lessor the Land and Building
(herein collectively called the "Premises") and Lessor wishes to lease to
Lessee the Premises, on the terms and conditions hereinafter provided;
NOW, THEREFORE, in consideration of the payment of the rent and the
keeping and performance of the covenants and agreements by Lessee as hereinafter
set forth, Lessor does hereby lease to Lessee, and Lessee does hereby lease from
Lessor, the Premises. Lessee hereby acknowledges that except as expressly
provided herein Lessor has not made any representation or warranty as to the
suitability of the Premises for the conduct of Lessee's business. No easement
for light or air is included in the Premises.
FOR AND IN CONSIDERATION of the leasing of the Premises as aforesaid,
the parties hereby covenant and agree as follows:
1. TERM. The term (herein called the "Lease Term") of this Lease shall
commence on the earlier of (herein called the "Commencement Date "):
(i) the date on which Lessee occupies the Building with Lessor's consent or
(ii) the later of April 1, 1995 or the date on which the Building is
"substantially complete" (as hereinafter defined); and unless sooner terminated
pursuant to the provisions hereof the Lease Term shall terminate at 11:59 p.m.
on the date (herein called the "Expiration Date") next preceding the date that
is ten (10) years, six (6) months after the Commencement Date. After the
Commencement Date and on the request of either Lessor or Lessee, Lessor and
Lessee shall execute a written agreement setting forth the Commencement Date
and the Expiration Date. Lessor covenants to and with Lessee that so long as
Lessee pays Annual Base Rental and Base Rent (each as hereinafter defined),
Lessee shall have the peaceable and quiet enjoyment to the possession of the
Premises, subject, however, to the terms of this Lease.
<PAGE> 2
2. RENT.
2.1 The annual base rental (herein called "Annual Base Rental") for the
Premises shall be as follows for each respective Lease Year (as hereinafter
defined) and shall be payable in equal monthly installments (herein called "Base
Rent") payable in advance on the first day of each and every calendar month
during the Lease Term commencing on the date that is six (6) months after the
Commencement Date (herein called the "Rental Commencement Date"):
Lease Year 1 Annual Base Rental of $542,599.20
Base Rent per month of $45,216.60
Lease Year 2 Annual Base Rental of $542,599.20
Base Rent per month of $45,216.60
Lease Year 3 Annual Base Rental of $553,451.18
Base Rent per month of $46,120.93
Lease Year 4 Annual Base Rental of $564,520.21
Base Rent per month of $47,043.35
Lease Year 5 Annual Base Rental of $575,810.61
Base Rent per month of $47,984.22
Lease Year 6 Annual Base Rental of $587,326.82
Base Rent per month of $48,943.90
Lease Year 7 Annual Base Rental of $599,073.36
Base Rent per month of $49,922.78
Lease Year 8 Annual Base Rental of $611,054.83
Base Rent per month of $50,921.24
Lease Year 9 Annual Base Rental of $623,275.92
Base Rent per month of $51,939.66
Lease Year 10 Annual Base Rental of $635,741.44
Base Rent per month of $52,978.45
As used in this Section 2.1, the term "Lease Year" shall mean a period of time,
and the first Lease Year shall commence on the first day of the calendar month
following the Rental Commencement Date (herein called the "Lease Year 1
Commencement") (unless the Rental Commencement Date is the first day of a
calendar month in which case the Rental Commencement Date shall be the Lease
Year 1 Commencement) and shall end on the last day of the calendar month
preceding the calendar month in which the first anniversary of the Lease Year 1
Commencement occurs. During the period of the Rental Commencement Date until
Lease
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<PAGE> 3
Year 1 Commencement, Lessee shall pay Base Rent at the same rate as Lease Year
1. Each succeeding Lease Year shall commence on the day immediately
following the last day of the immediately preceding Lease Year and shall end on
the day that is the anniversary of the date on which the previous Lease Year
ended. Base Rent shall be prorated at the rate of 1/30th of the Base Rent for
any partial month.
2.2 Lessee shall pay the Base Rent and any other amounts payable by
Lessee to Lessor under the terms hereof (herein collectively called the "Amounts
Due") promptly at the times and in the manner herein specified without
deduction, setoff, abatement, counterclaim, or defense except as expressly set
forth herein. If any installment of Base Rent is not received by Lessor on or
before the date that is five (5) days after the date on which it is due, Lessee
shall pay Lessor interest on such Base Rent from the date on which it was due
until the date it is actually paid at a rate per annum equal to the lesser of
(i) the prime rate of interest announced by Wachovia Bank of Georgia, N.A., or
its successors, plus five percent (5%) or (ii) the maximum rate permitted by
applicable law. The interest shall be due and payable at the time of actual
payment of the Base Rent. Any Base Rent payable to Lessor by Lessee shall be
paid in cash or by check at the office of Lessor, Suite 300, 40 Technology Park,
Norcross, Georgia 30092, or at such other place or places as Lessor may from
time to time designate in writing.
2.3 The Annual Base Rental amounts set forth in Section 2.1 hereof are
based upon Lessor's architect's calculation of 100,965 square feet of space in
the Premises (herein called the "Calculation") as calculated in accordance with
the Building Owners and Managers Association (herein called "BOMA") industry
standards where an entire building is leased to a single tenant. Lessee shall
have the right to object to the Calculation by delivering written notice to
Lessor within ten (10) days after the Commencement Date, failing which Lessee
shall be deemed to have agreed the Calculation is correct. If Lessee objects to
the Calculation within said ten (10) day period, Lessor and Lessee shall work
together to confirm and adjust the actual square feet in the Premises, and after
the square feet of the Premises has finally been determined, Lessor and Lessee
shall execute a certificate stipulating and agreeing to the same. If the square
footage so determined is less than 100,965 then the Annual Base Rental shall be
reduced accordingly. The square feet of the Premises and the Annual Base Rental
as so agreed to between Lessor and Lessee shall replace the square footage of
area of the Premises and the Annual Base Rental set forth above and shall be
deemed to be the net area of the Premises and the Annual Base Rental for all
purposes under this Lease. All payments of Annual Base Rental and all other
payments of rent and other sums of money required of Lessee herein shall be made
as and when required herein, notwithstanding any unresolved objections to the
Calculation. All such payments shall be based upon the Calculation prepared by
Lessor's architect until such objections have been finally resolved, whereupon
any overpayment theretofore made shall be adjusted by reducing the next
installment of Base Rent coming due.
3. FINANCIAL STATEMENTS. Upon request by Lessor, Lessee shall provide
Lessor with copies of its audited annual financial statements, prepared in
accordance with generally accepted accounting principles and which shall
demonstrate that Lessee is financially able to satisfy its obligations
hereunder. Lessor shall not deliver such financial statements of Lessee to
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<PAGE> 4
any third party without first obtaining a confidentiality agreement reasonably
acceptable to Lessee from such third party.
4. USE: OPERATION.
4.1 Lessee shall use the Premises only for office, research,
development and for product assembly, storage and distribution, and for no other
purpose without the prior written consent of Lessor. Lessee shall operate its
business in the Premises during the entire Lease Term and in compliance with all
applicable laws, ordinances, regulations, covenants, restrictions, and other
matters shown on the public records, now in force and all applicable laws,
ordinances and regulations hereafter enacted; provided, however, that Lessee
shall not be required to comply with any amendments hereinafter made to the
Protective Covenants (as hereinafter defined) or any other restrictive covenants
existing as of the date hereof and encumbering the Premises if such amendments
impose a greater restriction on the use or development of the Premises. Lessee
will not permit, create, or maintain any disorderly conduct, trespass, noise, or
nuisance whatsoever about the Premises which has a tendency to annoy or disturb
any persons occupying adjacent premises.
4.2 Lessee shall cause all loading and unloading of any goods or
materials delivered to or sent from the Premises to be done only at the loading
dock area of the Building or such other dock area as Lessor may designate;
provided that packages and other goods the delivery of which to other entrances
will not harm or otherwise damage the paint, finish or any other aspect of the
Building may be delivered to any door of the Building. Lessee hereby agrees to
remove within five (5) days of receiving notice from Lessor any goods or
materials delivered to or sent from the Premises stored on, accumulated on or
obstructing the loading dock area, trash bay, sidewalks, driveways, parking
areas, or entrances of the Building.
4.3 Lessee shall not perform or permit any work to be done on the
loading dock (on the exterior of the Building), sidewalks, driveways, parking
areas, or landscaped areas of the Premises without obtaining the prior written
consent of Lessor, which shall not be unreasonably withheld.
4.4 Lessee shall not use, handle, store, deal in, discharge, or
fabricate in violation of any local, state, or federal environmental protection
legislation or regulation any environmentally hazardous wastes or materials as
the same are now or hereafter may be defined or classified by any local, state,
or federal environmental protection legislation or regulation issued pursuant
thereto.
5. NET LEASE: MANAGEMENT FEE. This Lease shall be a completely net lease
and Lessee shall pay to Lessor, net throughout the Lease Term, the Annual Base
Rental and other Amounts Due, free of any offset, abatement or other deduction
whatsoever and without notice except as allowed pursuant to the express terms of
this Lease. Lessor shall not be required to make any payment of any kind
whatsoever with respect to the Premises, except as may be expressly set forth
herein. Additionally, Lessee shall pay Lessor a monthly management fee
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<PAGE> 5
equal to one percent (1.0%) of Lessee's then applicable Base Rent, which shall
be paid by Lessee in the same manner and at the same time as Base Rent.
6. UTILITIES AND SERVICES.
6.1 Lessee shall pay during the Lease Term the costs of all utilities
furnished to the Premises, including, without limitation, water, gas,
electricity, sewer and refuse disposal to the extent required by Lessee or
applicable law. Lessor warrants that such utilities are available to the
Premises over public rights of way or valid private easements and will be
available for Lessee's use on the Commencement Date to the extent necessary for
Lessee to operate the Premises in accordance with Section 4 hereof without
requirement by Lessee to pay any hook-up charges and upon payment of only normal
and customary usage charges. Lessee shall be solely responsible for the payment
of all telephone and cable charges incurred by Lessee, including, without
limitation, the cost of installation at the Premises of all telephone and cable
equipment which shall be installed at the request of Lessee. The furnishing of
and cost of janitorial services for the Premises shall be the sole
responsibility of Lessee.
6.2 Lessor shall not be held liable for any damage or injury suffered
by Lessee, resulting directly, indirectly, approximately or remotely from the
installation, use or interruption of any utility service to the Premises or the
Building, including, without limitation, temporary failure to supply any
heating, air conditioning, electrical, water or sewer services, or any of them,
and in particular any interruption in service by any cause beyond the immediate
control of Lessor except as expressly provided herein. Nothing herein shall be
deemed to release Lessor from any liability for any damage or injury suffered or
incurred as a result of Lessor's negligence or willful misconduct. No temporary
failure to provide services shall relieve Lessee from fulfillment of any
covenant of this Lease, including, without limitation, the covenant to pay Base
Rent or any other Amount Due in the manner and amounts, and promptly at the
times, as herein set forth unless caused by the negligence or willful misconduct
of Lessor. Further, the parties acknowledge that the temporary failure to
provide such services for any reason shall not render the Premises untenantable
unless caused by the negligence or willful misconduct of Lessor.
7. MAINTENANCE.
7.1 Lessor shall keep the roof, foundation, load bearing interior walls
and exterior walls (including glass therein) of the Building in good repair,
except as to damage arising from the acts of Lessee or Lessee's agents,
employees, invitees or licensees. On or before the Commencement Date, Lessor
shall deliver to Lessee a certificate of warranty issued by a third party
termite exterminating company stating that the Building (including the
foundation of the Building) has been properly treated for termites. Except as
otherwise provided in this Section 7.1, Section 7.5 and Section 40 hereof,
Lessor shall not be obligated to maintain or make any repairs or replacements to
the Premises or the Building during the Lease Term except for latent defects to
the Building which shall be the responsibility of Lessor (provided that Lessor
may pursue any warranty or guaranty relating thereto), and Lessee covenants and
agrees to assume all responsibility of repair and maintenance of the Premises
which is not the responsibility of Lessor under this Section 7.1, Section 7.5 or
under Section 40 hereof.
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<PAGE> 6
7.2 Upon the Commencement Date, Lessee shall accept and occupy the
Premises for its intended use, and, except as otherwise provided in Section 7.1
hereof, Lessee shall, at its sole cost, risk, expense and liability, keep and
maintain the Premises in good order and repair (including, without limitation,
annual treatment of the Building and foundation thereof for termite infestation,
provided that other than enforcing Lessee's termite bond on the Building Lessee
shall not have any obligation for the repair of termite related damage to the
Building), and in compliance with all applicable governmental codes, ordinances
and regulations; provided, however, Lessee shall not be responsible for (i)
environmental conditions existing on the Premises prior to the Commencement
Date, unless caused by Lessee or (ii) compliance with governmental codes,
ordinances and regulations applicable to the initial construction and completion
of the Premises as provided in Section 40 hereof which were in effect as of the
Commencement Date. Lessee shall also (i) keep all sewer and utility lines of the
Building, including, without limitation, all sewer connections, plumbing,
heating, ventilating and air conditioning equipment and appliances, wiring and
glass, in good order and repair; (ii) provide janitorial services for the
Building as required by Lessee; (iii) keep the Premises reasonably free from all
litter, dirt, debris and obstructions and in a clean and sanitary condition;
(iv) maintain the lawns, gardens, sidewalks, driveway and parking lots at the
Premises in a clean and! orderly manner and (v) provide Lessor with copies of
all maintenance agreements and all quarterly reports of service records.
7.3 At the expiration or other termination of this Lease, Lessee shall
surrender the Premises (and the keys thereto) in as good condition as when
received, loss by fire or other casualty not the result of any act or omission
of Lessee, and ordinary wear and tear only, excepted.
7.4 Nothing in this Section 7 shall be deemed to relieve Lessee or
Lessor from any liability which Lessee or Lessor, respectively, may have to the
other, under the terms of this Lease or otherwise, on account of any damage as
may be caused to the Premises or the Building by the negligence or misconduct of
Lessee or Lessor, respectively, or its agents, employees, invitees or licensees.
7.5 Upon substantial completion of the Premises, Lessor shall and does
hereby make to Lessee the same warranties relating to the construction of the
Premises, and all parts thereof, as Lessor expressly receives from its
contractor in its construction contract (Lessor shall obtain all such warranties
as are customarily obtained from construction contractors for the construction
of projects similar to the Premises). Lessor shall repair and replace or shall
cause to be repaired and replaced all such portions of the Premises covered by
such warranties upon the same terms and condition as provided in the warranties.
Lessee shall be entitled to enforce all such warranties directly against Lessor
on the same terms and conditions as Lessor may enforce against the maker of such
warranty. Promptly after Lessor shall have commenced construction of the
Premises Lessor shall provide Lessee with a list of all such warranties and a
copy of the contract or other document setting forth the terms of the warranty.
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<PAGE> 7
8. FORCE MAJEURE. In the event that either party hereto shall
be delayed or hindered in or prevented from the performance of any act
required hereunder by reason of failure of power, restrictive government laws
or regulations, riots, insurrection, war, or periods of inclement and adverse
weather conditions beyond or in excess of the average inclement and adverse
weather conditions for the time period in question or other reason of a like
nature other than finance not the fault of the party delayed in performing work
or doing acts required under the terms of this Lease, then performance of such
act shall be excused for the period of the delay and the period for the
performance of any such act shall be extended for a period equivalent to the
period of the delay, provided, however, (i) that such extension shall only
apply to the extent that the party seeking such extension continuously complies
with the next sentence and (ii) that in no event shall such extension exceed
ninety (90) days. If either party hereto is hindered or delayed by reason of
force majeure as provided above, the party so affected shall give prompt notice
of such force majeure and shall use good faith and reasonably diligent efforts
to end the force majeure or perform its obligations hereunder in an alternative
manner which is acceptable to the other party hereto. The provisions of this
Section 8 shall not cancel, postpone, or delay the due date of any payment to
be made by Lessee hereunder, or operate to excuse Lessee from prompt payment of
any Amount Due required by the terms of this Lease; provided however, nothing
herein shall obligate the Lessee to begin the payment of Rent prior to the
Rental Commencement Date of this Lease.
9. PROPERTY AND LIABILITY INSURANCE.
9.1 Lessee shall obtain prior to the Commencement Date and shall
maintain and keep in full force and effect, or in the event that Lessor is able
to obtain lower insurance rates Lessee at its option may cause Lessor to obtain
and maintain and keep in full force and effect (at the sole cost and expense of
Lessee), with Lessor and Lessor's mortgagees, Lessee and Lessee's lenders, named
as insureds therein as their respective interests may appear, the following
types and kinds of insurance:
9.1.1 Insurance against damage by fire, lightning and
explosion with extended coverage, upon the Premises and the Building,
including all improvements, fixtures and property of every description
and kind owned by Lessor or which could be owned by Lessor at the
conclusion of the Lease Term and located in the Building, including,
without limitation, fittings, installations, alterations, additions,
partitions and fixtures owned by Lessor, in an amount not less than one
hundred percent (100%) of the full replacement cost thereof. In the
event of any damage of the type insured against under this subsection
9.1.1, all insurance proceeds for such damage shall be paid to Lessor
and Lessor's mortgagees.
9.1.2 Rent insurance against loss of income arising out of
damage or destruction by fire, lightning, vandalism and malicious
mischief and such other hazards as are required to be insured pursuant
to subsection 9.1.1 hereof, in an amount not less than one hundred
percent (100%) of twelve (12) months gross rental income from the
Premises. Any proceeds from such rent insurance shall be paid to
Lessor.
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<PAGE> 8
9.2 Lessee shall comply with all applicable insurance regulations and
will not use or keep any substance or material in or about the Premises which
may vitiate or endanger the validity of insurance on the Building or cause such
insurance to be canceled or suspended. If any insurance policy upon the Premises
or the Building or any part thereof shall be canceled or shall be threatened by
the insurer to be canceled or the coverage thereunder reduced or threatened in
writing to be reduced, by reason of the use and occupation of the Premises by
Lessee or by any assignee or subtenant of Lessee and if Lessee fails to remedy
the condition giving rise to the cancellation or reduction or threat thereof
within the later of (i) fifteen (15) days prior to the DATE (as such date may be
extended by such insurer) set by such insurer as being the date on which such
insurance shall be canceled or reduced or (ii) twenty-four (24) hours after
notice thereof by Lessor, Lessor may, at its option, do any one of the
following:
9.2.1 Declare a default by Lessee, and thereupon the
provisions of Section 12 shall apply; or
9.2.2 Enter upon the Premises and remedy the condition giving
rise to the cancellation or reduction or threat thereof. In such event,
Lessee shall immediately pay the cost thereof to Lessor as additional
rent, and if Lessee fails to pay such cost, Lessor may declare a
default by Lessee and thereupon the provisions of Section 12 shall
apply. Lessor shall not be liable for any damage or injury caused to
any property of Lessee or of others located on the Premises reasonably
resulting from the reentry unless such damage or injury is caused by
Lessor's negligence.
Lessee acknowledges that it has no right to receive any proceeds from
any such insurance policies carried by Lessor other than those set forth in this
Section 9 or those with the same types of coverage as set forth in this Section
9.
9.3 All insurance policies shall be taken out with companies acceptable
to Lessor licensed and registered to operate in the State of Georgia and in form
reasonably satisfactory to Lessor. The insurance may be by blanket insurance
policy or policies. Such insurance policies may provide for deductible amounts
from the coverages afforded thereby in amounts of no less than Five Thousand
Dollars ($5,000.00). Lessee shall within fourteen (14) days of receipt from
Lessee's insurance company deliver certificates evidencing the insurance
policies and any endorsement, rider, or renewal thereof, to Lessor. Certificates
evidencing renewals shall be delivered to Lessor no later than fifteen (15) days
after each renewal, as often as renewal occurs, and in no event less than
fifteen (15) days prior to the date on which the policy would otherwise expire.
All insurance policies shall require the insurer to notify Lessor and Lessor's
mortgagees in writing thirty (30) days prior to any material change,
cancellation, or termination thereof.
9.4 Lessor and Lessee shall cooperate in connection with the collection
of any insurance monies that may be due in the event of loss, and Lessee and
Lessor shall execute and deliver such proofs of loss and other instruments which
may be required for the purpose of obtaining the recovery of any such insurance
monies. Lessee shall obtain with respect to all insurance policies taken out by
Lessee regarding the Premises or Lessee's property located therein, a waiver of
Lessee's insurance carriers subrogation rights against Lessor, in the insurance
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<PAGE> 9
policy itself or on a standard form of waiver issued by Lessee's insurance
carrier. Lessor shall obtain with respect to all insurance policies taken out by
Lessor relating to the Premises, or Lessor's property therein, a waiver of
Lessor's insurance carrier's subrogation rights against Lessee, in the insurance
policy itself or on a standard form of waiver issued by Lessor's insurance
carrier.
9.5 Lessee shall be solely responsible for the payment of the premiums
for all policies of insurance which are required to be maintained by Lessee
under this Section 9 or by Lessor at the request of Lessee. All such premiums
shall be paid by Lessee to the companies issuing such insurance policies prior
to the due date thereof of the invoice for the same.
9.6 Lessee shall, during its occupancy of the Premises and during the
entire Lease Term, at its sole cost and expense, obtain, maintain and keep in
force and effect, with Lessee, Lessor and Lessor's mortgagees named as
additional insureds therein as their respective interests may appear,
comprehensive general liability insurance with respect to the ownership,
maintenance and operation of the Premises having a combined single limit of
liability of not less than $1,000,000.00 and an umbrella liability policy having
a limit of liability of not less than $5,000,000.00. Such insurance shall
include coverage for "Fire Legal" liability with respect to the Premises and
coverage against liability for bodily injuries or property damage arising out of
the use by or on behalf of Lessee of owned, non-owned or hired automobiles and
other vehicles for limits not less than that specified above.
9.7 Neither Lessee nor any of the Lessee Parties shall cause the
Premises or the Building, or any part thereof to be damaged by fire or other
casualty such that Lessor's right to insurance proceeds from such casualty are
rendered void. If Lessee or any of the Lessee Parties cause such damage to the
Building or the Premises such that Lessor's right to insurance proceeds are
void, Lessee shall be fully responsible, to the extent not covered by insurance,
for repairing, restoring, or paying for the damage as Lessor shall reasonably
direct and this Lease shall remain in full force and effect without reduction or
abatement of rent.
10. ALTERATIONS AND IMPROVEMENTS.
10.1 Without the prior written consent of Lessor which shall not be
unreasonably withheld, conditioned or delayed, Lessee shall not make
alterations, additions or improvements in or to the Premises or install and
attach fixtures in and to the Premises, except that Lessee, without the prior
written consent of Lessor, shall be entitled to make interior alterations,
additions or improvements to the Premises not affecting the structure of the
Building so long as Lessee (i) delivers to Lessor prior written notice of and a
description of such minor interior alterations, additions or improvements, (ii)
updates, at Lessee's sole cost and expense, Lessor's as-built plans and
specifications of the Premises to reflect such alteration, addition or
improvement which costs and expenses shall be at commercially reasonable rates,
and (iii) restores the Premises on or before the expiration or earlier
termination of the Lease Term to the condition they were prior to such
alteration, addition or improvement, unless Lessor shall have agreed that such
alterations, additions or improvements need not be removed. As a condition to
Lessor's consent to alterations, additions or improvements, with respect to
which Lessee is
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<PAGE> 10
required to obtain Lessor's consent, Lessor may elect that any or all
installations made or installed by or on behalf of Lessee be removed at the end
of the Lease Term, and, if Lessor so elects, it shall be Lessee's obligation to
restore the Premises to the condition they were prior to the alterations,
additions, or improvements on or before the expiration or other termination of
this Lease. Such removal and restoration shall be at the sole expense of Lessee.
All alterations, additions, or improvements made, installed in, or attached to
the Premises by Lessee, upon the consent specified above, shall be made at
Lessee's expense in a good and workmanlike manner, strictly in accordance with
plans and specifications approved by Lessor, all applicable laws, ordinances,
regulations, and other requirements of any appropriate governmental authority,
and any applicable covenants or other restrictions. Prior to the commencement of
any such work, Lessee shall deliver to Lessor certificates issued by insurance
companies licensed and registered to operate in the State of Georgia evidencing
that workers' compensation insurance and public liability insurance, all in
amounts satisfactory to Lessor, are in force and effect and maintained by all
contractors and subcontractors engaged by Lessee to perform the work.
10.2 During the Lease Term, Lessee shall keep the Premises free from
all liens, rights to liens, or claims of liens of contractors, subcontractors,
mechanics, or materialmen for work done or materials furnished to the Property
at the request of Lessee. Whenever and so often as any such lien shall attach or
claims therefor shall be filed against the Property or any part thereof as a
result of work done or materials furnished to the Property at the request of
Lessee, Lessee shall, within fifteen (15) days after Lessee has notice of the
claim for lien, cause it to be discharged of record, which discharge may be
accomplished by deposit or bonding proceedings. If Lessee shall fail to cause
the lien to be discharged within the fifteen-day period, then, in addition to
any other right or remedy, Lessor may, but shall not be obligated to, discharge
it either by paying the amount claimed to be due or by procuring the discharge
of the lien by deposit or bonding proceedings. Any amount so paid by Lessor and
all costs and expenses, including, without limitation, attorneys' fees, incurred
by Lessor in connection therewith shall constitute additional rent payable by
Lessee under this Lease and shall be paid by Lessee in full on demand of Lessor
together with interest thereon from the date it was paid by Lessor. Lessee shall
not have the authority to subject the interest or estate of Lessor to any liens,
rights to liens, or claims of liens for services, materials, supplies, or
equipment furnished to Lessee, and all persons contracting with Lessee are
hereby charged with notice that they must look to Lessee and to Lessee's
interest only to secure payment.
10.3 All alterations, additions, or improvements, including, but not
limited to, fixtures, partitions, counters, and window and floor coverings,
which may be made or installed by either of the parties hereto upon the
Premises, irrespective of the manner of annexation, and irrespective of which
party may have paid the cost thereof, excepting only movable office furniture,
shop equipment and other trade fixtures and property of Lessee that may be
removed from the Premises without material alteration put in at the expense of
Lessee, shall be the property of Lessor, and shall remain upon and be
surrendered with the Premises as a part thereof at the expiration or other
termination of this Lease, without disturbance, molestation, or injury. Further,
notwithstanding anything contained herein to the contrary, Lessor shall be under
no obligation to insure the alterations, additions, or improvements or anything
in the nature of a leasehold improvement made or installed by or on behalf of
Lessee, or any of the Lessee's
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<PAGE> 11
licensees, agents, invitees, customers, servants, employees, contractors or
subcontractors (herein collectively called "Lessee Parties"), or any other
person, and such improvements shall be on the Premises at the risk of Lessee
only.
10.4 In the event Lessor makes any capital investment, major structural
repairs or improvements in or to the Premises or Building (of which Lessor shall
deliver prior notice to Lessee) which are required due to any negligence by
Lessee or any of the Lessee Parties or any breach by Lessee of its obligations
hereunder, any and all cost and expenses incurred by Lessor in making the
capital investment, major structural repairs, or improvements shall constitute
additional rent payable by Lessee under this Lease and shall be paid to Lessee
in full on demand of Lessor, together with interest thereon from the date of the
demand. The foregoing notwithstanding, if such capital investment relates to a
condition, the repair of which is Lessee's responsibility hereunder, Lessor
shall not make such repair unless Lessor has given Lessee notice of such repair
and Lessee has failed to diligently and in good faith to pursue such repair or
fails to complete such repair within thirty (30) days of notice from Lessor.
11. ASSIGNMENT OR SUBLETTING.
11.1 Lessee may assign this Lease or sublet or allow any other person,
firm, or corporation to use or occupy the Premises, or any part thereof, without
the prior written consent of Lessor. No assignment or subletting (with or
without the consent of Lessor) shall release Lessee from its obligations under
this Lease.
11.2 If Lessee shall assign this Lease or sublet the Premises, the
acceptance by Lessor of the Amount Due from any person claiming as assignee,
sublessee, or otherwise shall not be construed as a waiver of the right of
Lessor thereafter to collect any rent from Lessee, it being agreed that Lessor
may at any time accept any Amount Due under this Lease from any person offering
to pay it without thereby acknowledging the person so paying as lessee in place
of Lessee herein named, and without releasing Lessee from the obligations of
this Lease, and without recognizing the claims under which such person offers to
pay any Amount Due, but it shall be taken to be a payment on account by Lessee.
12. DEFAULTS.
12.1 In the event that (i) Lessee shall fail to pay the Base Rent or
any amounts payable to Lessor as reimbursement of insurance premiums for
insurance policies maintained by Lessor in accordance with Section 9.1 hereof,
or any part thereof, within five (5) days after its due date, which failure is
not cured within five (5) days after receipt of notice of such failure from
Lessor, or (ii) Lessee shall fail to pay any Amounts Due (other than Base Rent
or such insurance premiums described in the preceding clause) within thirty (30)
days of receipt of notice that the same is due, or (iii) Lessee shall fail to
comply with any of the terms, covenants, conditions, or agreements herein
contained or any of the rules and regulations now or hereafter established for
the government of the Building, which failure is not cured within thirty (30)
days after receipt of notice of such failure from Lessor, or (iv) Lessee shall
fail to comply with any term provision, condition, or covenant of any other
agreement between Lessor and Lessee, which failure is not
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<PAGE> 12
cured within thirty (30) days after receipt of notice of such failure from
Lessor, or (v) Lessee commits any default or breach as defined in any other
provision of this lease, which default or breach is not cured within thirty (30)
days after receipt of notice of such default or breach from Lessor (provided,
however, that if any default by Lessee described in clauses (iii), (iv) or (v)
above cannot reasonably be cured within thirty (30) days, then so long as Lessee
shall promptly commence and thereafter diligently and in good faith pursue the
cure of such default to completion, Lessee shall not be deemed to be in default
hereunder), then Lessor shall have the option, but not the obligation, to do any
one or more of the following in addition to, and not in limitation of, any other
remedy permitted by law, in equity or by this Lease:
12.1.1 Terminate this Lease, in which event Lessee shall
surrender the Premises to Lessor immediately, and recover all sums
owing and unpaid as of the date of termination and the unpaid rent. If
Lessee refuses to surrender or deliver possession of the Premises to
Lessor, Lessor may without notice enter into and upon the Premises, or
any portion thereof, and take possession of and repossess the Premises
and expel and remove the Lessee and its effects from the Premises,
without being liable for prosecution and damages therefore, and without
prejudice to any other remedy Lessor may have at law or equity;
12.1.2 Without terminating this Lease, retake possession of
the Premises and rent the Premises, or any part thereof, for such term
or terms and for such rent and upon such conditions as Lessor may, in
its sole discretion, think best, making such changes, improvements,
alterations, and repairs to the Premises as may be required. All rent
received by Lessor from any reletting shall be applied first to the
payment of any indebtedness other than rent due hereunder from Lessee;
second, to the payment of any reasonable costs and expenses of the
reletting, including but not limited to brokerage fees, attorneys' fees
and costs of such changes, improvements, alterations, and repairs;
third, to the payment of rent due and unpaid hereunder; and the
residue, if any, shall be held by Lessor and applied in payment of
future rent or damage as they may become due and payable hereunder. If
the rent received from the reletting during the Lease Term is at any
time insufficient to cover the costs, expenses, and payments enumerated
above, Lessee shall pay any deficiency to Lessor, as often as it shall
arise, on demand;
12.1.3 Correct or cure the default and recover any amount
expended in so doing, together with interest thereon until paid;
12.1.4 Recover any and all costs incurred by Lessor resulting
directly, indirectly, approximately, or remotely from the default,
including but not limited to reasonable attorneys, fees actually
incurred and calculated at such attorneys' standard hourly rates.
12.2 Intentionally Deleted
12.3 In the event of a default or threatened default under this Lease
by Lessee, Lessor shall be entitled to all equitable remedies, including without
limitation, injunction and specific performance.
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<PAGE> 13
12.4 Pursuit of any of the remedies herein provided shall not preclude
the pursuit of any other remedies herein provided or any other remedies provided
at law or in equity. Failure by Lessor to enforce one or more of the remedies
herein provided shall not be deemed to construed to constitute a waiver of any
default, or any violation or breach of any of the terms, provisions, or
covenants herein contained.
13. BANKRUPTCY. The filing or preparation for filing by or against Lessee
of any petition in bankruptcy, insolvency, or for reorganization under the
Federal Bankruptcy Code, any other federal or state law now or hereafter
relating to insolvency, bankruptcy, or debtor relief, or an adjudication that
Lessee is insolvent, bankrupt, or an issuance of an order for relief with
respect to Lessee under the Federal Bankruptcy Code, any other federal or state
law now or hereafter relating to insolvency, bankruptcy, or debtor relief, or
the execution by Lessee of a voluntary assignment for the benefit of, or a
transfer in fraud of, its general creditors, or the chronic failure or inability
of Lessee to pay its debts as they mature, or the levying on under execution of
the interest of Lessee under this Lease, or the filing or preparation for filing
by Lessee of any petition for a reorganization under the Federal Bankruptcy
Code, or for the appointment of a receiver or trustee for a substantial part of
Lessee's assets or to take charge of Lessee's business, or of any other petition
or application seeking relief under any other federal or state laws now or
hereafter relating to insolvency, bankruptcy, or debtor relief, or the
appointment of a receiver or trustee for a substantial part of Lessee's assets
or to take charge of Lessee's business, shall automatically constitute a default
in this Lease by Lessee for which Lessor may, at any time or times thereafter,
at its option, exercise any of the remedies and options provided to Lessor in
Section 12 hereof; provided, however, that if such petition be filed by a third
party against Lessee, and Lessee desires in good faith to defend against the
petition and is not in any way in default of any obligation hereunder at the
time of filing the petition, and Lessee within ninety (90) days thereafter
procures a final adjudication that it is solvent and a judgment dismissing the
petition, then this Lease shall be fully reinstated as though the petition had
never been filed.
14. DAMAGE AND CONDEMNATION.
14.1 In the event during the Lease Term the Premises are damaged by
fire or other casualty, but not to such an extent that repairs and rebuilding
cannot reasonably be completed within two hundred forty (240) days of the date
of the event causing the damage, Lessor shall and to the extent insurance
proceeds therefore are paid by the insurance company, diligently and in good
faith and as soon as practicable repair and rebuild the Premises. Without
limiting in any respect the foregoing, Lessor and Lessee shall promptly after
such casualty and in good faith meet and consult with each other and Lessor
shall estimate reasonably the time necessary to restore such Premises to the
condition prior to such casualty and Lessor agrees to use good faith and
diligent efforts to complete such restoration within such period so reasonably
estimated by Lessor. During such repair and rebuilding, this Lease shall remain
in full force and effect, but Lessor may to the extent actually and reasonably
necessary require Lessee temporarily to vacate the portions of the Premises so
affected by such restoration activities while they are being repaired and,
subject to the provisions of this Section 14.1, rent shall abate during this
period to
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<PAGE> 14
the extent that (i) the Premises are untenantable (including areas in which
Lessee is required to vacate) and cannot be used by Lessee for the purposes
contemplated in Section 4 hereof and (ii) an amount equal to such abated rent is
paid to Lessor under the insurance policies required in Section 9.1.2 hereof;
provided, however, that Lessor shall not be liable to Lessee for any damage or
expense which temporarily vacating the Premises may cause Lessee. Lessor shall
keep Lessee informed as to all aspects of the rebuilding and repair work and
shall give Lessee notice of estimated completion dates. If the Premises are not
repaired, rebuilt, or otherwise made suitable for occupancy by Lessee within the
aforesaid two hundred forty (240) day period (or earlier time period estimated
by Lessor for completion), Lessee shall have the right, by written notice to
Lessor, to terminate this Lease, in which event rent shall be abated for the
unexpired Lease Term, effective as of the date of the written notification, but
the other terms and conditions of this Lease shall continue and remain in full
force and effect until Lessee shall have vacated the Premises, removed all
Lessee's personal property therefrom and delivered peaceable possession thereof
to Lessor. If any part of the Premises is damaged such that repairs and
rebuilding cannot reasonably be completed within two hundred forty (240) days of
the date of the event causing the damage, Lessor or Lessee may by written notice
to the other terminate this Lease in which event rent shall be abated for the
unexpired Lease Term, Effective as of the date of the written notification, but
the other terms and conditions of this Lease shall continue and remain in full
force and effect until Lessee shall have vacated the Premises (except in all
events Base Rent shall abate to the extent of any portion of the Premises that
are untenantable), removed all Lessee's personal property therefrom and
delivered peaceable possession thereof to Lessor. If a casualty occurs during
the last three (3) years of the Lease Term and if Lessor shall fail within
fourteen (14) days of such casualty to covenant to restore the Premises, then
Lessee shall have the right to terminate this Lease within twenty eight (28)
days of such casualty in which event rent shall be abated for the unexpired
Lease Term, Effective as of the date of the written notification, but the other
terms and conditions of this Lease shall continue and remain in full force and
effect until Lessee shall have vacated the Premises (except in all events Base
Rent shall abate to the extent of any portion of the Premises that are
tenantable), removed all Lessee's personal property therefrom and delivered
peaceable possession thereof to Lessor, and shall within a reasonable amount of
time vacate the Premises. Failure by Lessee or Lessor, as the case may be, to
comply with any provision of this Section 14.1 shall subject non-complying party
to such costs, expenses, damages, and losses as the other party may incur by
reason of non-complying party's breach hereof.
14.2 In the event the Premises shall be taken, in whole or in such
substantial part that the remaining portion of the Premises cannot be reasonably
used by Lessee as contemplated under this Lease, by condemnation or the exercise
of the right of eminent domain, or if in lieu of any formal condemnation
proceedings or actions, if any, Lessor shall sell and convey the Premises, or
any such substantial part that the remaining portion of the Premises cannot be
reasonably used as contemplated under this Lease, to the governmental or other
public authority, agency, body, or public utility, seeking to take the Premises
or any portion thereof, then Lessor or Lessee, at its option, may terminate this
Lease upon ten (10) days' prior written notice to the other and prepaid rent
shall be proportionately refunded from the date of possession by the condemning
authority. Additionally, if Lessee reasonably and in good faith determines that
such taking materially and adversely affects Lessee's ability to use the
Premises as contemplated
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<PAGE> 15
hereby, Lessee may within fourteen (14) days of such taking terminate this
Lease. Lessor and Lessee shall each have the right with respect to their
separate interests to appear and to claim and recover from the condemning
authority such damages suffered by each party respectively. Lessee shall execute
and deliver any instruments, at the expense of Lessor, that Lessor may deem
necessary to expedite any condemnation proceedings, to effectuate a proper
transfer of title to such governmental or other public authority, agency, body
or public utility seeking to take or acquire the lands and Premises, or any
portion thereof. Lessee shall vacate the Premises, remove all Lessee's personal
property therefrom and deliver up peaceable possession thereof . Lessor or to
such other party designated by Lessor in the aforementioned notice. Failure by
Lessee or Lessor, as the case may be, to comply with any provisions of this
Section 14.2 shall subject the non-complying party to such costs, expenses,
damages, and losses as the other party may incur by reason of the non-complying
party's breach hereof. If this Lease is not terminated under this Section 14.2,
then to the extent and availability of condemnation proceeds received by Lessor
and subject to the rights of any mortgagee thereto, Lessor shall, at the sole
cost and expense of Lessor and with due diligence and in a good and workmanlike
manner, restore and reconstruct the Premises within a period of two hundred ten
(210) days after the date of the physical taking, and such restoration and
reconstruction shall-make the Premises reasonably tenantable and suitable for
the general use being made by Lessee prior to the taking; provided, however,
Lessor shall receive any award of or condemnation proceeds specifically
designated as compensation for such improvements. Notwithstanding the foregoing,
if Lessor has not completed the restoration and reconstruction on or before two
hundred ten (210) days after the date of physical taking so that the Premises
are not reasonably tenantable and suitable for the general use being made by
Lessee prior to the taking, Lessee, in addition to any other rights and remedies
Lessee may have, shall have the right to cancel this Lease. If this Lease
continues in effect after the physical taking, the rent payable hereunder shall
be equitably adjusted both during the period of restoration and reconstruction
and during the unexpired portion of the Lease Term.
14.3 In the event that during the Lease Term, any governmental
authority or the order or decree of any court, requires Lessee to repair, alter,
remove, reconstruct or improve (herein collectively called "Repairs") any part
of the Premises, then the Repairs (to the extent such Repairs were not a result
of the Premises' noncompliance with applicable laws in effect at the
Commencement Date) shall be effected promptly at the sole cost and expense of
Lessee and there shall not be any abatement of rent. If such Repairs relate to
the structure of the Building, then Lessor in good faith and diligently shall
perform such Repairs and there shall be no abatement of rent and Lessor shall
use good faith efforts so as not to unreasonably interfere with Lessee's use of
the Premises.
15. TAXES.
15.1 Lessee shall pay all taxes, assessments, and other governmental
charges, general or special, ordinary or extraordinary, foreseen or unforeseen,
including any installments therefore (herein called "Impositions"), levied,
assessed, or otherwise imposed by any lawful authority or payable with respect
to the Premises, excluding any income tax imposed upon Lessor except as provided
in Section 15.2 hereof, and relating to the Lease Term. Any taxes or assessments
relating to the Premises and for the year in which the Commencement Date occurs
(including
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those under the Protective Covenants) shall be pro rated between Lessor and
Lessee as of the Commencement Date and as of the Expiration Date.
15.2 If at any time during the Lease Term the methods of taxation
prevailing on the date hereof shall be altered so that in lieu of, or as a
substitute for, the whole or any part of the taxes, assessments, levies,
impositions or charges now levied, assessed, or imposed on real estate and the
improvements thereon, there shall be levied, assessed, or imposed a tax,
assessment, levy, fee or other charge: (i) on or measured by the rents received
therefrom; (ii) measured by or based in whole or in part upon the Premises and
imposed on Lessor; or (iii) measured by the rent payable by Lessee under this
Lease, then all such taxes, assessments, levies, impositions, charges, or fees
or the part thereof so measured or based, shall be deemed to be included within
the definition of "Impositions". The tax, levy or other imposition to which
reference is made hereinabove shall include sales, excise, or similar taxes, but
shall not include any net income, franchise, estate or inheritance taxes imposed
on Lessor.
15.3 If Lessee fails to pay any Imposition required to be paid by
Lessee by the terms of this Lease and Lessor pays the same, Lessee shall pay to
Lessor, as additional rent, any interest or penalty incurred by Lessor due to
Lessee's failure to pay such Imposition in a timely manner. The foregoing is in
addition to and not a limitation of any other remedies of Lessor provided in
this Lease.
15.4 In the event that a tax or assessment attributable to
environmental protection legislation, as distinguished from a tax or assessment
in the nature of a real estate property tax, is imposed upon Lessor by a
governmental authority having jurisdiction over the Premises, which tax or
assessment is attributable to a portion of the Premises being parking facilities
available to the Lessee and the Lessee Parties, such tax or assessment shall be
included within the definition of "Impositions".
15.5 Lessor shall diligently and in good faith use reasonable efforts
to minimize the Impositions levied against the Premises, including, without
limitation, retaining a property tax consultant acceptable to Lessor. Lessee
shall have the right diligently and in good faith to use reasonable efforts to
contest and minimize the Impositions levied against the Premises.
16. LIABILITY OF LESSOR AND LESSEE. Notwithstanding that joint or
concurrent liability may be imposed upon Lessor by law, Lessee shall indemnify,
defend, and hold harmless Lessor, at Lessee's expense, against (a) any default
by Lessee or permitted subtenant hereunder; (b) any act or negligence of Lessee
or any of the Lessee Parties; and (c) all claims for damages to persons or
property by reason of the use or occupancy of the Premises not caused by Lessor
or its agents, contractors, employees or invitees. Moreover, Lessor shall not be
liable for any damage, injury, destruction, or theft to or of the Premises, the
personal property of Lessee or any of the Lessee Parties, Lessee, or any of the
Lessee Parties arising from any use or condition of the Premises, or any
sidewalks, entranceways, or parking areas serving the Premises, or the act or
neglect of covenants or any other person, or the malfunction of any equipment or
apparatus serving the Premises, or any loss thereof by mysterious disappearance
or otherwise not resulting from the negligence or misconduct of Lessor, its
agents, contractors, employees or invitees.
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Lessor shall indemnify, defend, and hold harmless Lessee, at Lessors expense,
against (a) any default by Lessor hereunder, (b) any act of negligence of
Lessor, and (c) all claims for damages to persons or property negligently caused
by Lessor. After the Commencement date and except for the construction and
warranty obligations of Lessor in Sections 7.5 and 40 hereof, Lessee expressly
agrees to look solely to Lessor's interest in the Premises (including rents,
profits and, notwithstanding the last sentence in Section 9.2, insurance
proceeds therefrom) for the recovery of any judgment against Lessor, it being
agreed that Lessor (and its partners and shareholders) shall never be personally
liable for any such judgment.
17. RIGHT OF ENTRY.
17.1 Lessor reserves the right upon reasonable notice to Lessee, except
in the case of emergencies where no notice shall be required, for itself, its
mortgagees, or other respective agents and duly authorized representatives, to
enter and be upon the Premises at any time and from time to time to inspect the
Premises provided that Lessee may be present during any inspection.
17.2 After reasonable notice to Lessee, Lessee shall permit Lessor or
Lessor's agents at any reasonable hour of the day to enter into or upon and go
through and view the Premises and to exhibit the Premises to prospective
purchasers or tenants.
18. PROPERTY LEFT ON THE PREMISES. Upon the expiration of this Lease or
if this Lease should terminate for any cause, if Lessee or any of the
Lessee Parties or any other person should leave any property of any kind or
character in or upon the Premises, the fact of the leaving of property in or
upon the Premises shall be conclusive evidence of the intent by Lessee or such
person to abandon the property so left in or upon the Premises, and such
leaving shall constitute abandonment of the property. Lessor, its agents, or
attorneys, shall have the right and authority without notice to Lessee or
anyone else except as required by law, to remove and destroy, store, sell, or
otherwise dispose of, the property, or any part thereof, without being in any
way liable to Lessee or anyone else therefor. Lessee shall be liable to Lessor
for all expenses incurred in the removal and destruction, storage, sale or
other disposition of the property less any proceeds received by Lessor from the
sale of such property. The property removed or the proceeds from the sale or
other disposition thereof shall belong to the Lessor as compensation for the
removal and disposition of the property.
19. OTHER INTERESTS.
19.1 This Lease and Lessees interest hereunder shall at all times be
subject and subordinate to the lien and security title of any deeds to secure
debt, deeds of trust, mortgages, or other interests heretofore or hereafter
granted by Lessor or which otherwise encumber or affect the Premises and to any
and all advances to be made thereunder and to all renewals, modifications,
consolidations, replacements, substitutions, and extensions thereof (all of
which are hereinafter called the "Mortgage"); provided, however, that with
respect to that certain deed to secure debt from Lessor to Lenox Towers and any
Mortgage hereinafter granted, such subordination is conditioned upon delivery to
Lessee of a non-disturbance agreement in the form
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attached hereto as Exhibit "B" and by this reference incorporated herein and
made a part hereof, and Lessee agrees that if a potential lender objects to the
form of the non-disturbance agreement attached hereto as Exhibit "B" then Lessee
shall in good faith consider alternative forms of non-disturbance agreements
(but shall not be obligated to accept such alternative forms) to the extent
required by such potential lender. This clause shall be self-operative and no
further instrument of subordination need be required by any holder of any
Mortgage. In confirmation of such subordination, however, Lessee shall, at
Lessor's request, promptly execute, acknowledge, and deliver any instrument
which may be required to evidence subordination to any Mortgage and to the
holder thereof, and, in the event of a failure so to do, Lessor may, in addition
to any other remedies for breach of covenant hereunder, execute, acknowledge,
and deliver the instrument as the agent or attorney-in-fact of Lessee, and
Lessee hereby irrevocably constitutes Lessor its attorney-in-fact for such
purpose, Lessee acknowledging that the appointment is coupled with an interest
and is irrevocable. Lessee hereby waives and releases any claim it might have
against Lessor or any other party for any actions lawfully taken by the holder
of any Mortgage.
19.2 In the event of a sale or conveyance by Lessor of Lessor's
interest in the Premises other than a transfer for security purposes only, and
except as provided to the contrary herein Lessor shall be relieved, from and
after the date of transfer, of all obligations and liabilities accruing
thereafter on the part of Lessor, provided that any funds in the hands of Lessor
at the time of transfer in which Lessee has an interest shall be delivered to
the successor of Lessor and provided that Lessor agrees that in no event shall
Lessor be relieved from its construction obligations under Section 40 hereof.
This Lease shall not be affected by any such sale and Lessee shall attorn to the
purchaser or assignee.
19.3 Lessor represents and warrants to Lessee that as of the date
hereof Lessor owns fee simple title to the Premises subject only to the matters
set forth as exceptions in Lessor's commitment for title insurance insuring the
Premises from Chicago Title Insurance Company, dated July 16, 1994, Commitment
Number 07617.02, as endorsed by Endorsement 1 and as endorsed by Endorsement 2
(herein called the "Title Commitment") and subject to the deed to secure debt
from Lessor to Lenox Towers.
20. LESSEE'S TRANSFER OF STOCK OR ASSETS. Lessee shall not cause or allow
the dissolution, merger, consolidation, or other reorganization of Lessee, or
the sale or other transfer of capital stock of Lessee, or the sale of the assets
of Lessee such that Lessee or such surviving entity is financially unable to
perform its obligations under this Lease.
21. POSSESSION. Lessor shall deliver to Lessee actual possession of the
Premises upon "substantial completion" of the Premises in accordance with
Section 40 hereof.
22. HOLDING OVER. There shall be no renewal, extension, or reinstatement of
this Lease by operation of law. In the event of holding over by Lessee after the
expiration or sooner termination of this Lease, with Lessor's acquiescence and
without any express agreement of the parties, Lessee shall be a tenant at
sufferance and all of the terms, covenants, and conditions of this Lease shall
be applicable during that period, except that Lessee shall pay Lessor as Base
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Rent for the period of the hold over an amount equal to one and one half (1
1/2%) times the Base Rent which would have been payable by Lessee under Section
2.1 hereof had the holdover period been part of the original Lease Term,
together with all additional rent due hereunder and together with any other
Amount Due under this Lease. The rent payable by Lessee during the holdover
period shall be payable to Lessor on demand. If Lessee holds over as a tenant at
sufferance, Lessee shall vacate and deliver the Premises to Lessor upon demand.
In the event Lessee fails to surrender the Premises to Lessor upon expiration or
other termination of this Lease or of such tenancy at sufferance, then Lessee
shall indemnify Lessor against any and all loss or liability resulting from any
delay of Lessee in surrendering the Premises, including, but not limited to, any
amounts required to be paid to third parties who were to have occupied the
Premises and any attorneys' fees related thereto.
23. NO WAIVER. Lessee understands and acknowledges that no assent, express
or implied, by Lessor to any breach of any one or more of the terms, covenants
or conditions hereof shall be deemed or taken to be a waiver of any succeeding
or other breach, whether of the same or any other term, covenant or condition
hereof.
24. BINDING EFFECT. All the terms and provisions of this Lease shall be
binding upon and apply to the successors, permitted assigns, and legal
representatives of Lessor and Lessee or any person claiming by, through, or
under either of them or their agents or attorneys, subject always, as to Lessee,
to the restrictions contained in Section 11 hereof.
25. COMPLIANCE WITH RESTRICTIVE COVENANTS. In addition to and without in
any way limiting any of the other provisions of this Lease, Lessee shall comply
with any protective or restrictive covenants now or hereafter of record against
the Building or the Property, including, without limitation, that certain
Declaration of Covenants, Conditions, Restrictions and Easements for Technology
Park North, dated February 11, 1994 and recorded in Deed Book 10243, page 118,
Gwinnett County, Georgia records (herein the February 11, 1994 declaration is
called the "Protective Covenants"), as the same may be amended or modified on a
nondiscriminatory basis from time to time (a copy of which is attached hereto as
Exhibit "C") and to the provisions of all rules, regulations, guidelines and
procedures established, adopted or promulgated pursuant to the Protective
Covenants; provided that Lessee shall not be required to comply with any such
amendment or modification to the Protective Covenants to the extent such
amendment or modification imposes a greater restriction on the use or
development of the Premises. Lessor represents and warrants that the Protective
Covenants have not been amended as of the date hereof and that any other
restrictive covenants encumbering the Premises have not been amended as of the
date hereof except as provided in the Title Commitment. Lessee shall pay when
due any and all nondiscriminatory assessments charged, levied or assessed
against the Land or the Building under such Protective Covenants. Lessor
represents and warrants to Lessee that to the best of Lessor's actual knowledge,
the current assessments under the Protective Covenants are approximately Five
Hundred Dollars ($500) per acre per year. Lessee acknowledges that such
assessments are subject to change. If because of an amendment to the Protective
Covenants or any other restrictive covenants encumbering the Premises as of the
date hereof Lessee's financial obligations thereunder are materially increased,
Lessor shall pay such increased costs, provided that such obligation of Lessor
shall in no event apply to increased
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financial obligations under the Protective Covenants because of an increase in
Assessments (as defined in the Protective Covenants) resulting from an increase
in the underlying costs relating thereto. Lessor, at its sole cost and expense,
shall be responsible for causing the Premises, Building and initial landscaping
relating thereto to comply with the Protective Covenants or any other
restrictive covenants encumbering the Premises as of the date hereof.
26. SIGNS. Except for that signage identified on Exhibit "D" attached
hereto and by this reference incorporated herein and made a part hereof, which
has become approved by Lessor. Lessee shall not install, paint, display,
inscribe, place, or affix any sign, picture, advertisement, notice, lettering,
or direction (hereinafter collectively called "Signs") on the exterior of the
Premises, the common areas of the Building, the interior surface of glass and
any other location which could be visible from outside of the Premises without
first securing written consent from Lessor therefor which shall not be
unreasonably withheld, delayed or conditioned. Any Sign permitted by Lessor
shall at all times conform with all municipal ordinances or other laws,
regulations, deed restrictions, and protective covenants applicable regulations,
deed restrictions, and protective covenants applicable thereto. Lessee shall
remove all Signs at the expiration or other termination of this Lease, at
Lessee's sole risk and expense, and shall in a good and workmanlike manner
properly repair any damage caused by the installation, existence, or removal of
Lessee's Signs.
27. ESTOPPEL CERTIFICATE. Lessee and Lessor shall, at any time and from
time to time, upon not less than ten (10) days' prior written notice from the
other, execute, acknowledge, and deliver to the other a statement in writing
certifying that this Lease is unmodified and in full force and effect (or if
modified, stating the nature of the modification and certifying that this Lease,
as so modified, is in full force and effect) and the dates to which the rent and
other charges are paid, and acknowledging that Lessee is paying rent on a
current basis with no offsets of claims (or specifying the offsets or claims if
there are any claims), and that there are not, to such certifying party's
knowledge, any uncured defaults on the part of the other hereunder (or
specifying the offsets, claims, or defaults, if any are claimed), and such other
information reasonably required by Lessor. It is expressly understood and
acknowledged that any such statement may be relied upon by any prospective
purchaser or encumbrance of all or any portion of the Building or by any other
person to whom it is delivered.
28. SEVERABILITY. The terms, conditions, covenants and provisions of this
Lease shall be deemed to be severable. If any clause or provision herein
contained shall be adjudged to be invalid or unenforceable by a court of
competent jurisdiction or by operation of any applicable law, it shall not
affect the validity of any other clause or provision herein, but the other
clauses or provisions shall remain in full force and effect.
29. ENTIRE AGREEMENT. Lessee acknowledges that there are no covenants,
representations, warranties, or conditions, express or implied, collateral or
otherwise, forming part of or in any way affecting or relating to this Lease
save as expressly set out in this Lease and that this Lease together with the
Exhibits attached hereto constitutes the entire agreement between the parties
hereto and may not be modified except as herein explicitly provided or
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except by subsequent agreement in writing of equal formality hereto executed by
Lessor and Lessee.
30. CUMULATIVE REMEDIES. In the event of any breach, or threatened breach
by Lessee of any of the covenants or provisions hereto, Lessor shall, in
addition to all other remedies as provided by this Lease, have the right of
injunction and/or to damages and the right to invoke any remedy allowed in law
or in equity, and may have any one or more of the remedies contemporaneously.
The various rights, remedies, powers, options, and elections of Lessor reserved,
expressed, or contained in this Lease are cumulative and no one of them shall be
deemed to be exclusive of the others, or of such other rights, remedies, powers,
options, or elections as are now, or may hereafter, be conferred upon Lessor by
law.
31. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given when delivered in person or when
received if delivered by the United States Mail, return receipt requested, or
overnight courier addressed to the parties at the respective addresses set out
below:
If to Lessee: Melita International
6630 Bay Circle
Norcross, Georgia 30071
If to Lessor: Technology Park/Atlanta, Inc.
Suite 300
40 Technology Park/Atlanta
Norcross, Georgia 30092
or to such other addresses as the parties may direct from time to time by thirty
(30) days' written notice. However, the time period in which a response to any
notice, demand, or request must be given, if any, shall commence to run from the
date of receipt of the notice, demand, or request by the addressee thereof.
Rejection or other refusal to accept or the inability to deliver because of
changed address of which no notice was given shall be deemed to be receipt of
the notice, demand, or request sent. Lessee hereby appoints as its agent to
receive service of all dispossessory or distraint proceedings and notices in
connection therewith, the person in charge of or occupying the Premises at the
time; and if no person is in charge of or occupying the Premises, then the
service or notice may be made by attaching it on the main entrance to the
Premises and on the same day enclosing, directing, stamping, and marking by
first class certified mail, return receipt requested a copy of the service or
notice to Lessee at the last known address of Lessee.
32. RECORDING. This Lease, or any portion hereof, shall not be recorded
unless both parties hereto agree to the recording.
33. ATTORNEYS' FEES. Lessee agrees to pay Lessor's reasonable attorneys'
fees actually incurred at standard rates and any costs and expenses which Lessor
incurs in enforcing any of the obligations of Lessee under this Lease, if Lessor
prevails in such proceedings.
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34. HOMESTEAD. Lessee waives all homestead rights and exemptions which
it may have under any law as against any obligations owing under this Lease.
Lessee hereby assigns to Lessor its homestead and exemption.
35. TIME OF ESSENCE. Time is of the essence of this Lease.
36. NO ESTATE IN LAND. This Lease shall create the relationship of
landlord and tenant between Lessor and Lessee, and nothing contained herein
shall be deemed or construed by the parties hereto, or by any third party, as
creating the relationship of principal and agent, or of partnership, or of joint
venture, or of any relationship other than landlord and tenant, between the
parties hereto. No estate shall pass out of Lessor and Lessee has only a
usufruct not subject to levy and sale.
37. ACCORD AND SATISFACTION. No payment by Lessee or receipt by Lessor
of a lesser amount than the Base Rent or any other account of the earliest of
such amount then due, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Lessor may accept the check or payment without prejudice to
Lessor's right to recover the balance of the rent or pursue any other remedy
provided in this Lease.
38. BROKERS' FEES. Lessee and Lessor each warrant and represent to the
other that it has had no dealings with any broker or agent in connection with
this Lease other than Ackerman & Company and Lessor covenants to pay Ackerman &
Company its commission pursuant to separate written agreement and Lessor shall
indemnify and hold Lessee harmless from any liability relating to claim for a
commission by Ackerman & Company, and each party hereto shall, hold harmless and
indemnify the other from and against any and all costs, expense, or liability
for any compensation, commissions, and charges claimed by any broker or agent
(other than Ackerman & Company) claiming to have been engaged by the
indemnifying party with respect to this Lease or negotiations thereof. Lessee
represents and warrants that it has not incurred any obligation to Ackerman &
Company for any commission or fee with respect to the Lease.
39. MISCELLANEOUS.
39.1 Words of any gender used in this Lease shall be held and construed
to include any other gender, and words in the singular number shall be held to
include the plural unless the context otherwise requires.
39.2 The captions are inserted in this Lease for convenience only, and
in no way define, limit, or describe the scope or intent of this Lease, or of
any provision hereof, nor in any way affect the interpretation of this Lease.
39.3 This Lease is made and delivered in the State of Georgia and shall
be governed by and construed in accordance with the laws of the State of
Georgia.
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39.4 This Lease may be executed in counterparts which shall be
construed together as one instrument.
39.5 Whenever Lessor's or Lessee's consent or approval is required
herein, such consent and approval shall not be unreasonably withheld,
conditioned or delayed.
40. CONSTRUCTION OF IMPROVEMENTS.
40.1 Lessor and Lessee have approved and do hereby approve the
preliminary plans for the Premises identified on Exhibit "E", attached hereto
and by this reference incorporated herein and made a part hereof (herein called
the "Preliminary Plans").
40.2 Lessor, at its sole cost and expense, shall cause detailed plans
and specifications for the interior, exterior and basic structure of the
Building and the landscaping of the Land (herein called the "Plans") to be
prepared by Kohl, Gramigna Architects, Inc. (herein called the "Architect")
based upon and in accordance with the Preliminary Plans and to be delivered to
Lessee on or before September 14, 1994 (which date shall be extended one (1) day
for every day after August 8, 1994 that this Lease has not been fully executed).
Lessor, Lessee and the Architect shall meet generally once a week to discuss and
consult with each other concerning the Plans and their preparation. Lessor and
Lessee shall cooperate in good faith to resolve any objections expressed by
Lessee to the Plans. If the Plans are not finally approved by Lessee on or
before September 19, 1994 (which date shall be extended one (1) day for every
day after August 8, 1994 that this Lease has not been fully executed) then (i)
Lessee may at any time terminate this Lease (so long as the parties have not
subsequently approved the Plans) by written notice thereof to Lessor and (ii) if
the Plans are substantially in accordance with the Preliminary Plans (or any
changes requested by Lessee) Lessor may terminate this Lease (so long as the
parties have not subsequently approved the Plans) after the later of September
19, 1994 (which date shall be extended one (1) day for every day after August 8,
1994 that this Lease has not been fully executed) or the date that is five (5)
days after Lessor delivers the Final Plans to Lessee, whereupon in the event the
Plans are substantially in compliance with the Preliminary Plans (or any changes
requested by Lessee) and if Lessor delivered the final Plans to Lessee on or
before September 14, 1994 (as extended aforesaid) then Lessee shall promptly
reimburse Lessor for expenses incurred by Lessor in connection with the
preparation of said Plans and thereafter this Lease shall terminate and be of no
further force and effect. A complete set of the final Plans, as and when finally
approved by both Lessor and Lessee, shall be initialed on each page by an
officer of Lessor and Lessee, shall be deemed thus incorporated in and made a
part of this Lease and shall be herein called the "Plans." Lessor shall cause
three (3) copies of the Plans to be delivered to Lessee.
40.3 Lessor shall commence construction of the improvements of the
Premises in accordance with such Plans within twenty (20) days after such Plans
are finally approved by Lessor and Lessee.
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<PAGE> 24
40.4 No amendments to the Plans will be implemented without the written
approval of both Lessor and Lessee, which approval Lessor and Lessee each agree
not unreasonably to withhold or delay (disapproval by the holder of any Mortgage
shall be deemed a reasonable basis for disapproval) (herein such amendments are
called "Change Orders"). Any proposed Change Order to the Plans shall be
submitted by the proposing party to the other party in writing and shall be
approved or rejected in writing within ten (10) days after receipt thereof by
the non-proposing party. With respect to any Change Order proposed by Lessee,
Lessee shall pay any "additional construction costs" which are attributable to
such Change Order as follows:
40.4.1 With respect to the first $10,000.00 (in the
aggregate) of additional construction costs which are attributable to a
Change Order or Change Orders proposed by Lessee, Lessee shall pay such
additional construction costs to Lessor upon the Completion Date.
40.4.2 With respect to any additional construction costs
greater than $10,000.00 in the aggregate which are attributable to a
Change Order or Change Orders proposed by Lessee, Lessee shall pay to
Lessor such additional construction costs prior to commencement by
Lessor of construction required under such Change Order or Change
Orders.
As used herein, "additional construction costs" means the total cost
incurred by Lessor attributable to such Change Order including, without
limitation, architectural, engineering and design fees, the amount
charged to Lessor by its contractor, all construction related costs,
the costs of any insurance premiums which are required with respect to
the construction of the improvements, the costs of sales or use taxes
with respect to materials brought to the Premises, the costs of all
administrative, profit or overhead allowances charged by the contractor
and Lessor's indirect project management costs not to exceed ten
percent (10%) of total project costs that are greater than $10,000.00
(attributable to such Change Order or Change Orders).
40.5 Lessor shall substantially complete the Premises on or before the
date that is two hundred twenty-five (225) days after the date on which the
Plans are approved by Lessee in writing (herein called the "'Completion Date").
The Completion Date shall be extended to the extent construction or completion
of construction is delayed (i) by reason of force majeure as set forth in
Section 8 hereof making the construction of the Premises impractical or delaying
the same, or (ii) by amendments to the Plans requested by Lessee, or (iii) by
reason of any other act or omission of Lessee, its contractors, employees and
agents that actually delay construction of the Premises and for which Lessor
shall promptly notify Lessee in writing, but shall not be extended for any
reason, except Change Orders, past the date that is one hundred eighty (180)
days after the Completion Date (herein called the "Final Date of Completion").
In the event construction of the Premises is not "substantially completed" on or
before the date that is thirty (30) days after the Completion Date, as extended
as aforesaid, Lessor shall pay Lessee as its sole remedy and as liquidated
damages the sum of $1,000.00 for each day that the Premises are not
substantially completed after the date that is thirty (30) days after the
Completion Date, as extended as aforesaid. If the Premises are not
"substantially completed" on or before the Final
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<PAGE> 25
Date of Completion, this Lease at the option of Lessee shall terminate and be of
no further force and effect.
40.6 The term "substantially completed," "substantially complete," or
"substantial completion" as used in this Lease shall mean completed
substantially in accordance with the Plans, as amended as provided herein, to
the extent that the Premises, may be occupied by Lessee subject to a normal
punchlist of incomplete items which taken individually or in the aggregate do
not materially or substantially interfere with Lessee's intended use of the
Premises. In no event, however, shall the Premises be deemed to be substantially
complete until Lessor has furnished Lessee with a validly issued certificate of
occupancy from the appropriate governmental authorities required to allow Lessee
initially to occupy and use the Premises.
40.7 Lessor shall notify Lessee in writing on the date that Lessor
believes the Premises to be "substantially completed" in accordance with the
Plans, as amended in accordance with the terms hereof. Upon the substantial
completion of improvements as provided herein, Lessor shall notify Lessee of
such completion, and the Architect hereto within three (3) days after such
notice shall perform a walk-through inspection of the Premises. During such
inspection the parties shall prepare a punchlist of defective or incomplete
items, if any, which items Lessor shall correct within ninety (90) days after
the date of such inspection. Upon substantial completion, Lessor shall deliver
to Lessee and Lessor shall cause the Architect to deliver to Lessee, written
certification, (a) that, the Plans are complete, that, the Plans provide for the
Premises to be constructed in accordance with all applicable zoning, building
and other occupancy laws and all other applicable laws, rules and regulations
and that, the Plans provide for a complete properly functioning building in
accordance with normal architectural design standards for a building comparable
to the Premises, (b) that (to the best of the Architect's knowledge) the Plans
have received all requisite approvals under the Protective Covenants and (c)
that, to the best of the certifying party's knowledge after diligent inquiry,
the Premises have been substantially completed in accordance with the Plans
subject only to the agreed upon punchlist items. Additionally, upon substantial
completion of the Premises Lessor shall deliver to Lessee a certificate from an
exterminating company chosen by Lessor, stating that the Premises are free from
termite infestation.
40.8 Notwithstanding anything to the contrary contained herein, the
Commencement Date, and therefore the date on which the payment of rent commences
hereunder, shall be accelerated by the number of days, if any, "substantial
completion" (i) is delayed due to amendments to the Plans requested by Lessee,
or (ii) is otherwise delayed if such delay is actually caused by Lessee, its
contractors, employees, or agents, and Lessor shall so notify Lessee.
40.9 Upon the Commencement Date, Lessor shall assign to Lessee, to the
extent assignable, all guarantees and warranties given by third parties to
Lessor and relating to items in the Premises the maintenance of which is the
obligation of Lessee hereunder; provided, however, that to the extent any such
guarantees and warranties are in effect after the expiration of the Lease Term,
Lessee shall assign the expiration of the Lease Term to Lessor prior to such
guarantees and warranties.
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<PAGE> 26
40.10 Lessor agrees to obtain three (3) competitive bids from general
contractors to construct the Premises in accordance with the Plans. Upon receipt
of the bids, Lessor shall deliver to Lessee copies of each of the bids for
Lessee's review. Lessor agrees to accept the lowest bid it receives. In the
event the lowest bid is for a total contract sum of less than $3,300,000.00, the
Base Rent due under this Lease shall be reduced by an amount equal to the amount
by which the bid is less than the $3,300,000 divided by 120.
41. PARKING AREAS.
41.1 Lessor shall provide Lessee with parking spaces on the Land in
accordance with the Plans. Such parking spaces shall be for the exclusive use of
Lessee and the Building.
41.2 Lessee acknowledges and agrees that the Premises, including,
without limitation, lawns, gardens, parking areas, sidewalks and driveways,
shall at all times be subject to the exclusive control and management of Lessee.
Lessee shall, at all times and at its sole cost and expense, operate and
maintain the areas referred to above free from all litter, dirt, debris and
obstructions, and in a clean and sanitary condition.
41.3 Lessee, for itself and the Lessee Parties, acknowledges and agrees
that its indemnification of Lessor set forth in Section 16 hereof shall extend
to and include any occurrence upon or within the lawns, gardens, sidewalks,
driveways and parking lots of the Premises, and the insurance required to be
obtained and maintained in force by Lessee shall extend to and include the
occurrences involving Lessee and any of the Lessee Parties upon or within the
lawns, gardens, sidewalks, driveways and parking lots of the Premises, to the
full extent of Lessee's insurable interest therein.
41.4 Lessee shall cooperate fully with Lessor in the enforcement of any
reasonable and nondiscriminatory program of rules and regulations designed for
the orderly control and operation of parking areas.
42. OPTION TO EXTEND. Provided that Lessee is not in default hereunder
(after the expiration of any applicable grace and cure periods) on the last day
of the initial Lease Term hereof and is in possession of the Premises and if the
Lease is then in full force and effect, Lessee shall have the (hereinafter
called the "First Option") to extend the Lease Term hereof for a period of three
(3) years after the last day of the initial Lease Term (herein called the "First
Extended Lease Term"). Provided that Lessee has exercised the First Option as
provided above, is not in default hereunder on the last day of the First
Extended Lease Term and is in possession of the Premises and if the Lease is
then in full force and effect, Lessee shall have a second option (herein called
the "Second Option") to extend the Lease Term hereof for an additional period of
three (3) years after the last day of the First Extended Lease Term (herein
called the "Second Extended Lease Term"). Provided that Lessee has exercised the
Second Option as provided above, is not in default hereunder on the last day of
the Second Extended Lease Term and is in possession of the Premises and if the
Lease is then in full force and effect, Lessee shall have a third option (herein
called the "Third Option") to extend the Lease Term hereof for an additional
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<PAGE> 27
period of three (3) years after the last day of the Second Extended Lease Term
(herein called the "Third Extended Lease Term"; the First Extended Lease Term,
the Second Extended Lease Term and the Third Extended Lease Term are hereinafter
collectively called the "Extended Lease Terms"). All terms and conditions of
this Lease shall apply during each Extended Lease Term except that Lessee's
Annual Base Rental and Base Rent shall he determined in accordance with Section
42.1 hereof. The First Option shall be exercised by written notice from Lessee
to Lessor given on or before the date that is twelve (12) months prior to the
expiration of the initial Lease Term, the Second Option shall be exercised by
written notice from Lessee to Lessor given on or before twelve (12) months prior
to the expiration of the First Extended Lease Term and the Third Option shall be
exercised by written notice from Lessee to Lessor given on or before twelve (12)
months prior to the expiration of the Second Extended Lease Term.
42.1 The Annual Base Rental rate under this Lease for the Extended
Lease Terms shall then be determined as follows:
42.1.1 Upon Lessee's written request prior to the required
exercise date of any option, Lessor shall promptly deliver written
notice to Lessee of Lessor's estimation of the fair market rental rate
and shall negotiate in good faith with Lessee in an attempt to agree
upon such fair market rental rate. The Annual Base Rental under this
Lease shall be an amount equal to ninety-five percent (95%) of the then
"fair market rental rate," as hereinafter defined, as agreed upon by
Lessor and Lessee not later than forty-five (45) days after Lessee's
delivery to Lessor of written notice exercising the First Option,
Second Option or Third Option, as appropriate. In the event Lessor and
Lessee are unable to agree upon the definition of the fair market
rental rate prior to the required exercise date, then the Annual Base
Rental for the Extended Lease Terms shall be an amount equal to the
then "fair market rental rate," as hereinafter defined and established.
The phrase "fair market rental rate" shall mean the annual rental rate
(projected to the date of the commencement of the Extended Lease Terms)
which Lessee would expect to pay and Lessor would expect to receive
under leases for space of comparable size and quality to the Premises
for comparable office buildings in the north suburban Atlanta, Georgia
area and as provided for in, and upon terms and conditions comparable
to, this Lease (including the three (3) year lease term) covering
premises similar to the Premises and taking into account any
concessions offered by landlords for such comparable space to the
Premises, including without limitation, rental concessions, tenant
improvement and design allowances and similar concessions. If Lessor
and Lessee have not reached agreement on a fair market rental rate and
executed an amendment to this Lease setting forth such agreement on or
before the date that is forty-five (45) days after Lessee's delivery to
Lessor of written notice exercising the First Option, the Second Option
or the Third option, as appropriate, and Lessee still desires to extend
the term of this Lease, then, within ten (10) days after that date,
each party shall appoint and employ, a real estate professional to
appraise and establish the "fair market rental rate". The two real
estate professionals, thus appointed, shall meet promptly and attempt
to agree upon and establish said rate or, upon failing to do so, shall
then jointly designate a third real estate professional within ten (10)
days of the appointment of the last two real estate professionals. If
they are unable to agree upon the third real estate professional,
either of
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<PAGE> 28
the parties, after giving five (5) days' notice to the other, may apply
to a judge of the Superior Court of Gwinnett County, Georgia (to whose
jurisdiction for this limited purpose both Lessor and Lessee hereby
consent) for the selection of a third real estate professional. Each of
bear the parties shall bear one-half (1/2) of the cost of the
appointment of the real estate professionals. Within thirty (30) days
after the selection of the third real estate professional, the real
estate professionals shall agree upon the "fair market rental rate". If
the real estate professionals are unable to agree within the stipulated
time, then each of the real estate professionals shall independently
estimate the fair market rental rate. Any rate that is more than ten
(10%) percent different from the middle estimate shall be disregarded,
and the remaining estimates shall be averaged to determine the fair
market rental rate. In any of said events, the determination so chosen
shall be final, conclusive and binding upon both Lessor and Lessee.
42.1.2 Notwithstanding the foregoing, (i) the Annual Base
Rental for the first Lease Year of the First Extended Lease Term shall
not exceed an amount equal to $667,528.51 (one hundred five percent
(105%) of the Annual Base Rental for Lease Year 10), (ii) the Annual
Base Rental for the second Lease Year of the First Extended Lease Term
shall not exceed an amount equal to $680,879.08 (one hundred two
percent (102%) of the Annual Base Rental for the first Lease Year of
the First Extended Lease Term), and (iii) the Annual Base Rental for
the third Lease Year of the First Extended Lease Term shall not exceed
an amount equal to $694,496.66 (one hundred two percent (102%) of the
Annual Base Rental for the second Lease Year of the First Extended
Lease Term).
42.2 There shall be no further extensions or renewals of the Lease
Term, except as expressly agreed to by the parties hereto in writing.
42.3 During the Extended Terms, Lessor shall have no obligations to
make any alterations or improvements to the Premises.
42.4 Lessor shall have no obligations in the Extension Terms to pay any
building allowances, design allowances or similar items to Lessee.
43. ENVIRONMENTAL CONCERNS. Lessor hereby warrants and represents to
Lessee that to the best of Lessor's knowledge there has been no release of a
"Hazardous Substance" on or from the Premises, or any part thereof, which has
created or which will create an imminent and substantial endangerment to health,
welfare or the environment by Lessor or other party acting at the direction or
with the consent of Lessor. Lessor has not received notification that it is a
potentially responsible party under Section 107 of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA") as a
result of the acts or omissions on or in any MANNER AFFECTING THE PREMISES.
Lessor has not received notification from any state or local government under
any similar provisions of state or local law. As used herein, Hazardous
Substance shall mean any petroleum or chemical liquids or solids, liquid or
gaseous products, contaminants, oils, radioactive materials, asbestos, PCB's,
ureaformaldehyde, or any toxic or hazardous waste or hazardous substances
(collectively, "Hazardous Substances"), as those terms are used in (A) the
Resources Conservation Recovery Act, as amended by the Hazardous and
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<PAGE> 29
Solid Waste Amendments of 1984, 42 U.S.C. Section.Section. 6901 et
seq.; (B) the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986, 42 U.S.C. Section.Section. 9601 et seq.; (C) the Clean Water Act, 33
U.S.C. Section.Section. 1251 et seq.; (D) the Toxic Substances and Control Act,
15 U.S.C. Section.Section. 2601 et seq.; (E) the Clean Air Act, 42 U.S.C.
Section.Section. 7401 et seq.; (F) any and all applicable environmental laws of
the State of Georgia; and (G) any other applicable federal, state or local law
governing hazardous substances, as such laws may be amended from time to time
(collectively, the "Hazardous Waste Laws"). Lessor shall at all times indemnify
and hold harmless Lessee against and from any and all claims, suits, actions,
debts, damages, costs, losses, obligations, judgments, charges, and expenses,
of any nature whatsoever suffered or incurred by Lessee due to a breach by
Lessor of the preceding representation and warranty. Lessee shall at all times
indemnify and hold harmless Lessor against and from any and all claims, suits,
actions, debts, damages, costs, losses, obligations, judgments, charges, and
expenses, of any nature whatsoever suffered or incurred by Lessor under or on
account of the Hazardous Waste Laws due to any discharge of Hazardous
Substances at the Premises during the Lease Term and not caused by Lessor or
the threat of a discharge of any Hazardous Substances at the Premises during
the Lease Term and not caused by Lessor. Lessor shall at all times indemnify
and hold harmless Lessee against and from any and all claims, suits, actions,
debts, damages, costs, losses, obligations, judgments, charges, and expenses,
of any nature whatsoever suffered or incurred by Lessee under or on account of
the Hazardous Waste Laws due to any discharge of Hazardous Substances at the
Premises prior to the Lease Term or caused by Lessor or the threat of a
discharge of any Hazardous Substances at the Premises prior to the Lease Term
or caused by Lessor.
44. SELF HELP. If Lessor fails to perform any material obligation or
duty of Lessor in this Lease and such failure shall continue (in the event of a
non-emergency condition) for a period of thirty (30) days after receipt of
written notice from Lessee of such failure (in the event of an emergency
condition Lessee shall give Lessor such notice as in reasonable and practical
under the circumstances), then, without prejudice to any of Lessee's other
rights and remedies at law or in equity, provided that Lessor is not then
diligently and in good faith pursuing the cure completion of such failure to
completion (or in the event of an emergency condition, there exists an imminent
threat of material damage to the Premises, Lessee's property or its employees),
Lessee may perform such obligation and duty on behalf of Lessor and Lessor shall
pay Lessee the reasonable cost of such cure. If Lessor shall fail to pay to
Lessee all such costs incurred by Lessee within thirty (30) days of demand by
Lessee, then Lessee may offset and deduct such unpaid amounts against the next
monthly installments of Base Rent due hereunder.
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<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals the day and year first above written.
LESSOR:
TECHNOLOGY PARK/ATLANTA, INC., a
Georgia Corporation
By:
---------------------------------
Richard R. O'Brien
Executive Vice President
[CORPORATE SEAL]
LESSEE:
MELITA INTERNATIONAL CORPORATION, a
Georgia corporation
By:
----------------------------------
Its:
------------------------------
[CORPORATE SEAL]
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<PAGE> 31
ASSIGNMENT AND ASSUMPTION OF LEASE
This instrument is executed and delivered pursuant to that certain
Agreement of Purchase and Sale ("Agreement") dated this 10th day of November,
1995, between TECHNOLOGY PARK/ATLANTA, INC., Georgia corporation, ("Seller") and
5051 PEACHTREE CORNERS CIRCLE, L.L.C., a Georgia limited liability company
("Purchaser") covering the real property described in Exhibit A attached hereto
("Real Property").
I. Assignment and Assumption of Lease. For good and valuable
consideration Seller hereby assigns, transfers, sets over and conveys to
Purchaser, and Purchaser hereby accepts all of the landlord's right, title and
interest in and to all tenant leases (the "Lease") covering the Real Property
currently in effect, described on Exhibit B attached hereto and by this
reference incorporated herein, and Purchaser hereby assures and agrees to
perform all of the landlord's obligations under the Lease arising from and after
the date hereof but as to the landlord's obligations with regard to security
deposits and other deposits only to the extent the security deposits and other
deposits have been transferred or credited to Purchaser;
II. Warranty. Seller hereby represents and warrants to Purchaser that
it is the owner of the lessor's interest under the Lease, that such interest is
free and clear of all liens, charges and encumbrances other than the Permitted
Exceptions (as defined in the Agreement), and Seller warrants and defends title
to the above-described lessor's interest unto Purchaser, its successors and
assigns, against the claims of all persons claiming by, through or under Seller,
subject only to the Permitted Exceptions as defined in the Agreement. Seller has
no knowledge of any encumbrance affecting the remaining property conveyed hereby
that would prevent Purchaser's use thereof in connection with the operation of
the Real Property; Seller's knowledge shall be limited to the actual knowledge
of Richard R. O'Brien, with reasonable inquiry.
III. Indemnities. Seller agrees to defend, indemnify and hold Purchaser
harmless from and against any and all claims, losses, damages and liabilities
that may be asserted against or incurred by Purchaser which are directly or
indirectly caused by or result from any obligations of Seller arising under the
Lease occurring prior to the date hereof, including without limitation any
failure of Sealer to transfer or credit any security deposit to Purchaser, if
any. Purchaser agrees to defend, indemnify and hold Seller harmless from and
against any and all claims, losses, damages and liabilities that may be asserted
against or incurred by Seller which are directly or indirectly caused by or
result from any obligation of Purchaser under the Lease arising after the date
hereof, including any default related to tenant security deposits which have
been transferred or credited to Purchaser, if any.
AS TO BOTH SIGNATURES, SIGNED, SEALED SELLER:
AND DELIVERED IN THE PRESENCE OF:
TECHNOLOGY PARK/ATLANTA, INC.
/s/
- --------------------------------
Unofficial Witness By: /s/ Richard R. O'Brien
---------------------------------
Name: Richard R. O'Brien
Title: Executive Vice President
PURCHASER:
/s/ Regina V. Cleveland
- ---------------------------------
Notary Public 5051 PEACHTREE CORNERS CIRCLE, L.L.C.
Commission Date: August 18, 1999 By: /s/ Aleksander Szlam
--------------------------------
Name: Aleksander Szlam
[NOTARY SEAL] Title: Manager__________________
-31-
<PAGE> 1
EXHIBIT 10.2
MELITA INTERNATIONAL CORPORATION
1992 DISCOUNTED STOCK OPTION PLAN
<PAGE> 2
MELITA INTERNATIONAL CORPORATION
1992 DISCOUNTED STOCK OPTION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3. ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 4. SHARES SUBJECT TO PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 5. TERMS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 6. TERM OF PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 7. INDEMNIFICATION OF COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 8. AMENDMENT AND TERMINATION OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 9. NO OBLIGATION TO EXERCISE OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 10. CHANGE IN CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 11. GENERAL RESTRICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 12. RIGHTS AS A STOCKHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
<PAGE> 3
MELITA INTERNATIONAL CORPORATION
1992 DISCOUNTED STOCK OPTION PLAN
THIS INDENTURE is made this 4th day of June 1992, by MELITA
INTERNATIONAL CORPORATION, a Georgia, USA corporation (hereinafter called the
"Company");
W I T N E S S E T H:
WHEREAS, the Company desires to promote in its employees the strongest
interest in the growth and success of the business of the Company, the
assurance that they will share in the prosperity of the business of the
Company, and the incentive to remain in the employ of the Company; and
WHEREAS, to that end the Company desires to provide those employees
who are eligible hereunder with options to purchase shares of the Company and,
accordingly, has formulated the discounted stock option plan herein embodied;
and
WHEREAS, the Board of Directors of the Company have approved and
authorized the discounted stock option plan herein embodied;
NOW, THEREFORE, the Company does hereby establish the Melita
International Corporation Discounted Stock Option Plan (hereinafter called the
"Plan") so that it shall read in its entirety as follows:
SECTION 1.
DEFINITIONS
Wherever used herein, the masculine pronoun shall be deemed to include
the feminine, and the singular to include the plural, unless the context
clearly indicates otherwise, and the following words and phrases shall, when
used herein, have the meanings set forth below:
1.1 "Act" means the Securities Exchange Act of 1934.
1.2 "Affiliate" means (a) any corporation which is a member of the
same controlled group of corporation (within the meaning of Section 414(b) of
the Code, as defined herein) as is the Company, and (b) any other trade or
business (whether or not incorporated) controlling, controlled by, or under
common control (within the meaning of Section 414(c) of the Code) with the
Company.
<PAGE> 4
1.3 "Agreement" means a Melita International Corporation 1992
Discounted Stock Option Agreement, which is an agreement subject to the terms
of the Plan.
1.4 "Board of Directors" means the Board of Directors of the
Company.
1.5 "Code" mans the Internal Revenue Code of 1986, as amended.
1.6 "Committee" means the committee appointed by the Board of
Directors to administer the Plan.
1.7 "Employee" means any person who is employed by the Company or
an Affiliate for purposes of the Federal Insurance Contributions Act.
1.8 "Option" means an option to purchase Shares of the Company
granted pursuant to and in accordance with the provisions of the Plan.
1.9 "Optionee" means an Employee who is granted an Option pursuant
to and in accordance with the provisions of the Plan.
1.10 "Option Shares" means Shares subject to and issued pursuant to
an exercise of an Option granted under the Plan.
1.11 "Share" means a share of the common stock of the Company.
SECTION 2.
ADMINISTRATION
2.1 Delegation to Committee. The Plan shall be administered by
the Committee. The Committee shall consist of at least two members of the
Board of Directors and shall be appointed by the Board of Directors, but, after
the first registration of an equity security of the Company under Section 12 of
the Act, no person shall be appointed as a member of the Committee who is, or
within one year prior to his becoming a member of the Committee was, granted or
awarded
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<PAGE> 5
equity securities pursuant to the Plan or any other plan of the Company or an
"affiliate" within the meaning of Rule 16b-3 under Section 16(b) of the Act,
except that participation in any plan which does not disqualify a director from
being disinterested as provided in Rule 16b-3 shall not disqualify a person
from becoming a member of the Committee. The Board of Directors may from time
to time remove members from or add members to the Committee. Vacancies on the
Committee shall be filled by the Board of Directors.
2.2 Committee Actions. The Committee shall select one of its
members as chairman, and shall hold meetings at such times and places as it may
determine. Acts approved by the majority of the Committee in a meeting at
which a quorum is present or acts reduced to or approved in writing by a
majority of the members of the Committee shall be the valid acts of the
Committee. A quorum shall be present at any meeting of the Committee which a
majority of the Committee members attend.
2.3 Finality. The Committee shall have the authority in its sole
discretion to interpret the Plan, to grant Options under and in accordance with
the provisions of the Plan, and to make all other determinations and to take
all other actions it deems necessary or advisable for the implementation and
administration of the Plan or Agreements thereunder, except to the extent such
powers are herein reserved by the Board of Directors. All actions of the Board
of Directors and the Committee shall be final, conclusive, and binding upon the
Employee. No member of the Board of Directors or the Committee shall be liable
for any action taken or decision made in good faith relating to the Plan or any
grant of an Option thereunder.
-3-
<PAGE> 6
SECTION 3.
ELIGIBILITY
Employees who are designated by the Committee shall be eligible to
receive Options under the Plan on the terms and subject to the restrictions
hereinafter set forth.
SECTION 4.
SHARES SUBJECT TO PLAN
4.1 The aggregate number of Option Shares which may be issued
under the Plan shall at no time exceed 640,000. The number of Shares with
respect to which an Option may be granted to any individual shall be determined
by the Committee. The limitations established by this Section shall be subject
to adjustment in accordance with the provisions of the Plan.
4.2 In the event that an Option expires or is terminated for any
reason, the Option Shares allocable to the unexercised portion of such Option
may again be subjected to an Option under the Plan.
SECTION 5.
TERMS AND CONDITIONS
5.1 Grant of Option. Each Option granted pursuant to the Plan
shall be authorized by the Committee.
5.2 Stock Option Agreement. Each Option shall be evidenced by an
Agreement, in such form and containing such terms and conditions as the
Committee from time to time may determine, provided that each Agreement:
(a) shall state the number of Option Shares to which it
pertains;
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<PAGE> 7
(b) shall state the exercise price and exercise period;
(c) shall provide that the Option is exercisable, with
respect to the number of Shares to which it pertains, only if and to
the extent that the Optionee is vested pursuant to the vesting formula
provided in the Agreement.
SECTION 6.
TERM OF PLAN
The Plan shall be effective on the date hereof and shall continue to
be effective until terminated by the Board of Directors.
SECTION 7.
INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification that the members
of the Committee may have, each member of the Committee shall be indemnified by
the Company against the reasonable expenses, including attorneys' fees,
actually and necessarily incurred in connection with the defense of any action,
suit or proceeding, or in connection with any appeal therein, to which it may
be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted thereunder, and against all
amounts paid by it in settlement thereof (provided the settlement has received
the prior approval of the Company) or paid by it in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in the action, suit or proceeding that the Committee
member is liable for negligence or misconduct in the performance of its duties;
provided that promptly after institution of the action, suit or proceeding the
Committee member shall in writing offer the
-5-
<PAGE> 8
Company the opportunity, at its own expense, to handle and defend such matter.
Upon the delivery to the Committee member of written notice of assumption by
the Company of the defense of such matter, the Company will not be responsible
to the Committee member for any further fees and disbursements relating to the
defense of such matter, including fees and disbursements of counsel.
SECTION 8.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors may, insofar as permitted by law, from time to
time, with respect to any Shares at the time not subject to Options, suspend or
terminate the Plan or revise or amend it in any respect whatsoever.
SECTION 9.
NO OBLIGATION TO EXERCISE OPTION
The granting of an Option shall impose no obligation upon the Optionee
to exercise the Option.
SECTION 10.
CHANGE IN CAPITALIZATION
If the number of Shares shall be increased or reduced by a change in
par value, split-up, stock split, reverse stock split, reclassification,
merger, consolidation, distribution of stock dividends or similar capital
adjustments, an appropriate adjustment shall be made by the Committee in the
number and kind of Shares available for the granting of Options under the Plan.
In addition, the Committee shall make an appropriate adjustment in the number
and kind
-6-
<PAGE> 9
of Shares as to which outstanding Options, or the portions thereof then
unexercised, shall be exercisable, to the end that the Optionee's proportionate
interest shall be maintained as before the occurrence of the event. The
adjustment in outstanding Options shall be made without change in the total
price applicable to the unexercised portion of the Option and with a
corresponding adjustment in the Option price per share. Any fractional Shares
resulting from such adjustments shall be eliminated. All adjustments made by
the Committee under this Section shall be conclusive.
Notwithstanding the foregoing paragraph, the Committee reserves the
right in the event of a sale of substantially all the Shares or property of the
Company or the merger or consolidation of the Company into another corporation,
or a dissolution or liquidation of the Company, to terminate the Options
granted under the Plan prior to the times set forth in Section 5 of the Plan,
in consideration of the payment to the Optionees of the difference between (a)
and (b) where (a) equals (1) the then fair market value of the Option Shares to
the extent vested and (b) equals the Option price of the Option Shares to the
extent vested.
SECTION 11.
GENERAL RESTRICTION
Notwithstanding anything contained herein or in any of the Agreements
to the contrary, no purported exercise of any Option shall be effective without
the written approval of the Company, which may be withheld to the extent that
the exercise, either individually or in the aggregate together with the
exercise of other previously exercised stock options and/or offers and sales
pursuant to any prior or contemplated offering of securities, would, in the
sole and absolute judgment of the Company, require the filing of a registration
statement with the United States
-7-
<PAGE> 10
Securities and Exchange Commission or with the securities commission of any
state or result in the Company's loss of status as an "S Corporation" within
the meaning of Section 1361(a) of the Code. The Company shall avail itself of
any exemptions from registration contained in applicable federal and state
securities laws which are reasonably available to the Company on terms which,
in its sole and absolute discretion, it deems reasonable and not unduly
burdensome or costly. Each Optionee shall, prior to the exercise of an Option,
deliver to the Company such information, representations and warranties as the
Company may reasonably request in order for the Company to be able to satisfy
itself that the Shares to be acquired pursuant to the exercise of an Option is
being acquired in accordance with the terms of an applicable exemption from the
securities registration requirements of applicable federal and state securities
laws.
SECTION 12.
RIGHTS AS A STOCKHOLDER
An Optionee or a transferee of an Option shall have no rights as a
stockholder with respect to any Option or Option Shares until the date of the
issuance of a stock certificate to him for the Option Shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which the
record date is prior to the date the stock certificate is issued, except as
otherwise provided in the Plan.
IN WITNESS WHEREOF, the Company has caused the Plan to be executed on
the ___ day of ______________1992.
MELITA INTERNATIONAL CORPORATION
By:_____________________________
Title:__________________________
ATTEST:
_____________________________
Title: ______________________
(CORPORATE SEAL)
-8-
<PAGE> 11
MELITA INTERNATIONAL CORPORATION
1992 STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of the Date of Grant by and between MELITA
INTERNATIONAL CORPORATION, a Georgia, U.S.A. corporation (the "Company"), and
[Optionee] (the "Optionee").
Upon and subject to the Additional Terms and Conditions attached
hereto and incorporated herein by reference as part of this Agreement, the
Company hereby awards as of the Date of Grant to Optionee an option under the
Melita International Corporation 1992 Stock Option Plan (the "Plan"), as
described below, to purchase the Option Shares. Capitalized terms not defined
or described have the meanings set forth in the Additional Terms and
Conditions.
<TABLE>
<S> <C> <C>
A. Date of Grant: [Grant Date]
-------------
B. Exercise Price: $[Exercise Price] per share
--------------
C. Option Shares: All of any part of [Shares] shares of the Company's common stock ("Common
------------- Stock")
D. Vesting Schedule:
----------------
</TABLE>
<TABLE>
<CAPTION>
Years of Service After Date of Grant Percentage of Option Shares Vested
------------------------------------ ----------------------------------
<S> <C>
0 0%
1 10%
2 20%
3 40%
4 75%
5 100%
</TABLE>
The Optionee shall only receive credit for a year of
service after the Date of Grant if he remains at all times
a full-time Employee of the Company or an Affiliate (as
reflected on the Company's or an Affiliate's business
records), for the twelve (12) consecutive month period
beginning on the first of January 1 or July 1 immediately
following the Date of Grant. In the event the Optionee
dies or becomes subject to a Disability while a full-time
Employee (as reflected on the Company's or an Affiliate's
business records), the Option shall be vested only to the
extent the Optionee was vested in the Option as of his or
her date of death or Disability.
Except as provided in the following sentence, in the
event the Optionee voluntarily terminates his or her
employment with the Company, at any time prior to the date
on which the Optionee would otherwise become one hundred
percent (100%) vested in the Option pursuant to the vesting
schedule set forth above, the Optionee shall forfeit all
rights under the Option, including the previously vested
percentage of the Option. Notwithstanding the foregoing,
if a "Change of Control" (as defined below) occurs prior to
the date on which the Optionee would become one hundred
percent (100%) vested in the Option pursuant to the vesting
schedule set forth above, and the Optionee voluntarily
terminates employment with the Company after the date on
which the Change of Control occurred, but prior to the date
on which the Optionee would become one hundred percent
(100%) vested in the Option according to the above vesting
schedule, the Optionee shall forfeit only that portion of
the Option in which the Optionee became vested after the
date on which the Change of Control occurred.
E. Contingent Grant: The effectiveness of this grant is
expressly conditioned on the Optionee receiving credit
(pursuant to D above) for a full year of service after the
Date of Grant. If the Optionee does not receive such
credit, this grant shall be null and void and without
effect from the Date of Grant.
<PAGE> 12
F. Exercise Period: The Option may be exercised as to
the percentage of vested Option Shares determined according
to the chart below during the Exercise Period which
commences as shown in the chart below and ends at the close
of business on the tenth anniversary of the Date of Grant.
<TABLE>
<CAPTION>
Exercise Period Percentage Vested Option Shares
--------------- -------------------------------
<S> <C>
January 1, 2002 33-1/3%
January 1, 2003 66-2/3%
January 1, 2004 100%
</TABLE>
Notwithstanding the foregoing, if there is a "Change of
Control" (as defined below), the Exercise Period shall
commence no later than the date fourteen (14) months after
the date on which the Change of Control occurs as to one
hundred percent (100%) of the vest Option Shares.
For purposes of this Agreement, "Change of Control"
means (i) any transaction, or series of related
transactions occurring within a ninety (90) day period,
whereby the beneficial ownership of fifty-one percent (51%)
or more of the then outstanding common stock (or other
securities having generally the right to vote for election
of the Board of Directors) shall be sold, assigned or
otherwise transferred, directly or indirectly, to one
party, other than an existing shareholder or option holder,
whether by sale or issuance of common stock or other
securities or otherwise, (ii) any transaction, or series of
related transactions occurring within a ninety (90) day
period, whereby the Company shall sell, assign or otherwise
transfer, directly or indirectly, assets (including stock
or other securities of subsidiaries, but other than the
grant of licenses to intangible assets in the ordinary
course of business) having a fair market value of fifty-one
percent (51%) or more of the total value of the assets of
the Company to one party, other than an existing
shareholder or option holder (or an Affiliate), or (iii) an
initial public offering of the Company's common stock under
the securities act of 1933, as amended (the "1933 Act").
Notwithstanding the above, the following shall not
constitute a Change of Control: (a) with respect to
subsection (ii) above only, any conveyance, transfer or
grant to a bank or other financial institution of a
collateral assignment of, security title to, or security
interest, in any goods, accounts, inventory, general
intangibles or other assets of the Company, or an
Affiliate, to secure the obligations of the Company or an
Affiliate, to such bank or other financial institution, or
the exercise of any rights or remedies by such bank or
other financial institution after a default of corporate
indebtedness and corporate reorganizations where the
resulting corporate entities are controlled by the current
shareholders of the Company, or (b) any sale, assignment or
other transfer, directly or indirectly, by an existing
shareholder to, or for the benefit of, a member of the
existing shareholder's family.
IN WITNESS WHEREOF, the Company has executed and sealed this Agreement
as of the Date of Grant set forth above.
Melita International Corporation
By:
-------------------------------------
Aleksander Szlam
Title: Chairman and CEO
ATTEST:
---------------------------------
Halina Szlam
Title: Secretary
(CORPORATE SEAL)
OPTIONEE:
-------------------------------
[Optionee]
-2-
<PAGE> 13
ADDITIONAL TERMS AND CONDITIONS
OF MELITA INTERNATIONAL CORPORATION
1992 STOCK OPTION AGREEMENT
1. Definitions
(a) "Affiliate" means (a) any corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Internal Revenue Code) as is the Company, and (b) any other trade or
business (whether or not incorporated) controlling, controlled by, or under
common control (within the meaning of Section 414(c) of the Internal Revenue
Code) with the Company.
(b) "Disability" means a disability of an Optionee such that the
Optionee is entitled to disability retirement benefits under the federal Social
Security Act or such that the Optionee is entitled to recover benefits under
any long-term disability plan or policy maintained by the Company or an
Affiliate. The determination of whether a disability exists shall be made by
the Committee and shall be substantiated by competent medical advice.
(c) "Employee" means any person who is employed by the Company or
an Affiliate for purposes of the Federal Insurance Contributions Act.
(d) "Fair Market Value" means (1) the most recent price per share
at which shares of Common Stock were sold in an arm's length transaction, if
there has been any such transaction in the twelve-month period preceding the
relevant time for determining Fair Market Value, or (2) if no such transaction
has occurred or if such transaction has occurred but is deemed irrelevant by
the Committee based on significant differences in circumstances, a price that
the Committee determines in good faith reflects, as of the most recent fiscal
year end of the Company unless the Committee determines there is a more recent
valuation date, the value of an Option Share in light of relevant factors,
including, without limitation, earnings, discounts reflective of minority
ownership, restrictions on transfer, and the absence of a regular trading
market for Common Stock, the value per Option Share at the relevant time as
determined in good faith by the Committee.
(e) "Option" means an option under the Melita International
Corporation 1992 Stock Option Plan to purchase an Option Share.
(f) "Option Shares" means the shares of Melita International
Corporation common stock owned by the Optionee as a result of the Exercise of
an Option.
(g) "Termination for Cause" means a termination of the employment
relationship between the Optionee and the Company or Affiliate due to any of
the following reasons: (1) willful and continued failure (other than any such
failure resulting from his incapacity during physical or mental illness) to
substantially perform his duties with the Company or an Affiliate continuing 30
days after notice by the Company to the Optionee of such failure, (2) any act
of fraud, misappropriation, dishonesty, embezzlement or similar conduct against
the Company or an Affiliate, as finally determined through arbitration or final
judgment
<PAGE> 14
of a court of competent jurisdiction (which arbitration or judgment, due to the
passage of time or otherwise, is not subject to further appeal); or (3)
conviction of the Optionee for a felony or any other crime involving moral
turpitude (which conviction, due to the passage of time or otherwise, is not
subject to further appeal).
2. Term and Exercise of Option
(a) Except as otherwise provided in this Agreement, Optionee shall
have the right to exercise the Option from time to time during the Exercise
Period defined previously in the Agreement with respect to all or any part of
the vested Option Shares.
(b) (1) As a condition to exercising this Option, Optionee
must deliver to the President of the Company on any business day (A) written
notice, signed by the person exercising the Option, specifying the number of
Option Shares being exercised and, if required, making the representations and
covenants in substantially the same form as provided in the Notice of Exercise,
attached as Exhibit A hereto; (B) payment in cash or in shares of Common Stock
that have been held by the Optionee for at least six months of the Purchase
Price (defined in Section 3); (C) payment in cash of the tax withholding
liability arising from the exercise; and (D) an executed shareholders'
agreement, containing terms and conditions substantially similar to any
shareholders' agreement executed by and applicable to the holders of a majority
of the shares of Common Stock, if so required by the Committee.
(2) In lieu of payment of all tax withholding by Optionee
as provided above, Optionee may elect to have the number of Option Shares he is
to receive upon exercise of an Option reduced by the smallest number of whole
Option Shares which, when multiplied by the fair market value of the Shares
determined as of the Tax Date (defined below), is sufficient to satisfy
required federal, state, and local, if any, withholding taxes arising from
exercise of the Option (a "Withholding Election"). An Optionee may make a
Withholding Election only if all of the following conditions are met:
(A) the Withholding Election must be made prior
to the date on which the amount of tax required to be withheld is determined
(the "Tax Date") by executing and delivering to the Company a properly
completed Notice of Withholding Election, attached as Exhibit B hereto;
(B) any Withholding Election made will be
irrevocable; however, the Committee may at its sole discretion disapprove and
give no effect to any Withholding Election; and
(C) if the Optionee is required to file
beneficial ownership reports pursuant to Subsection (a) of Section 16 of the
Securities Exchange Act of 1934 (the "Act"), at any time during the period in
which the Option is exercisable, then:
(i) no Option to which any Withholding
Election relates may be exercised until the earlier of either (I) one year
after the Company has been subject to the reporting requirements of Section 15
of the Act and has filed all reports and
-2-
<PAGE> 15
statements required to be filed pursuant to that Section during that year, or
(II) at least six months after the date of grant (except in the event of death
or Disability of the Optionee prior to the expiration of the six month period);
and
(ii) the Withholding Election must be
made either (I) at least six months prior the Tax Date, or (II) prior to the
Tax Date and in any ten business day period beginning on the third business day
following the release of the Company's quarterly or annual summary statement of
sales and earnings.
Upon receipt of such notice and payment in full of the Purchase Price
and tax withholding liability, the Company shall cause to be issued a
certificate representing the shares of Common Stock purchases.
(c) Except as otherwise provided in this Agreement, the
Option shall terminate on the earliest of (1) the last day of the Exercise
Period; (2) the date the Committee exercises its right pursuant to Section 2(d)
to terminate the Option; (3) if Optionee ceases to be an employee as a result
of a Termination for Cause, the time of such termination; (4) if the Optionee
engages to work in the USA within seven years following his termination of
employment with the Company or an Affiliate, in any capacity directly or
indirectly with any organization which directly or indirectly for itself or
through or for others is involved in the same or a similar business as the
Company's, which is designing, developing, manufacturing, marketing, selling,
and/or providing services in connection with outbound predictive dialing and
call management systems, the time of such engagement; or (5) if the Optionee
uses, copies, reproduces, discloses, or otherwise disseminates any Confidential
Information in any way that is not clearly necessary to perform his duties with
the Company or an Affiliate, the time of such act; or (6) if the Optionee fails
after his termination of employment with the Company or an Affiliate to deliver
promptly to the Company all Confidential Information which he used, had, or
controlled in connection with his employment with the Company or an Affiliate,
the time of such failure. For purposes of this Agreement, "Confidential
Information" means any information of any kind and in any form, whether
tangible (e.g., written specifications or hardware) or intangible (e.g.,
software programs, business strategies, or ideas), used by or related to the
Company or an Affiliate which is or could be economically valuable because it
is not generally known (or could not be readily known by proper methods or
means) by others who could otherwise derive economic value from it and which is
the subject of reasonable efforts to keep it secret, and all reproductions,
modifications, and other derivatives of such information, and any information
received from a third party which the Company or an Affiliate has agreed to
treat as confidential, such as information from customers, prospective
customers, or vendors (e.g., International Business Machines Corporation,
Oracle Corporation, and Dialogic Corporation).
(d) Notwithstanding any other provision of this
Agreement, the Committee reserves the right at all times to terminate the
Option in consideration of the payment to the Optionee of the difference
between (1) and (2) where (1) equals the Fair Market Value of the unexercised
Option Shares to the extent vested and (2) equals the Purchase Price of the
unexercised Option Shares to the extent vested.
-3-
<PAGE> 16
(e) The price paid by the Company shall be payable at the
Company's option (1) by delivery to the Optionee of the entire price in the
form of cash or check; or (2) by payment of four substantially equal annual
installments, the first installment being due at the date of termination of the
Option and the second, third and fourth installment being due on the first,
second and third anniversaries of the date of termination of the Option,
respectively.
3. Purchase Price. Optionee must pay to the Company the Exercise
Price (subject to adjustment pursuant to Section 8) multiplied by the number of
the Option Shares being acquired through the exercise of this Option (the
"Purchase Price"). Shares of Common Stock tendered by the Optionee in
satisfaction of the Purchase Price shall be credited at their Fair Market
Value.
4. Non-Transferability of Option. Except for any transfer of the
Option by bequest or inheritance, the Optionee shall not have the right to make
or permit to exist any transfer or hypothecation, whether outright or as
security, with or without consideration, voluntary or involuntary, of all or
any part of any right, title or interest in the Option. Any such disposition
not made in accordance with this Agreement shall be deemed null and void. The
Option shall be exercisable during the lifetime of Optionee only by Optionee,
and after his death by a legatee or legatees under Optionee's last will and
testament or by his personal representative or representatives, who shall be
bound by the same terms of this Agreement as apply to the Optionee.
5. Restrictions on Transfer of Option Shares. Except as provided
in this Agreement or for any transfer of Option Shares by gift, bequest, or
inheritance to the Optionee's or a subsequent shareholder's family member,
estate, heirs, or legatees or for any transfer after the closing of an initial
public offering of Common Stock, the Optionee shall not have the right to make
or permit to exist any transfer or hypothecation, whether outright or as
security, with or without consideration, voluntary or involuntary, of all or
any part of any right, title or interest (including, but not limited to, voting
rights) in or to any Option Shares. Any such disposition not made in
accordance with this Agreement shall be deemed null and void. Any permitted
transferee under this Section shall be bound by the same terms of this
Agreement as apply to the Optionee.
6. No Rights as Shareholder. Optionee, or his permitted
transferee under Section 4 shall have no rights as a stockholder with respect
to any Option Shares until the issuance of a stock certificate to him for such
shares. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
on or with respect to Option Shares purchases pursuant to this Option for which
the record date is prior to the date of exercise hereof, except as provided in
Section 8 below.
7. Right to Repurchase Option Shares.
(a) (1) At all times prior to the closing of an initial
public offering of Common Stock, (2) within ninety (90) days following a
Termination for Cause, or (3) at any time following an act described in Section
2(c)(4), or 2(c)(5) hereof or any failure described in Section 2(c)(6) hereof,
the Company shall have the right to repurchase from the Optionee all Option
Shares. For this purpose, a notice of exercise given by the Company to the
Optionee
-4-
<PAGE> 17
pursuant to this Section 7 shall be effective to perfect the Company's right of
repurchase, subject to the remaining provisions of this Section 7.
(b) (1) The Company upon exercising this right of
repurchase shall give written notice to the Optionee of the number of shares of
Option Shares to be repurchased, of the repurchase price, which shall be
determined pursuant to Section 7(c) hereof, and of the time and date of the
closing of the repurchase of the Option Shares, which shall be no later than
sixty (60) days from the date of the notice and shall be held at the principal
office of the Company. At closing, the Company shall deliver the application
portion of the repurchase price and the Optionee shall deliver the Option
Shares to be repurchased duly endorsed for transfer and with all required
revenue stamps attached, and the title to the Option Shares shall be
transferred to the Company free and clear of all liens, claims, and
encumbrances, however described, except for restrictions imposed by applicable
securities laws.
(2) If the Company decides to repurchase less
than all of the Option Shares owned by the Optionee, the Company shall employ
such method as it shall deem appropriate in determining the number of Option
Shares to be repurchased.
(3) The price for Option Shares repurchased by
the Company shall be payable by delivery to the Optionee at the closing of the
entire repurchase price in the form of cash or check; provided, however, except
for repurchases pursuant to written notice given within ninety (90) days
following a Termination for Cause or repurchases following any act described in
Section 2(c)(4) or 2(c)(5) hereof or any failure described in Section 2(c)(6)
hereof, the Company may pay the entire repurchase price in four substantially
equal annual installments consisting of principal and interest at the "Prime
Rate" reported in the Wall Street Journal on the first business day preceding
the date of repurchase, the first installment being due at the closing and the
second, third, and fourth installment being due on the first, second, and third
anniversaries of the closing, respectively.
(4) If the Optionee fails to consummate the sale
or deliver the Option Shares certificates properly assigned when requested to
do so, the Company, or its designee, shall cancel the Option Shares
certificates of the Optionee and deposit the payment pursuant to Section
7(b)(3) hereof which was to be made to the Optionee in exchange for the
certificates to the credit or account of the Optionee in escrow with any
clearinghouse bank in the City of Atlanta, Georgia, at the expense and risk of
the Optionee, or his successors or assigns, whereupon the Company shall treat
the Option Shares represented thereby as having been repurchased by the Company
or its designees.
(c) The repurchase price for each Option Share shall be
an amount equal to the Fair Market Value, except if the Option Shares are
repurchased by the Company (1) pursuant to written notice given within ninety
days following a Termination for Cause, in which case the repurchase price for
each Option
-5-
<PAGE> 18
Share shall be the lowest of Fair Market Value, book value per share of Common
Stock as most recently determined by the Committee, or the Exercise Price paid
by the Optionee, or (2) following any act described in Section 2(c)(4) or
2(c)(5) hereof or failure described in Section 2(c)(6) hereof, in which case
the repurchase price for each Option Share shall be the lower of (A) Fair
Market Value or (B) the greater of (i) the Exercise Price paid by the Optionee
or (ii) book value per share of Common Stock as most recently determined by the
Committee.
8. Change in Capitalization. Subject to the Committee's right to
terminate the Option pursuant to Section 2(d) of this Agreement, the total
number of Option Shares to be received upon exercise of the Option (both as to
the number of Option Shares and the Purchase Price) shall be appropriately
adjusted for any change in par value, split-up, stock split, reverse stock
split, reclassification, merger, consolidation, distribution of stock dividends
or similar capital adjustments, to the end that the Optionee's proportionate
interest in value shall be maintained as before the occurrence of the event.
The adjustment shall be made without change in the total price applicable to
the unexercised portion of the Option and with a corresponding adjustment in
the Exercise Price.
The foregoing adjustments and the manner of application of the
foregoing provisions shall be determined by the Committee in its sole
discretion. Any adjustment may provide for the elimination of any fractional
Option Shares.
9. Governing Laws. This Agreement part shall be construed,
administered and enforced according to the laws of the State of Georgia, USA;
provided, however, the Option may not be exercised except, in the reasonable
judgment of the Board of Directors, in compliance with exemptions under
applicable state securities laws of the state in which Optionee resides, and/or
any other applicable securities laws.
10. Successors. This Agreement shall inure to the benefit of the
heirs, legal representatives, successors and permitted assigns of the Company
and Optionee.
11. Notice. Any notice which either party hereto may be required
or permitted to give to the other shall be in writing, and may be delivered
personally or by mail, postage prepaid, addressed as follows: to the President
of the Company, or to the Company (attention of the President), at 5051
Peachtree Corners Circle, Norcross, Georgia USA 30092-2500, or at any other
address as the Company, by notice to Optionee, may designate in writing from
time to time; to Optionee, at Optionee's address as shown on the records of the
Company, or at any other address as Optionee, by notice to the Company, may
designate in writing from time to time.
12. Severability. In the event that any one or more of the
provisions or portion thereof contained in this Agreement shall for any reason
be held to be invalid, illegal or unenforceable in any respect, the same shall
not invalidate or otherwise affect any other provisions of this Agreement, and
this Agreement shall be construed as if the invalid, illegal or unenforceable
provision or portion thereof had never been contained herein.
13. Entire Agreement. Subject to the terms and conditions of the
Melita International Corporation 1992 Stock Option Plan, which is incorporated
herein by reference, this Agreement expresses the entire understanding and
agreement of the parties hereto with respect to such terms, restrictions and
limitations.
-6-
<PAGE> 19
14. Headings. Section headings used herein are for convenience of
reference only and shall not be considered in construing this Agreement.
15. Specific Performance. In the event of any actual or
threatened default in, or breach of, any of the terms, conditions and
provisions of this Agreement, the party or parties who are thereby aggrieved
shall have the right to specific performance and injunction in addition to any
and all other rights and remedies at law or in equity, and all such rights and
remedies shall be cumulative.
16. Resolution of Disputes. Any determination or interpretation
by the Committee shall be final, binding and conclusive on all persons affected
thereby.
17. Compliance with Securities Laws and Tax Laws. Notwithstanding
anything contained herein to the contrary, no purported exercise of the Option
shall be effective without the written approval of the Company, which may be
withheld to the extent that its exercise, either individually or in the
aggregate together with the exercise of other previously exercised stock
options and/or offers and sales pursuant to any prior or contemplated offering
of securities, would, in the sole and absolute judgment of the Company, require
the filing of a registration statement with the United States Securities and
Exchange Commission, or with the securities commission of any state or result
in the Company's loss of status as an "S Corporation" within the meaning of
Section 1361(a) of the Internal Revenue Code. The Company shall avail itself
of any exemptions from registration contained in applicable federal and state
securities laws which, in its sole and absolute discretion, it deems reasonable
and not unduly burdensome or costly. The Optionee shall deliver to the
Company, prior to the exercise of the Option, such information, representations
and warranties as the Company may request in order for the Company to be able
to satisfy itself that the Common Stock to be acquired pursuant to the exercise
of the Option is being acquired in accordance with the terms of an applicable
exemption from the securities registration requirements of applicable federal
and state securities laws.
In the event that the exercise of the Option is withheld for more than
180 days pursuant to the preceding paragraph, the Committee shall be required
to terminate the Option in accordance with the provisions of Sections 2(d) and
2(e) hereof.
*****
-7-
<PAGE> 20
EXHIBIT A
NOTICE OF EXERCISE OF
STOCK OPTION TO PURCHASE
COMMON STOCK OF
MELITA INTERNATIONAL CORPORATION
Name
--------------------------
Address
-----------------------
------------------------------
Date
--------------------------
Melita International Corporation
Attention: President
5051 Peachtree Corners Circle
Norcross, Georgia USA 30092-2500
Re: Exercise of Non-Qualified Stock Option
Gentlemen:
Subject to acceptance hereof in writing by Melita International
Corporation (the "Company") pursuant to the provisions of the Melita
International Corporation 1992 Stock Option Plan (the "Plan"), I hereby give at
least ten days, but not more than thirty days, prior notice of my election to
exercise options granted to me to purchase _____ shares of Common Stock of the
Company under the Melita International Corporation 1992 Stock Option Agreement
granted on __________________________ (the "Agreement"). The purchase shall
take place as of _______________, 19___ (the "Effective Date").
On or before the Exercise Date, I will pay the applicable purchase
price as follows:
[ ] by delivery of a certified check for the full purchase price
payable to the order of Melita International Corporation.
[ ] by delivery of a certified check for $__________ representing
a portion of the purchase price to the order of Melita International
Corporation with the balance to consist of shares of Common Stock that I have
owned for at least six months and that are represented by a stock certificate,
I will surrender to the Company with my endorsement. If the number of shares
of Common Stock represented by such stock certificate exceeds the number to be
applied against the purchase price, I understand that a new stock certificate
will be issued to me reflecting the excess number of shares.
[ ] by delivery of a stock certificate representing shares of
Common Stock that I have owned for at least six months which I will surrender
to the Company with my endorsement as payment of the purchase price. If the
number of shares of Common Stock represented by such
EXHIBIT A to Stock Option Agreement
<PAGE> 21
certificate exceeds the number to be applied against the purchase price, I
understand that a new certificate will be issued to me reflecting the excess
number of shares.
The required federal, state and local income tax withholding, if any,
on the exercise of the option shall be paid in cash on or before the Exercise
Date.
Covenants and Representations of Optionee. Optionee represents,
warrants, covenants, and agrees with the Company as follows as of the
date of exercising the Option:
(a) The Option is being exercised for Optionee's own account
without the participation of any other person, with the intent of holding the
Option Shares issuable pursuant thereto for investment and without the intent
of participating, directly or indirectly, in a distribution of the Option
Shares and not with a view to, or for resale in connection with, any
distribution of the Option Shares or any portion thereof;
(b) Optionee is not acquiring the Option Shares based upon any
representation, oral or written, by any person with respect to the future value
of, or income from, the Option, but rather upon an independent examination and
judgment as to the prospects of the Company;
(c) Optionee has received a copy of the Plan, is familiar with the
business and affairs of the Company, and realizes that the receipt of the
Option Shares is a speculative investment and that any possible profit
therefrom is uncertain;
(d) Optionee has had the opportunity to ask questions of and
receive answers from the Company and any person acting on its behalf and to
obtain all information available with respect to the Plan, the Company and its
affairs, and has received all information and data with respect to the Plan and
the Company that he has requested and which he has deemed relevant in
connection with his receipt of the Option and the Option Shares subject
thereto;
(e) Optionee is able to bear the economic risk of the investment,
including the risk of a complete loss of his investment, and Optionee
acknowledges that he must continue to bear the economic risk of the investment
in the Option Shares received upon Option exercise for an indefinite period;
(f) Optionee understands and agrees that the Option Shares subject
to the Option may be issued and sold to Optionee without registration under any
state or federal law relating to the registration of securities for sale, and
in that event will be issued and sold in reliance on exemptions from
registration under appropriate state and federal laws;
(g) The Option Shares issued to Optionee upon exercise of the
Option will not, subject to any other applicable restrictions set forth in the
Plan or the Agreement, be offered for sale, sold or transferred by Optionee
other than pursuant to:
(1) an effective registration under applicable state
securities laws or in a transaction which is otherwise in compliance with those
laws;
EXHIBIT A to Stock Option Agreement -2-
<PAGE> 22
(2) an effective registration under the Securities Act of
1933 (the "1933 Act"), or a transaction otherwise in compliance with the 1933
Act; and
(3) evidence satisfactory to the Company of compliance
with the applicable securities laws.
The Company shall be entitled to rely upon an opinion of counsel satisfactory
to it with respect to the compliance with the foregoing laws.
(h) The Company will be under no obligation to register the Option
Shares issuable pursuant to the Option or to comply with any exemption
available for sale of the Option Shares by the Optionee without registration,
and the Company is under no obligation to act in any manner so as to make Rule
144 promulgated under the 1933 Act available with respect to sale of the Option
Shares by the Optionee.
(i) A legend indicating that the Option Shares issued pursuant to
the Option has not been registered under the applicable securities laws and
referring to any applicable restrictions on transferability and sale of the
Option Shares may be placed on the certificate or certificates delivered to
Optionee and any transfer agent of the Company may be instructed to require
compliance therewith;
As soon as the stock certificate is registered in my name, please
deliver it to me at the above address.
Very truly yours,
----------------------------------------
Legal Signature
AGREED TO AND ACCEPTED
MELITA INTERNATIONAL CORPORATION
By:
-----------------------------
Title:
--------------------------
Number of Shares Exercised:
-----
Number of Shares Remaining: DATE:
----- -----------------------
EXHIBIT A to Stock Option Agreement -3-
<PAGE> 23
EXHIBIT B
NOTICE OF WITHHOLDING ELECTION
Name
--------------------------
Address
-----------------------
------------------------------
Date
--------------------------
Social Security No.
-----------
Melita International Corporation
Attention: President
5051 Peachtree Corners Circle
Norcross, Georgia USA 30092-2500
This election relates to the Option defined in Paragraph 3 below. I
hereby certify that:
(1) My correct name and social security number and my current
address are set forth at the end of this document.
(2) I am (check one, whichever is applicable).
[ ] the original recipient of the Option.
[ ] the legal representative of the estate of the
original recipient of the Option.
[ ] a legatee of the original recipient of the Option.
[ ] the legal guardian of the original recipient of the
Option.
(3) The Option pursuant to which this election is made is dated
_________________ and was issued under the Melita International Corporation
1992 Stock Option Agreement dated the ___ day of ________________, 19__ (the
"Agreement") in the name of _________________ for ________ Shares. This
election relates to __________ Shares issuable upon whole or partial
exercise(s) of the Option (the "Option Shares"); provided that the numbers set
forth above shall be deemed changed as appropriate to reflect stock splits and
other adjustments contemplated by the applicable Agreement provisions.
(4) In connection with any future exercise of the Option with
respect to the Option Shares, I hereby elect to have certain of the Option
Shares issuable pursuant to the exercise withheld by the Company for the
purpose of having the value of the Option Shares applied to pay federal, state,
and local, if any, taxes arising from the exercise. The Option Shares to be
withheld shall have, as of the Tax Date applicable to the exercise, a fair
market value equal to the minimum statutory tax withholding requirement under
federal, state, and local law in connection with the exercise.
EXHIBIT B to Stock Option Agreement
<PAGE> 24
(5) This Withholding Election is made prior to the Tax Date and is
otherwise made pursuant to Section 2 of the Agreement.
(6) I understand that this Withholding Election may not be
revised, amended or revoked by me but is subject to the disapproval of the
Board of Directors.
(7) I further understand that, if this Withholding Election is not
disapproved by the Board of Directors, the Company shall withhold from the
Option Shares a number of Option Shares having the value specified in Paragraph
4 above.
(8) The Agreement has been made available to me by the Company, I
have read and understand the Agreements and I have no reason to believe that
any of the conditions therein to the making of this Withholding Election have
not been met. Capitalized terms used in this Notice of Withholding Election
without definition shall have the meanings given to them in the Agreement.
Very truly yours,
----------------------------------
Legal Signature
AGREED TO AND ACCEPTED
MELITA INTERNATIONAL CORPORATION
By:
-----------------------------
Title:
--------------------------
Number of Shares Exercised:
-----
Number of Shares Remaining: Date:
----- ---------------------
EXHIBIT B to Stock Option Agreement -2-
<PAGE> 25
SECOND AMENDMENT TO
1992 DISCOUNTED STOCK OPTION PLAN
THIS SECOND AMENDMENT (this "Amendment") to the 1992 Discounted
Stock Option Plan, as amended (the "Plan"), is made and entered as of
the 1st day of March, 1997, by Melita International Corporation (the
"Company").
WHEREAS, the Company desires to correct a provision of the Plan
which would otherwise result in unfavorable accounting consequences to
the Company following its initial public offering;
NOW, THEREFORE, the Company hereby amends the Plan as follows:
1. The first sentence Section 7(a) of the Additional Terms and
Conditions of the Plan is hereby amended to read as follows:
(a) At all times prior to the closing of an initial public offering
of Common Stock, but not thereafter, the Company shall have the right to
repurchase from the Optionee all Option Shares.
2. Except as specifically amended hereby, the Plan shall remain in
full force and effect. Nevertheless, this Amendment shall be deemed to
modify the terms and conditions of all existing options granted under
the Plan.
IN WITNESS THEREOF, this Amendment is executed on behalf of the
Company as of the date first written above.
MELITA INTERNATIONAL CORPORATION
By: /s/ Aleksander Szlam
------------------------------------
Aleksander Szlam
Chairman of the Board and
Chief Executive Officer
<PAGE> 1
EXHIBIT 10.3
MELITA INTERNATIONAL CORPORATION
1997 STOCK OPTION PLAN
SECTION 1.
PURPOSE
The purpose of this Plan is to promote the interests of the Company by
granting Options to purchase Shares to Employees and Key Persons in order to
attract and retain Employees and Key Persons by providing an additional
incentive to work to increase the value of Shares and a stake in the future of
the Company which corresponds to the stake of each of the Company's
shareholders.
SECTION 2.
DEFINITIONS
Each term set forth in this Section 2 shall have the meaning set forth
opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular, and reference to one gender shall include the other gender.
2.1 BOARD means the Board of Directors of the Company.
2.2 CODE means the Internal Revenue Code of 1986, as amended.
2.3. COMMITTEE means the Committee appointed in Section 5.
2.4 COMMON STOCK means the common stock of the Company, no par value per
share.
2.5 COMPANY means Melita International Corporation, a Georgia
corporation, and any successor to such organization.
2.6 CONTINUOUS SERVICE means a period of continuous performance of
services by an Employee or Key Person for the Company, a Subsidiary or a
Parent.
2.7 EMPLOYEE means an employee of the Company, a Subsidiary or a Parent.
2.8 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
2.9 EXERCISE PRICE means the price which shall be paid to purchase one
(1) Share upon the exercise of an Option granted under this Plan.
2.10 EXISTING PERSON means (a) a shareholder or holder of any option or
warrant of the Company as of the effective date of the Plan or (b) any lineal
descendant or antecedent, father, mother, spouse, brother, or sister of such
shareholder or option or warrant holder or (c) a partnership, corporation,
limited liability company, trust or other entity formed primarily for the
benefit of any of the foregoing.
2.11 FAIR MARKET VALUE of each Share on any date means the price
determined below on the last business day immediately preceding the date of
valuation:
<PAGE> 2
(a) The closing sales price per Share, regular way, or in the
absence thereof the mean of the last reported bid and asked quotations, on such
date on the exchange having the greatest volume of trading in the Shares during
the thirty-day period preceding such date (or if such exchange was not open for
trading on such date, the next preceding date on which it was open); or
(b) If there is no price as specified in (a), the final reported
sales price per Share, or if not reported, the mean of the closing high bid and
low asked prices in the over-the-counter market for the Shares as reported by
the National Association of Securities Dealers Automatic Quotation System, or
if not so reported, then as reported by the National Quotation Bureau
Incorporated, or if such organization is not in existence, by an organization
providing similar services, on such date (or if such date is not a date for
which such system or organization generally provides reports, then on the next
preceding date for which it does so); or
(c) If there also is no price as specified in (b), the price per
Share determined by the Board by reference to bid-and-asked quotations for the
Shares provided by members of an association of brokers and dealers registered
pursuant to Subsection 15(b) of the Exchange Act, which members make a market
in the Shares, for such recent dates as the Board shall determine to be
appropriate for fairly determining current market value; or
(d) If there also is no price as specified in (c), an amount per
Share determined in good faith by the Board to be the price at which the
Committee acting in good faith determines through any reasonable valuation
method that a Share might change hands between a willing buyer and a willing
seller, neither being under any compulsion to buy or to sell and both having
reasonable knowledge of the relevant facts. The Fair Market Value may be based
on the most recent valuation of the Company performed by the Company's auditors
or by other professionals retained to value the Company.
2.12 INITIAL PUBLIC OFFERING means the first offering of Common Stock
for sale by the Company pursuant to a registration statement filed in
accordance with the 1933 Act or any comparable law then in effect.
2.13 ISO means an option granted under this Plan to purchase Shares
which is intended by the Company to satisfy the requirements of Code Section
422 as an incentive stock option.
2.14 KEY PERSON means (i) a member of the Board who is not an Employee,
(ii) a consultant, distributor or other person who has rendered valuable
services to the Company, a Subsidiary or a Parent, (iii) a person who has
incurred, or is willing to incur, financial risk in the form of guaranteeing or
acting as co-obligor with respect to debts or other obligations of the Company,
or (iv) a person who has extended credit to the Company. Key Persons are not
limited to individuals and, subject to the preceding definition, may include
corporations, partnerships, associations and other entities.
2.15 NON-ISO means an option granted under this Plan to purchase Shares
which is not intended by the Company to satisfy the requirements of Code
Section 422.
2.16 OPTION means an ISO or a Non-ISO.
2.17 OPTIONEE means any grantee of an Option.
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<PAGE> 3
2.18 PARENT means any corporation which is a parent of the Company
(within the meaning of Code Section 424).
2.19 PLAN means the Melita International Corporation 1997 Stock Option
Plan, as amended from time to time.
2.20 SHARE means a share of the Common Stock of the Company.
2.21 STOCK OPTION GRANT means the written agreement or instrument which
sets forth the terms of an Option granted to an Employee or Key Person under
this Plan.
2.22 SUBSIDIARY means any corporation which is a subsidiary of the
Company (within the meaning of Code Section 424(f)).
2.23 SURRENDERED SHARES means the Shares described in Section 11.2 which
(in lieu of being purchased) are surrendered for cash or Shares, or for a
combination of cash and Shares, in accordance with Section 11.
2.24 TEN PERCENT SHAREHOLDER means a person who owns (after taking into
account the attribution rules of Code Section 424(d)) more than ten percent
(10%) of the total combined voting power of all classes of shares of either the
Company, a Subsidiary or a Parent.
2.25 1933 ACT means the Securities Act of 1933, as amended.
SECTION 3.
SHARES SUBJECT TO OPTIONS
1,350,000 Shares of Common Stock, less the number of Shares (a) which
have been issued pursuant to exercised grants made under the Melita
International Corporation 1992 Discounted Stock Option Plan, or (b) which are
subject to options granted which remain outstanding under the Melita
International Corporation 1992 Discounted Stock Option Plan, shall be reserved
for issuance under this Plan. Such Shares shall be reserved, to the extent that
the Company deems appropriate, from authorized but unissued Shares, and from
Shares which have been reacquired by the Company. Furthermore, any Shares
subject to an Option which remain unissued after the cancellation, expiration
or exchange of such Option thereafter shall again become available for use
under this Plan, and any Shares subject to an option granted under the Melita
International Corporation 1992 Discounted Stock Option Plan which remain
unissued after the cancellation, expiration or exchange of such option
thereafter shall become available for use under this Plan. Notwithstanding the
above, any Surrendered Shares which remain after the surrender of an Option
under Section 11 shall not again become available for use under this Plan.
SECTION 4.
EFFECTIVE DATE
The effective date of this Plan shall be February 6, 1997, provided, the
shareholders of the Company approve this Plan within twelve (12) months after
such effective date. If such effective date comes before such shareholder
approval, any Options granted under this Plan before the date of such approval
automatically shall be granted subject to such approval.
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<PAGE> 4
SECTION 5.
COMMITTEE
This Plan shall be administered by the Committee appointed by the Board.
The Committee acting in its absolute discretion shall exercise such powers and
take such action as expressly called for under this Plan and, further, the
Committee shall have the power to interpret this Plan and (subject to Section
15) to take such other action in the administration and operation of this Plan
as the Committee deems equitable under the circumstances. The Committee's
actions shall be binding on the Company, on each affected Employee or Key
Person, and on each other person directly or indirectly affected by such
actions. Notwithstanding anything else to the contrary herein, the Board shall
have the authority and the final and conclusive decision to assume the powers
and responsibilities outlined above with respect to the Committee, in whole or
in part.
SECTION 6.
ELIGIBILITY
Except as provided below, only Employees shall be eligible for the grant
of Options under this Plan, but no Employee shall have the right to be granted
an Option under this Plan merely as a result of his or her status as an
Employee. Key Persons may be eligible, subject to written approval by the
Board, for the grant of Options under this Plan, but only if the Key Person has
provided valuable services to the Company, a Subsidiary or a Parent and only if
the Option is a Non-ISO.
SECTION 7.
GRANT OF OPTIONS
The Committee, acting pursuant to the procedure established by the
Board, shall either have the right to grant Options under this Plan, or
recommend to the Board that Options be granted under this Plan. In accordance
with the procedure established by the Board, the Committee, in its absolute
discretion, shall have the right to grant Options under this Plan from time to
time to purchase Shares and, further, shall have the right to grant new Options
in exchange for outstanding Options. Such Options shall be granted to Employees
or Key Persons selected by the Committee, acting in its discretion as set forth
above, and neither the Board nor the Committee shall be under any obligation
whatsoever to grant Options to all Employees or Key Persons, or to grant all
Options subject to the same terms and conditions. Each grant of an Option shall
be evidenced by a Stock Option Grant and each Stock Option Grant shall:
1. specify whether the Option is an ISO or Non-ISO; and
2. incorporate such other terms and conditions as the
Committee, acting in its absolute discretion, deems
consistent with the terms of this Plan, including
(without limitation) a restriction on the number of
Shares subject to the Option which first become
exercisable or subject to surrender during any
calendar year.
In determining Employee(s) or Key Person(s) to whom an Option shall be
granted and the number of Shares to be covered by such Option, the Committee
may take into account the recommendations of the President of the Company and
its other officers, the duties of the Employee or Key Person, the present and
potential contributions of the Employee or Key Person to the success of the
Company, the anticipated number of years of service remaining before the
attainment by the Employee of retirement age, and other factors deemed relevant
by the Committee, in its sole discretion, in connection with
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<PAGE> 5
accomplishing the purpose of this Plan. An Employee or Key Person who has been
granted an Option to purchase Shares of the Company, whether under this Plan or
otherwise, may be granted one or more additional Options.
If the Committee grants an ISO and a Non-ISO to an Employee on the same
date, the right of the Employee to exercise or surrender one such Option shall
not be conditioned on his or her failure to exercise or surrender the other
such Option.
SECTION 8.
EXERCISE PRICE
If an Option is an ISO, the Exercise Price for each Share subject to
such Option shall be no less than the Fair Market Value of a Share on the date
such Option is granted or, if such Option is granted to a Ten Percent
Shareholder, the Exercise Price for each Share subject to such Option shall be
no less than 110% of the Fair Market Value of a Share on the date such Option
is granted. If an Option is a Non-ISO, the Exercise Price for each Share shall
be no less than the minimum price required by applicable state law, or by the
Company's governing instrument, or $0.01, whichever price is greater. The
Exercise Price shall be payable in full in cash upon the exercise of any
Option.
SECTION 9.
EXERCISE PERIOD
Each Option granted under this Plan shall be exercisable in whole or in
part at such time or times as set forth in the related Stock Option Grant, but
no Stock Option Grant shall:
1. make an Option exercisable before the date (a) such Option
is granted; or (b) on which the Employee or Key Person
to whom the Option is granted shall have completed 12 months of
Continuous Service following the date of grant plus, for any
person who has not continuously performed services for the
Company, a Parent or a Subsidiary for at least six months prior
to the date of grant, an additional number of months equal to
the difference between (i) six months and (ii) the number of
months of Continuous Service prior to the date of grant; or
2. make an Option exercisable after the earlier of the:
(a) date such Option is exercised in full, or
(b) date which is the tenth (10th) anniversary of the
date such Option is granted, if such Option is a
Non-ISO or an ISO granted to a non-Ten Percent
Shareholder, or the date which is the fifth (5th)
anniversary of the date such Option is granted, if
such Option is an ISO granted to a Ten Percent
Shareholder.
A Stock Option Grant may provide for the exercise of an Option after the
employment of an Employee has terminated for any reason whatsoever, including
death or disability. The Committee shall have the right, in its discretion, to
accelerate the time during which any Option may be exercised and to include in
a Stock Option Grant provisions that will automatically trigger acceleration of
the time during which an Option may be exercised, including, without
limitation, a Change of Control, as described in Section 17 hereinbelow.
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<PAGE> 6
The Committee shall have the right, in its sole discretion, to condition
the vesting and exercisability of all or any portion of an Option upon an
Employee's successful attainment of annual or other periodic performance
objectives, as set forth in the Stock Option Grant.
SECTION 10.
NONTRANSFERABILITY
No Option granted under this Plan shall be transferable by an Employee
or Key Person other than by will or by the laws of descent and distribution,
and such Option shall be exercisable during an Employee's or Key Person's
lifetime only by the Employee or Key Person, as the case may be. The person or
persons to whom an Option is transferred by will or by the laws of descent and
distribution thereafter shall be treated as the Employee or Key Person.
SECTION 11.
SURRENDER OF OPTIONS
11.1 GENERAL RULE. Only until the occurrence of an Initial Public
Offering, the Committee, acting in its absolute discretion, may incorporate a
provision in a Stock Option Grant to allow an Employee or Key Person to
surrender his or her Option in whole or in part in lieu of the exercise in
whole or in part of that Option on any date that:
1. the Fair Market Value of the Shares subject to such Option
exceeds the Exercise Price for such Shares; and
2. the Option to purchase such Shares is otherwise
exercisable.
11.2 PROCEDURE. The surrender of an Option in whole or in part shall be
effected by the delivery of the Stock Option Grant to the Committee, together
with a statement signed by the Employee or Key Person which specifies the
number of Shares ("Surrendered Shares") as to which the Employee or Key Person
surrenders his or her Option and how he or she desires payment be made for such
Surrendered Shares.
11.3 PAYMENT. An Employee or Key Person in exchange for his or her
Surrendered Shares shall receive a payment in cash or in Shares, or in a
combination of cash and Shares, equal in amount on the date such surrender is
effected to the excess of the Fair Market Value of the Surrendered Shares on
such date over the Exercise Price for the Surrendered Shares. The Committee,
acting in its absolute discretion, can approve or disapprove an Employee's or
Key Person's request for payment in whole or in part in cash and can make that
payment in cash, in shares or in such combination of cash and Shares as the
Committee deems appropriate. A request for payment only in Shares shall be
approved and made in Shares to the extent payment can be made in whole Shares
and (at the Committee's discretion) in cash in lieu of any fractional Shares.
11.4 RESTRICTIONS. Any Stock Option Grant which incorporates a provision
to allow an Employee or Key Person to surrender his or her Option in whole or
in part also shall incorporate such additional restrictions on the exercise or
surrender of such Option as the Committee deems necessary to satisfy the
conditions to the exemption under Rule 16b-3 (or any successor exemption) to
Section 16(b) of the Exchange Act. Notwithstanding any other provision of the
Plan of a Stock Option Grant, no provision permitting the surrender of an
Option shall be enforceable or of any force and effect upon the occurrence of
an Initial Public Offering.
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<PAGE> 7
SECTION 12.
SECURITIES REGISTRATION
Each Stock Option Grant may provide that, upon the receipt of Shares as
a result of the surrender or exercise of an Option, the Employee or Key Person
shall, if so requested by the Company, hold such Shares for investment and not
with a view of resale or distribution to the public and, if so requested by the
Company, shall deliver to the Company a written statement satisfactory to the
Company to that effect. Each Stock Option Grant may also provide that, if so
requested by the Company, the Employee or Key Person shall make a written
representation to the Company that he or she will not sell or offer to sell any
of such Shares unless a registration statement shall be in effect with respect
to such Shares under the 1933 Act, and any applicable state securities law or,
unless he or she shall have furnished to the Company an opinion, in form and
substance satisfactory to the Company, of legal counsel acceptable to the
Company, that such registration is not required. Certificates representing the
Shares issued upon the exercise or surrender of an Option granted under this
Plan may at the discretion of the Company bear a legend to the effect that such
Shares have not been registered under the 1933 Act or any applicable state
securities law and that such Shares may not be sold or offered for sale in the
absence of an effective registration statement as to such Shares under the 1933
Act and any applicable state securities law or an opinion, in form and
substance satisfactory to the Company, of legal counsel acceptable to the
Company, that such registration is not required.
SECTION 13.
LIFE OF PLAN
No Option shall be granted under this Plan on or after the earlier of:
1. the tenth (10th) anniversary of the effective date of this
Plan (as determined under Section 4 of this Plan), in which
event this Plan otherwise thereafter shall continue in
effect until all outstanding Options have been surrendered
or exercised in full or no longer are exercisable, or
2. the date on which all of the Shares reserved under Section
3 of this Plan have (as a result of the surrender or
exercise of Options granted under this Plan) been issued or
no longer are available for use under this Plan, in which
event this Plan also shall terminate on such date.
SECTION 14.
ADJUSTMENT
The number of Shares reserved under Section 3 of this Plan, and the
number of Shares and other securities and property subject to Options granted
under this Plan, and the Exercise Price of such Options shall be adjusted by
the Committee in an equitable manner to reflect any change in the
capitalization of the Company, including, but not limited to, such changes as
stock dividends or stock splits. Furthermore, the Committee shall have the
right to adjust (in a manner which satisfies the requirements of Code Section
424(a)) the number of Shares reserved under Section 3 of this Plan, and the
number of Shares subject to Options granted under this Plan, and the Exercise
Price of such Options in the event of any corporate transaction described in
Code Section 424(a) which provides for the substitution or assumption of such
Options. If any adjustment under this Section 14 creates a fractional Share or
a right to acquire a fractional Share, such fractional Share shall be
disregarded, and the number of Shares
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<PAGE> 8
reserved under this Plan and the number subject to any Options granted under
this Plan shall be the next lower number of Shares, rounding all fractions
downward. An adjustment made under this Section 14 by the Committee shall be
conclusive and binding on all affected persons and, further, shall not
constitute an increase in the number of Shares reserved under Section 3 of this
Plan.
SECTION 15.
SALE OR MERGER OF THE COMPANY
If the Company agrees to sell all or substantially all of its assets for
cash or property, or for a combination of cash and property, or agrees to any
merger, consolidation, reorganization, division or other transaction in which
Shares are converted into another security or into the right to receive
securities or property and such agreement does not provide for the assumption
of or substitution for the Options granted under this Plan, each Option at the
direction and discretion of the Committee, or as is otherwise provided in the
Stock Option Grants, may be canceled unilaterally by the Company in exchange
for the vested whole Shares (or, subject to satisfying the conditions to the
exemption under Rule 16b-3 or any successor exemption to Section 16(b) of the
Exchange Act, for the whole Shares and the cash in lieu of a fractional Share)
which each Employee or Key Person otherwise would receive if he or she
exercised the vested portion of his or her outstanding Option on a date
immediately preceding such sale or other corporate transaction, any such
exchange to be made only upon the payment of the Exercise Price for such
outstanding Options.
SECTION 16.
AMENDMENT OR TERMINATION
This Plan may be amended by the Committee from time to time to the
extent that the Committee deems necessary or appropriate; provided, however, no
such amendment shall be made absent the approval of the shareholders of the
Company (1) to increase the number of Shares reserved under Section 3 except as
set forth in Section 14, (2) to extend the maximum life of the Plan under
Section 13 or the maximum exercise period under Section 9, (3) to decrease the
minimum Exercise Price under Section 8, or (4) to change the designation of
Employees or Key Persons eligible for Options under Section 6. The Committee
also may suspend the granting of Options under this Plan at any time and may
terminate this Plan at any time; provided, however, the Company shall not have
the right to modify, amend or cancel any Option granted before such suspension
or termination unless (1) the Employee or Key Person consents in writing to
such modification, amendment or cancellation or (2) there is a dissolution or
liquidation of the Company or a transaction described in Section 14 or Section
15 of this Plan.
SECTION 17.
CHANGE OF CONTROL
For purposes of this Plan and documents evidencing Options granted
pursuant to this Plan, a "Change of Control" of the Company shall be deemed to
have occurred if one of the following events takes place:
1. Any person other than an Existing Person becomes a holder of
record, as reflected on the stock transfer ledger of the
Company, of securities of the Company representing a right of
the person, acting individually and not in concert with any
other party (and not acting through a contract, arrangement,
understanding, relationship, proxy, voting trust, voting
agreement, or other device), to vote more than fifty percent
(50%) of the combined voting power of the Company's then
outstanding securities;
-8-
<PAGE> 9
2. A person other than an Existing Person obtains the right to
elect a majority of the members of the Board of Directors of
the Company, but not including any such right granted solely
pursuant to a proxy solicited by the Board of Directors of
the Company;
3. The Company or any of its subsidiaries shall sell, assign or
otherwise transfer, directly or indirectly, assets (including
stock or other securities of subsidiaries, but other than the
grant of licenses to intangible assets in the ordinary course
of business) having a fair market value of sixty-six percent
(66%) or more of all the assets of the Company and its
subsidiaries to any third party, other than a wholly-owned
subsidiary of the Company; or
4. Any person other than an Existing Person becomes a beneficial
owner (as such term is used in Rule 13d-3 under the Exchange
Act) of securities of the Company representing more than
fifty percent (50%) of the combined voting power of the
Company's then outstanding securities, as determined for
purposes of the election of members of the Board of Directors
of the Company.
Notwithstanding the above, no Change of Control shall be deemed to
occur solely as the result of the issuance of new securities pursuant to (a) an
Initial Public Offering or (b) the exercise of warrants and options granted and
outstanding as of the effective date of the Plan. In addition, a Change of
Control shall not, solely with respect to Section 17, Subsection 3 above, be
deemed to occur as a result of any conveyance, transfer or grant to a bank or
other financial institution of a collateral assignment of, securities title to
or security interest in any goods, accounts, inventory, general intangibles or
other assets of the Company or any of its subsidiaries to secure the
obligations of the Company or any of its subsidiaries to such bank or other
financial institution, or the exercise of any rights or remedies by such bank
or other financial institution relation thereto.
SECTION 18.
MISCELLANEOUS
18.1 SHAREHOLDER RIGHTS. No Employee or Key Person shall have any rights
as a shareholder of the Company as a result of the grant of an Option to him or
to her under this Plan or his or her exercise or surrender of such Option
pending the actual delivery of Shares subject to such Option to such Employee
or Key Person.
18.2 NO CONTRACT OF EMPLOYMENT. The grant of an Option to an Employee or
Key Person under this Plan shall not constitute a contract of employment or
other contract relating to the performance of any services by the Employee or
Key Person and shall not confer on an Employee or Key Person any rights upon
his or her termination of employment or other relationship in addition to those
rights, if any, expressly set forth in the Stock Option Grant which evidences
his or her Option.
18.3 WITHHOLDING. The exercise or surrender of any Option granted under
this Plan shall constitute an Employee's or Key Person's full and complete
consent to whatever action the Committee directs to satisfy the federal and
state tax withholding requirements, if any, which the Committee in its
discretion deems applicable to such exercise or surrender.
-9-
<PAGE> 10
18.4 TRANSFER. The transfer of an Employee between or among the Company,
a Subsidiary or a Parent shall not be treated as a termination of his or her
employment under this Plan.
18.5 CONSTRUCTION. This Plan shall be construed under the laws of the
State of Georgia.
-10-
<PAGE> 11
MELITA INTERNATIONAL CORPORATION
1997 STOCK OPTION PLAN
STOCK OPTION GRANT CERTIFICATE
MELITA INTERNATIONAL CORPORATION, a Georgia corporation (the "Company"), hereby
grants to the optionee named below ("Optionee") an option (this "Option") to
purchase the total number of shares shown below of Common Stock of the Company
(the "Shares") at the exercise price per share set forth below (the "Exercise
Price"), subject to all of the terms and conditions on the reverse side of this
Stock Option Grant Certificate and the Melita International Corporation 1997
Stock Option Plan (the "Plan"). Unless otherwise defined herein, capitalized
terms used herein shall have the meanings ascribed to them in the Plan. The
terms and conditions set forth on the reverse side hereof and the terms and
conditions of the Plan are incorporated herein by reference.
<TABLE>
<S> <C> <C>
In witness whereof, this Stock Option Shares Subject to Option: Optionee hereby acknowledges
Grant has been executed by the Company -------- receipt of a copy of the Plan,
by a duly authorized officer as of the represents that Optionee has read and
date specified hereon. Exercise Price Per Share: $ understands the terms and provisions of
-------- the Plan, and accepts this Option
MELITA INTERNATIONAL CORPORATION subject to all the terms and conditions
Term of Option: Years expiring of the Plan and this Stock Option Grant
---- ----- Certificate. Optionee acknowledges that
By: there may be adverse tax consequences
----------------------------------- Shares subject to issuance under this upon exercise of this Option or
Option shall be eligible for exercise disposition of the Shares and that
Date of Grant: according to the vesting schedule Optionee should consult a tax adviser
Type of Stock Option: described in Section 10 on the reverse prior to such exercise or disposition.
[ ] Incentive of this Stock Option Grant certificate.
[ ] Non-Qualified
Vesting Extension Period: --------------------------------------
Months Signature of Optionee
--------
Not Applicable
-------- --------------------------------------
Print Name of Optionee
Vesting: Four Year Performance Vesting
</TABLE>
<PAGE> 12
1. EXERCISE PERIOD OF OPTION. Subject to the terms and conditions of this
Option and the Plan, and unless otherwise modified by a written modification
signed by the Company and Optionee, this Option may be exercised with respect to
all of the Shares, but only according to the vesting schedule specified on the
obverse side of this Stock Option Grant Certificate and as described in Section
10 below, prior to the date which is the last day of the Term set forth on the
face hereof following the date of grant (hereinafter "Expiration Date").
2. RESTRICTIONS ON EXERCISE. This Option may not be exercised, unless such
exercise is in compliance with the Securities Act of 1933, as amended, and all
applicable state securities laws, as they are in effect on the date of exercise,
and the requirements of any stock exchange or national market system on which
the Company's Common Stock may be listed at the time of exercise. Optionee
understands that the Company is under no obligation to register, qualify or list
the Shares with the Securities and Exchange Commission ("SEC"), any state
securities commission or any stock exchange or national market system to effect
such compliance.
3. TERMINATION OF OPTION. Except as provided below in this Section, this
Option may not be exercised after the date which is thirty (30) days after
Optionee ceases to perform services for the Company, or any Parent or
Subsidiary. Optionee shall be considered to perform services for the Company, or
any Parent or Subsidiary, for all purposes under this Section and Section 10
hereof, if Optionee is an officer or full-time employee of the Company, or any
Parent or Subsidiary, or if the Committee determines that Optionee is rendering
substantial services as a part-time employee, consultant, contractor or advisor
to the Company, or any Parent or Subsidiary. The Committee shall have discretion
to determine whether Optionee has ceased to perform services for the Company, or
any Parent or Subsidiary, and the effective date on which such services cease
(the "Termination Date"). Notwithstanding anything contained herein to the
contrary, if the corporate position of Optionee is, at any time, altered or
revised such that Optionee's responsibilities are materially reduced or
decreased for any reason, as determined by the Committee in its sole discretion,
the vesting of Shares under Section 10 shall cease, effective as of the date of
such reduction in Optionee's employment responsibilities; provided, however,
except as otherwise provided in this Option and the Plan, Optionee shall have
the right to exercise this Option with respect to Shares which have vested under
Section 10 as of the date of such reduction of Optionee's responsibilities.
(a) Termination Generally. If Optionee ceases to perform services for
the Company, or any Parent or Subsidiary, for any reason, except death or
disability (within the meaning of Code Section 22(e)(3)), this Option shall
immediately be forfeited, along with any and all rights or subsequent rights
attached thereto, thirty (30) days following the Termination Date, but in no
event later than the Expiration Date.
(b) Death or Disability. If Optionee ceases to perform services for the
Company, or any Parent or Subsidiary, as a result of the death or disability of
Optionee (as determined by the Committee in its sole discretion), this Option,
to the extent (and only to the extent) that it would have been exercisable by
Optionee on the Termination Date, may be exercised by Optionee (or, in the event
of Optionee's death, by Optionee's legal representative) within ninety (90) days
after the Termination Date, but in no event later than the Expiration Date.
(c) No Right to Employment. Nothing in the Plan or this Stock Option
Grant Certificate shall confer on Optionee any right to continue in the employ
of, or other relationship with, the Company, or any Parent or Subsidiary, or
limit in any way the right of the Company, or any Parent or Subsidiary, to
terminate Optionee's employment or other relationship at any time, with or
without cause.
4. MANNER OF EXERCISE.
(a) Exercise Agreement. This Option shall be exercisable by delivery to
the Company of an executed Exercise and Shareholder Agreement ("Exercise
Agreement") in the form of the Exercise Agreement delivered to Optionee, if
applicable, or in such other form as may be approved or accepted by the Company,
which shall set forth Optionee's election to exercise this Option with respect
to some or all of the Shares, the number of Shares being purchased, any
restrictions imposed on the Shares, and such other representations and
agreements as may be required by the Company to comply with applicable
securities laws.
(b) Exercise Price. Such Exercise Agreement shall be accompanied by
full payment of the Exercise Price for the Shares being purchased. Payment for
the Shares may be made in U.S. dollars in cash (by check).
(c) Withholding Taxes. Prior to the issuance of Shares upon exercise
of this Option, Optionee must pay, or make adequate provision for, any
applicable federal or state withholding obligations of the Company.
(d) Issuance of Shares. Provided that such Exercise Agreement and
payment are in form and substance satisfactory to counsel for the Company, the
Company shall cause the Shares to be issued in the name of Optionee or
Optionee's legal representative.
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If this Option is an
ISO, and if Optionee sells or otherwise disposes of any of the Shares acquired
pursuant to the ISO on or before the later of: (a) the date two (2) years after
the Date of Grant, or (b) the date one (1) year after exercise of the ISO, with
respect to the Shares to be sold or disposed, Optionee shall immediately notify
the Company in writing of such sale or disposition. Optionee acknowledges and
agrees that Optionee may be subject to income tax withholding by the Company on
the compensation income recognized by Optionee from any such early disposition
by payment in cash or out of the current wages or earnings payable to Optionee.
6. NONTRANSFERABILITY OF OPTION. This Option may not be transferred in any
manner, other than by will or by the laws of descent and distribution, and may
be exercised during Optionee's lifetime only by Optionee. The terms of this
Option shall be binding upon the executor, administrators, successors and
assigns of Optionee.
7. TAX CONSEQUENCES. OPTIONEE UNDERSTANDS THAT THE GRANT AND EXERCISE OF
THIS OPTION, AND THE SALE OF SHARES OBTAINED THROUGH THE EXERCISE OF THIS
OPTION, MAY HAVE TAX IMPLICATIONS THAT COULD RESULT IN ADVERSE TAX CONSEQUENCES
TO OPTIONEE. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH, OR WILL
CONSULT WITH, HIS OR HER TAX ADVISOR AND OPTIONEE FURTHER ACKNOWLEDGES THAT
OPTIONEE IS NOT RELYING ON THE COMPANY OR ANY EMPLOYEE, OFFICER OR DIRECTOR OF,
OR COUNSEL OR ACCOUNTANTS FOR, THE COMPANY FOR ANY TAX, FINANCIAL OR LEGAL
ADVICE.
8. INTERPRETATION. Any dispute regarding the interpretation of this Stock
Option Grant Certificate shall be submitted by Optionee or the Company to the
Committee, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Committee shall be final and binding on the
Company and Optionee.
9. ENTIRE AGREEMENT. The Plan and the Exercise Agreement are incorporated
herein by this reference. Optionee acknowledges and agrees that the granting of
this Option constitutes a full accord, satisfaction and release of all
obligations or commitments made to Optionee by the Company or any of its
officers, directors, shareholders or affiliates with respect to the issuance of
any securities, or rights to acquire securities, of the Company or any of its
affiliates. This Stock Option Grant Certificate, the Plan and the Exercise
Agreement constitute the entire agreement of the parties hereto, and supersede
all prior undertakings and agreements with respect to the subject matter hereof.
10. VESTING AND EXERCISE OF SHARES. Subject to the terms of the Plan, this
Option and the Exercise Agreement, the Shares issued pursuant to the exercise of
this Stock Option Grant Certificate shall be subject to the vesting restrictions
selected on the obverse side of this Option and defined below. For purposes of
this Section, "Continuous Service" means a period of continuous performance of
services by Optionee for the Company, a Parent, or a Subsidiary, beginning on
and after the Effective Date, February 7, 1997, or such other date as is
established by the Commitee, as determined by the Committee.
Four Year Performance Vesting: Optionee may exercise this Option with
respect to the percentage of Shares set forth below only after Optionee has
completed the following periods of Continuous Service following the date of
grant:
(a) After twelve (12) months of Continuous Service, up to twenty-five
percent (25%) of the Shares, provided that the Year One Performance
Objectives, set forth below, have been achieved, in the sole judgment of
the Committee; further provided, that if the Year One Performance
Objectives have not been achieved, Optionee may exercise this Option with
respect to the aforementioned 25% of the Shares only upon completion of
forty-eight months of Continuous Service.
YEAR ONE PERFORMANCE OBJECTIVES:
(b) After twenty-four (24) months of Continuous Service, an additional
twenty-five percent (25%) of the Shares (over and above those subject to
Subsection (a) above), provided that the Year Two Performance Objectives,
set forth below, have been achieved, in the sole judgment of the Committee;
further provided, that if the Year Two Performance Objectives have not been
achieved, Optionee may exercise this Option with respect to the
aforementioned 25% of the Shares only upon completion of forty-eight months
of Continuous Service.
YEAR TWO PERFORMANCE OBJECTIVES:
(c) After thirty-six (36) months of Continuous Service, an additional
twenty-five percent (25%) of the Shares: and
(d) After forty-eight (48) months of Continuous Service, up to one
hundred percent (100%) of the Shares;
provided, however, that for any Optionee who has not continuously performed
services for the Company, a Parent or a Subsidiary for at least six months
prior to the Date of Grant, each of the periods referred to in clauses (a)
through (d) shall be extended by the number of months equal to the
difference between (i) six months and (ii) the number of months of
Continuous Service prior to the Date of Grant (the "Vesting Extension
Period"), as indicated on the obverse hereof.
Notwithstanding the above, an Optionee shall become one hundred percent (100%)
vested and shall be entitled to exercise the Option as to one hundred percent
(100%) of the Shares granted pursuant to this Stock Option Grant Certificate
upon a Change of Control of the Company, as defined in Section 17 of the Plan.
<PAGE> 13
MELITA INTERNATIONAL CORPORATION
1997 STOCK OPTION PLAN
EXERCISE AND SHAREHOLDER AGREEMENT
This Exercise and Shareholder Agreement (the "Exercise Agreement") is
made this_____ day of__________ , 199___ by and between Melita International
Corporation (the "Company") and the optionee named below ("Optionee")
pursuant to that certain Stock Option Grant described below which was granted
to Optionee under the Melita 1997 Stock Option Plan (the "Plan").
Optionee:
---------------------------------------
Social Security Number:
---------------------------------------
Address:
---------------------------------------
---------------------------------------
---------------------------------------
Number of Shares Purchased:
---------------------------------------
Price Per Share $
--------------------------------------
Aggregate Purchase Price: $
--------------------------------------
Date of Stock Option Grant:
--------------------------------------
Optionee hereby delivers to the Company the Aggregate Purchase Price
by check in the amount of $___________, receipt of which is acknowledged by the
Board of Directors ("Board") of the Company.
The Company and Optionee hereby agree as follows:
1. PURCHASE OF SHARES. On this date and subject to the terms and
conditions of this Exercise Agreement and the Plan, Optionee hereby exercises,
subject to the contingencies below, the Stock Option Grant between the Company
and Optionee dated as of the "Date of Stock Option Grant" set forth above (the
"Option") with respect to the "Number of Shares Purchased" set forth above of
the Company's Common Stock at the "Aggregate Purchase Price" set forth above
(the "Purchase Price") and the "Price per Share" set forth above (the "Purchase
Price Per Share"). The term "Shares" refers to the shares of the Company's no
par value common stock purchased under this Exercise Agreement and includes all
securities received (a) in replacement of the Shares and (b) as a result of
stock dividends or stock splits in respect of the Shares. Capitalized terms
used in this Exercise Agreement that are not defined herein have the
definitions ascribed to them in the Plan and the Option.
2. REPRESENTATIONS OF PURCHASER. Optionee represents and warrants to
the Company that:
(a) Optionee acknowledges that Optionee has received, read
and understood the Plan and the Option and agrees to abide by and be bound by
their terms and conditions;
<PAGE> 14
(b) Optionee is purchasing the Shares for Optionee's own
account for investment purposes only and not with a view to, or for sale in
connection with, a distribution of the Shares within the meaning of the
Securities Act of 1933, as amended (the "1933 Act");
(c) Optionee has no present intention of selling or otherwise
disposing of all or any portion of the Shares;
(d) Optionee is fully aware of (i) the highly speculative
nature of the investment in the Shares; (ii) the financial hazards involved in
the investment of the Shares; and (iii) the lack of liquidity of the Shares and
the restrictions on transferability of the Shares (e.g., that Optionee may not
be able to sell or dispose of the Shares or use them as collateral for loans);
and
(e) Optionee is capable of evaluating the merits and risks of
this investment, has the ability to protect Optionee's own interests in this
transaction and is financially capable of bearing a total loss of this
investment.
3. COMPLIANCE WITH SECURITIES LAWS. Optionee understands and
acknowledges that the Shares have not been registered under the 1933 Act and
that, notwithstanding any other provision of the Option to the contrary, the
exercise of any rights to purchase any Shares is expressly conditioned upon
compliance with the 1933 Act and all applicable state securities laws. Optionee
agrees to cooperate with the Company to ensure compliance with such laws.
4. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Shares held by
Optionee or any transferee (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company shall have an assignable right of first refusal
to purchase the Shares on the terms and conditions set forth in this Section 4
(the "Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares
shall deliver to the Company a written notice (the "Notice") stating (i) the
Holder's bona fide intention to sell or otherwise transfer such Shares, (ii)
the name of each proposed purchaser or other transferee ("Proposed
Transferee"), (iii) the number of Shares to be transferred to each Proposed
Transferee, and (iv) the bona fide cash price or other consideration for which
the Holder proposes to transfer the Shares (the "Offered Price"); in addition,
by providing the Notice, the Holder is deemed to be offering to sell the Shares
at the Offered Price to the Company.
(b) Exercise of Right of First Refusal. At any time within
thirty (30) days after receipt of the Notice, the Company or its assignee may,
by giving written notice to the Holder, elect to purchase any or all of the
Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with Subsection (c)
below.
(c) Purchase Price. The purchase price for the Shares
purchased under this Section 4 shall be the Offered Price. If the Offered Price
includes consideration other than cash, the cash equivalent value of the
non-cash consideration shall be determined by the Board in good faith.
(d) Payment. Payment of the purchase price shall be made, at
the option of the Company or its assignee, either (i) in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company or such assignee, or by any combination thereof
-2-
<PAGE> 15
within thirty (30) days after receipt of the Notice or (ii) in the manner and
at the time(s) set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed
in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee as provided in this Section 4,
then the Holder may sell or otherwise transfer such Shares to that Proposed
Transferee at the Offered Price or at a higher price, provided that such sale
or other transfer is consummated within one hundred and twenty (120) days after
the date of the Notice and provided further that any such sale or other
transfer is effected in accordance with any applicable securities laws and the
Proposed Transferee agrees in writing that the provisions of this Section 4
shall continue to apply to the Shares in the hands of such Proposed Transferee.
If the Shares described in the Notice are not transferred to the Proposed
Transferee within such period, a new Notice shall be given to the Company, and
the Company shall again be offered the Right of First Refusal, before any
Shares held by the Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the
contrary contained in this Section 4 notwithstanding, the transfer of any or
all of the Shares, during Optionee's lifetime or on Optionee's death by will or
intestacy, to Optionee's immediate family or to a trust for the benefit of
Optionee or Optionee's immediate family shall be exempt from the provisions of
this Section; provided, that as a condition to receiving the Shares, the
transferee or other recipient shall agree in writing to receive and hold the
Shares so transferred subject to the provisions of this Agreement, and to
transfer such Shares no further except in accordance with the terms of this
Agreement. As used herein, "immediate family" shall mean the Optionee's spouse,
lineal descendant or antecedent, father, mother, brother or sister.
(g) Termination of Right of First Refusal. The Right of First
Refusal shall terminate as to any Shares upon an Initial Public Offering (as
such term is defined in the Plan).
5. COMPANY'S REPURCHASE OPTION. The Company shall have the
option to repurchase all or a portion of the Shares on the terms and
conditions set forth in this Section 5 (the "Repurchase Option") if Optionee
should cease to be employed by the Company for any reason, or no reason,
including without limitation Optionee's death, disability, voluntary
resignation or termination by the Company with or without cause.
(a) Right of Termination Unaffected. Nothing in this
Agreement shall be construed to limit or otherwise affect in any manner
whatsoever the right or power of the Company to terminate Optionee's employment
or association with the Company at any time, for any reason or no reason, with
or without cause. For purposes of this Agreement, Optionee shall be considered
to be employed by the Company or associated with the Company if Optionee is an
officer, director or full-time employee of the Company or any Parent or
Subsidiary of the Company or if the Board determines that Optionee is rendering
substantial services as a part-time employee, consultant, contractor or advisor
to the Company or any Parent or Subsidiary of the Company. The Board shall have
discretion to determine whether Optionee has ceased to be employed by or
associated with the Company or any Parent or Subsidiary and the effective date
on which such employment or association is terminated (the "Termination Date").
(b) Exercise of Repurchase Option. Subject to Section 5(e)
below, any time following the Termination Date, the Company may elect to
repurchase any or all of the Shares by giving Optionee written notice of
exercise of the Repurchase Option.
-3-
<PAGE> 16
(c) Calculation of Repurchase Price. In the event Optionee's
employment with the Company terminates for any reason whatsoever, the Company
or its assignee shall have the option to repurchase from Optionee (or from
Optionee's personal representative as the case may be) any or all of the Shares
at a price equal to the Fair Market Value (as defined in the Plan) of such
Shares on the Termination Date.
(d) Payment of Repurchase Price. The repurchase price shall
be payable, at the option of the Company or its assignee, by (i) check, (ii) by
cancellation of all or a portion of any outstanding indebtedness of Optionee to
the Company or such assignee, (iii) by delivery of a promissory note of the
Company payable in equal annual installments over a four (4) year period from
the date of repurchase at a per annum interest rate equal to the prime rate as
announced from time to time by the Company's principal bank or, if the Company
has no principal bank, that rate announced by the Wall Street Journal as the
prevailing "prime rate" of interest per annum, as of the Termination Date, or
(iv) any combination of the above.
(e) Termination of Repurchase Rights. The Repurchase Option
shall terminate as to any Shares upon an Initial Public Offering (as such term
is defined in the Plan).
6. COMPLIANCE WITH FEDERAL AND STATE SECURITIES LAWS. Optionee
understands and acknowledges that, in reliance upon the representations and
warranties made by Optionee herein, the Shares have not been registered with
the Securities and Exchange Commission ("SEC") under the 1933 Act, but have
been issued under an exemption or exemptions from the registration requirements
of the 1933 Act which impose certain restrictions on Optionee's ability to
transfer the Shares and have not been registered under any Georgia securities
laws or the securities laws of any other state. Optionee understands that
Optionee may not transfer any Shares unless such Shares are registered under
the 1933 Act and the securities laws of Georgia (or the securities laws of any
other state, if applicable) or unless, in the opinion of counsel to the
Company, an exemption from such registration is available. Optionee understands
that only the Company may file a registration statement with the SEC or Georgia
(or other applicable states), and that the Company is under no obligation to do
so with respect to the Shares. Optionee has also been advised that an exemption
from registration may not be available or may not permit Optionee to transfer
all or any of the Shares in the amounts or at the times proposed by Optionee.
7. ESCROW. As security for the faithful performance of this
Exercise Agreement, Optionee agrees, immediately upon receipt of the
certificate(s) evidencing the Shares, to deliver such certificate(s), to the
Secretary of the Company or its designee ("Escrow Holder"), who is hereby
appointed to hold such certificate(s) in escrow and to take all such actions
and to effectuate all such transfers and/or releases of such Shares as are in
accordance with the terms of this Exercise Agreement. Optionee and the Company
agree that Escrow Holder shall not be liable to any party to this Exercise
Agreement (or to any other party) for any actions or omissions unless Escrow
Holder is grossly negligent relative thereto. The Escrow Holder may rely upon
any letter, notice or other document executed by any signature reputed to be
genuine and may rely upon advice of counsel and obey any order of any court
with respect to the transactions contemplated herein. The Shares shall be
released from escrow upon termination of both the Right of First Refusal set
forth in Section 4 and the Repurchase Option set forth in Section 5; provided,
however, that such release shall not affect the rights of the Company with
respect to any pledge of Shares to the Company. Optionee hereby irrevocably
constitutes and appoints Escrow Holder as Optionee's agent and attorney-in-fact
for the purpose of executing and delivering any and all documents necessary to
transfer any Shares purchased hereunder to the Company pursuant to the terms of
this Exercise Agreement and to record such transfer on the books of the
Company, such appointment being made with full power of substitution in the
premises.
-4-
<PAGE> 17
8. LEGENDS. Optionee understands and agrees that the certificate(s)
representing the Shares will bear legends in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE GEORGIA SECURITIES ACT OF 1973, AS AMENDED
("GEORGIA ACT"), UNDER ANY OTHER STATE SECURITIES LAW, OR UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("FEDERAL ACT"). THESE
SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED
FOR SALE, HYPOTHECATED, SOLD OR TRANSFERRED, NOR WILL ANY
ASSIGNEE OR TRANSFEREE THEREOF BE RECOGNIZED BY THE CORPORATION
AS HAVING AN INTEREST IN SUCH SHARES, IN THE ABSENCE OF (I) AN
EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THE SHARES
UNDER THE FEDERAL ACT, OR AN OPINION OF COUNSEL SATISFACTORY TO
THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED, AND (II)
AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THE SHARES
UNDER THE GEORGIA ACT AND UNDER ANY OTHER APPLICABLE STATE LAW,
OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT
SUCH SHARES WILL BE OFFERED FOR SALE, HYPOTHECATED, SOLD OR
TRANSFERRED ONLY IN A TRANSACTION WHICH IS EXEMPT UNDER, OR
WHICH IS OTHERWISE IN COMPLIANCE WITH, THE GEORGIA ACT AND ANY
OTHER APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THAT
CERTAIN EXERCISE AND SHAREHOLDER AGREEMENT DATED THE _____ DAY
OF _______________, 19___, A COPY OF WHICH IS ON FILE WITH THE
CORPORATION."
9. STOP-TRANSFER NOTICES. Optionee understands and agrees that, in
order to ensure compliance with the restrictions referred to herein, the
Company may issue appropriate "stop-transfer" instructions to its transfer
agent, if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.
10. TAX CONSEQUENCES. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER
ADVERSE TAX CONSEQUENCES AS A RESULT OF OPTIONEE'S PURCHASE OR DISPOSITION OF
THE SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX
CONSULTANT(S) OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY FOR
ANY TAX ADVICE. IN PARTICULAR, OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED
WITH OPTIONEE'S TAX ADVISORS CONCERNING THE ADVISABILITY OF FILING AN ELECTION
WITH THE INTERNAL REVENUE SERVICE UNDER SECTION 83(B) OF THE INTERNAL REVENUE
CODE OF 1986, AS IT MAY BE AMENDED FROM TIME TO TIME.
11. ENTIRE AGREEMENT. The Plan and the Option are incorporated herein
by reference. This Exercise Agreement, the Plan and the Option constitute the
entire agreement of the parties and supersede in their entirety all prior
undertakings and agreements of the Company and Optionee with respect to the
subject matter hereof, and are governed by Georgia law except for that body of
law pertaining to conflict of laws.
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Submitted by: Accepted by:
OPTIONEE: COMPANY:
- ------------------------------------- MELITA INTERNATIONAL
(Print name of Optionee) CORPORATION
By:
- ------------------------------------- --------------------------------
(Signature of Optionee)
Title:
-----------------------------
Dated: Dated:
------------------------------- -----------------------------
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<PAGE> 1
EXHIBIT 10.4
MELITA INTERNATIONAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE.
The Melita International Corporation Employee Stock Purchase Plan (the
"Plan") is intended to encourage employee stock ownership by offering employees
of Melita International Corporation (the "Company") and its subsidiaries
Purchase Rights (as such term is defined in Section 2) to purchase shares of
Common Stock. The Plan is intended to operate as a bifurcated plan, providing
benefits as an "employee stock purchase plan" as defined in Section 423 of the
Internal Revenue Code of 1986, as amended ("Code"), to those employees eligible
to participate in and receive benefits under such a plan, and providing similar
benefits through an employee stock purchase plan not intended to satisfy Code
Section 423 to eligible employees who may not benefit under a plan satisfying
Code Section 423. The provisions of the Plan shall, accordingly, be construed
so as to comply with the requirements of Section 423 of the Code, whenever
possible.
2. DEFINITIONS.
"BASE PAY" means regular straight-time and overtime earnings received from
the Company, excluding payments for incentive compensation, bonuses and other
special payments.
"BOARD" mean the Board of Directors of the Company.
"COMMITTEE" means the Board or, if designated by the Board, the
Compensation Committee of the Board or any other committee which may be so
designated.
"COMMON STOCK" or "STOCK" means the Common Stock, par value $.001 per
share, of Harbinger Corporation, and any other stock or securities (including
any other share or securities of an entity other than Harbinger Corporation)
for or into which the outstanding shares of such stock are hereinafter
exchanged or changed.
"COMPANY" means Melita International Corporation.
"CUSTODIAN" means Smith Barney, Inc., whose address is 388 Greenwich
Street, 28th Floor, New York, New York 10013, or such other person as the
Committee shall designate from time to time.
"EFFECTIVE DATE" means the date of effectiveness of the Company's
registration statement under the Securities Act of 1933 related to the
Company's initial public offering, or such other date set by the Board for the
Plan to become effective. The Effective Date shall be subject to shareholder
approval pursuant to Section 17.
<PAGE> 2
"EXERCISE DATE" means the last day of a Purchase Period (as such term is
defined in Section 4(b) hereof), on which date all Participants' outstanding
Purchase Rights will automatically be exercised.
"FAIR MARKET VALUE" of each share of Common Stock on any date means the
price determined below on the last business day immediately preceding the date
of valuation:
(a) The closing sales price per share of the Common Stock, regular
way, or in the absence thereof the mean of the last reported bid and asked
quotations, on such date on the exchange having the greatest volume of trading
in the Common Stock during the thirty-day period preceding such date (or if
such exchange was not open for trading on such date, the next preceding date on
which it was open); or
(b) If there is no price as specified in (a), the final reported
sales price per share of the Common Stock, or if not reported, the mean of the
closing high bid and low asked prices in the over-the-counter market for the
Common Stock as reported by the National Association of Securities Dealers
Automatic Quotation System, or if not so reported, then as reported by the
National Quotation Bureau Incorporated, or if such organization is not in
existence, by an organization providing similar services, on such date (or if
such date is not a date for which such system or organization generally
provides reports, then on the next preceding date for which it does so); or
(c) If there also is no price as specified in (b), the price per
share of the Common Stock determined by the Board by reference to bid-and-asked
quotations for the Common Stock provided by members of an association of
brokers and dealers registered pursuant to Subsection 15(b) of the Exchange
Act, which members make a market in the Common Stock, for such recent dates as
the Board shall determine to be appropriate for fairly determining current
market value; or
(d) If there also is no price as specified in (c), an amount per
share of the Common Stock determined in good faith by the Board to be the price
at which the Committee acting in good faith determines through any reasonable
valuation method that a share of the Common Stock might change hands between a
willing buyer and a willing seller, neither being under any compulsion to buy
or to sell and both having reasonable knowledge of the relevant facts. The Fair
Market Value may be based on the most recent valuation of the Company performed
by the Company's auditors or by other professionals retained to value the
Company.
"NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
"PARTICIPANT" means an employee of the Company or of a parent or
subsidiary of the Company who has enrolled in the Plan by completing a
Participation Form (as such term is defined in Section 5 hereof) with the Plan
Administrator. For purposes of the Plan, a parent means a company which owns a
majority interest in the Company and effectively controls the Company, and a
subsidiary means a company in which the Company owns a majority interest and
which the Company effectively controls. For purposes of employees participating
in the
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<PAGE> 3
portion of the Plan satisfying Code Section 423, the terms parent and
subsidiary have the meanings set forth in Code Sections 424(e) and (f),
respectively.
"PLAN ADMINISTRATOR" means the Director of Human Resources of the Company,
or any such other person so designated by the Committee.
"PURCHASE PERIOD" means a semi-annual period as defined in Section 4(b)
hereof.
"PURCHASE RIGHT" means a Participant's option to purchase shares of Common
Stock that is deemed to be granted to a Participant during a Purchase Period
pursuant to Section 7.
"SECTION 16(B) INSIDER" means those persons subject to the requirements of
Section 16(b) of the Securities Exchange Act of 1934, as amended.
"TRADING DAY" refers to a day during which the NASDAQ National Market
System is available for trading shares of Common Stock.
3. ELIGIBILITY.
(a) Participation in the Plan is voluntary. All full-time employees of the
Company, including officers and directors who are full-time employees but who
are not members of the Committee, who have completed at least six (6) months of
continuous service with the Company are eligible to participate in the Plan.
The employee's entry date in the Plan shall be the first day of the Purchase
Period immediately following the date the employee has satisfied the
eligibility provisions. Full-time employees mean those employees who work at
least twenty (20) hours per week and for more than nine (9) months in any
calendar year.
(b) Notwithstanding any provision of the Plan to the contrary, no employee
may participate in that part of the Plan which is intended to satisfy Code
Section 423 if prior to the grant of Purchase Rights or if following a grant of
Purchase Rights under the Plan, the employee would own, directly or by
attribution, stock, Purchase Rights or other stock options to purchase stock
representing five percent (5%) or more of the total combined voting power or
value of all classes of the Company's stock as defined in Code Section
423(b)(3).
(c) Subject to committee approval, any employees of a company or other
entity which is acquired directly or indirectly by the Company (whether by
merger, consolidation, stock purchase or otherwise) and becomes a subsidiary of
the Company (as such term is defined in Code Section 424(f)) may, for purposes
of determining eligibility to participate in the Plan, be granted past service
credit for employment with such company or entity.
4. SECURITIES SUBJECT TO THE PLAN AND PURCHASE PERIODS.
(a) The maximum number of shares which may be granted and purchased under
the Plan may not exceed Two Hundred and Fifty Thousand (250,000) shares of
Common Stock (subject to adjustment as provided in Section 15), which may be
authorized but unissued shares, re-acquired shares or shares bought on the open
market. If any Purchase Right granted shall
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<PAGE> 4
expire or terminate for any reason without having been exercised in full, the
unpurchased shares of Common Stock shall again become available for purposes of
the Plan, unless the Plan has been terminated.
(b) Purchase Period means each six-month period, beginning on January 1
and July 1 of each year; provided, however, that the first such Purchase Period
shall begin concurrently with the Effective Date of the Plan and end of the
first December 31 or June 30 occurring more than six months after the Effective
Date.
5. PARTICIPATION.
Eligible employees become Participants in the Plan by authorizing payroll
deductions for the purpose through a "Participation Form" filed with the Plan
Administrator no later than fifteen (15) days prior to the start date of a
Purchase Period. Notwithstanding the above, and subject to committee approval,
the Plan Administrator may provide for a special election period for
participation in the Plan following the acquisition of a company or other
entity directly or indirectly by the Company (whether by merger, consolidation,
stock purchase or otherwise) which results in such company or entity becoming a
subsidiary of the Company (as such term is defined in Code Section 424(f)).
Subject to committee approval, all employees of the Company and its
subsidiaries shall be eligible to participate in such special election period.
6. PAYROLL DEDUCTIONS.
(a) In order to purchase Common Stock each Participant must elect and
indicate on the Participation Form the amount he/she wishes to authorize the
Company to deduct at regular payroll intervals during the Purchase period,
expressed either as (1) an integral percentage amount ranging from one percent
(1%) to ten percent (10%) of such Participant's Base Pay for the applicable
payroll period, with a minimum deduction of $10.00 per payday during the
Purchase Period, or (2) a dollar amount to be deducted pro rata at regular
payroll intervals during the Purchase Period, with a minimum deduction of $10
per payday and a maximum dollar amount per payday to be set by the Committee.
The Committee shall determine from time to time whether method (1) or (2), or
both, shall be utilized. The Participation Form will include authorization for
the Company to make payroll deductions from the Participant's Base Pay.
(b) A Participant may not be granted Purchase Rights under the Plan with
respect to more than $25,000.00 worth of Common Stock for any calendar year
such Purchase Rights to purchase Common Stock are outstanding pursuant to the
terms of the Plan. The $25,000.00 limit is determined according to the Fair
Market Value of the Common Stock on the first day (the grant date) of the
Purchase Period. Participants will be notified if these limitations become
applicable to them.
(c) The amounts deducted from the Participant's Base Pay shall be credited
to a bookkeeping account established in the Participant's name under the Plan,
but no actual separate account will be established by the Company to hold such
amounts. There shall be no interest paid on the balance credited to a
Participant's account. Amounts deducted from the participant's Base
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<PAGE> 5
Pay may be commingled with the general assets of the Company and may be used
for its general corporate purposes prior to the purchase of Common Stock for a
Purchase Period.
(d) Payroll deductions shall begin on the first payday of each Purchase
Period, and shall end on the last payday of each Purchase Period. Eligible
employees may participate in the Plan and purchase shares only through payroll
deductions. Notwithstanding the above, a Participant on an approved leave of
absence may continue participating in the Plan by making cash payments to the
Company within a normal pay period equal to the amount of the normal payroll
deduction had a leave of absence not occurred. The right of a Participant on an
approved leave of absence to continue participating in the Plan shall terminate
upon the expiration of twelve (12) weeks of leave, unless the Participant's
right to re-employment by the Company after a longer leave is guaranteed by
statute or contract, in which case termination of the right to participate will
occur upon the expiration of such extended period.
(e) So long as a Participant remains an employee of the Company, payroll
deductions will continue in effect from Purchase Period to Purchase Period,
unless at least fifteen (15) calendar days prior to the first day of the next
succeeding Purchase Period the Participant:
(i) elects a different rate by filing a new Participation Form with
the Plan Administrator; or
(ii) withdraws from the Plan in accordance with Section 9 hereof.
(f) Unless a Participant files with the Plan Administrator a new
Participation Form electing to withdraw prior to fifteen (15) calendar days
before the beginning of the next Purchase Period as permitted under the Plan,
such Participant's payroll deductions will continue throughout the next
Purchase Period and his or her Purchase Right to purchase Common Stock will be
deemed to be fully and automatically exercised on the last day of such Purchase
Period with respect to payroll deductions made during that Purchase Period.
7. GRANT OF PURCHASE RIGHT.
(a) Subject to the effective date provisions of Section 17, at 5:01 p.m.
Eastern Standard Time, on the last day of each Purchase Period (the Exercise
Date), each Participant who has not withdrawn from the Plan pursuant to Section
9 shall be deemed to have been granted a Purchase Right as of the first day of
the Purchase Period to purchase as many full shares of Common Stock as can be
purchased with the balance credited to such Participant's account as of the
Exercise Date.
(b) The price at which each Purchase Right to purchase Common Stock shall
be exercised is the lower of:
(i) 85% of the Fair Market Value of the Common Stock on the NASDAQ
National Market System on the first Trading Day of a Purchase Period; or
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<PAGE> 6
(ii) 85% of the Fair Market Value of the Common Stock on the NASDAQ
National Market System on the last Trading Day of such Purchase Period.
(c) The number of shares purchasable by each Participant per Purchase
Period will be the number of whole and fractional shares obtained by dividing
the amount credited to the Participant's Account as of the Exercise Date in the
Purchase Period by the purchase price in effect for the Purchase Period.
(d) A Participant may not purchase shares of Stock with a Fair Market
Value exceeding $12,500 for any particular Purchase Period. The Committee has
the power, exercisable at any time prior to the start of a Purchase Period, to
increase or decrease the dollar value maximum for that Purchase Period, subject
to the limitations in Section 6(b). The maximum, as thus adjusted, will
continue in effect from Purchase Period to Purchase Period until the Committee
once exercises its power to adjust the maximum.
8. EXERCISE OF PURCHASE RIGHT
(a) Subject to the effective date provisions of Section 17, each
outstanding Purchase Right shall be deemed automatically exercised as of 5:01
p.m. of the Exercise Date (the last day of the Purchase Period). The exercise
of the Purchase Right is accomplished by applying the balance credited to each
Participant's account as of the Exercise Date to the purchase on the Exercise
Date of whole and fractional shares of Common Stock at the purchase price in
effect for the Purchase Period.
(b) If a Participant purchases the maximum share amount set forth in
Section 7(d), any amount not applied to the purchase of Common Stock for that
Purchase Period will be held for the purchase of Stock in the next Purchase
Period.
(c) If the number of Shares for which Purchase Rights are exercised
exceeds the number of Shares available in any Purchase Period under the Plan,
the Shares available for exercise will be allocated by the Plan Administrator
pro rata among the Participants in such Purchase Period in proportion to the
relative amounts credited to their accounts. Any amounts not thereby applied to
the purchase of Common Stock under the Plan will be refunded to the
Participants after the end of the Purchase Period.
9. WITHDRAWAL AND TERMINATION OF PURCHASE RIGHTS.
(a) A Participant may withdraw from the Plan during a Purchase Period by
providing written notice to the Plan Administrator on or before 5:00 p.m. of
the last business day of such Purchase Period. Such withdrawal will become
effective upon receipt by the Plan Administrator of such notice, and payroll
deductions will cease as soon as is administratively feasible from the date of
such notice, and no additional payroll deductions will be made on behalf of
such Participant during the Purchase Period. Such notice shall be on a form
(the "Withdrawal Form") provided by the Plan Administrator for that purpose.
The Withdrawal Form will permit such a Participant to elect to receive all
accumulated payroll deductions as a refund without penalty or to exercise such
Participant's outstanding Purchase Rights to purchase Stock on the following
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<PAGE> 7
Exercise Date in the amount of all payroll deductions withheld during the
Purchase Period prior to the Participant's withdrawal.
(b) Any Participant who withdraws from the Plan pursuant to Section 9(a)
will not be eligible to rejoin the Plan until the second (2nd) Purchase Period
following the Purchase Period of withdrawal. A Participant wishing to resume
participation may re-enroll in the Plan by completing and filing a new
Participation Form for a subsequent Purchase Period by following the applicable
enrollment procedures.
(c) To the extent, if any, required by Section 16(b) of the Securities
Exchange Act of 1934, as amended, and the rules, regulations, decisions and no
action positions thereunder, in the event a Participant who is a Section 16(b)
Insider ceases participation in the Plan, whether as a result of withdrawal
during a Purchase Period or of such Participant's decision to discontinue his
or her enrollment for subsequent Purchase Periods, such insider may not
re-enroll in the Plan until the Purchase Period beginning coincident with or
immediately following the expiration of a six (6) month period beginning upon
the effective date of such Section 16(b) Insider's withdrawal from the Plan.
(d) If a Participant ceases to be an employee of the Company for any
reason during a Purchase Period, his or her outstanding Purchase Right will
immediately terminate, and all sums previously collected from such Participant
during such Purchase Period under the terminated Purchase Right will be
refunded to the Participant.
10. RIGHTS AS SHAREHOLDER.
(a) A Participant is not a shareholder in shares to be purchased during a
Purchase Period until the Purchase Right is exercised on the Exercise Date.
Thus, a Participant will not have a right to any dividend or distribution made
prior to the Exercise Date on shares of Common Stock purchased during the
Purchase Period.
(b) Upon a written request made to the Custodian, the Participant will be
entitled to receive, as soon as practicable after the Exercise Date, a stock
certificate for the number of purchased shares. The Custodian may impose upon,
or pass through to, the Participant a reasonable fee for the transfer of shares
of Common Stock in the form of stock certificates from the Custodian to the
Participant. It is the responsibility of each Participant to keep his or her
address current with the Company through the Plan Administrator and with the
Custodian.
11. SALE OF COMMON STOCK ACQUIRED UNDER THE PLAN.
(a) Participants may sell the shares of Common Stock they acquire under
the Plan only in compliance with the restrictions set forth below.
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<PAGE> 8
(i) Section 16(b) Insiders may be subject to certain restrictions in
connection with their transactions under the Plan and with respect to the sale
of shares of Stock obtained under the Plan, including, but not limited to, the
Company's Insider Trading Policy.
(ii) Sales of Stock obtained under the Plan by a Participant must
comply with the Company's Insider Trading Policy, as the same may exist from
time to time.
(iii) No Participant purchasing shares of Common Stock under the Plan
shall be entitled to sell such shares of Stock until the first day of the
second (2nd) Purchase Period immediately following the Purchase Period in which
the shares of Stock were obtained. For purposes of this restriction, the
Company may, at its option, include the following legend on any certificates
representing the Stock so purchased:
"The shares represented by this Certificate are subject to certain
restrictions on sale and disposition contained in the Melita
International Corporation Employee Stock Purchase Plan, a copy of which
is on file with the Corporation."
(b) The Participant understands and agrees that, in order to insure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) A Participant shall immediately inform the Plan Administrator in
writing if the Participant transfers any shares purchased through the Plan
within two (2) years from the date of grant of the related Purchase Right. Such
transfer shall include disposition by sale, gift or other manner. The
Participant may be requested to disclose the manner of the transfer, the date
of the transfer, the number of shares involved and the transfer price. By
executing the Participation Form, each Participant obligates himself or herself
to provide such information to the Plan Administrator.
(d) The Company is authorized to withhold from any payment to be made to a
Participant, including any payroll and other payments not related to the Plan,
amounts of withholding and other taxes due in connection with any transaction
under the Plan, and a Participant's enrollment in the Plan will be deemed to
constitute his or her consent to such withholding.
12. PLAN ADMINISTRATION.
(a) The Plan shall be administered by the Committee. No member of the
Board will be eligible to participate in the Plan during his or her period of
Committee service.
(b) The Committee shall have the plenary power, subject to and within the
limited of the express provisions of the Plan:
(i) to determine the commencement and termination date of the offering
of Common Stock under the Plan; and
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<PAGE> 9
(ii) to interpret the terms of the Plan, established and revoke rules
for the administration of the Plan and correct or reconcile any defect or
inconsistency in the Plan.
(c) The Committee may delegate all or part of its authority to administer
the Plan to the Plan Administrator, who may in turn delegate the day-to-day
operations of the Plan to the Custodian. The Custodian will establish and
maintain, as agent for the Participants, accounts for the purpose of holding
shares of Common Stock and/or cash contributions as may be necessary or
desirable for the administration of the Plan.
(d) The Board may waive or modify any requirement that a notice or
election be made or filed under the Plan a specified period in advance in an
individual case or by adoption of a rule or regulation under the Plan, without
the necessity of an amendment to the Plan.
13. TRANSFERABILITY.
(a) Any account maintained by the Custodian for the benefit of a
Participant with respect to shares acquired pursuant to the Plan may only be in
the name of the Participant; provided, however, that the Participant may elect
to maintain such account with right of joint ownership with such Participant's
spouse. Such election may only be made on a form (the "Joint Account Form")
provided by the Company.
(b) Neither payroll deductions credited to a Participant's account nor any
Purchase Rights or other rights to acquire Common Stock under the Plan may be
assigned, transferred, pledged or otherwise disposed of by Participants other
than by will or the laws of descent and distribution and, during the lifetime
of a Participant, Purchase Rights may be exercised only by the Participant.
14. MERGER OR LIQUIDATION OF THE COMPANY.
In the event the Company merges with another corporation and the Company
is not the surviving entity, or in the event all or substantially all of the
stock or assets of the Company is acquired by another company, or in the event
of certain other similar transactions, the Committee may, in its sole
discretion and in connection with such transaction, cancel each outstanding
Purchase Right and refund all sums previously collected from Participants under
the canceled outstanding Purchase Rights, or, in its discretion, cause each
Participant with outstanding Purchase Rights to have his or her outstanding
Purchase Right exercised immediately prior to such transaction and thereby have
the balance of his or her account applied to the purchase of whole and
fractional shares of Common Stock (subject to the maximum dollar limitation of
Section 7(d)) at the purchase price in effect for the Purchase Period, which
would be treated as ending with the effective date of such transaction. The
balance of the account not so applied with be refunded to the Participant. In
the event of a merger in which the Company is the surviving entity, each
Participant is entitled to receive, for each share as to which such
Participant's Outstanding Purchase Rights are exercised as nearly as reasonably
may be determined by the Committee, in its sole discretion, the securities or
property that a holder of one share of Common Stock was entitled to receive
upon the merger.
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<PAGE> 10
15. ADJUSTMENT FOR CHANGES IN CAPITALIZATION.
To prevent dilution or enlargement of the rights of Participants under the
Plan, appropriate adjustments may be made in the event any change is made to
the Company's outstanding Common Stock by reason of any stock dividend, stock
split, combination of shares, exchange of shares or other change in the Common
Stock effected without the Company's receipt of consideration. Adjustments may
be made to the maximum number and class of securities issuable under the Plan,
the maximum number and class of securities purchasable per outstanding Purchase
Right and the number and class of securities and price per share in effect
under each outstanding Purchase Right. Any such adjustments may be made
retroactively effective to the beginning of the Purchase Period in which the
change in capitalization occurs, and any such adjustment will be made by the
Committee in its sole discretion.
16. AMENDMENT AND TERMINATION.
The Committee may terminate or amend the Plan at any time; provided,
however, that no termination or amendment of the Plan shall change or affect
Purchase Rights previously granted under the Plan without the consent of the
affected Participant. If not sooner terminated by the Committee, the Plan shall
terminate at the time Purchase Rights have been exercised with respect to all
shares of Common Stock reserved for grant under the Plan.
17. SHAREHOLDER APPROVAL AND EFFECTIVE DATE.
The Plan is subject to the approval of shareholders of the Company holding
a majority of the shares of the Common Stock. Until the Plan is approved by the
shareholders, no Purchase Rights shall be deemed granted or exercised under
Sections 7 and 8. Upon approval of the Plan by the Company's shareholders,
Purchase Rights shall be deemed granted and exercised as of the appropriate
dates in the Plan as of the Effective Date, and shares of Stock purchased shall
be deemed purchased as of the applicable Exercise Date.
18. NO EMPLOYMENT RIGHTS.
Participation in the Plan will not impose any obligations upon the Company
to continue the employment of the Participant for any specific period and will
not affect the right of the Company to terminate such person's employment at
any time, with or without cause.
19. COSTS.
Except as set forth in Section 10(b), costs and expenses incurred in the
administration of the Plan and the maintenance of accounts with the Custodian
may be shared by the Participant and the Company, to the extent provided in
this Section 19. Any brokerage fees and commissions for the purchase of Common
Stock under the Plan (including shares of Common Stock purchased upon
reinvestment of dividends and distributions) will be shared equally by the
Participant and the Company, but any brokerage fees and commission for the sale
of shares of Common Stock under the Plan by a Participant will be borne by such
Participant.
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<PAGE> 11
20. REPORTS.
After the close of each Purchase Period, each Participant in the Plan will
receive a report from the Custodian indicating the amount of the Participant's
contributions to the Plan during the Purchase Period, the amount of the
contributions applied to the purchase of Common Stock for the Purchase Period,
the purchase price per share in effect for the Purchase Period and the amount
of the contributions (if any) carried over to the next Purchase Period.
21. GOVERNING LAW.
The validity, construction and effect of the Plan and any rules and
regulations relating to the Plan will be determined in accordance with laws of
the State of Georgia, without giving effect to principles of conflicts of laws,
and applicable Federal law.
22. COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS.
The Plan, the granting and exercising of Purchase Rights hereunder, and
the other obligations of the Company, the Plan Administrator and the Custodian
under the Plan will be subject to all applicable federal and state laws, rules,
and regulations, and to such approvals by any regulatory or governmental agency
as may be required. The Company may, in its discretion, postpone the issuance
or delivery of shares of Common Stock upon exercise of Purchase Rights until
completion of such registration or qualification of such shares of Common Stock
or other required action under any federal or state law, rule, or regulation,
listing or other require action with respect to any automated quotation system
or stock exchange upon which the shares of Common Stock or other Company
securities are designated or listed, or compliance with any other contractual
obligation of the Company, as the Company may consider appropriate, and may
require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
deliver of shares of Common Stock in compliance with applicable laws, rules,
and regulations, designation or listing requirements, or other contractual
obligations.
23. EFFECT OF PLAN.
The provisions of the Plan shall, in accordance with its terms, be binding
upon and inure to the benefit of, all successors of each employee participating
in the Plan, including, without limitation, such employee's estate and the
executors, administrators or trustees thereof, heirs and legatees, and any
receiver, trustee in bankruptcy or representative of creditors of such
employee.
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EXHIBIT 10.5
MELITA INTERNATIONAL CORPORATION 401(K) PROFIT SHARING PLAN
SUMMARY PLAN DESCRIPTION
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TABLE OF CONTENTS
INTRODUCTION TO YOUR PLAN
GENERAL INFORMATION ABOUT YOUR PLAN
<TABLE>
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1. GENERAL PLAN INFORMATION.......................................................................................3
2. EMPLOYER INFORMATION...........................................................................................3
3. PLAN ADMINISTRATOR INFORMATION.................................................................................3
4. PLAN TRUSTEE INFORMATION.......................................................................................4
5. SERVICE OF LEGAL PROCESS.......................................................................................4
PARTICIPATION IN YOUR PLAN
1. ELIGIBILITY REQUIREMENTS.......................................................................................5
2. PARTICIPATION REQUIREMENTS.....................................................................................5
CONTRIBUTIONS TO YOUR PLAN
1. EMPLOYER CONTRIBUTIONS TO THE PLAN.............................................................................5
2. PARTICIPANT SALARY REDUCTION ELECTION..........................................................................6
3. YOUR SHARE OF EMPLOYER CONTRIBUTIONS...........................................................................7
4. COMPENSATION...................................................................................................8
5. FORFEITURES....................................................................................................9
6. TRANSFERS FROM QUALIFIED PLANS (ROLLOVERS).....................................................................9
BENEFITS UNDER YOUR PLAN
1. DISTRIBUTION OF BENEFITS UPON NORMAL RETIREMENT................................................................9
2. DISTRIBUTION OF BENEFITS UPON LATE RETIREMENT.................................................................10
3. DISTRIBUTION OF BENEFITS UPON DEATH...........................................................................10
4. DISTRIBUTION OF BENEFITS UPON DISABILITY......................................................................11
5. DISTRIBUTION OF BENEFITS UPON TERMINATION OF EMPLOYMENT.......................................................11
6. VESTING IN YOUR PLAN..........................................................................................12
7. BENEFIT PAYMENT OPTIONS.......................................................................................12
8. TREATMENT OF DISTRIBUTIONS FROM YOUR PLAN.....................................................................14
9. DOMESTIC RELATIONS ORDER......................................................................................14
10. PENSION BENEFIT GUARANTY CORPORATION.........................................................................15
YEAR OF SERVICE RULES
1. YEAR OF SERVICE AND HOUR OF SERVICE...........................................................................15
2. 1-YEAR BREAK IN SERVICE.......................................................................................16
YOUR PLAN'S "TOP HEAVY RULES"
1. EXPLANATION OF "TOP HEAVY RULES"..............................................................................17
CLAIMS BY PARTICIPANTS AND BENEFICIARIES
1. THE CLAIMS REVIEW PROCEDURE...................................................................................18
STATEMENT OF ERISA RIGHTS
1. EXPLANATION OF YOUR ERISA RIGHTS..............................................................................19
AMENDMENT AND TERMINATION OF YOUR PLAN
1. AMENDMENT.....................................................................................................20
2. TERMINATION...................................................................................................20
</TABLE>
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MELITA INTERNATIONAL CORPORATION 401(K) PROFIT SHARING PLAN
SUMMARY PLAN DESCRIPTION
I
INTRODUCTION TO YOUR PLAN
MELITA INTERNATIONAL CORPORATION has amended your 401(k) Profit
Sharing Plan and Trust as of January 1, 1993. MELITA INTERNATIONAL CORPORATION
continues to recognize the efforts you have made to its success. This amended
401(k) Profit Sharing Plan and Trust is for the exclusive benefit of eligible
employees and their beneficiaries.
Your Plan is a "salary reduction plan." It is also called a "401(k)
plan." Under this type of plan, you may choose to reduce your compensation and
have these amounts contributed to this Plan on your behalf.
The purpose of this Plan is to reward eligible employees for long and
loyal service by providing them with retirement benefits.
Between now and your retirement, your Employer intends to make
contributions for you and other eligible employees. When you retire, you will
be eligible to receive the value of the amounts which have accumulated in your
account.
Your Employer has the right to submit this Plan to the Internal
Revenue Service for approval. The Internal Revenue Service will issue a
"determination letter" to your Employer approving this Plan as a "qualified"
retirement plan, if this Plan meets specific legal requirements.
This Summary Plan Description is a brief description of your Plan and
your rights, obligations, and benefits under that Plan. Some of the statements
made in this Summary Plan Description are dependent upon this Plan being
"qualified" under the provisions of the Internal Revenue Code. This Summary
Plan Description is not meant to interpret, extend, or change the provisions of
your Plan in any way. The provisions of your Plan may only be determined
accurately by reading the actual Plan document, including the Adoption
Agreement.
A copy of your Plan and the Adoption Agreement are on file at your
Employer's office and may be read by you, your beneficiaries, or your legal
representatives at any reasonable time. If you have any questions regarding
either your Plan, the Adoption Agreement or this Summary Plan Description, you
should ask your Plan's Administrator. In the event of any discrepancy between
this Summary Plan Description and the actual provisions of the Plan, the Plan
will govern.
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II
GENERAL INFORMATION ABOUT YOUR PLAN
There is certain general information which you may need to know about
your Plan. This information has been summarized for you in this Section.
1. General Plan Information
MELITA INTERNATIONAL CORPORATION 401(K) PROFIT SHARING PLAN is the
name of your Plan.
Your Employer has assigned Plan Number 001 to your Plan.
The amended and restated provisions of your Plan become effective on
January 1, 1993.
Your Plan's records are maintained on a twelve-month period of time.
This is known as the Plan Year. The Plan Year begins on January 1st and ends on
December 31st.
Certain valuations and distributions are made on the Anniversary Date
of your Plan. This date is December 31st.
The contributions made to your Plan will be held and invested by the
Trustee of your Plan.
Your Plan and Trust will be governed by the laws of the State of
Georgia.
2. Employer Information
Your Employer's name, address and identification number are:
MELITA INTERNATIONAL CORPORATION
5051 PEACHTREE CORNERS CIR.
NORCROSS, Georgia 30092
58-1378534
Your Plan allows other employers to adopt its provisions. You or your
beneficiaries may examine or obtain a complete list of employers, if any, who
have adopted your Plan by making a written request to the Administrator.
3. Plan Administrator Information
The name, address and business telephone number of your Plan's
Administrator are:
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MELITA INTERNATIONAL CORPORATION
5051 PEACHTREE CORNERS CIR.
NORCROSS, Georgia 30092
770-446-7800
Your Plan's Administrator keeps the records for the Plan and is
responsible for the administration of the Plan. The Administrator has
discretionary authority to construe the terms of the Plan and make
determinations on questions which may affect your eligibility for benefits.
Your Plan's Administrator will also answer any questions you may have about
your Plan.
4. Plan Trustee Information
The names of your Plan's Trustees are:
ALEKSANDER SZLAM
HALINA SZLAM
The Trustees will collectively be referred to as Trustee throughout
this Summary Plan Description.
The principal place of business of your Plan's Trustee is
5051 PEACHTREE CORNERS CIR.
NORCROSS, Georgia 30092
Your Plan's Trustee has been designated to hold and invest Plan assets
for the benefit of you and other Plan participants. The trust fund established
by the Plan's Trustee will be the funding medium used for the accumulation of
assets from which benefits will be distributed.
5. Service of Legal Process
The name and address of your Plan's agent for service of legal process
are:
MELITA INTERNATIONAL CORPORATION
5051 PEACHTREE CORNERS CIR.
NORCROSS, Georgia 30092
Service of legal process may also be made upon the Trustee or
Administrator.
III
PARTICIPATION IN YOUR PLAN
Before you become a member or a "participant" in the Plan, there are
certain eligibility and participation rules which you must meet. These rules
are explained in this Section.
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1. Eligibility Requirements
You will be eligible to participate in the Plan if you have completed
one (1) Year of Service.
You should review the Article in this Summary entitled "YEAR OF
SERVICE RULES" for a further explanation of these eligibility requirements.
2. Participation Requirements
Once you have satisfied your Plan's eligibility requirements, your
next step will be to actually become a member or a "participant" in the Plan.
You will become a participant on a specified day of the Plan Year. This day
is called the Effective Date of Participation.
You will become a participant on the earlier of the first day of the
Plan Year or the first day of the seventh month of the Plan Year coinciding
with or next following the date you satisfy your Plan's eligibility
requirements.
IV
CONTRIBUTIONS TO YOUR PLAN
1. Employer Contributions to the Plan
Each year, your Employer will contribute to your Plan the following
amounts:
(a) The total amount of the salary reduction you elected to
defer. (See the Section in this Article entitled "Participant Salary
Reduction Election.")
(b) A discretionary matching contribution equal to a
percentage of the amount of the salary reduction you elected to defer,
which percentage will be determined each year by the Employer.
For a participant to qualify for a matching contribution, the
following conditions apply:
- If you are actively employed on the last day of the Plan
Year, you will share if you completed a Year of Service.
- If you terminate employment (not actively employed on the
last day of the Plan Year), you will not receive a matching
contribution regardless of the number of Hours of Service
credited for the Plan Year.
- You will share in the matching contribution for the year
regardless of the number of Hours of Service credited in the
year of your death, disability or retirement.
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These rules may have been different for Plan Years beginning prior to
the date your Employer actually adopted this amendment. You should refer to any
prior Summary Plan Description or your Administrator if you have any questions.
(c) A discretionary amount determined each year by your Employer.
For a participant to qualify for the discretionary
contribution, the following conditions apply:
- If you are actively employed on the last day of the Plan
Year, you will share if you completed a Year of Service.
- If you terminate employment (not actively employed on the
last day of the Plan Year), you will not share regardless of
the number of Hours of Service credited for the Plan Year.
- You will share for the year regardless of the number of
Hours of Service credited in the year of your death,
disability or retirement.
These rules may have been different for Plan Years beginning
prior to the date your Employer actually adopted this amendment. You
should refer to any prior Summary Plan Description or your
Administrator if you have any questions.
2. Participant Salary Reduction Election
As a participant, you may elect to defer up to 15% of your
compensation each year instead of receiving that amount in cash. However, your
total deferrals in any taxable year may not exceed a dollar limit which is set
by law. The limit for 1995 is $9,240. This limit will be increased in future
years for cost of living changes.
You may elect to defer your salary as of January 1 & July 1. Such
election will become effective as soon as administratively feasible. Your
election will remain in effect until you modify or terminate it. You may modify
your election as of January 1 & July 1 of any year. The modification will
become effective as soon as administratively feasible.
The amount you elect to defer, and any earnings on that amount, will
not be subject to income tax until it is actually distributed to you. This
money will, however, be subject to Social Security taxes at all times.
You should also be aware that the annual dollar limit is an aggregate
limit which applies to all deferrals you may make under this plan or other cash
or deferred arrangements (including tax-sheltered 403(b) annuity contracts,
simplified employee pensions or other 401(k) plans in which you may be
participating). Generally, if your total deferrals under all cash or deferred
arrangements for a calendar year exceed the annual dollar limit, the excess
must be included in your income for the year. For this reason, it is desirable
to request in writing that these excess
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deferrals be returned to you. If you fail to request such a return, you may be
taxed a second time when the excess deferral is ultimately distributed from the
Plan.
You must decide which plan or arrangement you would like to have
return the excess. If you decide that the excess should be distributed from
this Plan, you should communicate this in writing to the Administrator no later
than the March 1st following the close of the calendar year in which such
excess deferrals were made. The Administrator may then return the excess
deferral and any earnings to you by April 15th.
In the event you receive a hardship distribution from your deferrals
to any other plan maintained by your Employer, you will not be allowed to make
additional salary reductions for a period of twelve (12) months after you
receive the distribution. Furthermore, the dollar limitation set by law with
respect to your taxable year following the year in which you received the
distribution, will be reduced by your salary reductions, if any, for the
taxable year of the distribution.
You will always be 100% vested in the amount you deferred. This means
that you will always be entitled to all of the deferred amount. This money
will, however, be affected by any investment gains or losses. If the Trustee
invested this money and there was a gain, the balance in your account would
increase. Of course, if there was a loss, the balance in your account would
decrease.
Distributions from your deferred account are not permitted before age
59 1/2 EXCEPT in the event of:
(a) death;
(b) disability; or
(c) termination of employment.
In addition, if you are a highly compensated employee (generally
owners, officers or individuals receiving wages in excess of certain amounts
established by law), a distribution from your deferred account of certain
excess contributions may be required to comply with the law. The Administrator
will notify you when a distribution is required.
3. Your Share of Employer Contributions
Your Employer will allocate the amount you elect to defer to an
account maintained on your behalf.
If you are eligible, your Employer will also allocate the matching
contribution made to the Plan on your behalf. (See the Section in this Article
entitled "Employer Contributions to the Plan.")
Your Employer's discretionary contribution will be "allocated" or
divided among participants eligible to share in the contribution for the Plan
Year. Your share of the contribution
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will depend upon how much compensation you received during the year and the
compensation received by other eligible participants.
Your share of your Employer's discretionary contribution is
determined by the following fraction:
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Your Compensation
--------------------------------
Employer's Total Compensation of All Participants
Discretionary Contribution x Eligible to Share
For example:
</TABLE>
Suppose the Employer's discretionary contribution for the Plan Year is
$20,000. Employee A's compensation for the Plan Year is $25,000. The
total compensation of all participants eligible to share, including
Employee A, is $250,000. Employee A's share will be:
$20,000 x $25,000 or $2,000
--------
$250,000
In addition to the Employer's contributions made to your account, your
account will be credited annually with a share of the investment earnings or
losses of the trust fund.
You should also be aware that the law imposes certain limits on how
much money may be allocated to your account for a year. These limits are
extremely complex, but generally no more than the lesser of $30,000 or 25% of
your compensation may be allocated to you (excluding earnings) in any year. The
Administrator will inform you if these limits have affected you.
4. Compensation
For the purposes of your Plan, compensation has a special meaning.
Compensation is defined as your total salary, wages and other amounts which are
includable in your income for purposes of income taxes that is paid during the
Plan Year. However, the following will be excluded:
-- commissions
-- reimbursements or other expense allowances, fringe benefits, moving
expenses, deferred compensation, and welfare benefits.
In addition, salary reduction contributions to any cafeteria plan, tax
sheltered annuity, SEP or 401(k) Plan will be included as compensation for Plan
purposes.
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Your compensation will be recognized for benefit purposes from your
date of entry into the Plan.
For Plan Years beginning in 1994, the Plan, by law, cannot recognize
compensation in excess of $150,000. This amount will be adjusted in future
years for cost of living increases. It will also be applied to certain highly
compensated employees and their family members as if they were a single
participant. If you or a member of your family may be affected by this rule,
ask your Administrator for further details.
5. Forfeitures
Forfeitures are created when participants terminate employment before
becoming entitled to their full benefits under the Plan. Your account may grow
from the forfeitures of other participants. Forfeitures will be "allocated" or
divided among participants eligible to share for a Plan Year. However, a
portion of forfeited amounts will be used to reduce your Employer's
contributions to the Plan.
6. Transfers From Qualified Plans (Rollovers)
At the discretion of the Administrator, you may be permitted to
deposit into your Plan distributions you have received from other plans. Such a
deposit is called a "rollover" and may result in tax savings to you. You should
consult qualified counsel to determine if a rollover is in your best interest.
Your rollover will be placed in a separate account called a
"participant's rollover account." The Administrator may establish rules for
investment.
You will always be 100% vested in your "rollover account." This means
that you will always be entitled to all of your rollover contributions.
Rollover contributions will be affected by any investment gains or losses. If
the Trustee invested this money and there was a gain, the balance in your
account would increase. Of course, if there was a loss from an investment, the
balance in your account would decrease.
V
BENEFITS UNDER YOUR PLAN
1. Distribution of Benefits Upon Normal Retirement
Your Normal Retirement Date is the Anniversary Date coinciding with or
next following your 65th birthday (Normal Retirement Age).
At your Normal Retirement Age, you will be entitled to 100% of your
account balance. Payment of your benefits will begin as soon as practicable
following your Normal Retirement Date.
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2. Distribution of Benefits Upon Late Retirement
You may remain employed past your Plan's Normal Retirement Date and
retire instead on your Late Retirement Date. Your Late Retirement Date is the
Anniversary Date coinciding with or next following the date you choose to
retire, after first having reached your Normal Retirement Date. On your Late
Retirement Date, you will be entitled to 100% of your account balance. Actual
benefit payments will begin as soon as practicable following your Late
Retirement Date.
3. Distribution of Benefits Upon Death
Your beneficiary will be entitled to 100% of your account balance upon
your death and 50% of such account balance is the "spouse's death benefit."
If you are married at the time of your death, your spouse will be the
beneficiary of the "spouse's death benefit," which will be equal in value to
50% of your account balance as of your date of death. You may elect in writing,
on a form to be furnished to you by the Administrator, a beneficiary for the
"spouse's death benefit" other than your spouse. IF YOU WISH TO DESIGNATE A
BENEFICIARY OTHER THAN YOUR SPOUSE, YOUR SPOUSE MUST IRREVOCABLY CONSENT TO
WAIVE ANY RIGHT TO THE "SPOUSE'S DEATH BENEFIT." YOUR SPOUSE'S CONSENT MUST BE
IN WRITING, BE WITNESSED BY A NOTARY OR A PLAN REPRESENTATIVE AND ACKNOWLEDGE
THE SPECIFIC NONSPOUSE BENEFICIARY.
If no valid waiver is in effect, the "spouse's death benefit" payable
to your spouse will be in the form of a survivor annuity, that is, periodic
payments over the life of your spouse. Your spouse may direct that payments
begin within a reasonable period of time after your death. The size of the
monthly payments will depend on the value of your account at the time of your
death. The death benefit may also be distributed in a single lump sum, provided
your spouse consents in writing to this alternative form.
Generally, the period during which you and your spouse may waive this
survivor annuity begins as of the first day of the Plan Year in which you reach
age 35 and ends when you die. The Administrator must provide you with a
detailed explanation of the survivor annuity. This explanation must be given to
you during the period of time beginning on the first day of the Plan Year in
which you reach age 32 and ending on the first day of the Plan Year in which
you reach age 35.
It is, therefore, important that you inform the Administrator when you
reach age 32 so that you may receive this information.
If, however,
(a) your spouse has validly waived any right to the death
benefit in the manner outlined above,
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(b) your spouse cannot be located; or
(c) you are not married at the time of your death,
then the "spouse's death benefit" will be paid to the beneficiary of your own
choosing in a single lump sum. You may designate the beneficiary on a form to
be supplied to you by the Administrator. If you change your designation, your
spouse must again consent to the change. Also, since the death benefit upon
your death is your entire account balance, you may, at all times, designate the
beneficiary for amounts in excess of the "spouse's death benefit" without your
spouse's consent.
Under a special rule, you and your spouse may waive the survivor
annuity form of payment any time before you reach age 35. However, any waiver
will become invalid at the beginning of the Plan Year in which you reach age
35, and you and your spouse will be required to make another waiver.
Regardless of the method of distribution selected, your entire death
benefit must be paid to your beneficiaries within five years after your death.
Since your spouse participates in these elections and has certain
rights in the death benefit, you should immediately report any change in your
marital status to the Administrator.
4. Distribution of Benefits Upon Disability
Under your Plan, disability is defined as a physical or mental
condition resulting from bodily injury, disease, or mental disorder which
renders you incapable of continuing any gainful occupation with your Employer.
Your disability will be determined by a licensed physician chosen by the
Administrator. However, if your condition constitutes total disability under
the federal Social Security Act, then the Administrator may deem that you are
disabled for purposes of the Plan.
If you become disabled while a participant, you will be entitled to
100% of your account balance. Payment of your disability benefits will be made
to you as if you had retired. (See the Section in this Article entitled
"Benefit Payment Options.")
5. Distribution of Benefits Upon Termination of Employment
Your Plan is designed to encourage you to stay with your Employer
until retirement. Payment of your account balance under your Plan is generally
only available upon your death, disability or retirement.
If your employment terminates for reasons other than those listed
above, you will be entitled to receive only your "vested percentage" of your
account balance and the remainder of your account will be forfeited. Only
contributions made by your Employer are subject to forfeiture. (See the Section
in this Article entitled "Vesting in Your Plan.")
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Distributions may be made at the participant's election on or after
the anniversary date of semi-annual anniversary date following the date of
termination.
If your vested benefit under the Plan at the time of any prior
distribution exceeded $3,500 or currently exceeds $3,500, you (and your spouse,
if you are married) must give written consent before the distribution may be
made. Also, if you want the distribution to be in a form other than an annuity
payment, you and your spouse must first waive the annuity form of payment.
Amounts of $3,500 or less will be distributed early without the need for
consent. (See the Section in this Article entitled "Benefit Payment Options"
for a further explanation of how benefits are paid from the Plan.)
Under the Plan's administrative procedures, if the value of your
vested account is zero, any non-vested account balance will be forfeited
immediately.
6. Vesting in Your Plan
Your "vested percentage" in your account is determined under the
following schedule and is based on vesting Years of Service. You will always,
however, be 100% vested upon your Normal Retirement Age. (See the Section in
this Article entitled "Distribution of Benefits Upon Normal Retirement.")
Vesting Schedule
Years of Service Percentage
2 20 %
3 40 %
4 60 %
5 80 %
6 100 %
Regardless of this vesting schedule, you are always 100% vested in
your salary reduction amounts contributed to the Plan.
Your vested percentage will not be less than your vested percentage
under the Plan before this amendment and restatement.
7. Benefit Payment Options
There are various methods by which benefits may be distributed to you
from your Plan. The method depends on your marital status, as well as the
elections you and your spouse make. All methods of distribution, however, have
equivalent values. The rules under this Section apply to all distributions you
will receive from the Plan, whether by reason of retirement, termination, or
any other event which may result in a distribution of benefits.
If you are married on the date your benefits are to begin, you will
automatically receive a joint and 50% survivor annuity, unless you otherwise
elect. This means that if you die and are
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survived by a spouse, your spouse will receive a monthly benefit for the
remainder of his life equal to 50% of the benefit you were receiving at the
time of your death. You may elect a joint and 75% or 100% survivor annuity
instead of the standard joint and 50% survivor annuity. It should be noted that
a joint and survivor annuity may provide a lower monthly benefit than other
forms of payment. You should consult qualified tax counsel before making such
election.
If you are not married on the date your benefits are to begin, you
will automatically receive a life annuity, which means you will receive
payments for as long as you live.
You may, however, elect to waive these forms of payment, subject to
the following rules.
When you are about to receive any distribution, the Administrator will
explain the joint and survivor annuity or the life annuity to you in greater
detail. You will be given the option of waiving the joint and survivor annuity
or the life annuity form of payment during the 90-day period before the annuity
is to begin. IF YOU ARE MARRIED, YOUR SPOUSE MUST IRREVOCABLY CONSENT IN
WRITING TO THE WAIVER IN THE PRESENCE OF A NOTARY OR A PLAN REPRESENTATIVE. You
may revoke any waiver. The Administrator will provide you with forms to make
these elections. Since your spouse participates in these elections, you must
immediately inform the Administrator of any change in your marital status.
If you and your spouse elect not to take a joint and survivor annuity,
or if you are not married when your benefits are scheduled to begin and have
elected not to take a life annuity, you may elect to receive your benefits in
one lump-sum payment in cash or in property.
Regardless of the form of payment you receive, its value to you will
be the same value as each alternative form of payment.
GENERALLY, WHENEVER A DISTRIBUTION IS TO BE MADE TO YOU ON OR BEFORE
AN ANNIVERSARY DATE, IT MAY BE POSTPONED BY THE PLAN FOR A PERIOD OF UP TO 180
DAYS, FOR ADMINISTRATIVE CONVENIENCE. HOWEVER, UNLESS YOU ELECT IN WRITING TO
DEFER THE RECEIPT OF BENEFITS, NO DISTRIBUTION MAY BEGIN LATER THAN THE 60TH
DAY AFTER THE CLOSE OF THE PLAN YEAR IN WHICH THE LATEST OF THE FOLLOWING
EVENTS OCCURS:
(a) the date on which you reach the age of 65 or
your Normal Retirement Age;
(b) the 10th anniversary of the year in which you
became a participant in the Plan;
(c) the date you terminated employment with your
Employer.
Regardless of whether you elect to delay the receipt of benefits,
there are other rules which generally require minimum payments to begin no
later than the April 1st following the year in which you reach age 70 1/2.
You should see the Administrator if you feel you may be affected by this rule.
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8. Treatment of Distributions From Your Plan
Whenever you receive a distribution from your Plan, it will normally
be subject to income taxes. You may, however, reduce, or defer entirely, the
tax due on your distribution through use of one of the following methods:
(a) The rollover of all or a portion of the distribution to
an Individual Retirement Account (IRA) or another qualified employer
plan. This will result in no tax being due until you begin withdrawing
funds from the IRA or other qualified employer plan. The rollover of
the distribution, however, MUST be made within strict time frames
(normally, within 60 days after you receive your distribution). Under
certain circumstances all or a portion of a distribution may not
qualify for this rollover treatment. In addition, most distributions
will be subject to mandatory federal income tax withholding at a rate
of 20%. This will reduce the amount you actually receive. For this
reason, if you wish to roll over all or a portion of your distribution
amount, the direct transfer option described in paragraph (b) below
would be the better choice.
(b) You may request that a direct transfer of all or a
portion of your distribution amount be made to either an Individual
Retirement Account (IRA) or another qualified employer plan willing to
accept the transfer. A direct transfer will result in no tax being due
until you withdraw funds from the IRA or other qualified employer
plan. Like the rollover, under certain circumstances all or a portion
of the amount to be distributed may not qualify for this direct
transfer. If you elect to actually receive the distribution rather
than request a direct transfer, then in most cases 20% of the
distribution amount will be withheld for federal income tax purposes.
If you decide to directly transfer all or a portion of your
distribution amount, you (and your spouse, if you are married) must
first waive the annuity form of payment. (See the Section in this
Article entitled "Benefit Payment Options" for a further explanation
of this waiver requirement.)
(c) The election of favorable income tax treatment under
"10-year forward averaging," "5-year forward averaging" or, if you
qualify, "capital gains" method of taxation.
WHENEVER YOU RECEIVE A DISTRIBUTION, THE ADMINISTRATOR WILL DELIVER TO
YOU A MORE DETAILED EXPLANATION OF THESE OPTIONS. HOWEVER, THE RULES WHICH
DETERMINE WHETHER YOU QUALIFY FOR FAVORABLE TAX TREATMENT ARE VERY
COMPLEX. YOU SHOULD CONSULT WITH QUALIFIED TAX COUNSEL BEFORE MAKING A CHOICE.
9. Domestic Relations Order
As a general rule, your interest in your account, including your
"vested interest," may not be alienated. This means that your interest may not
be sold, used as collateral for a loan, given away or otherwise transferred. In
addition, your creditors may not attach, garnish or otherwise interfere with
your account.
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There is an exception, however, to this general rule. The
Administrator may be required by law to recognize obligations you incur as a
result of court ordered child support or alimony payments. The Administrator
must honor a "qualified domestic relations order." A "qualified domestic
relations order" is defined as a decree or order issued by a court that
obligates you to pay child support or alimony, or otherwise allocates a portion
of your assets in the Plan to your spouse, former spouse, child or other
dependent. If a qualified domestic relations order is received by the
Administrator, all or a portion of your benefits may be used to satisfy the
obligation. The Administrator will determine the validity of any domestic
relations order received.
10. Pension Benefit Guaranty Corporation
Benefits provided by your Plan are NOT insured by the Pension Benefit
Guaranty Corporation (PBGC) under Title IV of the Employee Retirement Income
Security Act of 1974 because the insurance provisions under ERISA are not
applicable to your Plan.
VI
YEAR OF SERVICE RULES
1. Year of Service and Hour of Service
The term "Year of Service" is used throughout this Summary Plan
Description and throughout your Plan. A Year of Service for eligibility
purposes is defined as follows:
You will have completed a Year of Service if, at the end of your first
twelve consecutive months of employment with your Employer, you have
been credited with 1000 Hours of Service.
If you have not been credited with 1000 Hours of Service by the end of
your first twelve consecutive months of employment, you will have
completed a Year of Service at the end of any following Plan Year
during which you were credited with 1000 Hours of Service.
You will have completed a Year of Service for vesting purposes if you
are credited with 1000 Hours of Service during a Plan Year, even if you were
not employed on the first or last day of the Plan Year.
You will have completed a Year of Service for purposes of sharing in
Employer contributions if you are credited with 1000 Hours of Service during a
Plan Year.
Also, for the purposes of the Plan, your Years of Service with Melita
Electronic Labs, Inc. / Melita Europe, Ltd. will be recognized.
An "Hour of Service" has a special meaning for Plan purposes. You will
be credited with an Hour of Service for:
(a) each hour for which you are directly or indirectly
compensated by your Employer for the performance of duties during the
Plan Year;
15
<PAGE> 17
(b) each hour for which you are directly or indirectly
compensated by your Employer for reasons other than performance of
duties (such as vacation, holidays, sickness, disability, lay-off,
military duty, jury duty or leave of absence during the Plan Year);
and
(c) each hour for back pay awarded or agreed to by your
Employer.
You will not be credited for the same Hours of Service both under (a)
or (b), as the case may be, and under (c).
2. 1-Year Break in Service
A 1-Year Break in Service is a computation period during which you
have not completed more than 500 Hours of Service with your Employer.
A 1-Year Break in Service does NOT occur, however, in the computation
period in which you enter or leave the Plan for reasons of:
(a) an authorized leave of absence;
(b) certain maternity or paternity absences.
The Administrator will be required to credit you with Hours of Service
for a maternity or paternity absence. These are absences taken on account of
pregnancy, birth, or adoption of your child. No more than 501 Hours of Service
will be credited for this purpose and these Hours of Service will be credited
solely to avoid your incurring a 1-Year Break in Service. The Administrator may
require you to furnish proof that your absence qualifies as a maternity or
paternity absence.
These break in service rules may be illustrated by the
following examples:
Employee A works 300 hours in a Plan Year. At the end of the Plan
Year, Employee A will have a 1-Year Break in Service because she has
worked less than 501 hours in a Plan Year. Employee B works 300 hours
in a Plan Year and takes an authorized leave of absence for which he
is credited with an additional 250 hours. Employee B will NOT have a
1-Year Break in Service because he is credited with more than 500
hours in a Plan Year.
If you are reemployed after a 1-Year Break in Service and were vested
in any portion of your account derived from Employer contributions, you will
receive credit for all Years of Service credited to you before your 1-Year
Break in Service.
If you do not have a "vested interest" in the Employer contributions
allocated to your account when you terminate your employment, you will lose
credit for your pre-break Years of Service when your consecutive 1-Year Breaks
in Service equal or exceed the greater of 5 years, or your pre-break Years of
Service. For example:
16
<PAGE> 18
Employee B terminated employment on January 1, 2000 with 2 Years of
Service. Employee B was not vested at the time of his termination of
employment. Employee B returns to work on January 1, 2003. Employee B
will be credited with his 2 pre-break Years of Service because his
period of termination (3 years) did not exceed 5 years.
VII
YOUR PLAN'S "TOP HEAVY RULES"
1. Explanation of "Top Heavy Rules"
A 401(k) Profit Sharing Plan that primarily benefits "key employees"
is called a "top heavy plan." Key employees are certain owners or officers of
your Employer. A Plan is a "top heavy plan" when more than 60% of the
contributions or benefits have been allocated to key employees.
Each year, the Administrator is responsible for determining whether
your Plan is a "top heavy plan."
If your Plan becomes top heavy in any Plan Year, then non-key
employees will be entitled to certain "top heavy minimum benefits," and other
special rules will apply. Among these top heavy rules are the following:
(a) Your Employer may be required to make a contribution
equal to 3% of your compensation to your account;
(b) If you are a participant in more than one Plan, you may
not be entitled to minimum benefits under both Plans.
VIII
CLAIMS BY PARTICIPANTS AND BENEFICIARIES
Benefits will be paid to participants and their beneficiaries without
the necessity of formal claims. You or your beneficiaries, however, may make a
request for any Plan benefits to which you may be entitled. Any such request
must be made in writing, and it should be made to the Administrator. (See the
Article in this Summary entitled "GENERAL INFORMATION ABOUT YOUR PLAN.")
Your request for Plan benefits will be considered a claim for Plan
benefits, and it will be subject to a full and fair review. If your claim is
wholly or partially denied, the Administrator will furnish you with a written
notice of this denial. This written notice must be provided to you within a
reasonable period of time (generally 90 days) after the receipt of your claim
by the Administrator. The written notice must contain the following
information:
(a) the specific reason or reasons for the denial;
(b) specific reference to those Plan provisions on which the
denial is based;
17
<PAGE> 19
(c) a description of any additional information or material
necessary to correct your claim and an explanation of why such
material or information is necessary; and
(d) appropriate information as to the steps to be taken if
you or your beneficiary wishes to submit your claim for review.
If notice of the denial of a claim is not furnished to you in
accordance with the above within a reasonable period of time, your claim will
be deemed denied. You will then be permitted to proceed to the review stage
described in the following paragraphs.
If your claim has been denied, and you wish to submit your claim for
review, you must follow the Claims Review Procedure.
1. The Claims Review Procedure
(a) Upon the denial of your claim for benefits, you may file
your claim for review, in writing, with the Administrator.
(b) YOU MUST FILE THE CLAIM FOR REVIEW NO LATER THAN 60 DAYS
AFTER YOU HAVE RECEIVED WRITTEN NOTIFICATION OF THE DENIAL OF YOUR
CLAIM FOR BENEFITS OR, IF NO WRITTEN DENIAL OF YOUR CLAIM WAS
PROVIDED, NO LATER THAN 60 DAYS AFTER THE DEEMED DENIAL OF YOUR CLAIM.
(c) You may review all pertinent documents relating to the
denial of your claim and submit any issues and comments, in writing,
to the Administrator.
(d) Your claim for review must be given a full and fair
review. If your claim is denied, the Administrator must provide you
with written notice of this denial within 60 days after the
Administrator's receipt of your written claim for review. There may be
times when this 60-day period may be extended. This extension may only
be made, however, where there are special circumstances which are
communicated to you in writing within the 60-day period. If there is
an extension, a decision will be made as soon as possible, but not
later than 120 days after receipt by the Administrator of your claim
for review.
(e) The Administrator's decision on your claim for review
will be communicated to you in writing and will include specific
references to the pertinent Plan provisions on which the decision was
based.
(f) If the Administrator's decision on review is not
furnished to you within the time limitations described above, your
claim will be deemed denied on review.
(g) If benefits are provided or administered by an insurance
company, insurance service, or other similar organization which is
subject to regulation under the insurance laws, the claims procedure
relating to these benefits may provide for review. If
18
<PAGE> 20
so, that company, service, or organization will be the entity to which
claims are addressed. If you have any questions regarding the proper
person or entity to address claims, you should ask the Administrator.
IX
STATEMENT OF ERISA RIGHTS
1. Explanation of Your ERISA Rights
As a participant in this Plan you are entitled to certain rights and
protections under the Employee Retirement Income Security Act of 1974, also
called ERISA. ERISA provides that all Plan participants are entitled to:
(a) examine, without charge, all Plan documents,
including:
(1) insurance contracts;
(2) collective bargaining agreements; and
(3) copies of all documents filed by the Plan with
the U.S. Department of Labor, such as detailed annual reports
and Plan descriptions.
This examination may take place at the Administrator's office
and at other specified employment locations of the Employer. (See the
Article in this Summary entitled "GENERAL INFORMATION ABOUT YOUR
PLAN");
(b) obtain copies of all Plan documents and other Plan
information upon written request to the Plan Administrator. The
Administrator may make a reasonable charge for the copies;
(c) receive a summary of the Plan's annual financial report.
The Administrator is required by law to furnish each participant with
a copy of this summary annual report;
(d) obtain a statement telling you whether you have a right
to receive a retirement benefit at Normal Retirement Age and, if so,
what your benefits would be at Normal Retirement Age if you stop
working under the Plan now. If you do not have a right to a retirement
benefit, the statement will tell you how many years you have to work
to get a right to a retirement benefit. THIS STATEMENT MUST BE
REQUESTED IN WRITING AND IS NOT REQUIRED TO BE GIVEN MORE THAN ONCE A
YEAR. The Plan must provide the statement free of charge.
In addition to creating rights for Plan participants, ERISA imposes
duties upon the people who are responsible for the operation of the Plan. The
people who operate your Plan, called "fiduciaries" of the Plan, have a duty to
do so prudently and in the interest of you and other Plan participants and
beneficiaries. No one, including your employer or any other person, may fire
19
<PAGE> 21
you or otherwise discriminate against you in any way to prevent you from
obtaining a pension benefit or exercising your rights under ERISA.
If your claim for a retirement benefit is denied in whole or in part,
you must receive a written explanation of the reason for the denial. You have
the right to have the Administrator review and reconsider your claim. (See the
Article in this Summary entitled "CLAIMS BY PARTICIPANTS AND BENEFICIARIES.")
Under ERISA, there are steps you can take to enforce the above rights.
For instance, if you request materials from the Plan and do not receive them
within 30 days, you may file suit in a federal court. In such a case, the court
may require the Administrator to provide the materials and pay you up to
$100.00 a day until you receive the materials, unless the materials were not
sent because of reasons beyond the control of the Administrator.
If you have a claim for benefits which is denied or ignored, in whole
or in part, you may file suit in a state or federal court.
If the Plan's fiduciaries misuse the Plan's money, or if you are
discriminated against for asserting your rights, you may seek assistance from
the U.S. Department of Labor, or you may file suit in a federal court. The
court will decide who should pay court costs and legal fees. If you are
successful, the court may order the person you have sued to pay these costs and
fees. If you lose, the court may order you to pay these costs and fees if, for
example, it finds your claim is frivolous.
If you have any questions about this statement, or about your rights
under ERISA, you should contact the nearest Area Office of the U.S.
Labor-Management Services Administration, Department of Labor.
X
AMENDMENT AND TERMINATION OF YOUR PLAN
1. Amendment
Your Employer has the right to amend your Plan at any time. In no
event, however, will any amendment:
(a) authorize or permit any part of the Plan assets to be
used for purposes other than the exclusive benefit of participants or
their beneficiaries; or
(b) cause any reduction in the amount credited to your
account; or
(c) cause any part of your Plan assets to revert to the
Employer.
2. Termination
Your Employer has the right to terminate the Plan at any time. Upon
termination, all amounts credited to your accounts will become 100% vested.
20
<PAGE> 22
MELITA INTERNATIONAL CORPORATION
401(k) PROFIT SHARING PLAN
SUMMARY OF MATERIAL MODIFICATIONS
I.
INTRODUCTION
MELITA INTERNATIONAL CORPORATION has amended your 401(k) Profit
Sharing Plan effective January 1, 1996. The purpose of this amendment is to add
a loan provision and change the requirements for eligibility.
This is merely a summary of the important changes to the Plan. If you
have any questions, contact your Plan's Administrator. A copy of the Plan,
including this amendment, is available for your inspection. If there is any
discrepancy between the terms of the Plan and this Summary of Material
Modifications, the provisions of the Plan will control.
II.
SUMMARY OF CHANGES
Eligibility Requirements
You will be eligible to participate in the Plan if you have completed
1/2 Year of Service.
Loan Requirements
1. LOAN REQUIREMENTS
There are various rules and requirements that apply for any loan.
These rules are outlined in this Section. In addition, your Employer has
established a written loan program which explains these requirements in more
detail. You can request a copy of the loan program from the Administrator.
Generally, the rules for loans include the following:
(a) Loans must be made available to all participants and their
beneficiaries on a uniform and non-discriminatory basis.
(b) All loans must be adequately secured. You may use up to one-half
(1/2) of your vested account balance under the Plan as security for
the loan. If more security is required, your principal residence may
be used, if permitted by State law. The Plan may also require that
repayments on the loan obligation be by payroll deduction.
<PAGE> 23
(c) All loans must bear a reasonable rate of interest. The interest
rate must be one a bank or other professional lender would charge for
making a loan in a similar circumstance.
(d) All loan must have a definite repayment period which provides for
payments to be made not less frequently than quarterly and for the
loan to be amortized on a level basis over a reasonable period of
time, not to exceed five (5) years. However, if you use the loan to
acquire your principal residence, you may repay the loan over a
reasonable period of time that may be longer than five (5) years.
(e) All loans will be considered a directed investment from your
account under the Plan. All payments of principal and interest by you
on a loan will be credited to your account.
(f) The amount the Plan may loan to you is limited by rules under the
Internal Revenue Code. All loans, when added to the outstanding
balance of all other loans from the Plan, will be limited to the
lesser of:
(1) $50,000 reduced by the excess, if any, of your highest
outstanding balance of loans from the Plan during the
one-year period prior to the date of the loan over your
current outstanding balance of loans; or
(2) 1/2 of your vested account balance.
The $50,000 limit stated in (1) above will not be reduced for
loans made on or before December 31, 1986.
Also, no loan in an amount less than $1,000 will be made.
(g) Your spouse must consent to any loan before it can be made if you
use your vested interest as security for the loan. This rule only
applies if the vested interest used as security exceeds $3,500.
(h) Loans will only be granted if you incur a financial hardship or
have a specified financial need. For this purpose, if you or a member
of your immediate family incur significant health expenses or a loss
of income due to illness, disability or death, you may apply for a
loan. Your Employer may also grant loans to help you establish your
principal residence or to pay for a college education, including
graduate studies, for you or your dependents.
(i) If you fail to make payments when they are due under the loan, you
will be considered to be "in default". The Trustee would then have
authority to take all reasonable actions to collect the balance owing
on the loan. This could include filing a lawsuit or foreclosing on the
security for the loan. Under certain circumstances, a loan that is in
default may be considered a distribution from the Plan, and could
result in
-2-
<PAGE> 24
taxable income to you. In any event, your failure to repay a loan will
reduce the benefit you would otherwise be entitled to from the Plan.
(j) Loans will not be made to any "Shareholder-employees" unless
exemptions for such loans are obtained from the Department of Labor. A
shareholder-employee is a participant who owns more than 5% of your
Employer's outstanding capital stock during any year in which your
Employer elects to be taxed as a small business corporation.
-3-
<PAGE> 25
MELITA INTERNATIONAL CORPORATION
401(K) PROFIT SHARING PLAN
PARTICIPANT LOAN PROGRAM
MELITA INTERNATIONAL CORPORATION 401(k) PROFIT SHARING PLAN permits loans to be
made to Participants and their beneficiaries. However, before any loan is
made, the Plan requires that a written loan program be established which sets
forth the rules and guidelines for making Participant loans. This document
shall serve as the required written loan program. In addition, the
Administrator may use this document to serve as, or supplement, any required
notice of the loan program to Participants and their beneficiaries. All
references to Participants in this loan program shall include Participants and
their Beneficiaries who are "parties in interest" as defined by Act Section
3(14).
1. The Administrator of the Plan is authorized to administer the
Participant loan program. All applications for loans shall be made by
a Participant to the Administrator on forms which the Administrator
will make available for such purpose.
2. All loan applications shall be considered by the Administrator
within a reasonable time after the Participant makes formal
application. The Participant shall also be required to provide such
supporting information deemed necessary by the Administrator. This
may include a financial statement, tax returns and such other
financial information which the Administrator may consider necessary
and appropriate to determine whether a loan should be granted.
Furthermore, the Participant shall authorize the Administrator to
obtain a credit report on the Participant.
3. The Administrator shall determine whether a Participant
qualifies for a loan, applying such criteria as a commercial lender of
funds would apply in like circumstances with respect to the
Participant. Such criteria shall include, but not be limited to, the
creditworthiness of the Participant and his general ability to repay
the loan, the period of time such Participant has been employed by the
Employer, whether adequate security has been provided for the loan,
and whether the Participant agrees, as a condition for receiving the
loan, to make repayments through direct, after-tax payroll deduction.
4. With regard to any loan made pursuant to this program, the
following rule(s) and limitation(s) shall apply, in addition to such
other requirements set forth in the Plan:
(i) Loans shall only be granted from salary reductions.
(ii) No loan in an amount less than $1,000 shall be granted
to any Participant.
(iii) No loan shall be granted to any Participant having a
loan currently outstanding from the Plan.
<PAGE> 26
(iv) Loans shall only be granted in the event of a
Participant's hardship or for the purpose of
enabling a Participant to meet certain specified
financial situations. For this purpose, a loan shall
be authorized in the event of significant health
expenses or loss of income resulting from a prolonged
illness or disability of the Participant, loss of
income or significant health expenses resulting from a
prolonged illness, disability or death in the
Participant's immediate family, establishing the
principal residence of the Participant, or for paying
for a college education (including graduate studies)
for the Participant or his dependents. The
Administrator shall determine whether a Participant
qualifies for a loan under this paragraph.
(iv) All loans made pursuant to this program shall be
considered a directed investment from the account(s)
of the Participant maintained under the Plan. As
such, all payments of principal and interest made by
the Participant shall be credited only to the
account(s) of such Participant.
5. Any loan granted or renewed under this program shall bear a
reasonable rate of interest. In determining such rate of interest,
the Plan shall require a rate of return commensurate with the
prevailing interest rate charged on similar commercial loans under
like circumstances by persons in the business of lending money. Such
prevailing interest rate standard shall permit the Administrator to
consider factors pertaining to the opportunity for gain and risk of
loss that a professional lender would consider on a similar
arms-length transaction, such as the creditworthiness of the
Participant and the security given for the loan. Therefore, in
establishing the rate of interest, the Administrator shall conduct a
reasonable and prudent inquiry with professional lenders in the same
geographic locale where the Participant and Employer reside to
determine such prevailing interest rate for loans under like
circumstances.
6. The Plan shall require that adequate security be provided by
the Participant before a loan is granted. For this purpose, the Plan
shall consider a Participant's interest under the Plan to be adequate
security. However, in no event shall more than 50% of a Participant's
vested interest in the Plan (determined immediately after origination
of the loan) be used as security for the loan. Generally, it shall be
the policy of the Plan not to make loans which require security other
than the Participant's vested interest in the Plan. However, if
additional security is necessary to adequately secure the loan, then
the Administrator shall require that such security be provided before
the loan will be granted. For this purpose, the Participant's
principal residence may serve as additional security.
7. All loans must have a definite repayment period which provides
for payments to be made not less frequently than quarterly, and
for the loan to be amortized on a level basis over a reasonable period
of time, not to exceed five (5) years. However, if the Participant
uses the loan to acquire his/her principal residence, they may repay
the loan over a reasonable period of time that may be longer than five
(5) years.
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<PAGE> 27
8. Generally, a default shall occur upon the failure of a
Participant to timely remit payments under the loan when due. In such
event, the Trustee shall take such reasonable actions which a prudent
fiduciary in like circumstances would take to protect and preserve
Plan assets, including foreclosing on any collateral and commencing
such other legal action for collection which the Trustee deems
necessary and advisable. However, the Trustee shall not be required
to commence such actions immediately upon a default. Instead, the
Trustee may grant the Participant reasonable rights to cure any
default, provided such actions would constitute a prudent and
reasonable course of conduct for a professional lender in like
circumstances. In addition, if no risk of loss of principal or income
would result to the Plan, the Trustee may choose, in its discretion,
to defer enforcement proceedings. If the qualified status of the Plan
is not jeopardized, the Trustee and the Administrator may treat a loan
that has been defaulted upon and not cured within a reasonable period
of time as a deemed distribution from the Plan.
9. Upon satisfaction of the criteria established for granting a
loan, the Administrator shall inform the Trustee that the Participant
has qualified to receive a loan under the Plan's program. The
Trustee shall review the determination made by the Administrator
(including the prevailing interest rate which has been set for the
loan) and, if it determines that such loan would be a prudent
investment for the Plan, applying such fiduciary standards required by
ERISA, the Trustee may grant the loan request. In making such
determination, the Trustee may consider the liquidity of the Plan
assets available for loans. The Trustee shall then require that the
Participant execute all documents necessary to establish the loan,
including a promissory note and such other documents which will
provide the Plan with adequate security.
10. The loan set-up and origination fee is the sole responsibility
of the Participant. The fee is set up as $150.00 per loan.
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<PAGE> 28
Adopted this 2nd day of May, 1996. The loan program may be amended from time
to time.
EMPLOYER:
/s/ Alexksander Szlam, CEO
- ----------------------------------
TRUSTEE:
/s/ Alexksander Szlam
- ----------------------------------
TRUSTEE:
/s/ Hamlina Szlam
- ----------------------------------
ADMINISTRATOR:
/s/ Alexksander Szlam
- ----------------------------------
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<PAGE> 1
EXHIBIT 10.6
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is made as of the
5th day of March, 1997 between Alek Szlam, an individual resident of the State
of Georgia ("Executive"), and Melita International Corporation, a Georgia
corporation with its principal place of business located in Norcross, Georgia
("the Company").
WHEREAS, the Company desires to employ Executive as the Chief Executive
Officer of the Company, and Executive desires to accept said employment from
the Company; and
WHEREAS, the Company and Executive have agreed upon the terms and
conditions of Executive's employment with the Company and the parties desire to
express the terms and conditions in this employment agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and accepted, the parties hereby
agree as follows:
1. EMPLOYMENT OF EXECUTIVE. The Company hereby employs Executive, and
Executive hereby accepts such employment from the Company, under the terms of
this Agreement for a period beginning on the Effective Date and terminating on
the date two (2) years thereafter (the "Term").
2. DUTIES. During the Term of this Agreement, Executive shall be employed as
the Board of Directors and the Chief Executive Officer of the Company.
Executive's responsibilities as Chief Executive Officer shall be to plan for
the future of the Company and to involve himself in the management and
operations of the Company in a manner as he and the Board of Directors from
time to time deem appropriate under the circumstances. The Executive shall
devote his full business time, attention, skill, energies and efforts to the
diligent performance of his duties hereunder, except during periods of illness
or periods of vacation and leaves of absence consistent with the Company's
policy. Executive shall establish his own work schedule for the performance of
his duties as described in this Section 2.
3. BASE SALARY. Executive's base salary commencing on the Effective Date and
during the Term of this Agreement shall be $300,000 per year (the "Base
Salary"), which amount may be increased annually at the discretion of the Board
of Directors. The Base Salary shall be paid to Executive by the Company
monthly in arrears or in accordance with the Company's regular payroll practice
as in effect from time to time.
4. ANNUAL BONUS.
Immediately following completion of each fiscal year of the Company and no
later than four (4) months after such date, Executive shall receive, in
addition to the Base Salary, an annual performance bonus in the amount of
$160,000.
<PAGE> 2
5. BENEFITS AND OTHER COMPENSATION.
Commencing on the Effective Date of this Agreement and during the Term of
this Agreement, the Company shall provide the benefits described below.
(a) Management Stock Incentive Program. The Executive shall participate in
the Company's stock option, stock purchase or other stock incentive plan
generally available to executive officers of the Company and shall be eligible
for the grant of stock options, restricted stock and other awards thereunder.
In addition the Company's Board of Directors shall annually consider the
Executive's performance, and determine if any additional bonus is appropriate.
(b) Vacation. Executive shall have the right to set his own reasonable
vacation schedule as an integral part of Executive's right to set his own work
schedule.
(c) Medical Insurance and Other Benefits. The Company shall provide
Executive with medical insurance coverage for Executive in accordance with the
terms of the Company's medical insurance plan, if any, as it exists from time
to time and shall provide Executive with coverage under all other employee
benefit plans, programs and policies which the Company maintains from time to
time for the benefit of its executive employees.
(d) Expenses. Executive shall be reimbursed monthly by the Company for
the ordinary and necessary business expenses incurred by him in the performance
of his duties for the Company; provided that Executive shall first document
said business expenses in the manner generally required by the Company under
its standard employee business expense reimbursement policies and procedures.
6. TERMINATION; TERM.
(a) The term of this Agreement (the "Term") shall commence on the
Effective Date and end two (2) years thereafter. The term shall be
automatically extended for successive two (2) year periods unless either party
hereto delivers to the other written notice three (3) months prior to the end
of the Term of its desire to terminate this Agreement.
(b) Notwithstanding the terms of Section 6 (a) hereof, This Agreement and
the Executive's employment hereunder may be terminated as follows:
(i) immediately, without any notice by or to either party hereto,
upon the death of the Executive;
(ii) immediately by the Company for the Disability of the Executive
upon delivery by the Company to the Executive of a Notice of Termination;
or
(iii) immediately by the Company for Cause upon delivery by the
Company to the Executive of a Notice of Termination.
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<PAGE> 3
(c) If the Executive's employment with the Company shall be terminated
during the Term (i) by reason of the Executive's death, or (ii) by the Company
for Disability or Cause, the Company shall pay to the Executive (or in the case
of his death, the Executive's estate) within fifteen days after the Termination
Date a lump sum cash payment equal to the Executive's Accrued Compensation.
(d) The pay and benefits provided for in this Section 6 shall be in lieu
of any other severance pay to which the Executive may be entitled under any
Company severance plan, program, practice or arrangement. The Executive's
entitlement to any other compensation or benefits shall be determined in
accordance with the Company's employee benefit plans and other applicable
programs, policies and practices then in effect.
(e) The Base Salary, and benefits paid or provided herein, but no other
additional compensation, shall be paid to Executive or his estate up to the
effective date of termination of this Agreement for whatever reason, including
the death of Executive, and not thereafter.
7. EXECUTIVE WORKS. Executive agrees that Executive will promptly disclose
to the Company all Executive Works (defined below). Executive hereby
irrevocably assigns to the Company all right, title and interest in and to any
and all Executive Works, created by Executive at any time prior to Effective
Date and Executive will execute, without requiring the Company to provide any
further consideration therefor, such confirmatory assignments, instruments and
documents as the Company deems necessary or desirable in order to effect such
assignment. Executive further agrees that all Executive Works created by him
during the course of his employment by the Company are the sole property of the
Company and hereby assigns such Executive Works to the Company, and Executive
will execute, without requiring the Company to provide any further
consideration therefor, such confirmatory assignments, instruments and
documents as the Company deems necessary or desirable in order to effect such
assignment. The term "Executive Works" as used in this Agreement means any and
all works of authorship, inventions, discoveries, improvements, designs,
techniques, and work product, whether or not patentable, and in whatever form,
which are created, made, developed or reduced to practice, or caused to be
created, made, developed or reduced to practice by Executive during the course
of his employment with the Company, including all worldwide copyrights, trade
secrets, patent rights, and all confidential, proprietary and property rights
therein, and that relate in any way to the current or future business of the
Company or that result from any work performed by Executive for the Company.
8. WORKS MADE FOR HIRE. The Company and Executive acknowledge that in the
course of Executive's employment by the Company, Executive may have created, or
may create, for the Company or its customers certain works of authorship. Such
works may consist of manuals, documentation, pamphlets, instructional
materials, videodisks, computer programs, user interfaces, tapes or other
copyrightable material, or portions thereof, and may be created within or
without the Company's facilities and before, during or after normal business
hours. All such works related to or useful in the business of the Company are
specifically intended to be works
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made for hire by Executive and owned by the Company or its customers, as
applicable, and Executive shall cooperate with the Company in the protection of
the Company or its customer's, as applicable, copyrights therein and, to the
extent deemed desirable by the Company or its customers, as applicable, the
registration of such copyrights.
9. PRODUCTS, NOTES, RECORDS AND SOFTWARE. All memoranda, notes, records and
other documents and computer software made or compiled by Executive during the
course of Executive's employment by the Company or made available to him during
the course of his employment by the Company, including, without limitation, all
customer data, billing information, service data, and other technical material,
confidential information and trade secrets of the Company and its affiliates,
shall be the Company's property and Executive shall deliver all such materials
(and all copies thereof) to the Company within three (3) days after any
termination of his employment with the Company.
10. NONDISCLOSURE. Executive acknowledges and agrees that during his
employment by the Company, he has had, or will have, access to trade secrets
and other confidential or proprietary information peculiar to the Company, the
disclosure or use of which would injure the Company. Therefore, Executive
agrees that he will not use, reveal, or divulge any such trade secrets if such
use, revelation, or divulgence would violate the Georgia Trade Secrets Act of
1990, as amended. In addition, Executive agrees that during his employment by
the Company and after any termination thereafter, he will not, directly or
indirectly, use, reveal, or divulge any such confidential information,
proprietary information or trade secrets. However, Executive shall not be
required to keep confidential any trade secrets or confidential or proprietary
information of the Company which is or becomes publicly available, is
independently developed by Executive outside of the scope of his employment
relationship with the Company, or is rightfully obtained from third parties.
11. NONCOMPETITION. During the course of his employment by the Company and
for a period of two (2) years after termination of his employment by the
Company, Executive agrees that he shall not engage in or render services to any
entity engaged in, the predictive dialing computer software business or any
other business in which the Company is engaged during the course of his
employment (the "Business") within the United States of America ("Territory"),
and two (2) years thereafter.
12. NONSOLICITATION.
(a) Customers. During his employment by the Company, Executive shall not,
directly or indirectly without the Company's prior written consent, contact any
customer of the Company, with whom Executive, in the ordinary course of his
employment by the Company, had a material contact ("Customer") for business
purposes unrelated to furthering the business of the Company. For a period of
two (2) years following his employment by the Company, Executive shall not,
directly or indirectly, (i) contact, solicit, divert or take away, any Customer
for purposes of, or with respect to, selling a product or service which
competes with the Business of the Company, or (ii) take any affirmative action
in regard to establishing or continuing a
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relationship with a Customer for purposes of making, or which directly or
indirectly results in, a sale of a product or service which competes with the
Business of the Company.
(b) Employees. During the employment of the Executive and for a period of
two (2) years following any termination of employment of Executive, Executive
shall not, directly or indirectly, recruit or hire, or attempt to recruit or
hire, any other employees of the Company who were employed by the Company
during the employment of the Executive and who are actively employed during the
employment of the Executive or such two (2) year period.
13. REMEDY FOR BREACH. Executive agrees that remedies at law of the Company
for any actual or threatened breach by Executive of any of the covenants
contained in Section 7 through 12 of this Agreement would be inadequate and
that the Company shall be entitled to specific performance by Executive of the
covenants in such paragraphs or injunctive relief against activities in
violation of such paragraphs, or both, by temporary or permanent injunction or
other appropriate judicial remedy, writ or order, in addition to any damages
and legal expenses (including attorney's fees) which the Company may be legally
entitled to recover. Executive acknowledges and agrees that the covenants
contained in Sections 7 through 12 of this Agreement shall be construed as
agreements independent of any other provision of this or any other contract
between the parties hereto, and that the existence of any claim or cause of
action by Executive against the Company, whether predicated upon this or any
other contract, shall not constitute a defense to the enforcement by the
Company of said covenants.
14. SURVIVAL. The provisions of Sections 7 through 13 shall survive
termination of this Agreement.
15. INVALIDITY OF ANY PROVISION. It is the intention of the parties hereto
that Sections 7 through 12 of this Agreement shall be enforced to the fullest
extent permissible under the laws and public policies of each state and
jurisdiction in which such enforcement is sought, but that the unenforceability
(or the modification to conform with such laws or public policies) of any
provision hereof shall not render unenforceable or impair the remainder of this
Agreement which shall be deemed amended to delete or modify, as necessary, the
invalid or unenforceable provisions. The parties further agree to alter the
balance of this Agreement in order to render the same valid and enforceable.
16. APPLICABLE LAW. This Agreement is being executed in the State of Georgia
and shall be construed and enforced in accordance with the internal laws of the
State of Georgia, without giving effect to the conflicts laws of such state.
17. WAIVER OF BREACH. The waiver by the Company of a breach of any provision
of this Agreement by Executive shall not operate or be construed as a waiver
of any subsequent breach by Executive.
18. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and shall inure to the benefit of
the Company, its Successors and Assigns, and the Company shall require any
Successors and Assigns to
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expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal personal representative.
19. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties. This Agreement may not be changed orally but only by an agreement in
writing signed by the party against whom enforcement of any waiver, changes,
modification, extension, or discharge is sought.
20. DEFINITIONS. For purposes of this Agreement, the following terms shall
have the following meanings:
(a) "Act" shall mean the Securities Act of 1933, as amended.
(b) "Accrued Compensation" shall mean an amount, including all amounts
earned or accrued through the Termination Date but not paid as of the
Termination Date including, (i) base salary of the Executive, (ii)
reimbursement for reasonable and necessary expenses incurred by the Executive
on behalf of the Company as of the Termination Date, and (iii) bonuses and
incentive compensation owed to the Executive.
(c) The termination of the Executive's employment shall be for "Cause" if
it is a result of:
(i) any act that the Board of Directors reasonably determines (A)
constitutes, on the part of the Executive, fraud, dishonesty, gross
malfeasance of duty, or conduct grossly inappropriate to the Executive's
office, and (B) is demonstrably likely to lead to material injury to the
Company or resulted or was intended to result in a material benefit to
the Executive at the Company's expense; or
(ii) the conviction (from which no appeal may be or is timely taken)
of the Executive of a felony; provided, however, that in the case of
clause (i) above, such conduct shall not constitute Cause (x) unless (A)
there shall have been delivered to the Executive a written notice setting
forth with specificity the reasons that the Board believes the
Executive's conduct constitutes the criteria set forth in clause (i), (B)
the Executive shall have been provided the opportunity to be heard in
person by the Board (with the assistance of the Executive's counsel if
the Executive so desires), and (C) after such hearing, the termination
for Cause is approved by a resolution adopted in good faith by two-thirds
of the members of the Board (other than the Executive).
(d) "Disability" shall mean a physical or mental infirmity which
materially impairs the Executive's ability to substantially perform any of the
essential functions of his job with the
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Company for a period of 180 consecutive days, as determined by an independent
physician selected with the approval of both the Company and the Executive.
(e) "Effective Date" shall mean the day that the Company closes its
Initial Public Offering.
(f) "Initial Public Offering" shall mean the closing of the first public
offering of the Company's common stock registered under the Act in which the
aggregate proceeds to the Company, net of all underwriting discounts and
commissions and other expenses of issuance and distribution as stated in the
prospectus relating to such offering, are at least twenty-five million dollars
($25,000,000).
(g) "Notice of Termination" shall mean a written notice of termination
from the Company or the Executive which specifies an effective date of
termination, indicates the specific termination provision in this Agreement
relied upon, and sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
(h) "Successors and Assigns" shall mean, for a corporation, a corporation
or other entity acquiring all or substantially all the assets and business of
the Company (including this Agreement), and for any individual as the
Executive, the estate, successors or heirs, and/or the legal representative of
the Executive, whether by operation of law or otherwise.
(i) "Termination Date" shall mean, in the case of the Executive's death,
his date of death, and in all other cases, the date specified in the Notice of
Termination.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
EXECUTIVE: COMPANY:
MELITA INTERNATIONAL CORPORATION
/s/ Alek Szlam
- ----------------------------
Alek Szlam
By: /s/ J. Neil Smith
--------------------------------------
J. Neil Smith, President and Chief
Operating Officer
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<PAGE> 1
EXHIBIT 10.7
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is made as of the
5th day of March, 1997 between J. Neil Smith, an individual resident of the
State of Georgia ("Executive"), and Melita International Corporation, a Georgia
corporation with its principal place of business located in Norcross, Georgia
("the Company").
WHEREAS, the Company desires to employ Executive as the President and
Chief Operating Officer of the Company, and Executive desires to accept said
employment from the Company; and
WHEREAS, the Company and Executive have agreed upon the terms and
conditions of Executive's employment with the Company and the parties desire to
express the terms and conditions in this employment agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and accepted, the parties hereby
agree as follows:
1. EMPLOYMENT OF EXECUTIVE. The Company hereby employs Executive, and
Executive hereby accepts such employment from the Company, under the terms of
this Agreement for a period beginning on the Effective Date and terminating on
July 31, 1999 (the "Term").
2. DUTIES. During the Term of this Agreement, Executive shall be employed as
the President and the Chief Operating Officer of the Company. Executive's
responsibilities as the President and Chief Operating Officer of the Company
shall be to take such action to involve himself in the general overall and day
to day management and operations of the Company in a manner as he and the Board
of Directors of the Company (the "Board of Directors") from time to time deem
appropriate under the circumstances.
3. BASE SALARY. Executive's base salary commencing on the Effective Date and
during the Term of this Agreement shall be $225,000 per fiscal year (the "Base
Salary"), which amount may be increased annually at the discretion of the Board
of Directors. The Base Salary shall be paid to Executive by the Company
monthly in arrears or in accordance with the Company's regular payroll practice
as in effect from time to time.
4. ANNUAL BONUS.
Immediately following completion of each fiscal year of the Company and no
later than four (4) months after such date, Executive shall receive, in
addition to the Base Salary, an annual performance bonus as determined by the
Board of Directors of up to $100,000 ("Annual Bonus").
<PAGE> 2
5. BENEFITS AND OTHER COMPENSATION.
Commencing on the Effective Date of this Agreement and during the Term of
this Agreement, the Company shall provide the benefits described below.
(a) Management Stock Incentive Program. The Executive shall participate in
the Company's stock option, stock purchase, or other stock incentive plan
generally available to executive officers of the Company and shall be eligible
for the grant of stock options, restricted stock and other awards thereunder.
In addition, the Board of Directors shall annually consider the Executive's
performance and determine if any additional bonus is appropriate for the
Executive. Furthermore, the Company confirms that the Executive has received
450,000 stock options (the "IPO Options") under the Melita International
Corporation 1992 Discounted Stock Option Plan (the "Stock Option Plan") to
purchase, subject to the terms and conditions of the Plan, shares of the
Company's common stock and that, in accordance with such plan and grant, all
stock options granted by the Company to the Executive pursuant to the Stock
Option Plan shall vest upon the occurrence of the Initial Public Offering. In
accordance with the terms of the Stock Option Plan, no such IPO Options are
exercisable by the Executive prior to 14 months after the Initial Public
Offering.
(b) Vacation. Executive shall have the right to vacation time in
accordance with the vacation policy of the Company.
(c) Medical Insurance and Other Benefits. The Company shall provide
Executive with medical insurance coverage for Executive in accordance with the
terms of the Company's medical insurance plan, if any, as it exists from time
to time and shall provide Executive with coverage under all other employee
benefit plans, programs and policies which the Company maintains from time to
time for the benefit of its executive employees.
(d) Expenses. Executive shall be reimbursed monthly by the Company for
the ordinary and necessary business expenses incurred by him in the performance
of his duties for the Company; provided that Executive shall first document
said business expenses in the manner generally required by the Company under
its standard employee business expense reimbursement policies and procedures.
6. TERMINATION; TERM.
(a) The term of this Agreement (the "Term") shall commence on the
Effective Date and end on July 31, 1999. The term shall be automatically
extended for successive two (2) year periods unless either party hereto
delivers to the other party written notice at least three (3) months prior to
the end of the Term of its desire to terminate this Agreement.
(b) Notwithstanding the terms of Section 6 (a) hereof, This Agreement and
the Executive's employment hereunder may be terminated as follows:
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<PAGE> 3
(i) immediately, without any notice by or to either party hereto,
upon the death of the Executive;
(ii) immediately by the Company for the Disability of the Executive
upon delivery by the Company to the Executive of a Notice of Termination;
(iii) immediately by the Company for Cause upon delivery by the
Company to the Executive of a Notice of Termination; or
(iv) by the Executive for Good Reason upon delivery by the Executive
to the Company of a Notice of Termination.
(c) If the Executive's employment with the Company shall be terminated
during the Term (i) by reason of the Executive's death, or (ii) by the Company
for Disability or Cause, the Company shall pay to the Executive (or in the case
of his death, the Executive's estate) within fifteen days after the Termination
Date a lump sum cash payment equal to the Executive's Accrued Compensation. In
addition, if the Company terminates the Executive's employment with the Company
other than for Cause, the Company shall pay to the Executive within fifteen
days after the Termination date a lump sum cash payment equal to the
Executive's Base Salary plus the stock rights provided in Section 6 (d) (ii)
hereof. In the event of termination of this Agreement by reason of the death or
Disability of the Executive, he, his estate or legal representatives shall also
be entitled to the stock rights set forth in Section 6 (d) (ii) hereof.
(d) If the Executive's employment with the Company shall be terminated by
Executive for Good Reason, in addition to other rights and remedies available
in law or equity, the Executive shall be entitled to the following:
(i) the Company shall pay the Executive a lump sum cash payment
within fifteen days of the Termination Date of an amount equal to
Executive's Base Salary;
(ii) the restrictions on any outstanding incentive awards
(including stock options) granted to the Executive under any of the
Company's stock option, stock purchase or under any other incentive
plan or arrangement shall lapse and all stock options and stock
appreciation rights granted to the Executive and shall become 100%
vested and immediately exercisable.
(e) In the event the Executive resigns from his employment with the
Company, other than for Good Reason pursuant to Section 6(b)(iv) hereof, or is
terminated by the Company for Cause, then the Executive shall receive Accrued
Compensation and all of the IPO Options according to the following schedule if
such resignation occurs:
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<PAGE> 4
(i) before July 1, 1997, 25% of the IPO Options shall be
vested and exercisable and the Executive shall exercise only such
amount and the balance shall not and cannot ever be exercised;
(ii) as of July 1, 1997, 50% of the IPO Options shall be
vested and exercisable and the Executive shall exercise only such
amount and the balance shall not and cannot ever be exercised;
(iii) as July 1, 1998, 75% of the IPO Options shall be
vested and exercisable and the Executive shall exercise only such
amount and the balance shall not and cannot ever be exercised; and
(iv) as of July 1, 1999, 100% of the IPO Options shall be
vested and exercisable.
(f) The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise
and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Executive in any subsequent
employment.
(g) The severance pay and benefits provided for in this Section 6 shall be
in lieu of any other severance pay to which the Executive may be entitled under
any Company severance plan, program, practice or arrangement. The Executive's
entitlement to any other compensation or benefits shall be determined in
accordance with the Company's employee benefit plans and other applicable
programs, policies and practices then in effect.
(h) The benefits paid or provided herein shall be the only benefits paid
to the Executive or his estate.
7. EXECUTIVE WORKS. Executive agrees that Executive will promptly
disclose to the Company all Executive Works (defined below). Executive hereby
irrevocably assigns to the Company all right, title and interest in and to any
and all Executive Works, created by Executive at any time prior to Effective
Date and Executive will execute, without requiring the Company to provide any
further consideration therefor, such confirmatory assignments, instruments and
documents as the Company deems necessary or desirable in order to effect such
assignment. Executive further agrees that all Executive works created by him
during the course of his employment by the Company are the sole property of the
Company and hereby assigns such Executive Works to the Company, and Executive
will execute, without requiring the Company to provide any further
consideration therefor, such confirmatory assignments, instruments and
documents as the Company deems necessary or desirable in order to effect such
assignment. The term "Executive Works" as used in this Agreement means any and
all works of authorship, inventions, discoveries, improvements, designs,
techniques, and work product, whether or not patentable, and in whatever form,
which are created, made, developed or reduced to practice, or caused to be
created, made, developed or reduced to practice by Executive during the course
of
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the Executive's employment by the Company, including all worldwide copyrights,
trade secrets, patent rights, and all confidential, proprietary and property
rights therein, and that relate in any way to the current or future business of
the Company or that result from any work performed by Executive for the
Company.
8. WORKS MADE FOR HIRE. The Company and Executive acknowledge that in the
course of Executive's employment by the Company, Executive may have created, or
may create, for the Company or its customers certain works of authorship. Such
works may consist of manuals, documentation, pamphlets, instructional
materials, videodisks, computer programs, user interfaces, tapes or other
copyrightable material, or portions thereof, and may be created within or
without the Company's facilities and before, during or after normal business
hours. All such works related to or useful in the business of the Company are
specifically intended to be works made for hire by Executive and owned by the
Company or its customers, as applicable, and Executive shall cooperate with the
Company in the protection of the Company or its customer's, as applicable,
copyrights therein and, to the extent deemed desirable by the Company or its
customers, as applicable, the registration of such copyrights.
9. PRODUCTS, NOTES, RECORDS AND SOFTWARE. All memoranda, notes, records
and other documents and computer software made or compiled by Executive during
the course of Executive's employment by the Company or made available to him
during the course of his employment by the Company, including, without
limitation, all customer data, billing information, service data, and other
technical material, confidential information and trade secrets of the Company
and its affiliates, shall be the Company's property and Executive shall deliver
all such materials (and all copies thereof) to the Company within three (3)
days after any termination of his employment with the Company.
10. NONDISCLOSURE. Executive acknowledges and agrees that during his
employment by the Company, he has had, or will have, access to trade secrets
and other confidential or proprietary information peculiar to the Company, the
disclosure or use of which would injure the Company. Therefore, Executive
agrees that he will not use, reveal, or divulge any such trade secrets if such
use, revelation, or divulgence would violate the Georgia Trade Secrets Act of
1990, as amended. In addition, Executive agrees that during his employment by
the Company and after any termination thereafter, he will not, directly or
indirectly, use, reveal, or divulge any such confidential information,
proprietary information or trade secrets. However, Executive shall not be
required to keep confidential any trade secrets or confidential or proprietary
information of the Company which is or becomes publicly available, is
independently developed by Executive outside of the scope of his employment
relationship with the Company, or is rightfully obtained from third parties.
11. NONCOMPETITION. During the course of his employment by the Company
and for a period of two (2) years after termination of his employment by the
Company, Executive agrees that he shall not engage in or render services to any
entity engaged in, the predictive dialing computer software business or any
other business in which the Company is engaged during the course of his
employment (the "Business") within the United States of America ("Territory"),
and two (2) years thereafter.
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12. NONSOLICITATION.
(a) Customers. During his employment by the Company, Executive shall not,
directly or indirectly without the Company's prior written consent, contact any
customer of the Company, with whom Executive, in the ordinary course of his
employment by the Company, had a material contact ("Customer") for business
purposes unrelated to furthering the business of the Company. For a period of
two (2) years following his employment by the Company, Executive shall not,
directly or indirectly, (i) contact, solicit, divert or take away, any Customer
for purposes of, or with respect to, selling a product or service which
competes with the Business of the Company, or (ii) take any affirmative action
in regard to establishing or continuing a relationship with a Customer for
purposes of making, or which directly or indirectly results in, a sale of a
product or service which competes with the Business of the Company.
(b) Employees. During the employment of the Executive and for a period of
two (2) years following any termination of employment of Executive, Executive
shall not, directly or indirectly, recruit or hire, or attempt to recruit or
hire, any other employees of the Company who were employed by the Company
during the employment of the Executive and who are actively employed during the
employment of the Executive or such two (2) year period.
13. REMEDY FOR BREACH. Executive agrees that remedies at law of the
Company for any actual or threatened breach by Executive of any of the
covenants contained in Section 7 through 12 of this Agreement would be
inadequate and that the Company shall be entitled to specific performance by
Executive of the covenants in such paragraphs or injunctive relief against
activities in violation of such paragraphs, or both, by temporary or permanent
injunction or other appropriate judicial remedy, writ or order, in addition to
any damages and legal expenses (including attorney's fees) which the Company
may be legally entitled to recover. Executive acknowledges and agrees that the
covenants contained in Sections 7 through 12 of this Agreement shall be
construed as agreements independent of any other provision of this or any other
contract between the parties hereto, and that the existence of any claim or
cause of action by Executive against the Company, whether predicated upon this
or any other contract, shall not constitute a defense to the enforcement by the
Company of said covenants.
14. SURVIVAL. The provisions of Sections 7 through 13 shall survive
termination of this Agreement.
15. INVALIDITY OF ANY PROVISION. It is the intention of the parties
hereto that Sections 7 through 12 of this Agreement shall be enforced to the
fullest extent permissible under the laws and public policies of each state and
jurisdiction in which such enforcement is sought, but that the unenforceability
(or the modification to conform with such laws or public policies) of any
provision hereof shall not render unenforceable or impair the remainder of this
Agreement which shall be deemed amended to delete or modify, as necessary, the
invalid or unenforceable
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<PAGE> 7
provisions. The parties further agree to alter the balance of this Agreement
in order to render the same valid and enforceable.
16. APPLICABLE LAW. This Agreement is being executed in the State of
Georgia and shall be construed and enforced in accordance with the internal
laws of the State of Georgia, without giving effect to the conflicts laws of
such state.
17. WAIVER OF BREACH. The waiver by the Company of a breach of any
provision of this Agreement by Executive shall not operate or be construed as a
waiver of any subsequent breach by Executive.
18. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and shall inure to the benefit of
the Company, its Successors and Assigns, and the Company shall require any
Successors and Assigns to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal personal representative.
19. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties. This Agreement may not be changed orally but only by an agreement in
writing signed by the party against whom enforcement of any waiver, changes,
modification, extension, or discharge is sought.
20. DEFINITIONS. For purposes of this Agreement, the following terms shall
have the following meanings:
(a) "Act" shall mean the Securities Act of 1933, as amended.
(b) "Accrued Compensation" shall mean an amount, including all amounts
earned or accrued through the Termination Date but not paid as of the
Termination Date including, (i) base salary of the Executive, (ii)
reimbursement for reasonable and necessary expenses incurred by the Executive
on behalf of the Company as of the Termination Date, and (iii) incentive
compensation owed to the Executive.
(c) "Base Amount" shall mean the greater of the Executive's annual Base
Salary (i) at the rate in effect on the Termination Date or (ii) the highest
rate in effect at any time during the 90 day period prior to a Change in
Control, and shall include all amount of base salary that are deferred under
qualified and non-qualified employee benefit plans of the Company.
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(d) The termination of the Executive's employment shall be for "Cause" if
it is a result of:
(i) any act that the Board of Directors reasonably determines (A)
constitutes, on the part of the Executive, fraud, dishonesty, gross
malfeasance of duty, or conduct grossly inappropriate to the Executive's
office, and (B) is demonstrably likely to lead to material injury to the
Company or resulted or was intended to result in a material benefit to
the Executive at the Company's expense; or
(ii) the conviction (from which no appeal may be or is timely taken)
of the Executive of a felony;
provided, however, that in the case of clause (i) above, such conduct
shall not constitute Cause (x) unless (A) there shall have been delivered
to the Executive a written notice setting forth with specificity the
reasons that the Board believes the Executive's conduct constitutes the
criteria set forth in clause (i), (B) the Executive shall have been
provided the opportunity to be heard in person by the Board (with the
assistance of the Executive's counsel if the Executive so desires), and
(C) after such hearing, the termination for Cause is approved by a
resolution adopted in good faith by two-thirds of the members of the
Board (other than the Executive).
(e) A "Change in Control" shall mean the occurrence during the Term of any
of the following events:
(i) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any
"Person" (as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934 (the "1934 Act"))
immediately after which such Person has "Beneficial Ownership" (within
the meaning of Rule 13d-3 promulgated under the 1934 Act) of a majority
or more of the combined voting power of the Company's then outstanding
Voting Securities; provided, however, that in determining whether a
Change in Control has occurred, Voting Securities which are acquired in a
"Non-Control Acquisition" (as hereinafter defined) or the acquisition of
voting securities by a Person who, immediately prior to such acquisition,
had Beneficial Ownership of 20% or more of the combined voting power of
the Company's then outstanding voting securities shall not constitute an
acquisition which would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (1) an employee benefit plan
(or a trust forming a part thereof) maintained by (x) the Company or (y)
any corporation or other Person of which a majority of its voting power
or its equity securities or equity interest is owned directly or
indirectly by
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<PAGE> 9
the Company (a "Subsidiary"), (2) the Company or any Subsidiary, or (3)
any Person in connection with a "Non-Control Transaction" (as hereinafter
defined).
(ii) The individuals who, as of the date of this Agreement, are
members of the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that if
the election, or nomination for election by the Company's stockholders,
of any new director was approved by a vote of at least two-thirds of the
Incumbent Board, such new director shall, for purposes of this Agreement,
be considered as a member of the Incumbent Board; provided, further,
however, that no individual shall be considered a member of the Incumbent
Board if such individual initially assumed office as a result of either
an actual or threatened "Election Contest" (as described in Rule 14a-11
promulgated under the 1934 Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board (a "Proxy Contest") including by reason of any agreement
intended to avoid or settle any Election Contest or Proxy Contest; or
(iii) Approval by a majority of the stockholders of the Company of:
(A) A merger, consolidation or reorganization involving the
Company, unless
(1) the stockholders of the Company, immediately before
such merger, consolidation or reorganization, own, directly
or indirectly, immediately following such merger,
consolidation or reorganization, at least a majority of the
combined voting power of the outstanding voting securities of
the corporation resulting from such merger or consolidation
or reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership of the
Voting Securities immediately before such merger,
consolidation or reorganization, and
(2) the individuals who were members of the Incumbent
Board immediately prior to the execution of the agreement
providing for such merger, consolidation or reorganization
constitute at least majority of the members of the board of
directors of the Surviving Corporation.
(A transaction described in clauses (1) and (2)
shall herein be referred to as a "Non-Control
Transaction.")
(B) A complete liquidation or dissolution of the
Company; or
(C) An agreement for the sale or other disposition of
all or substantially all of the assets of the Company to any
Person (other than a transfer to a Subsidiary).
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<PAGE> 10
(iv) Notwithstanding anything contained in this Agreement to the
contrary, if the Executive's employment is terminated at any time prior
to a Change in Control and the Executive reasonably demonstrates that
such termination (A) was at the request of a third party who has
indicated an intention or taken steps reasonably calculated to effect a
Change in Control (a "Third Party") or (B) otherwise occurred in
connection with, or in anticipation of, a Change in Control, then for all
purposes of this Agreement, the date of a Change in Control with respect
to the Executive shall mean the date immediately prior to the date of
such termination of the Executive's employment.
(f) "Disability" shall mean a physical or mental infirmity which
materially impairs the Executive's ability to substantially perform any of the
essential functions of his job with the Company for a period of 180 consecutive
days, as determined by an independent physician selected with the approval of
both the Company and the Executive.
(g) "Effective Date" shall mean the day that the Company closes its
Initial Public Offering.
(h) "Good Reason" shall mean the occurrence of any of the following
events or conditions:
(i) a change in the Executive's status, title, position or
responsibilities which, in the Executive's reasonable judgment, represents
an adverse change from his status, title, position or responsibilities
created by this Agreement, which is reasonably presented to the Board of
Directors and which is accepted by the Board of Directors after due
investigation and deliberation;
(ii) a reduction in the Executive's Base Salary or any failure to
pay the Executive any other compensation or benefits to which he is
entitled under this Agreement within five days of the date due;
(iii) the Company's requiring the Executive to be based at any place
outside a 30-mile radius from the Executive offices occupied by the
Executive immediately prior to a Change in Control, except for reasonably
required travel on the Company's business which is not materially greater
than such travel requirements prior to such Change in Control;
(iv) the failure by the Company to (A) continue in effect (without
reduction in benefit level and/or reward opportunities) any material
compensation or Executive benefit
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<PAGE> 11
plan in which the Employee was participating at any time within ninety
days preceding the date of a Change in Control or at any time thereafter,
unless such plan is replaced with a plan that provides substantially
equivalent compensation or benefits to the Executive or (B) provide the
Executive with compensation and benefits, in the aggregate, at least
equal (in terms of benefit levels and/or reward opportunities) to those
provided for under each other Executive benefit plan, program and
practice in which the Executive was participating at any time within
ninety days preceding the date of a Change in Control or at any time
thereafter;
(v) the insolvency or the filing (by any party, including the
Company) of a petition for bankruptcy of the Company, which petition is
not dismissed within sixty days;
(vi) any material breach by the Company of any provision of this
Agreement;
(vii) any purported termination of the Executive's employment for
Cause by the Company which does not comply with the terms of this
Agreement; or
(viii) the failure of the Company to obtain an agreement,
satisfactory to the Executive, from any Successors and Assigns to assume
and agree to perform this Agreement, as contemplated in Section 6 hereof.
Any event or condition described in clause (i) through (viii) above which
occurs prior to a Change in Control but which the Executive reasonably
demonstrates (A) was at the request of a Third Party, or (B) otherwise arose in
connection with, or in anticipation of, a Change in Control (whether or not it
actually occurs), shall constitute Good Reason for purposes of this Agreement,
notwithstanding that it occurred prior to the intended Change in Control. The
Executive's right to terminate his employment for Good Reason shall not be
affected by his incapacity due to physical or mental illness.
(i) "Initial Public Offering" shall mean the closing of the first public
offering of the Company's common stock registered under the Act in which the
aggregate proceeds to the Company, net of all underwriting discounts and
commissions and other expenses of issuance and distribution as stated in the
prospectus relating to such offering, are at least twenty-five million dollars
($25,000,000).
(j) "Notice of Termination" shall mean a written notice of termination
from the Company or the Executive which specifies an effective date of
termination, indicates the specific termination provision in this Agreement
relied upon, and sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
(k) "Successors and Assigns" shall mean, for a corporation, a corporation
or other entity acquiring all or substantially all the assets and business of
the Company (including this Agreement),and for any individual as the Executive,
the estate, successors or heirs, and/or the legal representative of the
Executive, whether by operation of law or otherwise.
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<PAGE> 12
(l) "Termination Date" shall mean, in the case of the Executive's death,
his date of death, and in all other cases, the date specified in the Notice of
Termination.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
EXECUTIVE: COMPANY:
/s/ J. Neil Smith MELITA INTERNATIONAL CORPORATION
- --------------------------------
J. Neil Smith By: /s/ Alek Szlam
-----------------------------
Alek Szlam, Chairman and Chief
Executive Officer
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<PAGE> 1
EXHIBIT 10.8
MELITA INTERNATIONAL CORPORATION/___________
TAX INDEMNIFICATION AGREEMENT
This TAX INDEMNIFICATION AGREEMENT, dated as of the 5th day of March,
1997, is entered into by MELITA INTERNATIONAL CORPORATION, a Georgia corporation
(the "Company") and _____________ (the "Stockholder").
RECITALS
WHEREAS, prior to February 7, 1997, the Stockholder held four percent
of the outstanding shares of the Company's Voting Common Stock, no par
value, (the "Common Stock"); and
WHEREAS, the Company has elected to be taxed as S corporation under the
Code and that election has not been terminated; and
WHEREAS, the Company is now contemplating offering and selling shares
of its Common Stock to the public (the "Public Offering"); and
WHEREAS, the Company plans, just prior to the commencement of the
Public Offering, to terminate its S corporation election; and
WHEREAS, the parties hereto wish to set forth their agreement with
respect to certain adjustments to the federal and state income tax
liability of the Stockholder and the Company attributable to Tax Items
of the Company that pass through to the Stockholder under the
provisions of Subchapter S of the Code and any similar provisions of
state law for the period during which the Company is an S Corporation;
NOW, THEREFORE, for value received, the parties agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement the following definitions shall apply:
(a) "Adjustment" shall mean any proposed or final change in any S
Corporation Tax Liability initiated by the IRS, state or local taxing authority,
or any other relevant taxing authority.
(b) "Code" shall mean the Internal Revenue Code of 1986,
as amended and in effect for the taxable period in question.
<PAGE> 2
(c) "Final Determination" shall mean the final resolution of any
Income Tax liability (including all related interest and penalties) for a
taxable period. A Final Determination shall result from the first to occur of:
(i) the expiration of 30 days after IRS acceptance of a
Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and
Acceptance of Overassessment on Federal Revenue Form 870 or 870-AD (or any
successor comparable form or the expiration of a comparable period with respect
to any comparable agreement or form under the laws of other jurisdictions),
unless, within such period, the taxpayer gives notice to the other party of the
taxpayer's intention to attempt to recover all or part of any amount paid
pursuant to the Waiver by the filing of a timely claim for refund;
(ii) a decision, judgment, decree, or other order by a court
of competent jurisdiction that is not subject to further judicial review (by
appeal or otherwise) and has become final;
(iii) the execution of a closing agreement under section 7121
of the Code or the acceptance by the IRS or its counsel of an offer in
compromise under section 7122 of the Code, or comparable agreements under the
laws of other jurisdictions;
(iv) the expiration of the time for filing a claim for refund
or for instituting suit in respect of a claim for refund disallowed in whole or
part by the IRS or other relevant taxing authority;
(v) any other final disposition of the tax liability for
such period by reason of the expiration of the applicable statute of
limitations; or
(vi) any other event that the parties agree is a final and
irrevocable determination of the liability at issue.
(d) "Income Tax" shall mean federal income taxes and state and
local taxes imposed upon, or measured by, income. Income Tax includes interest,
penalties, and other additions to tax.
(e) "IRS" shall mean the United States Internal Revenue Service
or any successor, including, but not limited to, its agents, representatives,
and attorneys.
(f) "S Corporation" shall mean an S Corporation within the
meaning of section 1361 of the Code.
(g) "S Corporation Tax Liability" shall mean the personal Income
Tax liability of the Stockholder for Income Taxes attributable to:
(i) the Company's Tax Items that pass through to the
Stockholder under the provisions of Subchapter S of the Code and any similar
provisions of state and local law, or
(ii) the Stockholder's receipt of indemnity payments
hereunder.
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<PAGE> 3
(h) "Tax Benefit" shall mean a reduction in the personal Income Tax
liability of the Stockholder (as a result of Tax Items of the Company and all
other Tax Items reflected on the Stockholder's tax return) for any taxable
period.
The Stockholder shall be deemed to have realized or received a
Tax Benefit from a Tax Item in a taxable period only if and to the extent that
the Stockholder's personal Income Tax liability for such period is less than it
would have been if such liability were determined without regard to such Tax
Item.
The Stockholder shall be deemed to have realized or received a
Tax Benefit with respect to a carryover only if, when, and to the extent the
carryover is used to produce a Tax Benefit.
(i) "Tax Item" shall mean any item of income, gain, loss, deduction,
credit, recapture of credit, or any other item which increases or decreases
Income Taxes paid or payable by the Stockholder (when the Company is an S
Corporation) or by the Company.
ARTICLE II
INDEMNIFICATION FOR CERTAIN TAXES
(a) The Stockholder shall pay to the Company an amount equal to any
Tax Benefit actually realized or received arising from an Adjustment with
respect to a Tax Item of the Company for any taxable period in which the Company
was taxable as an S Corporation.
(b) If based on a Final Determination the Company is deemed to have
been a C corporation for federal, state or local income tax purposes during any
period in which it reported (or intends to report) its taxable income as an S
corporation, the Stockholder agrees to contribute to the capital of the Company
an amount necessary to hold the Company harmless from any taxes (net of any
refunds) and interest arising from such Final Determination.
The obligations of the Stockholder under this subsection (b) shall
include all taxes (net of any refunds) and interest incurred by the Company as a
C Corporation for periods ending before the date of termination of the Company S
election during 1997 (the "Termination Date"), other than any obligation arising
from an adjustment to the Company's tax return for a period ending before the
Termination Date which, if the Company had been an S corporation for such
period, would have given rise to an obligation of the Company to the Stockholder
under subsection (c) of this Article II.
The Stockholder's obligation under this subsection (b) shall be limited
to the total distributions to the Stockholder made by the Company through and
including the Termination Date, reduced by any taxes (net of any refunds) and
interest of the Stockholder attributable to such distributions.
(c) The Company shall pay and indemnify the Stockholder for any S
Corporation Tax Liability arising from an Adjustment with respect to a Tax Item
of the Company.
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<PAGE> 4
(d) Any payment required under this Article shall be made by the
earliest of (1) 20 days after the Stockholder receives a refund or credit, (2)
20 days after a Final Determination with respect to such tax, (3) with respect
to a carryover, 20 days after the Stockholder files a tax return on which the
carryover produces a Tax Benefit, or (4) 20 days after the determination by the
parties or pursuant to Article IV that such payment is due.
ARTICLE III
COOPERATION AND EXCHANGE OF INFORMATION
Whenever the Stockholder or the Company becomes aware of an issue which
either party believes could give rise to payment or indemnification from the
other party under Article II, the Stockholder or the Company (as the case may
be) shall promptly give notice of the issue to the other party. The indemnitor
and its representatives, at the indemnitor's expense, shall be entitled to
participate in all conferences, meetings, or proceedings with the IRS or other
taxing authority with respect to the issue.
The parties agree to consult and cooperate with each other in the
negotiation and settlement or litigation of any Adjustment that may give rise to
any payment or an indemnification payment under this Agreement. All decisions
with respect to such negotiation and settlement or litigation shall be made by
the parties after full and good faith consultation.
If a party who will be required to make an indemnification payment (the
"Indemnifying Party") proposes to accept a settlement offered by the relevant
taxing authority with respect to an issue for one or more taxable years, but the
party who will be entitled to receive the payment (the "Indemnified Party")
disagrees with the proposed settlement, then the Indemnifying Party may pay to
the Indemnified Party the amount that would be due under this Agreement pursuant
to such settlement and, in that event, the Indemnifying Party shall have no
further responsibility for amounts attributable to that issue for the taxable
years involved.
ARTICLE IV
DISPUTES
If the parties are, after negotiation in good faith, unable to agree
upon the appropriate calculation of amounts due under this Agreement, the
controversy shall be settled by Arthur Andersen, L.L.P. (the "Accounting Firm").
The decision of the Accounting Firm shall be final, and each of the
Company and the Stockholder agree immediately to pay to the other any amount due
under this Agreement pursuant to such decision. The expenses of the Accounting
Firm shall be borne one-half by the Company and one-half by the Stockholder
unless the Accounting Firm specifies otherwise.
Any dispute arising between the parties with reference to the legal
interpretation of this Agreement or their rights hereunder shall, upon written
request of either party, be submitted to three arbitrators, one to be chosen by
each party, and the third by the two so chosen. Each party shall submit its case
to its arbitrator within thirty days of the appointment of the third arbitrator.
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<PAGE> 5
The decision in writing of any two arbitrators, when filed with the parties
hereto, shall be final and binding on both parties. Judgment may be entered upon
the final decision of the arbitrators in any court having jurisdiction. Each
party shall bear the expense of its own arbitrator and shall jointly and equally
bear with the other party the expense of the third arbitrator and of the
arbitration.
ARTICLE V
MISCELLANEOUS
Section 5.1 Term of Agreement. This Agreement shall become effective as
of the date of its execution and shall continue in full force and effect
indefinitely, except that this Agreement shall be void and of no effect if the
Company's S corporation status is not terminated before January 1, 1998.
Section 5.2 Severability. If any term of this Agreement is held by a
court of competent jurisdiction to be unenforceable, the remainder of the terms
set forth herein shall remain in full force and effect and shall in no way be
impaired. In the event that any term is held to be unenforceable, the parties
shall use their best efforts to find an alternative means to achieve the same or
substantially the same result as that contemplated by such term.
Section 5.3 Assignment. Except by operation of law or in connection
with the sale of all or substantially all the assets of a party, this Agreement
shall not be assignable, in whole or in part, directly or indirectly, by the
Stockholder without the written consent of the Company or by the Company without
the written consent of the Stockholder. Any attempt to assign any right or
obligations arising under this Agreement without such consent shall be void.
However, the provisions of this Agreement shall be binding upon inure to the
benefit of, and be enforceable by the parties and their respective successors
and permitted assigns.
Section 5.4 Further Assurances. Subject to the provisions of this
Agreement, the parties shall acknowledge such other instruments and documents,
and take all other actions, as may be reasonably required in order to effectuate
the purposes of this Agreement.
Section 5.5 Parties in Interest. Except as herein otherwise
specifically provided, nothing in this Agreement expressed or implied is
intended to confer any right or benefit upon any person, firm, or corporation
other than the parties and their respective successors and permitted assigns.
Section 5.6 Waivers, Etc. No failure or delay on the part of the
parties in exercising any power or right under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. No modification or waiver of any provision of this
Agreement nor consent to any departure by the parties therefrom shall in any
event be effective unless it shall be in writing, and then such waiver or
consent shall be effective only in the specific instance and for the purpose
which given.
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<PAGE> 6
Section 5.7 Set-off. All payments to be made by any party under this
Agreement shall be made without set-off, counterclaim, or withholding, all of
which are expressly waived.
Section 5.8 Change of Law. If, due to any change in applicable law or
regulations or the interpretation thereof by any court or other governing body
having jurisdiction subsequent to the date of this Agreement, performance of any
provision of this Agreement shall be impracticable or impossible, the parties
shall use their best efforts to find an alternative means to achieve the same or
substantially the same results as are contemplated by such provision.
Section 5.9. Headings. Descriptive headings are for convenience only
and shall not control or affect the meaning of any provision of this Agreement.
Section 5.10 Counterparts. For the convenience of the parties, any
number of counterparts of this Agreement may be executed by the parties and each
executed counterpart shall be an original instrument.
Section 5.11 Notices. All notices provided for in this Agreement shall
be validly given if in writing and delivered personally or sent by registered
mail, postage prepaid
if to the Company, at
Melita International
5051 Peachtree Corners Circle
Norcross, Georgia 30092-2500
Attn: President
copy to:
Robert A. Enholm
General Counsel
Melita International
5051 Peachtree Corners Circle
Norcross, Georgia 30092-2500
if to the Stockholder, to:
-------------------------------
-------------------------------
-------------------------------
or to such other addresses as any party may, from time to time, designate in a
written notice given in a like manner. Notice given by mail shall be deemed
delivered five calendar days after the date mailed.
Section 5.12 Governing Law. This Agreement shall be governed by the
domestic substantive laws of Georgia without regard to any choice or conflict of
laws rule or provision that would cause the application of the domestic
substantive laws of any other jurisdiction.
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<PAGE> 7
Section 5.13 No Double Recovery. The total recovery received by the
Company pursuant to Article II(b) of this Agreement, the Melita International
Corporation/Aleksander Szlam Tax Indemnification Agreement, and the Melita
International Corporation/Halina Szlam, as Trustee U/A/D February 7, 1997 Tax
Indemnification Agreement shall not exceed the total taxes (net of refund) and
interest arising from the Final Determination referred to therein.
[Remainder of page intentionally left blank]
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<PAGE> 8
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed as of the day and year first written above.
MELITA INTERNATIONAL CORPORATION: STOCKHOLDER:
By: (SEAL)
----------------------------- ------------------------
J. Neil Smith, President
------------------------
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<PAGE> 1
EXHIBIT 10.9
INVENTIONS, INC.
TAX INDEMNIFICATION AGREEMENT
This TAX INDEMNIFICATION AGREEMENT, dated as of the 5th day of March,
1997, is entered into by INVENTIONS, INC., a Georgia corporation (the
"Company") and ___________________________________ (the "Stockholder").
RECITALS
WHEREAS, the Stockholder holds all of the outstanding shares of
the Company's no par value Non-Voting Common Stock (the
"Non-Voting Common Stock"); and
WHEREAS, the Company has elected to be taxed as S corporation
under the Code and that election has not been lost or revoked; and
WHEREAS, pursuant to a planned public offering of the shares of a
sister corporation, the Company plans to terminate its S
corporation status just prior to the commencement of that public
offering; and
WHEREAS, during the period of the Company's S corporation status,
the Company has paid no federal taxes and the Stockholder has
assumed the responsibility for paying certain taxes and should
those taxes be decreased or increased, the Company and Stockholder
should share the benefit or burden of those taxes, as the case may
be, for periods prior to the termination of the Company's S
corporation status;
WHEREAS, the parties wish to provide for the equitable adjustment
among themselves for tax benefits or burdens occasioned by the
operation of the Company prior to the termination of the Company's
S corporation status;
NOW, THEREFORE, FOR VALUE RECEIVED, the parties agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement the following definitions shall apply:
(a) "Adjustment" shall mean any proposed or final change in any S
Corporation Tax Liability initiated by the IRS or Georgia taxing authority.
<PAGE> 2
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended and in
effect for the taxable period in question.
(c) "Final Determination" shall mean the final resolution of any Income
Tax liability (including all related interest and penalties) for a taxable
period. A Final Determination shall result from the first to occur of:
the expiration of 30 days after IRS acceptance of a Waiver of Restrictions on
Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment
on Federal Revenue Form 870 or 870-AD (or any successor comparable form or the
expiration of a comparable period with respect to any comparable agreement or
form under the laws of Georgia), unless, within such period, the taxpayer gives
notice to the other party of the taxpayer's intention to attempt to recover all
or part of any amount paid pursuant to the Waiver by the filing of a timely
claim for refund;
a decision, judgment, decree, or other order by a court of competent
jurisdiction that is not subject to further judicial review (by appeal or
otherwise) and has become final;
the execution of a closing agreement under section 7121 of the Code or the
acceptance by the IRS or its counsel of an offer in compromise under section
7122 of the Code, or comparable agreements under the laws of Georgia;
the expiration of the time for filing a claim for refund or for instituting
suit in respect of a claim for refund disallowed in whole or part by the IRS or
the Georgia Department of Revenue;
any other final disposition of the tax liability for such period by reason of
the expiration of the applicable statute of limitations; or
any other event that the parties agree is a final and irrevocable determination
of the liability at issue.
(d) "Income Tax" shall mean federal income taxes and Georgia income taxes.
Income Tax includes interest, penalties, and other additions to tax.
(e) "IRS" shall mean the United States Internal Revenue Service or any
successor, including, but not limited to, its agents, representatives, and
attorneys.
(f) "S Corporation" shall mean an S Corporation within the meaning of
section 1361 of the Code.
(g) "S Corporation Tax Liability" shall mean the personal Income Tax
liability of the Stockholder for Income Taxes attributable to (a) the Company's
Tax Items that pass through to the Stockholder under the provisions of
Subchapter S of the Code and any similar provisions of state and local law or
(b) the Stockholder's receipt of indemnity payments hereunder.
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<PAGE> 3
(h) "Tax Benefit" shall mean a reduction in the personal Income Tax
liability of the Stockholder (as a result of Tax Items of the Company and all
other Tax Items reflected on the Stockholder's tax return) for any taxable
period.
The Stockholder shall be deemed to have realized or received a Tax Benefit
from a Tax Item in a taxable period only if and to the extent that the
Stockholder's personal Income Tax liability for such period is less than it
would have been if such liability were determined without regard to such Tax
Item.
The Stockholder shall be deemed to have realized or received a Tax Benefit
with respect to a carryover only if, when, and to the extent the carryover is
used to produce a Tax Benefit.
(i) "Tax Item" shall mean any item of income, gain, loss, deduction,
credit, recapture of credit, or any other item which increases or decreases
Income Taxes paid or payable by the Company or by the Stockholder when the
Company is an S Corporation.
ARTICLE II
INDEMNIFICATION FOR CERTAIN TAXES
(a) The Stockholder shall pay to the Company an amount equal to any Tax
Benefit actually realized or received arising from an Adjustment with respect
to a Tax Item of the Company for any taxable period in which the Company was
taxable as an S Corporation.
(b) If based on a Final Determination the Company is deemed to have been a
C corporation for federal or state income tax purposes during any period in
which it reported (or intends to report) its taxable income as an S
corporation, the Stockholder agrees to contribute to the capital of the Company
an amount necessary to hold the Company harmless from any taxes (net of any
refunds) and interest imposed on the Company and arising from such Final
Determination.
The obligations of the Stockholder under this subsection (b) shall include
all taxes (net of any refunds) and interest incurred by the Company as a C
Corporation for periods ending before the date of termination of the Company S
election during 1997 (the "Termination Date"), other than:
(i) any obligation arising from an adjustment to the
Company's tax return for a period ending before the
Termination Date which, if the Company had been an S
corporation for such period, would have given rise to an
obligation of the Company to the Stockholder under subsection
(c) of this Article II; and
(ii) any taxes, interest, and penalties incurred by
the Company for all taxable years ending before January, 1997.
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<PAGE> 4
The Stockholder's obligation under this subsection (b) shall be limited
to the total distributions to the Stockholder made by the Company through and
including the Termination Date, reduced by any taxes (net of any refunds) and
interest of the Stockholder attributable to such distributions.
(c) The Company shall pay and indemnify the Stockholder for any S
Corporation Tax Liability arising from an Adjustment with respect to a Tax Item
of the Company.
(d) Any payment required under this Article shall be made by the earliest
of (1) 20 days after the Stockholder receives a refund or credit, (2) 20 days
after a Final Determination with respect to such tax, (3) with respect to a
carryover, 20 days after the Stockholder files a tax return on which the
carryover produces a Tax Benefit, or (4) 20 days after the determination by the
parties or pursuant to Article IV that such payment is due.
ARTICLE III
COOPERATION AND EXCHANGE OF INFORMATION
Whenever the Stockholder or the Company becomes aware of an issue which
either party believes could give rise to payment or indemnification from the
other party under Article II, the Stockholder or the Company (as the case may
be) shall promptly give notice of the issue to the other party. The indemnitor
and its representatives, at the indemnitor's expense, shall be entitled to
participate in all conferences, meetings, or proceedings with the IRS or other
taxing authority with respect to the issue.
The parties agree to consult and cooperate with each other in the
negotiation and settlement or litigation of any Adjustment that may give rise
to any payment or an indemnification payment under this Agreement. All
decisions with respect to such negotiation and settlement or litigation shall
be made by the parties after full and good faith consultation.
If a party who will be required to make an indemnification payment (the
"Indemnifying Party") proposes to accept a settlement offered by the relevant
taxing authority with respect to an issue for one or more taxable years, but
the party who will be entitled to receive the payment (the "Indemnified Party")
disagrees with the proposed settlement, then the Indemnifying Party may pay to
the Indemnified Party the amount that would be due under this Agreement
pursuant to such settlement and, in that event, the Indemnifying Party shall
have no further responsibility for amounts attributable to that issue for the
taxable years involved.
ARTICLE IV
DISPUTES
If the parties are, after negotiation in good faith, unable to agree upon
the appropriate calculation of amounts due under this Agreement, the
controversy shall be settled by Arthur Andersen, L.L.P. (the "Accounting
Firm"). The decision of the Accounting Firm shall be final,
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<PAGE> 5
and each of the Company and the Stockholder agree immediately to pay to the
other any amount due under this Agreement pursuant to such decision.
The expenses of the Accounting Firm shall be borne one-half by the Company
and one-half by the Stockholder unless the Accounting Firm specifies otherwise.
Any dispute arising between the parties with reference to the legal
interpretation of this Agreement or their rights hereunder shall, upon written
request of either party, be submitted to three arbitrators, one to be chosen by
each party, and the third by the two so chosen. Each party shall submit its
case to its arbitrator within thirty days of the appointment of the third
arbitrator. The decision in writing of any two arbitrators, when filed with
the parties hereto, shall be final and binding on both parties. Judgment may
be entered upon the final decision of the arbitrators in any court having
jurisdiction. Each party shall bear the expense of its own arbitrator and
shall jointly and equally bear with the other party the expense of the third
arbitrator and of the arbitration.
ARTICLE V
MISCELLANEOUS
Section 5.1 Term of Agreement. This Agreement shall become effective as
of the date of its execution and shall continue in full force and effect
indefinitely, except that this Agreement shall be void and of no effect if the
Company's S corporation status is not terminated before January 1998.
Section 5.2 Severability. If any term of this Agreement is held by a
court of competent jurisdiction to be unenforceable, the remainder of the terms
set forth herein shall remain in full force and effect and shall in no way be
impaired. In the event that any term is held to be unenforceable, the parties
shall use their best efforts to find an alternative means to achieve the same
or substantially the same result as that contemplated by such term.
Section 5.3 Assignment. Except by operation of law or in connection with
the sale of all or substantially all the assets of a party, this Agreement
shall not be assignable, in whole or in part, directly or indirectly, by the
Stockholder without the written consent of the Company or by the Company
without the written consent of the Stockholder. Any attempt to assign any
right or obligations arising under this Agreement without such consent shall be
void. However, the provisions of this Agreement shall be binding upon inure to
the benefit of, and be enforceable by the parties and their respective
successors and permitted assigns.
Section 5.4 Further Assurances. Subject to the provisions of this
Agreement, the parties shall acknowledge such other instruments and documents,
and take all other actions, as may be reasonably required in order to
effectuate the purposes of this Agreement.
Section 5.5 Parties in Interest. Except as herein otherwise specifically
provided, nothing in this Agreement expressed or implied is intended to confer
any right or benefit upon
-5-
<PAGE> 6
any person, firm, or corporation other than the parties and their respective
successors and permitted assigns.
Section 5.6 Waivers, Etc. No failure or delay on the part of the
parties in exercising any power or right under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. No modification or waiver of any provision of this
Agreement nor consent to any departure by the parties therefrom shall in any
event be effective unless it shall be in writing, and then such waiver or
consent shall be effective only in the specific instance and for the purpose
which given.
Section 5.7 Set-off. All payments to be made by any party under this
Agreement shall be made without set-off, counterclaim, or withholding, all of
which are expressly waived.
Section 5.8 Notices. All notices provided for in this Agreement shall be
validly given if in writing and delivered personally or sent by registered
mail, postage prepaid
if to the Company, at
c/o Melita International
5051 Peachtree Corners Circle
Norcross, Georgia 30092-2500
Attn: President
copy to:
Robert A. Enholm
General Counsel
Melita International
5051 Peachtree Corners Circle
Norcross, Georgia 30092-2500
if to the Stockholder, to:
--------------------------------
--------------------------------
--------------------------------
or to such other addresses as any party may, from time to time, designate in a
written notice given in a like manner. Notice given by mail shall be deemed
delivered five calendar days after the date mailed.
-6-
<PAGE> 7
Section 5.9 Governing Law. This Agreement shall be governed by the
domestic substantive laws of Georgia without regard to any choice or conflict
of laws rule or provision that would cause the application of the domestic
substantive laws of any other jurisdiction.
Section 5.10 No Double Recovery. The total recovery received by the
Company pursuant to Article II(b) of this Agreement and the Inventions,
Inc./Aleksander Szlam Tax Indemnification Agreement shall not exceed the total
taxes (net of refund) and interest arising from the Final Determination
referred to therein.
[Remainder of page intentionally left blank]
-7-
<PAGE> 8
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed as of the day and year first written above.
<TABLE>
<S> <C>
COMPANY: STOCKHOLDER:
INVENTIONS, INC.,
a Georgia corporation -------------------------------
By:
---------------------------------- -------------------------------(SEAL)
Its duly authorized representative
-------------------------------
</TABLE>
-8-
<PAGE> 1
EXHIBIT 10.10
NOTE
$3,000,000 Dated June 19, 1992
Undersigned hereby promises to pay to the order of Aleksander Szlam
the sum of Three Million Dollars ($3,000,000) together with interest thereon at
the prime rate stated in the Wall Street Journal on the last day of the
applicable quarter plus 1%, such interest payable quarterly in arrears on the
first day of each quarter beginning October 1, 1992. The principal is due in
sixteen (16) equal quarterly installments beginning July 1, 1996, all at such
place as Payee may direct.
This note may be prepaid without premium, in whole or in part, at any
time and from time to time. Any such prepayment shall be applied first to
accrued, unpaid interest and thereafter to principal.
In the event of a failure by Undersigned to make any payment required
hereunder ("default") when due or if Aleksander Szlam's direct or indirect
ownership of Melita International Corporation falls below seventy-five percent
(75%) of the outstanding common stock, the entire principal and interest
hereunder shall, at the option of the Payee, exercisable at any time following
the tenth day after notice of such default, become immediately due and payable
at the rate of prime plus one (1%) per year, compounded annually, until paid.
WITNESS the hand of Undersigned.
By: Melita International Corporation
/s/ /s/ Aleksander Szlam
- -------------------------------- -------------------------------------------
Vice President, Finance Title: President & Chief Executive Officer
Date: 6/19/92
--------------------------------------
- --------------------------------
Corporate Seal
/s/
- --------------------------------
Secretary
<PAGE> 1
Melita International Corporation, EXHIBIT 11.1
Melita Europe Limited and Inventions, Inc.
Computation of Pro Forma Earnings Per Share
<TABLE>
<CAPTION>
PRO FORMA FOR THE
YEAR ENDED
DECEMBER 31, 1996
-----------------
IN THOUSANDS
<S> <C>
PRIMARY AND FULLY DILUTED
Pro Forma Net Income 4,782
Weighted Average Common Stock Outstanding
During the Period 8,000
Cheap Stock (1) 110
Effect of the Combination (2) 3,143
Dilutive Effect of Common Stock Equivalents 142
------
Total 11,395
======
Per share amount 0.42
======
</TABLE>
(1) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, common stock and common stock equivalents issued at prices below the
assumed initial public offering price per share ("cheap stock") during the
twelve months immediately preceding the initial filing date of the Company's
Registration Statement for its public offering have been included as
outstanding for all periods presented.
(2) Reflects pro forma issuance of 3,143,395 shares of Common Stock in
connection with the combination of Melita International Corporation, Melita
Europe Limited and Inventions, Inc.
<PAGE> 1
EXHIBIT 21.1
MELITA INTERNATIONAL CORPORATION
List of Subsidiaries
The subsidiaries of the Registrant are as follows:
Inventions, Inc. Organized in Georgia
Melita Europe Limited Organized in the United Kingdom
Each company does business in the name listed above.
<PAGE> 1
EXHIBIT 23.1
[LETTERHEAD OF ARTHUR ANDERSEN LLP APPEARS HERE]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our firm) included in or made part of this
Registration Statement.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 4, 1997
<PAGE> 1
EXHIBIT 23.2
[LETTERHEAD OF BDO STOY HAYWARD APPEARS HERE]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement on Form S-1 of our report dated February 28, 1997 on the
financial statements of Melita Europe Limited as of December 31, 1995 and
December 31, 1996 and for the three years in the period ended December 31, 1996.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO STOY HAYWARD
Ewell, Epsom Surrey
March 4, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMBINED
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1994 JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1994 DEC-31-1995 DEC-31-1996
<S> <C> <C> <C>
<EXCHANGE-RATE> 1 1 1
<CASH> 0 5,959 9,849
<SECURITIES> 0 0 0
<RECEIVABLES> 0 9,534 12,347
<ALLOWANCES> 0 331 487
<INVENTORY> 0 3,027 2,442
<CURRENT-ASSETS> 0 18,531 24,321
<PP&E> 0 5,762 7,180
<DEPRECIATION> 0 3,423 4,456
<TOTAL-ASSETS> 0 20,928 27,069
<CURRENT-LIABILITIES> 0 11,627 16,197
<BONDS> 0 3,000 2,625
0 0 0
0 0 0
<COMMON> 0 49 49
<OTHER-SE> 0 25 55
<TOTAL-LIABILITY-AND-EQUITY> 0 20,928 27,069
<SALES> 18,186 24,620 32,077
<TOTAL-REVENUES> 27,156 35,282 47,540
<CGS> 6,310 8,730 11,494
<TOTAL-COSTS> 9,564 14,012 18,357
<OTHER-EXPENSES> 14,992 16,609 21,835
<LOSS-PROVISION> 146 117 260
<INTEREST-EXPENSE> 271 297 273
<INCOME-PRETAX> 2,646 4,749 7,609
<INCOME-TAX> (26) 0 0
<INCOME-CONTINUING> 2,672 4,749 7,609
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,508 2,955 4,782
<EPS-PRIMARY> 0 0 .42
<EPS-DILUTED> 0 0 .42
</TABLE>
<PAGE> 1
EXHIBIT 99.1
[LETTERHEAD OF ARTHUR ANDERSEN LLP APPEARS HERE]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited in accordance with generally accepted auditing standards,
the combined financial statements of Melita International Corporation, Melita
Europe Limited, and Inventions, Inc. included in this registration statement and
have issued our report thereon dated February 28, 1997. Our audit was made for
the purpose of forming an opinion on the basic combined financial statements
taken as a whole. Schedule II identified in Item 16(b) is presented for purposes
of complying with the Securities and Exchange Commission's rules and is not part
of the basic combined financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic combined financial
statements and, in our opinion, fairly states in all material respects the
combined financial data to be set forth therein in relation to the basic
combined financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 28, 1997
