<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0 - 18323
SYNTELLECT INC.
(Exact name of registrant as specified in its charter)
Delaware 86-0486871
(State or other jurisdiction of (IRS employer
incorporation) identification number)
1000 Holcomb Woods Parkway, Suite 410A, Roswell, Georgia 30076
(Address of principal executive office) (Zip Code)
(770) 587-0700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
13,403,378 shares of common stock, $.01 par value, were
outstanding on April 30, 1996
<PAGE> 2
SYNTELLECT INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
March 31, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Operations-
Three Months Ended March 31, 1996 and March 31, 1995 4
Condensed Consolidated Statements of Cash Flows-
Three Months Ended March 31, 1996 and March 31, 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
EXHIBITS
Exhibit 10.14 - Stock Purchase Agreement, dated April 1, 1996,
between Syntellect Inc. and Atlas Telecom, Inc. 12
Exhibit 11 - Schedule of Computation of Net Income (Loss) Per Share 21
Exhibit 27 - Finanical Data Schedule 22
</TABLE>
<PAGE> 3
SYNTELLECT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,860 $ 5,125
Marketable securities 5,362 4,225
Receivables, net 12,315 14,881
Inventories 6,028 5,293
Prepaid expenses 1,748 2,154
Deferred contract costs 0 1,133
- --------
Total current assets 28,313 32,811
Property and equipment, net 5,947 5,821
Other assets 1,045 1,087
----- --------
$ 35,305 $ 39,719
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,132 $ 3,660
Accrued liabilities 5,856 7,168
Customer deposits 662 482
Deferred revenue 3,056 3,311
Current portion of long-term debt 326 747
-------- --------
Total current liabilities 12,032 15,368
Long-term debt, less current portion 96 175
Shareholders' equity:
Preferred stock, $.01 par value. Authorized
2,500,000 shares; no shares issued
or outstanding -- --
Common stock, $.01 par value. Authorized 134 134
25,000,000 shares; issued and outstanding,
13,403,378 and 13,381,753, respectively
Additional paid-in capital 60,312 60,246
Deferred compensation (81) (91)
Accumulated deficit (35,898) (34,815)
Foreign currency translation adjustment (151) (140)
Unrealized holding gain (loss) on marketable
securities 2 (17)
-------- --------
24,318 25,317
Treasury stock, at cost, 175,732 shares (1,141) (1,141)
-------- --------
23,177 24,176
-------- --------
$ 35,305 $ 39,719
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 4
SYNTELLECT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1996 1995
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(unaudited)
<S> <C> <C>
Net revenues:
System sales $ 7,539 $ 8,723
Service bureau 2,165 1,374
Maintenance and other services 3,242 3,202
------- -------
Total net revenues 12,946 13,299
Cost of revenues:
System sales 4,557 4,627
Service bureau 1,202 737
Maintenance and other services 843 757
------- -------
Total cost of revenues 6,602 6,121
------- -------
Gross margin 6,344 7,178
Operating expenses:
Selling, marketing and administrative 5,162 4,854
Research and development 1,528 1,171
Depreciation and amortization 793 733
------- -------
Total operating expenses 7,483 6,758
------- -------
Operating income (loss) (1,139) 420
Other income (expense)
Interest income 105 173
Other (49) (4)
------- -------
56 169
------- -------
Income (loss) before income taxes (1,083) 589
Income taxes 0 25
------- -------
Net income (loss) $(1,083) $ 564
======= =======
Net income (loss) per common and equivalent share $ (0.08) $ 0.04
======= =======
Shares used in per share calculations 13,388 13,790
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
SYNTELLECT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1996 1995
---- ----
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(1,083) $564
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 793 733
Provision for doubtful accounts 90 65
Provision for inventory obsolescence 9 6
Stock option compensation expense 10 7
(Increase) decrease in receivables 2,476 453
(Increase) decrease in inventories (744) (595)
Increase (decrease) in accounts payable (1,528) (11)
Increase (decrease) in accrued liabilities (1,312) (871)
Change in other assets and liabilities 1,479 (80)
Total adjustments 1,273 (293)
Net cash provided by operating activities 190 271
Cash flows from investing activities:
Purchase of marketable securities (3,607) (26)
Maturities of marketable securities 2,489 12
Purchase of property and equipment (892) (586)
Proceeds from disposition of Dytel product line -- 39
Net cash used in investing activities (2,010) (561)
Cash flows from financing activities:
Proceeds from sale of common stock 66 20
Principal payments on long-term debt (500) (309)
Net cash used in financing activities (434) (289)
Effect of exchange rates on cash (11) 130
Net decrease in cash and cash equivalents (2,265) (449)
Cash and cash equivalents at beginning of period 5,125 5,921
Cash and cash equivalents at end of period $ 2,860 $ 5,472
======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest $ 16 $ 37
======= =======
Cash paid for income taxes $ 155 $ --
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
SYNTELLECT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except shares and per share amounts)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include the accounts of Syntellect Inc. (the "Company") and its wholly-owned
subsidiaries, Pinnacle Investment Associates, Inc., Syntellect Canada Inc.,
Syntellect Europe Ltd., Syntellect Technology Corp. (formerly Dytel, Inc.) and
Syntellect Network Systems Inc. All significant intercompany balances and
transactions have been eliminated in consolidation.
The financial statements have been prepared in accordance with
generally accepted accounting principles, pursuant to the rules and regulations
of the Securities and Exchange Commission. In the opinion of management, the
financial statements include all adjustments of a normal recurring nature which
are necessary for a fair presentation of the results for the interim periods
presented. Certain information and footnote disclosures normally included in
financial statements have been condensed or omitted pursuant to such rules and
regulations. Although the Company believes that the disclosures are adequate to
make information presented not misleading, it is suggested that these financial
statements be read in conjunction with the consolidated financial statements and
the notes thereto included in the Company's 1995 annual report on Form 10-K. The
results of operations for the three months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year.
(2) ACQUISITION OF PINNACLE INVESTMENT ASSOCIATES, INC.
On March 14, 1996, Syntellect completed its acquisition of Pinnacle
Investment Associates, Inc. ("Pinnacle") in a transaction that has been
accounted for as a pooling of interests. Pursuant to the terms of the merger,
Syntellect issued 4,685,838 shares of common stock and assumed outstanding
options belonging to Pinnacle stockholders for the purchase of an additional
740,848 shares of common stock at a weighted average exercise price of $1.04 per
share. The common stock issued in this transaction had a total value of $20.5
million based on the fair market value of the common stock on the date of
issuance. Pinnacle is a holding company that owns all of the outstanding capital
stock of Telecorp Systems, Inc. ("Telecorp"). Telecorp develops and distributes
inbound and outbound call center systems worldwide, primarily in the cable
television, newspaper and health care industries.
The financial position and results of operations of Syntellect and
Pinnacle for all periods presented have been restated to give effect to the
merger. The following presents supplemental disclosure of the separate results
of Syntellect and Pinnacle for those periods presented in the accompanying
financial statements prior to the date of the merger.
Combined Condensed Balance Sheets
As of December 31, 1995
(unaudited)
<TABLE>
<CAPTION>
SYNTELLECT PINNACLE COMBINED
---------- -------- --------
<S> <C> <C> <C>
Assets
Current assets $24,893 $ 7,918 $32,811
Property and equipment 3,785 2,036 5,821
Other assets 1,040 47 1,087
------- ------- -------
$29,718 $10,001 $39,719
======= ======= =======
Liabilities
Current liabilities $ 9,614 $ 5,754 $15,368
Long-term debt 175 -- 175
9,789 5,754 15,543
Shareholders' equity 19,929 4,247 24,176
$29,718 $10,001 $39,719
======= ======= =======
</TABLE>
<PAGE> 7
Combined Condensed Statements of Operations
For The Three Months Ended March 31, 1995
(unaudited)
<TABLE>
<CAPTION>
SYNTELLECT PINNACLE COMBINED
---------- -------- --------
<S> <C> <C> <C>
Net revenues $10,156 $3,143 $13,299
Cost of revenues 4,565 1,556 6,121
------- ------ -------
Gross margin 5,591 1,587 7,178
Operating expenses 5,283 1,475 6,758
------- ------ -------
Operating income 308 112 420
Other income (expense) 131 38 169
------- ------ -------
Income (loss) before taxes 439 150 589
Income tax expense 25 -- 25
------- ------ -------
Net income $ 414 $ 150 $ 564
======= ====== =======
Net income per share $ .05 $ .03 $ .04
======= ====== =======
Shares used in per share calculation 8,643 5,147 13,790
======= ====== =======
</TABLE>
(3) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
<S> <C> <C>
Finished goods $ 6,071 $ 5,499
Purchased components 4,562 6,729
Repair, warranty and maintenance inventory 1,881 2,090
-------- --------
12,514 14,318
Less allowances for obsolescence (6,486) (9,025)
-------- --------
$ 6,028 $ 5,293
======== ========
</TABLE>
(4) DISPOSITION OF SYNTELLECT NETWORK SYSTEMS INC. SUBSIDIARY
On April 1, 1996, the Company sold its Syntellect Network Systems Inc.
subsidiary ("SNS") under a stock purchase agreement with an unrelated third
party. Under the Agreement, the Company sold all of the issued and outstanding
shares of SNS common stock for $720. The sales price will be received in 24
monthly installments of $30, without interest, beginning April 1996. The Company
expects to realize a gain on this transaction, however, the final gain cannot be
calculated at this time as the purchase price is subject to certain adjustments
through August 1, 1996.
<PAGE> 8
SYNTELLECT INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ACQUISITION OF PINNACLE INVESTMENT ASSOCIATES, INC.
On March 14, 1996, Syntellect completed its acquisition of Pinnacle
Investment Associates, Inc. ("Pinnacle") in a transaction that has been
accounted for as a pooling of interests. Pursuant to the terms of the merger,
Syntellect issued 4,685,838 shares of common stock and assumed outstanding
options belonging to Pinnacle stockholders for the purchase of an additional
740,848 shares of common stock at a weighted average exercise price of $1.04 per
share. The common stock issued in this transaction had a total value of $20.5
million based on the fair market value of the common stock on the date of
issuance. Pinnacle is a holding company that owns all of the outstanding capital
stock of Telecorp Systems, Inc. ("Telecorp"). Telecorp develops and distributes
inbound and outbound call center systems worldwide, primarily in the cable
television, newspaper and health care industries. The financial position and
results of operations of Syntellect and Pinnacle for all periods presented have
been restated to give effect of the merger.
The merger provides the combined company with several distinct
marketing advantages including: (i) a more diversified product line which
includes both inbound voice processing technology and outbound predictive dialer
products; (ii) a larger sales force and distribution network together with
improved access into new vertical markets; and (iii) the formation of the
Syntellect Interactive Services Division ("SIS Division") which combines the
voice response outsourcing, on-site facilities management and disaster recovery
services offered through Syntellect's transaction-based service bureau with the
processing capacity of Telecorp's National Transaction Center. In addition, the
merger provides the combined company with greater financial resources and access
to a new management team with substantial expertise in the voice processing
industry.
NET REVENUES
Net revenues for the first quarter ended March 31, 1996 were $12.9
million, a decrease of $353,000, or 3%, from the $13.3 million reported for the
corresponding quarter of 1995. Net revenues consist of SYSTEM SALES of $7.5
million, SERVICE BUREAU REVENUES of $2.2 million and MAINTENANCE AND OTHER
SERVICE REVENUES of $3.2 million, which represent 58%, 17% and 25% of net
revenues, respectively.
SYSTEM SALES decreased $1.2 million, or 14%, between the comparable
quarters. System sales include the Company's primary inbound product lines,
VocalPoint, an open architecture IVR platform; the Premier and Premier 030
proprietary IVR systems; and the VocalPoint System 6000 Audio Response Unit for
the cable television industry; and an outbound predictive dialer, the VocalPoint
System 9000. VocalPoint IVR sales decreased $505,000 quarter-over-quarter,
primarily in the domestic markets. The Company believes that distractions
related to the merger with Pinnacle impacted domestic sales of VocalPoint IVR
systems during the current quarter; however, demand for the VocalPoint IVR
product remains stable and the backlog of VocalPoint IVR orders at March 31,
1996 has increased approximately $400,000 over the year-end totals. Sales of the
Premier and Premier 030 product lines decreased $494,000 and $2.1 million
between periods, respectively. Sales of the older Premier lines continue to
decrease as these product lines are in their final phase-out stage. Premier 030
sales decreased as expected in the Company's domestic install base, and in those
international markets where the Company has introduced and is actively marketing
VocalPoint solutions. VocalPoint System 6000 sales increased $2.2 million
between the comparable quarters as a result of a $2.7 million call center
installation in the United Kingdom. Sales of the Company's outbound predictive
dialer, the VocalPoint System 9000, increased $178,000 quarter-over-quarter.
System sales were futher impacted between the comparable quarters by a
$504,000 decrease in sales of the Dytel product line and the System 2000
digitial voice system manufactured by the Syntellect Network Systems ("SNS")
subsidiary. The Company sold the Dytel product line to a third party purchaser
in February 1995. The SNS subsidiary was sold to an unrelated value added
reseller on April 1, 1996.
SERVICE BUREAU REVENUES increased $791,000, or 58%, between the
comparable quarters. This increase reflects the continued growth of the
Company's Home Ticket(TM) service, a pay-per-view order processing service for
cable television providers which is offered through the SIS Division in Atlanta.
MAINTENANCE AND OTHER SERVICE REVENUES remained at a comparable level
quarter-over-quarter.
<PAGE> 9
DOMESTIC AND INTERNATIONAL SALES represented $8.7 million, or 68%, and
$4.2 million, or 32%, of total revenues for the quarter ended March 31, 1996,
respectively. The international sales figure includes a $2.7 million VocalPoint
System 6000 call center installation in the United Kingdom.
GROSS MARGIN
The gross margin for the first quarter was $6.3 million, or 49% of net
revenues, as compared with the $7.2 million, or 54%, of net revenues reported
for the prior year quarter. The gross margin percentage went down between
periods due to the higher level of fixed cost allocated to cost of revenues. In
particular, additional costs were incurred between periods in the customer
support area where resources were added to shorten the application development
and installation cycle, and to implement formalized quality assurance
departments. The Company includes those costs directly associated with the
generation of revenue in its computation of gross margin, including direct
labor, application development, travel, maintenance, customer support, supplies
and hardware. Gross margins will fluctuate on a quarterly basis due to changes
in competitive pressures, sales volume, product mix, variations in the ratio of
domestic versus international sales, or changes in the mix of direct and
indirect sales activity; accordingly, the gross margin reported for the first
quarter is not necessarily indicative of the results to be expected for the full
year.
OPERATING EXPENSES
Operating expenses for the first quarter were $7.5 million, an increase
of $725,000, or 11%, over the $6.8 million reported for the prior year quarter.
Selling, marketing and administrative expenses increased $308,000, or 6%,
quarter-over-quarter primarily as a result of the Company's actions to integrate
the sales, marketing and administrative functions of Syntellect and Telecorp.
Research and development expenses increased $357,000, or 30%, over the prior
year quarter. This increase results from the continued development of features
and upgrades for the Company's existing product lines and enhanced offerings for
the SIS Division. Depreciation and amortization expense increased $60,000, or
8%, between periods as a result of capital purchases necessary to integrate the
operations of the merged Company and to increase the functionality of the SIS
Division.
NET INCOME (LOSS)
Syntellect incurred a net loss of $1.1 million, or $(.08) per share for
the first quarter, as compared to net income of $564,000, or $.04 per share in
the comparable period of 1995.
LIQUIDITY AND CAPITAL RESOURCES
Syntellect had working capital of $16.3 million at March 31, 1996, as
compared with $17.4 million at December 31, 1995. The current ratios at these
dates were 2.3:1 and 2.1:1, respectively. Cash, cash equivalents and marketable
securities at the end of the first quarter totaled $8.2 million as compared with
$9.4 million at year end. Syntellect generated a break even cash flow from
operating activities during the first quarter, and made $892,000 in capital
expenditures and $500,000 in principal payments on long-term debt. Receivables,
net of reserves were $12.3 million at March 31, 1996, a decrease of $2.6 million
from the $14.9 million reported at December 31, 1995. This decrease results from
the Company's improved collection efforts which lowered the average collection
period for trade receivables from 143 to 96 days by quarter end. The reserve for
doubtful accounts was $1.3 million at March 31, 1996, a decrease of $200,000
over the year end balance. Inventories increased $735,000 during the first
quarter primarily as the result of purchase commitments related to Premier 030
components. The working capital balance was also impacted during the first
quarter by the recognition of $930,000 in deferred revenues and $1.1 million in
deferred costs related to the completion of the large VocalPoint System 6000
call center installation in the United Kingdom.
Based on its current operating plan, Syntellect expects that its
current cash, cash equivalents and marketable securities combined with future
cash flows from operating activities should be sufficient to support the
Company's operations for the remainder of 1996 and 1997. Syntellect currently
has one available credit facility which provides for a revolving line of credit
of $500,000 with interest at prime + 1%. The Company had no outstanding
borrowings on this credit facility at March 31, 1996.
<PAGE> 10
SYNTELLECT INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Syntellect held a special meeting of shareholders on March 14, 1996 to
vote on various proposals related to the Agreement and Plan of Reorganization
between Syntellect and Pinnacle. Shareholders voted on the following proposals:
1. To approve the issuance to Pinnacle stockholders of (i) 4,685,838
shares of Syntellect common stock, par value $.01 per share, in connection with
the merger and (ii) up to 740,848 shares of Syntellect common stock issuable
upon the exercise of certain stock options of Pinnacle which, following the
merger, will be converted into options to purchase Syntellect common stock.
There were 5,010,667 votes cast in favor of this proposal, 110,359 against, and
49,950 abstained.
2. To approve an amendment to Syntellect's Restated Certificate of
Incorporation to increase the total number of authorized shares of Syntellect
common stock from 15,000,000 to 25,000,000. There were 7,830,111 votes cast in
favor of this proposal, 201,191 against, and 26,800 abstained.
3. To approve an amendment to Syntellect's Long-Term Incentive Plan to
(i) increase the number of shares of Syntellect common stock authorized for
issuance thereunder from 250,000 to 750,000 and (ii) increase the number of
shares of Syntellect common stock that may be awarded to any single participant
from 150,000 to 250,000. There were 3,763,593 votes cast in favor of this
proposal, 1,584,296 against, and 43,150 abstained.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10.14 - Stock Purchase Agreement, dated April 1, 1996,
between Syntellect Inc. and Atlas Telecom, Inc.
Exhibit 11 - Schedule of Computation of Net Income (Loss) Per
Share
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
The following current report on Form 8-K was filed during the
three months ended March 31, 1996:
Form 8-K current report, dated March 14, 1996, reporting
shareholder approval of Syntellect's merger with Pinnacle
Investment Associates, Inc.
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYNTELLECT INC.
Date: May 13, 1996 By /s/ Neal L. Miller
----------------------------------------------
Neal L. Miller
Vice President, Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and Accounting Officer)
<PAGE> 1
Exhibit 10.14
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
April 1, 1996 between Syntellect Inc., a Delaware corporation ("Seller"), and
Atlas Telecom, Inc., a Delaware corporation ("Buyer").
RECITALS
Seller is the holder of all issued and outstanding shares of common
stock of Syntellect Network Systems Inc., an Arizona corporation ("SNS").
Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, all issued and outstanding shares of common stock of SNS on the terms and
conditions described herein. After consummation of the transactions described
herein, Buyer will be the sole shareholder of SNS.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representation and warranties contained herein, the parties agree as follows:
ARTICLE 1
SALE OF STOCK; CLOSING
1.1 Sale of Stock. Subject to the terms and conditions this Agreement,
on the "Closing Date", as hereinafter defined, Seller agrees to sell, and Buyer
agrees to buy, all of the issued and outstanding shares of common stock, $.01
par value. of SNS (the "Stock") in the manner and pursuant to the terms set
forth herein.
1.2 Price. In exchange for the Stock, Buyer will pay a total of
$720,000 or such lesser amount as may be determined pursuant to this Section 1.2
(the "Purchase Price") in monthly installments of $30,000 each, without
interest, the first of which shall be due and payable at the "Closing", as
hereinafter defined, and the remainder of which shall be due on the first day of
each succeeding calendar month beginning May 1, 1996 until the Purchase Price
has been paid in full and shall be payable by check of Buyer. The specified
Purchase Price of $720,000 shall be reduced by $20,000 for each employee over
six of the employees employed by SNS on March 15, 1996 that voluntarily resign
from employment by SNS either before or after the Closing Date and prior to
August 1, 1996. The $20,000 per employee reduction to the Purchase Price will be
immediately applicable in respect of the seventh and each subsequent employee
who resigns from employment by SNS prior to August 1, 1996. The specified
reduction in the Purchase Price pursuant to this Section 1.2 shall not affect
the obligation of Buyer to make the monthly installment payment of $30,000
provided for hereunder but the aggregate amount to be paid by Buyer hereunder
shall be the Purchase Price as so reduced.
1.3 Time of Closing. The closing of this transaction (the "Closing")
shall occur on April 1, 1996 or on such other date as is mutually acceptable to
Buyer and Seller (the "Closing Date"). The Closing shall take place at 9:00 am
at Buyer's offices at 4640 SW Macadam Avenue, Portland, Oregon 97201.
1.4 Events of Closing. At the Closing, in addition to the matters
described in Article V, the following events shall occur simultaneously:
(a) Buyer shall pay the first installment of the Purchase
Price to Seller by check of Buyer.
(b) Seller shall deliver to Buyer certificates representing
the Stock, free of any liens, encumbrances or restrictions, properly endorsed or
accompanied by stock powers endorsed in blank.
(c) Seller shall provide to Buyer all necessary authorization
in order that Buyer and SNS will be able to obtain access to all of SNS's bank
and other similar accounts, safe deposit boxes, vaults and other secure accounts
and places.
(d) Seller shall deliver to Buyer all existing Seller and SNS
documents, owned by or in the control of Seller or SNS, relating to SNS's
business, including but not limited to, all business books and records, and
licenses and permits of SNS.
<PAGE> 2
ARTICLE 11
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
2.1 Corporate Existence and Authority. Seller is a corporation duly
organized and validly existing under the laws of the State of Delaware. Seller
has the full corporate power and authority to enter into and perform its
obligations under this Agreement and carry out its terms. Seller has taken all
corporate action necessary to authorize the execution, delivery and performance
of this Agreement. This Agreement has been duly and validly executed and
delivered by Seller and is binding upon and enforceable against Seller in
accordance with its terms, except as enforceability may be limited or affected
by applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the rights of creditors and except as
enforceability may be limited by rules of law governing specific performance,
injunctive relief or other equitable remedies.
2.2 No Adverse Consequences. Neither the execution and delivery of this
Agreement by Seller nor the consummation of the transactions contemplated by
this Agreement will (a) violate or conflict with any provision of Seller's or
SNS's certificate of incorporation or bylaws, (b) violate any law, judgment,
order, injunction, decree, rule, regulation or ruling of any governmental
authority applicable to Seller or SNS; (c) either alone or with the giving of
notice or the passage of time or both, conflict with, constitute grounds for
termination or acceleration of, result in the breach of the terms, conditions or
provisions of, or constitute a default under, any agreement, instrument, license
or permit to which Seller or SNS is a party or by which either of them is bound
or (d) except as provided in Schedule 2.2, require any notices to or consent of
any third party, including without limitation any governmental agency.
2.3 Corporate Existence. SNS is a corporation duly organized, validly
existing and in good standing under the laws of the State of Arizona. SNS has
all necessary corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as now conducted and as
proposed to be conducted. SNS is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each jurisdiction in which it is
required to be qualified and in which the failure to be so qualified could have
a material adverse effect on the business, properties, operations or financial
condition of SNS. Schedule 2.3 contains complete and accurate copies of SNS's
articles of incorporation and bylaws and a list of all states in which SNS is
qualified or licensed to do business.
2.4 Subsidiaries. SNS has no subsidiaries and owns no stock or other
interest in any other corporation or in any partnership or limited liability
company, or other venture or entity.
2.5 Legal Proceedings. Except as set forth in Schedule 2.5, there is
neither pending nor, to the knowledge of Seller, threatened by or against Seller
or SNS any legal action, claim, arbitration, investigation or administrative
proceeding before any governmental authority that could have a material adverse
effect on SNS following the Closing or enjoin or restrict the right or ability
of Seller to perform its obligations under this Agreement and, to the knowledge
of Seller, there is no basis for any such claim, litigation, proceeding or
investigation.
2.6 Capital Stock. The authorized capital stock of SNS consists of
1,000 shares of common stock, $.01 par value, of which 1,000 shares are
outstanding and owned by Seller and constitute all issued and outstanding shares
of capital stock of SNS and the Stock for purposes of this Agreement. All shares
of capital stock of SNS are validly issued, fully paid and nonassessable. There
are no outstanding subscriptions, options, warrants, rights, puts, calls,
commitments, plans or other agreements calling for the purchase, issuance or
sale of any shares of the capital stock of SNS. Seller has legal title and
authority to sell the Stock to Buyer as contemplated by this Agreement, free and
clear of all liens and encumbrances and all restrictions on transfer (other than
as may be imposed by applicable federal and state securities laws), taxes,
interests, options, subscriptions, warrants, puts, calls, purchase rights,
preemptive or similar rights, security interests, pledges, commitments,
contracts, equities, claims and demands. At the Closing, Buyer will acquire the
Stock constituting all outstanding shares of capital stock of SNS.
2.7 Contracts. Schedule 2.7, which is organized by type of agreement,
contains a complete and accurate list of all material agreements to which SNS is
a party or by which it is bound (the "Contracts"), except that Schedule 2.14
contains a list of all material agreements to which SNS is a party relating to
the Proprietary Rights, as defined in Section 2.14 (including agreements
pursuant to which SNS has obtained any rights to such assets), excluding
end-user object code licenses.
<PAGE> 3
2.8 Material Assets. Schedule 2.8 consisting of Fixed Asset Listing
Excluding Inventory, Capitalized System/2000S and Related Equipment and
Inventory, Sections 1-3, contains a list of all material assets owned by SNS
("Material Assets"). Except as set forth in Schedule 2.8, SNS has legal and
marketable title to all of the Material Assets subject to no encumbrance, lien,
charge or other restriction,
2.9 Environmental Matters. Except as set forth in Schedule 2.9, to the
knowledge of Seller:
(a) SNS possesses all governmental and other licenses it is
required to carry under any Environmental Law, as defined below, for its
business as now conducted. No material violation exists in respect of, and no
proceeding is pending or threatened to revoke or limit, any such License. SNS
has complied in material respects with, and is not now in material violation of,
all Environmental Laws. SNS has not taken any action or inaction resulting in
any Contamination that was required to be reported to a governmental body under
any Environmental Law that was not so reported.
(b) No real property currently owned or, to its knowledge
without investigation, leased or occupied by SNS is used as a hazardous waste
treatment, storage or disposal facility within the meaning of Subtitle C of the
Resource Conservation and Recovery Act ("RCRA") or any comparable state
Environmental Law. No real property currently owned, or to its knowledge without
investigation, leased or occupied by SNS is listed on the National Priority List
or the Comprehensive Environmental Response, Compensation and Liability
Information System list compiled by the Environmental Protection Agency or any
comparable list compiled by any state.
(c) SNS has not received notice from any governmental agency
or other person that it has been named as a responsible or potentially
responsible party with respect to any site listed on the lists described in
Section 2.9(d) or that it otherwise is potentially liable for Contamination
under any Environmental Law.
(d) No portion of any property currently owned, or to its
knowledge without investigation, leased or occupied by SNS is Contaminated. With
respect to property previously owned, leased or occupied by SNS, SNS did not
cause any Contamination during SNS's ownership, lease or occupancy.
For purposes of this Agreement, "Environmental Law" means any federal, state or
local statute, regulation or ordinance pertaining to the protection of human
health or the environment and any applicable orders, judgments, decrees,
permits, licenses or other authorizations or mandates under such laws.
"Hazardous Substance" means any hazardous, toxic, radioactive or infectious
substance, material or waste as defined, listed or regulated under any
Environmental Law, and includes without limitation petroleum oil and its
fractions. "Contamination" means the existence (actual or reasonably suspected)
in the environment of a Hazardous Substance, if the existence or suspected
existence of such Hazardous Substance requires any investigatory, remedial,
removal or other response action under any Environmental Law, if such response
action legally could be required by any governmental authority, or if such
response action otherwise is reasonable or appropriate under the circumstances.
2.10 Tax Matters. Except as set forth in Schedule 2.10, SNS has filed
or Seller will cause SNS to file in a timely fashion all United States, state,
local and foreign tax returns and reports heretofore required to be filed by it
and has paid and withheld all taxes shown as due thereon or otherwise required
to be paid or withheld with respect to all periods ending on or prior to the
Closing Date, and no taxing authority has asserted any deficiency in the payment
of any tax or informed SNS or Seller that it intends to assert any such
deficiency or to make any audit or other investigation of SNS or Seller for the
purpose of determining whether such a deficiency should be asserted against SNS
or Seller.
2.11 Employee Benefits. Schedule 2.11 lists all pension, retirement,
profit sharing, deferred compensation, bonus, commission, incentive, life
insurance, health and disability insurance, hospitalization and all other
employee benefit plans or arrangements (including, without limitation, any
contracts or agreements with trustees, insurance companies or others relating to
any such employee benefit plans or arrangements) established, maintained or
contributed to by Seller, and complete and accurate copies of all those plans or
arrangements have been provided to Buyer.
2.12 Financial Statements. Seller has delivered to Buyer SNS's
unaudited financial statements for the years ended December 31, 1994 and 1995
and SNS's unaudited fiscal statements for the period ended February 29, 1996
(collectively, the "Financial Statements"). The Financial Statements were
prepared according to generally accepted accounting principles, applied on a
consistent basis, and present fairly the fiscal position and results of
operations of SNS as of the dates and for the periods specified therein,
subject, in the case of unaudited financials, to
<PAGE> 4
normal year-end adjustments and the absence of footnotes. The interim balance
sheet dated February 29, 1996 accurately states or discloses all of SNS's
material liabilities, contingent liabilities and accounts receivable.
2.13 Undisclosed Liabilities. Except for liabilities or obligations
described in Schedule 2.13 or in another Schedule to this Agreement, neither SNS
nor any of the property of SNS is subject to any material liability or
obligation, whether absolute, contingent, known or unknown, that was not
included or adequately reserved against in the Financial Statements, including
without limitation any such liability or obligation arising after the date of
the interim balance sheet dated February 29, 1996.
2.14 Intellectual Property. Schedule 2.14 contains a list and summary
description of all of all patents owned or used by SNS or patent applications
filed by SNS and all trademarks, trade names, service marks and copyrights, or
applications therefor, owned or used by SNS and a list of all material
agreements relating to the Proprietary Rights, as hereinafter defined, to which
SNS is a party. SNS owns, or possesses adequate licenses or other rights to use,
all computer software, patents, patent applications, trademarks, trademark
applications, trade secrets, service marks, trade names, copyrights, inventions,
drawings, designs, customer lists, proprietary know-how or information or other
rights with respect thereto used in its business ("Proprietary Rights"), and the
Proprietary Rights are sufficient to conduct such business as it has been and is
now being conducted. To the knowledge of Seller, the operations of SNS do not
conflict with or infringe upon any proprietary rights owned, possessed or used
by any third party. Except as set forth on Schedule 2.14, no one has asserted
that such operations conflict with or infringe upon any proprietary rights
owned, possessed or used by any third party, and neither Seller nor SNS has
received notice of or been threatened with any claims, disputes, actions,
proceedings, suits or appeals pending against Seller or SNS with respect to any
of the Proprietary Rights.
2.15 Disclosure. This Agreement does not contain any untrue statement
of a material fact or omit a material fact necessary to make each statement
contained herein not misleading. No responsible officer or director of Seller or
SNS has intentionally concealed any fact known by such person to have a material
adverse effect upon the existing or expected financial condition, operating
results, assets, customer relations, employee relations or business prospects of
SNS.
2.16 Renewal and Survival of Representations and Warranties. All
representations and warranties contained in this Article II shall be deemed made
as of the date of this Agreement and renewed as of the Closing Date.
2.17 Schedules. A number of the representations and warranties
contained in this Article II refer to Schedules which have not been completed by
Seller or approved by Buyer on the date hereof. Seller shall complete and submit
to Buyer all such Schedules on or before the Closing Date. Upon completion by
Seller and approval by Buyer, such Schedules shall be deemed to have been part
of this Agreement as of the date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
3.1 Corporate Existence and Authority. Buyer is a corporation duly
organized and validly existing under the laws of the State of Delaware. Buyer
has all necessary corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as now conducted and as
proposed to be conducted. Buyer is duly qualified or licensed to do business as
a foreign corporation and is in good standing in each jurisdiction in which it
is required to be qualified and in which the failure to be so qualified could
have a material adverse effect on the business, properties, operations or
financial condition of Buyer. Schedule 3.1 contains complete and accurate copies
of Buyer's articles of incorporation and bylaws and a list of all states in
which Buyer is qualified or licensed to do business. Buyer has the full
corporate power and authority to enter into and perform its obligations under
this Agreement and carry out its terms. Buyer has taken all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement. This Agreement has been duly and validly executed and delivered by
Buyer and is binding upon and enforceable against Buyer in accordance with its
terms, except as enforceability may be limited or affected by applicable
bankruptcy, insolvency, reorganization or other laws of general application
relating to or affecting the rights of creditors and except as enforceability
may be limited by rules of law governing specific performance, injunctive relief
or other equitable remedies.
<PAGE> 5
3.2 No Adverse Consequences. Neither the execution and delivery of this
Agreement by Buyer nor the consummation of the transactions contemplated by this
Agreement will (a) violate or conflict with any provision of Buyer's articles of
incorporation or bylaws, (b) violate any law, judgment, order, injunction,
decree, rule, regulation or ruling of any governmental authority applicable to
Buyer, (c) either alone or with the giving of notice or the passage of time or
both, conflict with, constitute grounds for termination or acceleration of,
result in the breach of the terms, conditions or provisions of, result in the
loss of any benefit to Buyer under, or constitute a default under, any
agreement, instrument, license or permit to which Buyer is a party or by which
it is bound or (d) require any notices to or consent of any third party,
including without limitation any governmental agency.
3.3 Legal Proceedings. Except as set forth in Schedule 3.3, there is
neither pending nor, to the knowledge of Buyer, threatened by or against Buyer
any legal action, claim, arbitration, investigation or administrative proceeding
before any governmental authority that could have a material adverse effect on
Buyer following the Closing or enjoin or restrict the right or ability of Buyer
to perform its obligations under this Agreement and, to the knowledge of Buyer,
there is no basis for any such claim, litigation, proceeding or investigation.
3.4 Financial Capacity. Buyer has the financial capacity to perform
its payment obligations under this Agreement.
3.5 Securities Law. Buyer will acquire the Stock for its own account
for investment purposes and not with a view toward any resale or distribution
thereof.
3.6 Renewal and Survival of Representations and Warranties. All
representations and warranties contained in this Article III shall be deemed
made as of the date of this Agreement and renewed as of the Closing Date.
ARTICLE IV
COVENANTS
4.1 Continuation of Business. Seller shall, and shall cause SNS to, use
its best efforts to keep the business and organization of SNS intact until the
Closing and carry on the business of SNS in its usual manner until Closing.
4.2 Severance Claims of Former SNS Employees. Effective on and after
the Closing, Seller shall assume and be directly liable with respect to, and
shall promptly discharge any liability of SNS or Seller for, severance claims of
any of the former employees of SNS discharged by SNS or Seller by notice of
termination letters on February 19, 1996. Buyer will not hire, or cause SNS to
hire, any former employee of SNS to which severance payments have been made
pursuant to such termination letters.
4.3 Retention of Employees. Effective upon the Closing, Buyer will
cause SNS to continue the employment in Horsham, Pennsylvania of each SNS
employee employed on the Closing Date, at the same salary as that paid by SNS to
such employee prior to the Closing. Following the Closing, Buyer shall cause SNS
to offer its employees benefits consistent with those offered by Buyer to its
employees.
4.4 Use of Labeled Parts. SNS shall have the right after the Closing
to use all parts in its inventory on the Closing Date labeled with any label of
Seller.
4.5 Assumption of Responsibility for Operating Expenses. The parties
anticipate that the Closing will occur on or about April 1, 1996. If the Closing
occurs subsequent to April 1, 1996 and Seller has made advances to SNS or paid
outright any operating expenses attributable to SNS or its business relating to
any period on or after April 1, 1996, Buyer shall reimburse, or cause SNS to
reimburse, Seller immediately following the Closing for such expenditures but
only to the extent that any such advances or expenditures are made or incurred,
as the case may be, in accordance with Section 4.1.
4.6 Conversion of Intercompany Payable to Equity. Prior to the Closing,
Seller will take all corporate action necessary to convert all intercompany
payables owing by SNS to Seller as of April 1, 1996 (and if the Closing occurs
subsequent to April 1, 1996, any amounts advanced or expended by Seller on
behalf of SNS to the extent the same are not reimbursable by SNS and Buyer under
Section 4.5) into equity of SNS in the form of paid-in capital and will provide
evidence to Buyer of such conversion of intercompany payables to paid-in
capital.
<PAGE> 6
4.7 Survival. All covenants hereunder shall survive for a period of 12
months from the Closing Date.
4.8 Name Change. Buyer shall take all actions, at its expense, as may
be necessary to change the name of SNS on or immediately after the Closing.
ARTICLE V
CONDITIONS TO THE PARTIES' OBLIGATIONS TO CLOSE
5.1 Conditions to Seller's Obligation to Close. All obligations
of Seller to consummate the transactions described herein are subject to the
fulfillment, prior to or at the Closing, of each of the following conditions:
(a) (i) Buyer shall have performed and complied in all
material respects with all covenants, agreements, obligations and conditions
required by this Agreement to be so complied with or performed, (ii) all
representations and warranties made by Buyer in this Agreement shall be true in
all material respects when made and at and as of the time of the Closing as
though such representations and warranties were made at and as of the Closing,
and (iii) Buyer shall have delivered to Seller a certificate, dated the Closing
Date, certifying as to the fulfillment of the conditions specified in Sections
5.2(a)(i) and 5.2(a)(ii).
(b) At the Closing Date, no action, suit, or other proceeding
shall have been overtly threatened or instituted against Buyer to restrain,
enjoin, or otherwise prevent the consummation of this Agreement.
5.2 Conditions to Buyer's Obligation to Close. All obligations of
Buyer to consummate the transactions described herein are subject to the
fulfillment, prior to or at the Closing, of each of the following
conditions:
(a) (i) Seller shall have performed and complied in all material
respects with all covenants, agreements, obligations and conditions required by
this Agreement to be so complied with or performed, (ii) all representations and
warranties made by Seller in this Agreement and the statements made by Seller in
the Schedules attached hereto or in any instrument, list, certificate or writing
delivered by Seller pursuant to this Agreement shall be true in all material
respects when made and at and as of the time of the Closing as though such
representations and warranties were made at and as of the Closing, and (iii)
Seller shall have delivered to Buyer a certificate, dated the Closing Date,
certifying as to the fulfillment of the conditions specified in Sections
5.3(b)(i) and 5.3(b)(ii).
(b) At the Closing Date, no action, suit, or other proceeding
shall have been overtly threatened or instituted against Seller or SNS to
restrain, enjoin, or otherwise prevent the consummation of this Agreement.
(c) Seller shall have delivered to Buyer resignations of all
officers and directors of SNS.
ARTICLE VI
TERMINATION
6.1 Termination. This Agreement and the transactions contemplated
hereunder may be terminated at any time prior to the Closing without further
liability or obligations on the part of the terminating party only in the
following manner:
(a) By mutual written consent of Seller and Buyer;
(b) By Seller or by Buyer if (i) any of the conditions to
Closing contained in Article V have not been fulfilled through no fault on the
part of the terminating party or (ii) any transactions contemplated hereby shall
not have been consummated by April 30, 1996, or a later date mutually agreed to
in writing by the parties hereto, through no fault on the part of the
terminating party; or
(c) By Buyer or Seller, if not then in default, upon notice to
the other party that the terminating party, in its reasonable discretion, is
dissatisfied with any of the Schedules provided hereunder by the other party.
<PAGE> 7
6.2 Procedure; Effect of Termination. If either party elects to
terminate this Agreement pursuant to this Article VI by notice to the other
party, or both parties by mutual consent agree to terminate this Agreement
pursuant to this Article VI, each of the parties shall be released from all
liabilities and obligations under this Agreement and shall have no liability to
the other.
ARTICLE VII
INDEMNIFICATION
7.1 Seller Indemnification. Seller agrees to indemnify, protect,
reimburse and defend Buyer against and hold Buyer, and its shareholders,
officers, directors, employees and agents (collectively, "Buyer Indemnitee"),
harmless from and against any and all losses, claims, damages, liabilities and
related expenses to which a Buyer Indemnitee becomes subject due to, or arising
out of or resulting from, any breach or inaccuracy of any representation or
warranty of Seller made in this Agreement or any failure by Seller to fulfill
any of its covenants or agreements hereunder.
7.2 Buyer Indemnification. Buyer agrees to indemnify, protect,
reimburse and defend Seller against and hold Seller, and its shareholders,
officers, directors, employees and agents (collectively, "Seller Indemnitee"),
harmless from and against any and all losses, claims, damages, liabilities and
related expenses to which a Seller Indemnitee becomes subject due to, or arising
out of or resulting from, any breach or inaccuracy of any representation or
warranty of Buyer made in this Agreement or any failure by Buyer to fulfill any
of its covenants or agreements hereunder.
7.3 Indemnification Procedure. Promptly after receipt by a party (the
"Indemnified Party") of notice of any complaint or the commencement of any
action or proceeding by a party which is the subject of indemnification
hereunder, the Indemnified Party will notify the party required to indemnify the
Indemnified Party (the "Indemnified Party") in writing of such complaint or with
the commencement of such action or proceeding and furnish such Indemnifying
Party with copies of all claims, demands, documents, pleadings or other writings
or information in connection therewith and, such Indemnifying Party will assume
the defense of such complaint, claim, action or proceeding, and the payment of
all expenses and costs with respect thereto. The Indemnified Party shall have
the right to employ its own separate counsel, but the fees and expenses of such.
8.4 Waiver. Failure of either party at any time to require performance
of any provision of this Agreement shall not limit such party's right to enforce
such provision, nor shall any waiver of any breach of any provision of this
Agreement constitute a waiver of any succeeding breach of such provision or a
waiver of such provision itself. Any waiver of any provision of this Agreement
shall be effective only if set forth in writing and signed by the party to be
bound.
8.5 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Oregon.
8.6 Severabilitv. If any term or provision of this Agreement or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement and the application of such
term or provision to persons or circumstances other than those as to which it is
held invalid or unenforceable shall not be affected thereby, and each term or
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
8.7 Time of Essence. Seller and Buyer hereby acknowledge and agree that
time is strictly of the essence with respect to each and every term, condition,
obligation and provision of this Agreement.
8.8 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument, binding on the parties. If this
Agreement is executed in counterpart, each party will transmit by facsimile a
copy of the signed counterpart upon execution and will cause an executed
original counterpart to be transmitted by courier service to the other party.
8.9 Amendments, Waiver. Except for any termination of this Agreement
by Buyer expressly permitted under Section 6. 1, this Agreement may not be
modified, amended or terminated except by the written
<PAGE> 8
agreement of Seller and Buyer. A party may waive one or more of its rights
under this Agreement only in a written instrument signed by the party.
8.10 Authority. The person executing this Agreement on behalf of each
party warrants that she/he has the authority to execute this Agreement and to so
bind that party as provided herein.
8.11 Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be personally delivered, sent by
registered or certified mail, postage prepaid, return receipt requested or by
facsimile. Any notice, if mailed, shall be deemed given when received; any
notice, if transmitted by facsimile, shall be deemed given when transmitted and
electronically confirmed. Notices shall be given to the following persons:
To Buyer: Atlas Telecom, Inc.
4640 SW Macadam Avenue
Portland, OR 97210
Attention: J. Bradford Shiley
Facsimile No.: (503) 228-0368
With a copy to: Stoel Rives LLP
900 SW Fifth Avenue, Suite 2300
Portland, Oregon 97204
Attention: Henry H. Hewitt
Facsimile No.: (503) 220-2480
To Seller: Syntellect Inc.
15810 N 28th Avenue
Phoenix, AZ 85023
Attention: Neal Miller, Chief Financial Officer
Facsimile No.: (602) 789-2899
With a copy to: Snell & Wilmer
Attention: Greg Hall
One Arizona Center
Phoenix, AZ 85004-0001
Facsimile No.: (602) 382-6070
8.12 Disputes. Seller and Buyer agree that in the event of any dispute
concerning their respective rights and obligations under this Agreement, the
dispute will be resolved by arbitration before a panel of three arbitrators.
Seller shall select one arbitrator, Buyer shall select one arbitrator and the
two arbitrators chosen by the parties shall select the third arbitrator. The
decision of the arbitrators will be final and binding on the parties. The
arbitration will take place in Multnomah County, Oregon, pursuant to the
commercial arbitration rules of the American Arbitration Association. The
prevailing party will be entitled to an award of its reasonable attorneys' fees,
costs and expenses incurred in preparation for and through the arbitration. The
parties agree that the arbitrator shall have no authority to enter an award of
punitive damages.
<PAGE> 9
ARTICLE IX
DEFINITIONS
Defined term Definition Section
"Agreement" Preamble
"Closing" and "Closing Date" 1.3
"Contamination" 2.9
"Contracts" 2.7
"SNS" Recitals
"Environmental Law" 2.9
"Financial Statements" 2.12
"Hazardous Substance" 2.9
"Indemnified Party" 7.5
"Indemnified Persons" 7.4
"Indemnifying Party" 7.5
"Losses" 7.1(a)
"Material Assets" 2.8
"Proprietary Rights" 2.14
"Seller" Preamble
"Seller Indemnitee" 7.3
"Purchase Price" 1.2
"RCRA" 2.9(b)
"Buyer" Preamble
"Buyer Indemnitee" 7.2
"Stock" 1.1
The parties ahve executed this Stock Purchase Agreement as of the date
first set forth above.
SYNTELLECT INC.
By: /s/ Neal Miller
----------------------------------------------
Title: Vice President and Chief Financial Officer
ATLAS TELECOM, INC.
By: /s/ J. Bradford Shiley
----------------------------------------------
Title: Corporate Secretary
<PAGE> 1
EXHIBIT 11
SYNTELLECT INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF NET INCOME (LOSS) PER SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1996 1995
---- ----
<S> <C> <C>
Net income (loss) $(1,083) $ 564
======= =======
Weighted average shares:
Common shares outstanding 13,388 13,114
Common equivalent shares representing shares issuable
upon exercise of stock options (1) 676
Total weighted average shares - primary 13,388 13,790
Incremental common equivalent shares (calculated using the
higher of end of period or average market value (2) -- --
Total weighted average shares - fully diluted 13,388 13,790
Primary net income (loss) per common and equivalent share $ (.08) $ .04
======= =======
Fully diluted net income (loss) per common and equivalent share (2) $ (.08) $ .04
======= =======
Additional adjustments to fully diluted weighted average shares (3):
Total weighted average shares - fully diluted 13,388 13,790
Common equivalent shares representing shares issuable
upon exercise of stock options (1) -- --
------- -------
Total weighted average shares - fully diluted, as adjusted 13,388 13,790
Fully diluted net income (loss) per common and equivalent share, as $ (.08) $ .04
adjusted (3) ======= =======
</TABLE>
- - ------
Notes:
(1) Amount calculated using the treasury stock method and fair market
values.
(2) This calculation is submitted in accordance with Regulation S-K Item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
Incremental amounts are zero; calculation is shown for presentation
purposes only.
(3) This calculation is submitted in accordance with Regulation S-K Item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No.
15 because it produces an anti-dilutive result.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET OF SYNTELLECT, INC. AND SUBSIDIARIES AS OF
MARCH 31, 1996, AND THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS OF
SYNTELLECT, INC. AND SUBSIDIARIES FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 2,860
<SECURITIES> 5,362
<RECEIVABLES> 13,672
<ALLOWANCES> 1,357
<INVENTORY> 6,028
<CURRENT-ASSETS> 28,313
<PP&E> 21,409
<DEPRECIATION> 15,462
<TOTAL-ASSETS> 35,305
<CURRENT-LIABILITIES> 12,032
<BONDS> 0
0
0
<COMMON> 134
<OTHER-SE> 23,043
<TOTAL-LIABILITY-AND-EQUITY> 35,305
<SALES> 7,539
<TOTAL-REVENUES> 12,946
<CGS> 4,557
<TOTAL-COSTS> 6,602
<OTHER-EXPENSES> 7,483
<LOSS-PROVISION> 90
<INTEREST-EXPENSE> 16
<INCOME-PRETAX> (1,083)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,083)
<DISCONTINUED> 0
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<NET-INCOME> (1,083)
<EPS-PRIMARY> (.08)
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</TABLE>
