<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
AUGUST 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-13616
INTERVOICE, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-1927578
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17811 WATERVIEW PARKWAY DALLAS, TX 75252
(Address of principal executive offices)
972-454-8000
(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
--- ---
The Registrant had 13,765,429 shares of common stock, no par value per
share, outstanding as of the close of the period covered by this report.
================================================================================
<PAGE> 2
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED AUGUST 31, 1998
NOTE A -- BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information. The
consolidated balance sheet at February 28, 1998 has been derived from audited
financial statements at that date. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of the unaudited August 31, 1998 and 1997 consolidated financial
statements have been included. Operating results for the six month period ended
August 31, 1998 are not necessarily indicative of the results that may be
expected for the year ending February 28, 1999 as they may be affected by a
number of factors, including the timing and ultimate receipt of orders from
significant customers which continue to constitute a large portion of the
Company's sales, the sales channel mix of products sold, and changes in general
economic conditions, any of which could have an adverse effect on operations.
NOTE B - REVENUE RECOGNITION
The Company recognizes revenue for sales of systems which do not require
customization by the Company at the time of shipment. Subsequent to December 1,
1997, revenue for systems which require customization by the Company are
recognized by the contract method of accounting using percentage of completion
for larger, more complex systems (generally over a $500,000 sales price) and the
completed contract method for smaller systems. Prior to December 1, 1997, the
Company recognized revenue on systems requiring customization at the date of
shipment or at the point after shipment when the remaining obligations of the
Company became insignificant. This change in accounting was required by the
American Institute of CPA's Statement of Position 97-2 which was adopted by the
Company as of December 1, 1997 and is required to be applied prospectively for
transactions entered into after that date.
The Company recognizes revenue from services at the time the service is
performed or over the period of the contract for maintenance/support.
NOTE C - EARNINGS PER SHARE
Basic earnings per share exclude any dilutive effect of stock options and
restricted stock arrangements. Diluted earnings per share includes the dilutive
impact of stock options and restricted stock arrangements.
<PAGE> 3
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ ---------------------------
August 31, August 31, August 31, August 31,
1998 1997 1998 1997
-------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Numerator:
Net Income $ 4,429,140 $ 2,216,181 $ 7,431,728 $ 2,487,043
============== =========== =========== ===========
Denominator:
Denominator for basic earnings per share
weighted average shares outstanding 13,866,377 16,164,448 13,858,966 16,307,091
============== =========== =========== ===========
Effect of dilutive securities:
Employee Stock Options 964,822 91,681 675,744 115,773
Non-vested restricted stock -0- 41,545 -0- 42,220
-------------- ----------- ----------- -----------
Dilutive Potential common shares 964,822 133,226 675,744 157,993
-------------- ----------- ----------- -----------
Denominator for diluted earnings per share 14,831,199 16,297,674 14,534,740 16,465,084
============== =========== =========== ===========
Net income per common share - basic $ 0.32 $ 0.14 $ .54 $ .15
============== =========== =========== ===========
Net income per common share - diluted $ 0.30 $ 0.14 $ .51 $ .15
============== =========== =========== ===========
</TABLE>
Options to purchase 286,850 and 1,899,257 shares of common stock at average
prices of $21.20 and $13.40, respectively, were outstanding during the three
months ended August 31, 1998 and 1997, respectively, but were not included in
the computation of diluted earnings per share because the options' prices were
greater than the average market price of the Company's common shares during such
periods and, therefore, the effect would have been anti-dilutive. For the same
reasons, 299,850 and 937,512 shares of common stock at average prices of $20.96
and $16.89, respectively, were outstanding and not included in the computation
of diluted earnings per share during the six months ended August 31, 1998 and
1997, respectively.
<PAGE> 4
InterVoice, Inc.
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
August 31, February 28,
ASSETS 1998 1998
- ---------------------------------------------------- ------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 8,253,878 $ 4,190,940
Accounts and notes receivable, net of allowance
for doubtful accounts of $665,000 in 1999 and
$368,005 in 1998 35,366,886 26,040,332
Inventory 9,422,697 9,343,338
Prepaid expenses and other current assets 2,120,594 4,490,813
Deferred income taxes 2,325,745 2,325,745
------------ ------------
57,489,800 46,391,168
PROPERTY AND EQUIPMENT
Building 16,273,579 16,249,914
Computer equipment 23,805,899 24,496,337
Furniture, fixtures and other 3,566,886 3,756,164
Service equipment 4,796,082 4,582,221
------------ ------------
48,442,446 49,084,636
Less allowance for depreciation 18,408,270 16,736,766
------------ ------------
30,034,176 32,347,870
OTHER ASSETS
Intangible assets, net of amortization
of $2,340,154 in 1999 and
$1,679,113 in 1998 5,740,244 6,154,437
------------ ------------
$ 93,264,220 $ 84,893,475
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 11,007,312 $ 10,491,913
Customer deposits 5,176,903 2,625,498
Deferred income 5,159,095 5,500,743
Short term borrowings 9,000,000 9,000,000
Income taxes payable 1,280,563 --
------------ ------------
31,623,873 27,618,154
DEFERRED INCOME TAXES 644,803 644,803
STOCKHOLDERS' EQUITY
Preferred Stock, $100 par value--2,000,000
shares authorized: none issued
Common Stock, no par value, at nominal
assigned value--62,000,000 shares
authorized: 19,700,229 issued,
13,765,429 outstanding in 1999
and 19,503,291 issued, 13,802,491
outstanding in 1998 9,835 9,726
Additional capital 45,633,512 44,314,685
Treasury stock - at cost (54,588,637) (50,202,999)
Retained earnings 69,940,834 62,509,106
------------ ------------
60,995,544 56,630,518
------------ ------------
$ 93,264,220 $ 84,893,475
============ ============
</TABLE>
<PAGE> 5
InterVoice, Inc.
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ ------------------------------
August 31, August 31, August 31, August 31,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 33,070,279 $ 29,276,334 $ 63,070,616 $ 54,018,617
Cost of goods sold 13,443,991 11,481,455 25,974,089 22,896,334
------------ ------------ ------------ ------------
Gross Margin 19,626,288 17,794,879 37,096,527 31,122,283
------------ ------------ ------------ ------------
Research and development expenses 3,238,150 3,504,588 6,523,023 6,502,605
Selling, general and administrative
expenses 9,531,013 11,289,794 19,013,057 21,390,992
------------ ------------ ------------ ------------
Income from operations 6,857,125 3,000,497 11,560,447 3,228,686
Other income (87,564) 135,710 (214,298) 324,233
------------ ------------ ------------ ------------
Income before income taxes 6,769,561 3,136,207 11,346,149 3,552,919
Income taxes 2,340,421 920,026 3,914,421 1,065,876
------------ ------------ ------------ ------------
Net income $ 4,429,140 $ 2,216,181 $ 7,431,728 $ 2,487,043
============ ============ ============ ============
Net income per share - basic $ 0.32 $ 0.14 $ 0.54 $ 0.15
============ ============ ============ ============
Net income per share - diluted $ 0.30 $ 0.14 $ 0.51 $ 0.15
============ ============ ============ ============
</TABLE>
<PAGE> 6
InterVoice, Inc.
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
---------------------------- Additional Treasury Retained
Shares Amount Capital Stock Earnings Total
---------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at February 28, 1998 13,802,491 $ 9,726 $ 44,314,685 ($50,202,999) $ 62,509,106 $ 56,630,518
Exercise of stock
options 196,938 109 1,318,827 -- -- 1,318,936
Purchase of treasury
stock, net (234,000) -- -- (4,385,638) -- (4,385,638)
Net income -- -- -- 7,431,728 7,431,728
---------- ------------ ------------ ------------ ------------ ------------
Balance at August 31, 1998 13,765,429 $ 9,835 $ 45,633,512 ($54,588,637) $ 69,940,834 $ 60,995,544
========== ============ ============ ============ ============ ============
</TABLE>
<PAGE> 7
InterVoice, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ ------------------------------
August 31, August 31, August 31, August 31,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,429,140 $ 2,216,181 $ 7,431,728 $ 2,487,043
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization 2,553,079 2,197,672 5,161,719 4,219,456
Changes in operating assets
and liabilities: (372,944) (1,865,327) (2,788,879) (1,084,279)
------------ ------------ ------------ ------------
NET CASH FROM OPERATIONS 6,609,275 2,548,526 9,804,568 5,622,220
INVESTING ACTIVITIES
Purchase of property
and equipment (1,080,957) (3,033,852) (2,428,080) (6,122,153)
Purchased software (232,855) (687,757) (246,848) (1,845,156)
------------ ------------ ------------ ------------
(1,313,812) (3,721,609) (2,674,928) (7,967,309)
FINANCING ACTIVITIES
Purchase of Treasury Stock (4,267,738) -- (4,385,638) (1,797,099)
Exercise of stock options 917,629 127,673 1,318,936 207,861
------------ ------------ ------------ ------------
(3,350,109) 127,673 (3,066,702) (1,589,238)
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 1,945,354 (1,045,410) 4,062,938 (3,934,327)
Cash and cash equivalents,
beginning of period 6,308,524 21,273,107 4,190,940 24,162,024
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 8,253,878 $ 20,227,697 $ 8,253,878 $ 20,227,697
============ ============ ============ ============
</TABLE>
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SALES. Sales in the first six months and second quarter of fiscal 1999
increased approximately $9.1 million and $3.8 million, respectively, or 17% and
13%, respectively, when compared to the same periods of fiscal 1998. These
increases were due primarily to increased domestic customer premise equipment
(CPE) sales. A portion of the increase is attributable to customer demand for
the Company's recently released host computer and operating system independent
products. The Company also has been successful in focusing its efforts on
diversifying into vertical markets in which the Company has not previously
participated, such as inbound call centers. This diversification also has
influenced the Company's increased domestic CPE sales. For the first six months
and second quarter of fiscal 1999, such sales constituted 61% and 69% of the
Company's total sales, respectively, and increased 20% and 37%, respectively,
when compared to the same periods of fiscal 1998.
Worldwide telecommunications (Telco) sales for the first six months and second
quarter of fiscal 1999 constituted 19% and 13%, respectively, of the Company's
total sales. Such sales for the first six months of fiscal 1999 increased 34%
when compared to the same period of fiscal 1998. Worldwide Telco sales decreased
30% in the second quarter of fiscal 1999, as compared to the same period of
fiscal 1998 in which the Company recorded two large sales to Latin American
telecommunications companies. Sales to domestic Telco customers constituted 51%
and 84% of the Company's worldwide telecommunications sales during the first six
months and second quarter of fiscal 1999, respectively. A sale to a domestic
long distance company constituted approximately 65% of domestic Telco sales
during the second quarter of fiscal 1999. While international Telco sales during
the second quarter of fiscal 1999 were weak, the Company believes international
demand, particularly in Latin America, remains strong.
International CPE sales and service revenue constituted the remaining 20% and
18% of the Company's total sales during the first six months and second quarter
of fiscal 1999, respectively. No customer accounted for 10% or more of the
Company's total sales during the first six months or second quarter of fiscal
1999.
COST OF GOODS SOLD. Cost of goods sold of approximately $26.0 million
during the first six months decreased to 41% of total sales from 42% in the same
period of the previous year. This was the result of increased sales and the
Company's continued emphasis on expense control. Cost of goods sold of
approximately $13.4 million during the second quarter of fiscal 1999 increased
to 41% of total sales from 39% in the same period of the previous year. This was
the result of a decrease of international sales in the mix of the Company's
total sales. International sales historically have a lower cost of sales
percentage than domestic sales due to a more favorable software to hardware
ratio.
RESEARCH AND DEVELOPMENT. Research and development expenses were
approximately $6.5 million and $3.2 million during the first six months and
second quarter of fiscal 1999, respectively. Research and Development expenses
during the first six months of
<PAGE> 9
fiscal 1999 were approximately equal to such expenses in the same period of the
previous year and declined approximately $0.3 million, or 8%, in the second
quarter of fiscal 1999 versus the same period in fiscal 1998. Such a decline was
in line with the Company's emphasis on expense control. Research and development
expenses during the first six months and second quarter of fiscal 1999 included
porting the Company's InterSoft core software to the UNIX and Windows NT
operating systems; developing computer platform independent voice automation
hardware and software; developing the NSP 5000 platform; and the integrating of
the ESP product line purchased from Integrated Telephony Products, Inc. into the
Company's InControl product offering for enhanced network services.
Additionally, expenditures were made for the ongoing development of the
Company's OneVoice Software Agent Platform including OneVoice Systems (the
Company's IVR system), InVision (the Company's custom application development
tool), InterDial (the Company's outbound predictive dialer system), OneLink (a
digital interface for analog switches), and digital VocalCard software and
hardware functionality.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses decreased to approximately $19.0 million and $9.5
million during the first six months and second quarter of fiscal 1999,
respectively, from approximately $21.4 million and $11.3 million during the same
periods of the previous year. As a percentage of the Company's total sales, such
expenses decreased to 30% in the first six months of fiscal 1999 from 40% in the
same period of fiscal 1998, and to 29% in the second quarter of fiscal 1999 from
39% in the same period of fiscal 1998. The Company has continued its measures to
control expenses, particularly selling, general and administrative expenses.
OTHER INCOME/EXPENSE. Other expense of approximately $0.2 million and
$0.1 million during the first six months and second quarter of fiscal 1999,
respectively, was primarily net interest expense paid on its short term
borrowings.
INCOME FROM OPERATIONS. Operating income and net income during the
first six months of fiscal 1999 were approximately $11.6 million and $7.4
million, respectively, compared to $3.2 million and $2.5 million, respectively,
during the same period of the previous year. Operating income and net income
during the second quarter of fiscal 1999 were approximately $6.9 million and
$4.4 million, respectively, compared to approximately $3.0 million and $2.2
million, respectively, during the same period of the previous year. The
increases in operating income and net income are the result of increased sales
and the Company's efforts to control expenses.
LIQUIDITY AND CAPITAL RESOURCES. At August 31, 1998, the Company had
cash reserves of approximately $8.2 million while borrowings under the Company's
unsecured, revolving credit line with NationsBank were $9.0 million. Operating
cash flow during the first six months and second quarter of fiscal 1999 were
approximately a positive $9.8 million and $6.6 million, respectively. Investing
activities, primarily the purchase of computer and test equipment, during the
first six months and second quarter of fiscal 1999 consumed $2.7 million and
$1.3 million, respectively. The re-purchase of the Company's common stock during
the first six months and second quarter of fiscal 1999 consumed $4.4 million and
$4.3 million, respectively. Proceeds from the exercise of employee stock options
during the first six months and second quarter of fiscal 1999 contributed $1.3
million and $0.9 million, respectively. Net
<PAGE> 10
cash flow during the first six months and second quarter of fiscal 1999 was $4.1
million and $1.9 million, respectively. The Company did not increase its
borrowings during the quarter.
The Company reviews share repurchase and acquisition opportunities from time to
time. During the first six months and second quarter of fiscal 1999, the Company
repurchased 234,000 and 224.000 shares, respectively, of its common stock at
costs of $4,385,638 and $4,267,738 respectively, pursuant to an authorization by
its Board of Directors. The Company believes that market conditions made the
repurchase of such shares of value to its shareholders and that it has access to
the financial resources necessary to pursue attractive repurchase and/or
acquisition opportunities as they arise.
Subsequent to August 31, 1998, the Company purchased a computer telephony
software suite from Dronen Consulting, Incorporated for $3.0 million in cash
and 75,000 shares of the Company's common stock. The cash portion of the
purchase price was sourced from cash reserves. The Company's borrowings were not
increased as a result of the purchase.
The Company believes its cash reserves and internally generated cash flow are
sufficient to meet its operating cash requirements for the foreseeable future.
Additionally, the Company is in process of renegotiating its unsecured,
revolving credit line with NationsBank and expects to complete such
renegotiation by the end of October, 1998.
FORWARD LOOKING STATEMENTS. This report on Form 10-Q includes
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. All statements other than statements of historical facts included in
this announcement regarding the Company's financial position, business strategy,
plans and objectives of management of the Company for future operations, and
industry conditions, are forward-looking statements. Although the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to be
correct. The following significant factors, among others, sometimes have
affected, and in the future could affect, the Company's actual results and could
cause such results during fiscal 1999, and beyond, to differ materially from
those expressed in any forward-looking statements made by or on behalf of the
Company:
o The Company faces intense competition based on product capabilities and
experiences ever-increasing demands from its actual and prospective
customers for its products to be compatible with a variety of rapidly
proliferating computing, telephony and computer networking technologies and
standards. The ultimate success of the Company's products is dependent, to
a large degree, on the Company allocating its resources to developing and
improving products compatible with those technologies, standards and
functionality's that ultimately become widely accepted by the Company's
actual and prospective customers. The Company's success is also dependent,
to a large degree, on the Company's ability to implement arrangements with
other vendors with complementary product offerings to provide actual and
prospective customers greater functionality and to ensure that the
Company's products are compatible with the increased variety of
technologies and standards.
<PAGE> 11
o Continued availability of suitable non-proprietary computing platforms and
system operating software that are compatible with the Company's products.
o Certain of the components for the Company's products are available from
limited suppliers. The Company's operating results could be adversely
affected if the Company were unable to obtain such components in the
future.
o Increasing litigation with respect to the enforcement of patents,
copyrights and other intellectual property.
o The ability of the Company to retain its customer base and, in particular,
its more significant customers such as Siemens AG, an InterVoice
distributor, which accounted for over ten percent of the Company's total
sales during fiscal 1998. Since such customers generally are not
contractually obligated to place further orders with the Company.
o Legislative and administrative changes and, in particular, changes
affecting the telecommunications industry, such as the Telecommunications
Act of 1996. While many industry analysts expect the Telecommunications Act
of 1996 ultimately to result in at least a temporary surge in the
procurement of telecommunications equipment and related software and other
products, there is no assurance that the Company can estimate with
sufficient accuracy those products which will ultimately be purchased, the
timing of any such purchases or the quantities to be purchased.
o Risks involved in the Company's international distribution and sales of
its products, including unexpected changes in regulatory requirements,
unexpected changes in exchange rates, the difficulty and expense of
maintaining foreign offices and distribution channels, tariffs and other
barriers to trade, difficulty in protecting intellectual property rights,
and foreign governmental regulations that may limit or restrict the sales
of call automation systems. Additionally, changes in foreign credit markets
and currency exchange rates may result in requests by many international
customers for extended payment terms and may have an adverse impact on the
Company's cash flow and its level of accounts receivable.
o The quantity and size of large sales (sales valued at approximately $1
million or more) during any fiscal quarter, which can cause wide variations
in the Company's sales and earnings on a quarter to quarter basis.
o Ability of the Company to properly estimate costs under fixed price
contracts in developing application software and otherwise tailoring its
systems to customer-specific requests.
o The Company's ability to hire and retain, within the Company's
compensation parameters, qualified technical talent and outside contractors
in highly competitive markets for the services of such personnel.
o Mergers and acquisitions between companies in the telecommunications
industry which could result in fewer companies purchasing the Company's
products for telecommunications applications, and/or delay such purchases
by companies that are in the process of reviewing their strategic
alternatives in light of a merger or acquisition.
<PAGE> 12
o Extreme price and volume trading volatility in the U.S. stock market,
which has had a substantial effect on the market prices of securities of
many high technology companies, frequently for reasons other than the
operating performance of such companies. These broad market fluctuations
could adversely affect the market price of the Company's common stock.
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of the company was held at 10:00 a.m., local
time, on Thursday, July 23, 1998 in Plano, Texas.
For/Against and Broker Non Votes
Proxies were solicited by the Board of Directors of the Company pursuant to
Regulation 14A under the Securities Exchange Act of 1934. There was no
solicitation in opposition to the Board of Directors nominees as listed in the
proxy statement and all such nominees were duly elected. The following persons
are the nominees of the Board of Directors who were elected as directors at the
annual meeting: Daniel D. Hammond, Joseph J. Pietropaolo, George C. Platt, Grant
A. Dove and David W. Brandenburg. The number of votes cast for the election of
each of the nominees for director, and the number of abstentions, were as
follows: 12,636,927 votes for the election of Daniel D. Hammond, with 124,099
abstentions; 12,436,354 votes for the election of Joseph J. Pietropaolo, with
324,672 abstentions; 12,631,407 votes for the election of George C. Platt, with
129,619 abstentions; 12,446,354 votes for the election of Grant A. Dove, with
314,672 abstentions; and 12,632,480 votes for the election of David W.
Brandenburg, with 128,546 abstentions. No votes were cast against the election
of any nominee for director.
The final matter voted on and approved by the shareholders, as fully described
in the proxy statement for the annual meeting, was a proposal to approve an
amendment to the Company's Employee Stock Purchase Plan to increase from 200,000
to 500,000 the aggregate number of shares of common stock of the Company
authorized for issuance under the Plan. The shareholders and their proxies cast
12,047,670 votes in favor of the amendment, 498,266 votes against the amendment,
and there were 215,090 abstentions.
ITEM 6. EXHIBITS
The Exhibits required to be filed by this Item 6 are set forth in the Index to
Exhibits accompanying this report.
<PAGE> 14
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.
INTERVOICE, INC.
Date: 10/14/98 By: /s/ ROB-ROY J. GRAHAM
----------------------------
Rob-Roy J. Graham
Chief Financial Officer
(Chief Accounting Officer)
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------
<S> <C>
10.1 Employment Agreement dated as of September 1, 1998 between the
Company and David W. Berger(1)
10.2 Employment Agreement dated as of September 16, 1998 between the
Company and Rob-Roy J. Graham(1)
10.3 InterVoice, Inc. 1998 Stock Option Plan(1)
10.4 Assets Purchase Agreement dated as of September 15, 1998 between
the Company and Dronen Consulting, Incorporated(1)
27 Financial Data Schedule(1)
</TABLE>
- -----------------
(1) Exhibits attached hereto.
<PAGE> 1
EXHIBIT 10.1
INTERVOICE, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is dated as of September
1, 1998 effective as of September 1, 1998, between INTERVOICE, INC., a Texas
corporation with its principal executive offices at 17811 Waterview Parkway,
Dallas, Texas 75252 (the "Company"), and DAVID BERGER (the "Employee").
WITNESSETH:
WHEREAS, the Company desires to employ the Employee, and the Employee
desires to be employed by the Company, as President and Chief Operating Officer
in accordance with the terms and conditions set forth in this Agreement;
NOW THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and subject to the
terms and conditions hereinafter set forth, the parties hereto agree as
follows:
1. DEFINITIONS.
In addition to the words and terms elsewhere defined in this Agreement,
the following words and terms as used herein shall have the following meanings,
unless the context or use indicates a different meaning:
"Annualized Compensation Amount" means an amount equal to the
annualized salary payable and bonuses accrued or payable to the Employee
pursuant to Section 4 of this Agreement during the most recent completed fiscal
year of the Company.
"Applicable EPS Bonus Percentage" means, with respect to the applicable
fiscal year, the percentage set forth in the right hand column below as
determined with reference to the increase or decrease in the Company's earnings
per share between such fiscal year and the greater of $0.00 or the earnings per
share for the immediately preceding fiscal year:
<PAGE> 2
<TABLE>
<CAPTION>
INCREASE OR DECREASE IN EARNINGS PER
SHARE IN APPLICABLE FISCAL YEAR
COMPARED TO IMMEDIATELY PRECEDING APPLICABLE EPS
FISCAL YEAR BONUS PERCENTAGE
----------- ----------------
<S> <C>
40% or more increase 100%
35% through 39% increase 75%
25% through 34% increase 50%
10% through 24% increase 40%
0% through 9% increase 20%
1% through 10% decrease 10%
11% or more decrease 0%
</TABLE>
"Applicable Revenue Bonus Percentage" means, with respect to the
applicable fiscal year, the percentage set forth in the right hand column below
as determined with reference to the increase or decrease in the Company's total
revenues between such fiscal year and the greater of $102,307,713 or the total
revenues for the immediately preceding fiscal year:
<TABLE>
<CAPTION>
INCREASE OR DECREASE IN REVENUES IN
APPLICABLE FISCAL YEAR COMPARED TO APPLICABLE REVENUE
IMMEDIATELY PRECEDING FISCAL YEAR BONUS PERCENTAGE
- ------------------------------------ ------------------
<S> <C>
40% or more increase 100%
35% through 39% increase 75%
25% through 34% increase 50%
10% through 24% increase 40%
0% through 9% increase 20%
Decrease in revenues 0%
</TABLE>
"Cause" means (a) any act by the Employee that is materially adverse to
the best interests of the Company and which, if the subject of a criminal
proceeding, could result in a criminal conviction for a felony or (b) the
negligent or willful failure by the Employee to substantially perform his duties
hereunder, which duties are within the control of the Employee (other than the
failure resulting from the Employee's incapacity due to physical or mental
illness), provided, however, that the Employee shall not be deemed to be
terminated for Cause under this subsection (b) unless and until (1) after the
Employee receives written notice from the Company specifying with reasonable
particularity the actions of Employee which constitute a violation of this
subsection (b) and (2) within a period of 30
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<PAGE> 3
days after receipt of such notice (and during which the violation is within the
control of the Employee), Employee fails to reasonably and prospectively cure
such violation.
"Common Stock" means the Company's common stock, no par value per
share.
An "Event of Default" means the occurrence of any of the following
events prior to the Triggering Date, unless remedied or otherwise cured within
30 days after the Company's receipt of written notice from the Employee of
such event, (a) a breach by the Company of any of its express or implied
obligations under this Agreement, (b) without his prior concurrence, the
Employee is assigned any duties or responsibilities that are inconsistent with
his position, duties, responsibilities or status at the commencement of the term
of this Agreement, or his reporting responsibilities or titles in effect at such
time are changed, (c) the Employee's base compensation is reduced or any other
failure by the Company to comply with Section 4, or (d) any change in any
employee benefit plans or arrangements in effect on the date hereof in which the
Employee participates (including without limitation any pension and retirement
plan, savings and profit sharing plan, stock ownership or purchase plan, stock
option plan, or life, medical or disability insurance plan), which would
adversely affect the Employee's rights or benefits thereunder, unless such
change occurs pursuant to a program applicable to all executive officers of the
Company and does not result in a proportionately greater reduction in the rights
of or benefits to the Employee as compared to any other executive officer of the
Company.
"Good Reason" means the occurrence of a Triggering Event (as defined
below) and (a) a breach by the Company of any of its express obligations under
this Agreement, (b) without his prior concurrence, the Employee is assigned any
duties or responsibilities that are inconsistent with his position, duties,
responsibilities or status at the commencement of the term of this Agreement, or
his reporting responsibilities or titles in effect at such time are changed, (c)
the Employee's base compensation is reduced or any other failure by the Company
to comply with Section 4, or (d) any change in any employee benefit plans or
arrangements in effect on the date hereof in which the Employee participates
(including without limitation any pension and retirement plan, savings and
profit sharing plan, stock ownership or purchase plan, stock option plan, or
life, medical or disability insurance plan), which would adversely affect the
Employee's rights or benefits thereunder, unless such change occurs pursuant to
a program applicable to all executive officers of the Company and does not
result in a proportionately greater reduction in the rights of or benefits to
the Employee as compared to any other executive officer of the Company.
"Triggering Date" means the date of a Triggering Event.
A "Triggering Event" shall be deemed to have occurred if (a) a person
or group (as such terms are used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) directly or
indirectly, of securities of the Company representing more than 20% of the
combined voting power of the Company's then outstanding securities, or (b) at
any annual or special meeting of shareholders of the Company one or more
directors are elected who were not nominated by management of the Company to
serve on the Board of Directors of the Company, or (c) the Company
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<PAGE> 4
is merged or consolidated with another corporation and as a result of such
merger or consolidation less than 51% of the outstanding voting securities of
the surviving or resulting corporation are owned in the aggregate by the former
shareholders of the Company, other than by a party to such merger or
consolidation or affiliates (within the meaning of the Exchange Act) of any
party to such merger or consolidation, as the same existed immediately prior to
such merger or consolidation, or (d) the Company sells all or substantially all
of its assets to another corporation which is not a wholly-owned subsidiary of
the Company.
2. EMPLOYMENT.
The Company hereby employs the Employee and the Employee hereby accepts
employment on the terms and conditions set forth herein.
3. TERM.
The initial term of this Agreement shall be from September 1, 1998
until February 28, 2001 unless sooner terminated in accordance with the
provisions herein regarding termination. Subject to earlier termination as
provided herein, the initial term of this Agreement shall be automatically
extended for one (1) year from March 1, 2001, unless either the Employee or the
Company gives written notice to the other six months or more prior to february
28, 2001.
4. COMPENSATION.
(a) Base Salary. For all services rendered by the Employee under this
Agreement, the Company shall pay the Employee a base salary of $250,000 per
year. Such salary shall be payable in equal monthly installments in accordance
with the customary payroll policies of the Company in effect at the time such
payment is made, or as otherwise mutually agreed upon.
(b) Annual Bonus. Effective for the Company's fiscal year ending
February 28, 1999 and continuing with respect to each subsequent fiscal year
thereafter during the term of this Agreement, the Company will pay Employee an
annual bonus equal to the sum of (a) the mathematical product of Employee's base
salary pursuant to Subsection 4(a) for such fiscal year multiplied by the
Applicable Revenue Bonus Percentage and (b) the mathematical product of the
Employee's base salary pursuant to Subsection 4(a) for such fiscal year
multiplied by the Applicable EPS Bonus Percentage; provided, however, during the
Company's fiscal year ending February 28, 1999 the Employee's bonus shall be pro
rated by multiplying his bonus by a fraction of which (i) the numerator is the
number of days during such fiscal year that the Employee is employed by the
Company and (ii) the denominator is 365. Notwithstanding the immediately
preceding sentence, during the fiscal year ending February 28, 1999 the
Employee's bonus shall not be less than the mathematical product of (i) $150,000
multiplied by a fraction of which (i) the numerator is the number of days during
such fiscal year that the Employee is employed by the Company and (ii) the
denominator is 365. The Employee's bonus pursuant to this Subsection 4(b) shall
be earned as of the end of the Company's fiscal year and payable within five
days after the Company's receipt of its audited annual financial statements. The
formula set forth herein for determining annual bonuses
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<PAGE> 5
shall be adjusted from time to time when and if there occur stock splits or
other changes in capital structure which result in an increase or decrease in
outstanding capital stock of more than 25%.
(c) Bonus. In addition to the Employee's annual base salary and other
benefits provided for in this Agreement, the Company may pay to the Employee a
discretionary bonus with respect to any completed fiscal year in an amount to be
approved by the Board of Directors of the Company; provided, however, in no
event shall the bonus payable hereunder, if any, exceed Employee's annual base
salary provided for in Section 4(a).
(d) Benefits. The Employee shall be entitled to participate in or
receive benefits under any employee benefit plan or arrangements made available
by the Company in the future to its executive officers and key management
personnel, subject to and on a basis consistent with the terms, conditions and
overall administration of such plan or arrangement. Nothing paid to the Employee
arrangement presently in effect or made available in the future shall be deemed
to be in lieu of the salary and bonuses payable to the Employee pursuant to
Subsections 4(a), (b) and (c).
(e) Stock Option. In consideration of the Employee's execution of this
Agreement, the Company will grant an option to purchase 150,000 shares of the
Company's Common Stock to the Employee pursuant to the Company's 1998 Stock
Option Plan. The exercise price for such option will be the closing price for
the Company's Common Stock on the Nasdaq National Market on the date of
commencement of the Employee's employment with the Company. The option to
purchase 150,000 shares of the Company's Common Stock is intended to encompass
the initial term of this Agreement and, while the Board of Directors could award
additional options to the Employee during such term, there is no present
intention to do so even though options may be awarded to other executives of the
Company during such time period.
(f) Restricted Stock. Subject to the forfeiture and other terms and
conditions of the Company's Restricted Stock Plan, the Company will award the
Employee, upon the date of commencement of his employment with the Company, the
opportunity to receive up to 15,000 shares of the Company's Common Stock
(the "Restricted Stock"). The award of Restricted Stock will be evidenced by,
and subject to, a Restricted Stock Agreement (Senior Executive Version) between
the Company and the Employee. The Company will issue one-third of the Restricted
Stock (5,000 shares) to the Employee if prior to April 4, 2002, and at such
times as, the closing price for shares of the Company's Common Stock on the
Nasdaq National Market first averages, respectively, $29.54, $36.93 and $46.16
for a period of 20 consecutive market days. Any Restricted Stock awarded to the
Employee will be forfeited if, within two years after the date of issuance of
such stock, the Employee voluntarily or involuntarily ceases to be employed by
the Company.
(g) Expenses. Upon receipt of itemized vouchers, expense account
reports, and supporting documents submitted to the Company in accordance with
the Company's procedures from time to time in effect, the Company shall
reimburse Employee for all reasonable and necessary travel, entertainment, and
other reasonable and necessary business expenses incurred ordinarily and
necessarily by Employee in connection with the performance of his duties
hereunder.
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<PAGE> 6
(h) Vacation. Employee shall be entitled to a minimum of four weeks
paid vacation during each twelve month period commencing on the effective date
of this Agreement.
(i) Moving Expenses. The Company will reimburse the Employee for
certain reasonable, properly documented relocation expenses in accordance with
the Company's Domestic Moving Allowance Policy in connection with the Employee's
relocation to the Dallas, Texas metropolitan area.
5. POSITION, DUTIES, EXTENT OF SERVICES AND SITUS.
(a) Position and Duties. Employee shall serve as the President and
Chief Operating Officer of the Company, accountable only to the Chairman of the
Board and Chief Executive Officer (the "Chairman") of the Company and, subject
to the authority of the Chairman, shall have supervision and control over, and
responsibility for, the general management and operation of the Company and
shall have such other powers and duties as may from time to time be prescribed
by the Chairman and provided that such duties are reasonable and customary for a
President and Chief Operating Officer of a public company.
(b) Extent of Services and Situs. The Employee shall devote
substantially all of his business time, attention, and energy to the business
and affairs of the Company and shall not during the term of his employment under
this Agreement engage in any other business activity which could constitute a
conflict of interest, whether or not such business activity is pursued for gain,
profit, or other pecuniary advantage. This shall not be construed as preventing
the Employee from managing his current investments or investing his assets in
such form or manner as will not require any services on the part of the Employee
in the operation and the affairs of the companies in which such investments are
made, subject to the provisions of Sections 6 and 27.
6. COVENANT NOT TO COMPETE.
(a) The Employee acknowledges that (i) as a result of his position with
the Company he will receive specialized and unique training and knowledge
concerning the Company, its business, its customers and the industry in which it
competes, (ii) the Company's business, in large part, depends upon its exclusive
possession and use of the Proprietary Information (as defined in Section 27),
(iii) the Company is entitled to protection against the unauthorized disclosure
or use by Employee of the Proprietary Information or the training and knowledge
received by the Employee and (iv) he has received in this Agreement good and
valuable consideration for the covenants he is making in this Section 6 and in
Section 27. The Company and the Employee acknowledge and agree that the
covenants contained in this Section 6 and in Section 27 are reasonably necessary
for the protection of the Company and are reasonably limited with respect to the
activities they prohibit, their duration, their geographical scope and their
effects on the Employee and the public. The parties acknowledge that the purpose
and effect of the covenants are to protect the Company from unfair competition
by the Employee.
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<PAGE> 7
(b) Except as provided in the last sentence of this Section 6(b),
during the period in which the Employee renders services to the Company under
this Agreement and for eighteen (18) months thereafter, the Employee shall not,
without the written consent of the Company, own, manage, operate, control, serve
as an officer, director, employee, partner or consultant of or be connected in
any way with or have any interest in any corporation, partnership,
proprietorship or other entity which carries on business activities in
competition with the Company's activities in any state of the United States or
in any foreign country in which the Company has sold or installed its products
or systems or has definitive plans to sell or install its products at any time
prior to or at the time of the date of termination of the Employee's employment;
except that the Employee may own up to 1% of the shares of any publicly-owned
corporation, provided that none of his other relationships with such corporation
violates such covenant. Notwithstanding the foregoing, the provisions of this
Section 6 shall not apply if the Employee's employment with the Company under
this Agreement is terminated (i) by the Company, unless the Employee is
terminated in accordance with Section 7 or for Cause in accordance with
Subsection 9.1(a) or 9.2(a), or (ii) at the election of the Employee prior to
the Triggering Date after the occurrence of an Event of Default which has not
been waived in writing or on or after the Triggering Date for Good Reason.
(c) The Company and the Employee hereby agree that in the event that
the noncompetition covenants contained herein should be held by any court or
other constituted legal authority of competent jurisdiction to be effective in
any particular area or jurisdiction only if said covenants are modified to limit
their duration, geographical area or scope, then the parties hereto will
consider Section 6 to be amended and modified with respect to that particular
area or jurisdiction so as to comply with the order of any such court or other
constituted legal authority and, as to all other jurisdictions or political
subdivisions thereof, the noncompetition covenants contained herein will remain
in full force and effect as originally written. The Company and the Employee
further agree that in the event that the noncompetition covenants contained
herein should be held by any court or other constituted legal authority of
competent jurisdiction to be void or otherwise unenforceable in any particular
area or jurisdiction notwithstanding the operation of this Section 6(c), then
the parties hereto will consider this Section 6 to be amended and modified so as
to eliminate therefrom that particular area or jurisdiction as to which such
noncompetition covenants are so held void or otherwise unenforceable, and, as to
all other areas and jurisdictions covered by the noncompetition covenants, the
terms and provisions hereof shall remain in full force and effect as originally
written.
(d) Employee recognizes and acknowledges that the Company would suffer
irreparable harm and substantial loss if Employee violated any of the terms and
provisions of this Section 6 or Section 27 and that the actual damages which
might be sustained by the Company as the result of any breach of this Section 6
or Section 27 would be difficult to ascertain. Employee agrees, at the election
of the Company and in addition to, and not in lieu of, the Company's right to
terminate Employee's employment and to seek all other remedies and damages which
the Company may have at law and/or equity for such breach, that the Company
shall be entitled to an injunction restraining Employee from breaching any of
the terms or provisions of this Section 6 or Section 27.
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<PAGE> 8
7. COMPENSATION IN THE EVENT OF DISABILITY.
(a) Disability. If the Employee becomes disabled during the term of
this Agreement the Company shall cause to be paid to the Employee an amount
equal to his base salary in effect at the time of disability under Subsection
4(a) for the shorter of the duration of the disability or the remainder of the
term of this Agreement and, subject to the provisions of Sections 22 and 25,
with no liability on its part for further payments to the Employee during the
duration of the disability. Subject to Subsection 7(b) below, full compensation
shall be reinstituted upon the Employee's return to employment and resumption of
his duties. Without limiting the scope of the immediately preceding sentence,
and subject to Subsection 7(b) below, if the annual bonus or any discretionary
bonus would otherwise be payable pursuant to Subsections 4(b) or (c) hereof
while the Employee is disabled and the Employee thereafter returns to work
without such disability ever resulting in his Complete Disability (as defined in
Subsection 7(b) hereof), the Company will pay the Employee such annual bonus and
any such discretionary bonus promptly after the Employee has returned to work
for ten consecutive business days. For purposes of this Subsection 7(a) the
Employee shall be deemed "disabled" when, despite any reasonable accommodation
required by law, he is unable, for a period of 90 consecutive days, to perform
his normal duties of employment due to bodily injury or disease or any other
physical or mental disability.
(b) Complete Disability. The Company shall have the right to terminate
the Employee's employment under this Agreement prior to the expiration of the
term upon the "Complete Disability" of the Employee as hereinafter defined
(provided, however, that the obligations of the Company under Subsection 7(a)
shall not terminate). The term "Complete Disability" as used in this Subsection
7(b) shall mean (i) the total inability of the Employee, despite any reasonable
accommodation required by law, due to bodily injury or disease or any other
physical or mental incapacity, to perform the services provided for hereunder
for a period of 120 days in the aggregate, within any given period of 180
consecutive days during the term of this Agreement, in addition to any
statutorily required leave of absence, and (ii) where such inability will, in
the opinion of a qualified physician (reasonably acceptable to Employee), be
permanent and continuous during the remainder of his life.
8. COMPENSATION IN THE EVENT OF DEATH.
If the Employee dies during the term of his employment, the Company
shall pay to such person as the Employee shall designate in a notice filed with
the Company, or, if no such person shall be designated, to his estate as a death
benefit, his base salary in effect at the time of his death pursuant to
Subsection 4(a), in equal semi-monthly installments on the first and fifteenth
day of each month immediately succeeding his death, for a period of months (not
exceeding 12) determined by multiplying the number of complete 12-month periods
of employment of the Employee by the Company (whether pursuant to an employment
agreement or not) by two, in addition to any payments the Employee's spouse,
beneficiaries, or estate may be entitled to receive pursuant to any pension or
employee benefit plan or life insurance policy maintained by the Company, and,
except for any obligations of the Company under Sections 22 and 25, all other
obligations of the Company hereunder shall cease at the time of the Employee's
death.
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<PAGE> 9
9. TERMINATION.
9.1 Termination Prior to the Triggering Date. (a) Upon at least 30
days' prior written notice to the Employee and prior to the Triggering Date, the
Company may terminate the Employee's employment with the Company under this
Agreement only for Cause or in accordance with Section 7 and, subject to the
provisions of Sections 7, 22 and 25, with no liability on its part for further
payments to the Employee. The Company may effect a termination for Cause
pursuant to this Subsection 9.1(a) only by the affirmative vote of a majority
of the members of the Board of Directors of the Company. In voting upon such
termination for Cause, if the Employee is also a member of the Board of
Directors of the Company, then he may not vote on, and will not be considered
present for any purpose with respect to, a matter presented to the Board of
Directors of the Company pursuant to this Subsection 9.1(a).
(b) Prior to the Triggering Date, the Employee may terminate his
employment with the Company under this Agreement by giving at least 90 days'
prior written notice of his desire to terminate employment to the Board of
Directors of the Company. If the Employee's employment with the Company under
this Agreement is terminated pursuant to this Subsection 9.1(b), the Employee
will continue to accrue and receive his base salary in effect at the time
pursuant to Subsection 4(a) through the date of termination specified in such
notice with no liability on the part of the Company for further payments to the
Employee, subject to the provisions of Sections 22 and 25.
(c) Prior to the Triggering Date, if the Employee's employment with the
Company is terminated by the Company without Cause or if the Employee terminates
his employment with the Company following the occurrence of an Event of Default
which has not been waived in writing by the Employee, the Employee will continue
to accrue and receive his base salary in effect at the time pursuant to
Subsection 4(a) through the date of termination and will be entitled to receive
the benefits provided for under Subsection 10.1 (unless the Employee's
employment is terminated in accordance with Section 7) with no liability on the
part of the Company for further payments to the Employee, subject to the
provisions of Sections 7, 22 and 25.
9.2 Termination On or After the Triggering Date. (a) Upon at least 30
days' prior written notice to the Employee and on or after the Triggering Date,
the Company may terminate the Employee's employment with the Company under this
Agreement only for Cause or in accordance with Section 7 and, subject to the
provisions of Sections 7, 22 and 25, with no liability on its part for further
payments to the Employee. The Company may effect a termination for Cause
pursuant to this Subsection 9.2(a) only by the affirmative vote of two-thirds of
the members of the Board of Directors of the Company. In voting upon such
termination for Cause, if the Employee is also a member of the Board of
Directors of the Company, then he may not vote on, and will not be considered
present for any purpose with respect to, a matter presented to the Board of
Directors of the Company pursuant to this Subsection 9.2(a).
(b) On or after the Triggering Date, if the Employee's employment with
the Company is terminated by the Company without Cause or if the Employee
terminates his employment with the
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<PAGE> 10
Company for Good Reason, the Employee will continue to accrue and receive his
base salary in effect at the time pursuant to Subsection 4(a) through the date
of termination and will be entitled to receive the payments and benefits
provided for under Subsections 10.2 and 10.3 (unless the Employee's employment
is terminated in accordance with Section 7) with no liability on the part of the
Company for further payments to the Employee, subject to the provisions of
Sections 7, 22 and 25.
(c) On or after the Triggering Date, the Employee may, in his sole and
absolute discretion and without any prior approval by the Board of Directors of
the Company, and upon twelve months' prior written notice to the Board of
Directors of the Company, terminate his employment with the Company under this
Agreement for any reason whatsoever. If the Employee's employment with the
Company under this Agreement is terminated pursuant to this Subsection 9.2(c),
the Employee will continue to accrue and receive his base salary in effect at
the time pursuant to Subsection 4(a) through the date of termination specified
in such notice and will be entitled to receive the benefits provided for under
Subsections 10.2 and 10.3 with no liability on the part of the Company for
further payments to the Employee, subject to the provisions of Sections 22 and
25.
10. COMPENSATION AFTER CERTAIN TERMINATIONS.
10.1 Remaining Compensation. If the Employee's employment with the
Company is terminated (whether such termination is by the Employee or by the
Company) at any time prior to the Triggering Date for any reason other than (a)
termination by the Company for Cause in accordance with Subsection 9.1(a); (b)
termination by the Company in accordance with Section 7; (c) the Employee's
death; or (d) termination at the election of the Employee pursuant to Subsection
9.1(b) then, within five days after the date of such termination, (i) the
Remaining Compensation (as herein defined) which would have been paid to the
Employee during the remainder of the term of this Agreement if termination had
not occurred shall become due and payable and shall be paid to the Employee in a
single lump sum in cash, and (ii) all stock options granted to Employee pursuant
to Subsection 4(e) hereof which are not then exercisable shall, notwithstanding
the provisions of any other agreement, become immediately exercisable and shall
remain exercisable until they are exercised or until they otherwise would
expire. For purposes of this Subsection 10.1, the "Remaining Compensation" shall
mean the annual base salary for one year only payable to the Employee pursuant
to Subsection 4(a) at the time of termination plus an amount representing the
value of all employee benefits including, without limitation, any unearned
annual bonuses described in Subsection 4(b), discretionary bonuses and incentive
compensation under plans then in effect. For these purposes, the value of any
unearned annual bonuses and all of such other employee benefits shall be deemed
to be equal to 12 months base salary payable to the Employee pursuant to
Subsection 4(a) at the time his employment is terminated.
10.2 Post Triggering Date Severance Payment. If the Employee's
employment with the Company is terminated (whether such termination is by the
Employee or by the Company) at any time on or within three years after the
Triggering Date for any reason other than (a) termination by the Company for
Cause in accordance with Subsection 9.2(a) or (b) termination by the Company in
accordance with Section 7 or (c) the Employee's death or (d) termination at the
election of the
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<PAGE> 11
Employee other than termination for Good Reason without compliance with the
requirements of Section 9.2(c), then, within five days after the date of such
termination, the Company shall pay the Employee a lump sum amount in cash equal
to 2.99 times the Annualized Compensation Amount.
10.3 Gross-Up Payment. In the event that (i) the Employee becomes
entitled to the payments provided under Section 10.2 of this Agreement (the
"Change in Control Payments") and any of the Change in Control Payments will be
subject to the tax (the "Excise Tax") imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), or any successor provision, or
(ii) any payments or benefits received or to be received by the Employee
pursuant to the terms of any other plan, arrangement or agreement (the "Benefit
Payments") will be subject to the Excise Tax, the Company shall pay to the
Employee an additional amount (the "Gross-Up Payment") such that the net amount
retained by the Employee, after deduction of any Excise Tax on the Change in
Control Payments and the Benefit Payments, and any federal, state and local
income tax and Excise Tax upon the payment provided for by this Section 10.3,
shall be equal to the Change in Control Payments and the Benefit Payments,
provided, however, that in determining the amount of the Gross-Up Payment, any
Excise Tax on the Change in Control Payments and the Benefit Payments shall be
determined using a rate no higher that 20%. For purposes of determining whether
any of the Change in Control Payments or the Benefit Payments will be subject to
the Excise Tax and the amount of such Excise Tax, (i) any payments or benefits
received or to be received by the Employee in connection with a change in
control of the Company or the Employee's termination of employment (whether
pursuant to the terms of the agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result in change in control
or any person affiliated with the Company or such persons) shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of Section 280G(b)(1) shall
be treated as subject to the Excise Tax, unless in the opinion of tax counsel
selected by the Company's independent auditors and acceptable to the Employee
such payments or benefits (in whole or in part) do not constitute parachute
payments, or such excess payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code, (ii) the amount of the Change in Control Payments and
the Benefit Payments that shall be treated as subject to the Excise Tax shall be
equal to the lesser of (A) the total amount of the Change in Control Payments
and the Benefits Payments or (B) the amount of excess parachute payments within
the meaning of Sections 280G(b)(1) and (4) (after applying clause (i), above)
and (iii) the value of any non-cash benefits or any deferred payment or benefit
shall be determined by the Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Employee shall be deemed to
pay federal income taxes at the highest marginal rate of federal income taxation
in the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rates of taxation in the state and
locality of the Employee's residence on the date of termination, net of the
maximum reduction in federal income taxes which could be obtained from deduction
of such state and local taxes. In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time
of termination of the Employee's employment, the Employee shall repay to the
Company at that time that amount of such reduction in Excise Tax as is finally
determined to be the portion of the Gross-Up Payment attributable to such
reduction plus interest on the amount of such
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<PAGE> 12
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of the Employee's employment
(including by reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall make an
additional gross-up payment to the Employee in respect of such excess (plus any
interest payable with respect to such excess) at the time that the amount of
such excess is finally determined.
11. MITIGATION.
The Employee shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Agreement be reduced by
any compensation earned by the Employee as the result of employment by another
employer after the date of termination of Employee's employment with the
Company, or otherwise.
12. ENTIRE AGREEMENT
This Agreement embodies the entire agreement and understanding between
the parties hereto with respect to the subject matter hereof and supersedes all
prior negotiations, agreements, and understandings relating to such subject
matter, and may be modified or amended only by an instrument in writing signed
by the parties hereto.
13. LAW TO GOVERN.
This Agreement is executed and delivered in the State of Texas and
shall be governed, construed and enforced in accordance with the laws of the
State of Texas, except as stated in Section 28.
14. ASSIGNMENT.
This Agreement is personal to the parties, and neither this Agreement
nor any interest herein may be assigned (other than by will or by the laws of
descent and distribution) without the prior written consent of the parties
hereto nor be subject to alienation, anticipation, sale, pledge, encumbrance,
execution, levy, or other legal process of any kind against the Employee or any
of his beneficiaries or any other person. Notwithstanding the foregoing, the
Company shall be permitted to assign this Agreement to any corporation or other
business entity succeeding to substantially all of the business and assets of
the Company by merger, consolidation, sale of assets, or otherwise, if the
Company obtains the assumption of this Agreement by such successor. Failure by
the Company to obtain such assumption prior to the effectiveness of such
succession shall be a breach of this Agreement and shall entitle the Employee to
receive compensation from the Company under this Agreement in the same amount
and on the same terms as he would be entitled to hereunder if he has
voluntarily terminated his employment after the Triggering Date, and, for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Triggering Date.
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<PAGE> 13
15. BINDING AGREEMENT.
Subject to the provisions of Section 14 of this Agreement, this
Agreement shall be binding upon and shall inure to the benefit of the Company
and the Employee and their respective representatives, successors, and assigns.
16. REFERENCES AND GENDER.
All references to "Sections" and "Subsections" contained herein are,
unless specifically indicated otherwise, references to sections and subsections
of this Agreement. Whenever herein the singular number is used, the same shall
include the plural where appropriate, and words of either gender shall include
the other gender where appropriate.
17. WAIVER.
No waiver of any right under this Agreement shall be deemed effective
unless the same is set forth in writing and signed by the party giving such
waiver, and no waiver of any right shall be deemed to be a waiver of any such
right in the future. Only the Chief Executive Officer of the Company has
authority to waive any provision of this Agreement.
18. NOTICES.
Except as may be otherwise specifically provided in this Agreement, all
notices required or permitted hereunder shall be in writing and will be deemed
to be delivered when deposited in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, and (i) if to the
Company, if addressed to 17811 Waterview Parkway, Dallas, Texas 75252 and (ii)
if to the Executive, if addressed to 7720 St. Mario, Country Club Parkway,
Duluth, Georgia 30097, or at such other addresses as may have theretofore been
specified by written notice delivered in accordance herewith.
19. OTHER INSTRUMENTS.
The parties hereto covenant and agree that they will execute such other
and further instruments and documents as are or may become necessary or
convenient to effectuate and carry out the terms of this Agreement.
20. HEADINGS.
The headings used in this Agreement are used for reference purposes
only and do not constitute substantive matter to be considered the terms of this
Agreement.
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21. INVALID PROVISION.
Any clause, sentence, provision, section, subsection, or paragraph of
this Agreement held by a court of competent jurisdiction to be invalid, illegal,
or ineffective shall not impair, invalidate, or nullify the remainder of this
Agreement, but the effect thereof shall be confined to the clause, sentence,
provision, section, subsection, or paragraph so held to be invalid, illegal or
ineffective.
22. RIGHTS UNDER PLANS AND PROGRAMS.
Anything in this Agreement to the contrary notwithstanding, no
provision of this Agreement is intended, nor shall it be construed, to reduce or
in any way restrict any benefit to which the Employee may be entitled under any
other agreement, plan, arrangement, or program providing benefits for the
Employee.
23. MULTIPLE COPIES.
This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument. The terms of this Agreement
shall become binding upon each party from and after the time that he or it
executed a copy hereof. In like manner, from and after the time that any party
executes a consent or other document, such consent or other document shall be
binding upon such parties.
24. WITHHOLDING OF TAXES.
The Company may withhold from any amounts payable under this Agreement
all federal, state, city, or other taxes as shall be required pursuant to any
law or government regulation or ruling.
25. LEGAL FEES AND EXPENSES.
The Company shall pay and be responsible for all legal fees and
expenses which the Employee may incur as a result of the Company's failure to
perform under this Agreement or as a result of the Company or any successor
contesting the validity or enforceability of this Agreement.
26. SET OFF OR COUNTERCLAIM.
Except with respect to any claim against or debt or other obligation of
the Employee properly recorded on the books and records of the Company prior to
the Triggering Date, there shall be no right of set off or counterclaim against,
or delay in, any payment by the Company to the Employee or his beneficiaries
provided for in this Agreement in respect of any claim against or debt or other
obligation of the Employee, whether arising hereunder or otherwise.
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27. ASSIGNMENT, PROTECTION AND CONFIDENTIALITY OF PROPRIETARY INFORMATION.
The Employee acknowledges and agrees that all items of the Company's
Proprietary Information constitute valuable, special and unique assets and trade
secrets of its business, which provide to the Company a competitive advantage
over others who do not have access thereto and access to which is essential to
the performance of the Employee's duties hereunder. The Employee shall not,
during the term of this Agreement or thereafter, use or disclose any Proprietary
Information that is not otherwise publicly available, in whole or in part, for
his benefit or for the benefit of any other person or party, except for the
Company. As used herein, "Proprietary Information" includes, but is not limited
to, customer lists and prices, whether current or prospective, product designs
or other product information, experimental developments and other research and
development information, testing processes, marketing studies and research
activities, and any other trade secrets concerning the Company, its
shareholders, officers, directors, employees, business prospects, customers,
transactions, finances, affairs, opportunities, operations, properties or
assets. The Employee further agrees that all inventions, devices, compounds,
processes, formulas, techniques, improvements and modifications which he may
develop, in whole or in part, during the term of his employment or through or
with the facilities, equipment or resources of the Company shall be and remain
the sole and exclusive property of the Company. The Employee agrees to deliver
to the Company at any time the Company may request, all memoranda, notes, plans,
records, reports, and other documents (including copies thereof and all
embodiments thereof whether in computerized form or any other medium) relating
to the business or affairs of the Company or its subsidiaries which he may then
possess or have under his control. The Employee shall maintain in good condition
all tangible and other forms of Proprietary Information in the Employee's
custody or control until his obligations under the preceding sentence are
satisfied. The Employee agrees to execute all documents and take such other
actions as may be required to comply with this Section.
28. ARBITRATION.
Any dispute arising in connection with this Agreement or in any way
arising out of or related to the employment relationship between the Employee
and the Company, or the termination of that relationship, including any claim of
unlawful discrimination, shall be finally resolved by arbitration in Dallas,
Texas, governed by the Federal Arbitration Act and conducted pursuant to and in
accordance with the National Rules for the Resolution of Employment Disputes of
the American Arbitration Association. Either the Company or the Employee may
request arbitration by sending written notice to the other party. In any such
arbitration, the only issues to be considered and determined by the
arbitrator(s) shall be issues pertaining to legal and equitable rights and
obligations of the parties under this Agreement and any applicable law. A
decision and award of the arbitrator(s) shall be final, and may be entered in
any court having jurisdiction thereof, and application may be made to such court
for judicial acceptance and/or an order enforcing such decision and/or award.
Judicial review of any decision or award shall be in accordance with the Federal
Arbitration Act, except that review of any award of punitive or exemplary
damages shall be conducted as if the award of such damages were made by a jury
sitting in a federal district court in Dallas, Texas. In the event the
arbitrator(s) determine there
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<PAGE> 16
is a prevailing party in the arbitration, the prevailing party shall recover
from the losing party all costs of arbitration, including but not limited to the
fees of the arbitrator(s) and reasonable attorneys' fees incurred by the
prevailing party. The provisions of this Section 28 shall not be construed to
limit or to preclude either party from bringing an action in any court of
competent jurisdiction for injunctive relief.
29. OBLIGATIONS CONDITIONED ON MEDICAL REVIEW AND DRUG SCREEN TEST.
The Company's offer to employ the Employee as set forth in this
Agreement is expressly conditioned upon the Employee's successful completion of
a medical review and drug screen test in accordance with the Company's standard
policies and procedures. The Employee has been advised not to resign from any
current employment or decline a pending job offer without having first received
notification of his successful completion of the medical review and drug screen
test.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
INTERVOICE, INC.
By: /s/ DANIEL D. HAMMOND
----------------------------
Name: Daniel D. Hammond
--------------------------
Title:Chairman of the Board and
Chief Executive Officer
-------------------------
/s/ DAVID BERGER
-------------------------------
DAVID BERGER
16
<PAGE> 1
EXHIBIT 10.2
INTERVOICE, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is dated as of September
16, 1998 effective as of September 1, 1998, between INTERVOICE, Inc., a Texas
corporation with its principal executive offices at 17811 Waterview Parkway,
Dallas, Texas 75252 (the "Company"), and ROB-ROY J. GRAHAM (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee is employed by the Company as its Chief Financial
Officer, Secretary and Chief Accounting Officer; and
WHEREAS, the Company desires to continue to employ the Employee, and
the Employee desires to continue to be employed by the Company as Chief
Financial Officer, Secretary and Chief Accounting Officer in accordance with the
terms and conditions set forth in this Agreement;
NOW THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and subject to the
terms and conditions hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS.
In addition to the words and terms elsewhere defined in this Agreement,
the following words and terms as used herein shall have the following meanings,
unless the context or use indicates a different meaning:
"Annualized Compensation Amount" means an amount equal to the
annualized salary payable and bonuses accrued or payable to the Employee
pursuant to Section 4 of this Agreement during the most recent completed fiscal
year of the Company.
"Applicable EPS Bonus Percentage" means, with respect to the applicable
fiscal year, the percentage set forth in the right hand column below as
determined with reference to the increase or decrease in the Company's earnings
per share between such fiscal year and the greater of $1.05 or the earnings per
share for the immediately preceding fiscal year:
<PAGE> 2
<TABLE>
<CAPTION>
INCREASE OR DECREASE IN EARNINGS PER
SHARE IN APPLICABLE FISCAL YEAR
COMPARED TO IMMEDIATELY PRECEDING APPLICABLE EPS
FISCAL YEAR BONUS PERCENTAGE
- ------------------------------------- ----------------
<S> <C>
40% or more increase 100%
35% through 39% increase 75%
25% through 34% increase 50%
10% through 24% increase 40%
0% through 9% increase 20%
1% through 10% decrease 10%
11% or more decrease 0%
</TABLE>
"Applicable Revenue Bonus Percentage" means, with respect to the
applicable fiscal year, the percentage set forth in the right hand column below
as determined with reference to the increase or decrease in the Company's total
revenues between such fiscal year and the greater of $97,103,054 or the total
revenues for the immediately preceding fiscal year:
<TABLE>
<CAPTION>
INCREASE OR DECREASE IN REVENUES IN
APPLICABLE FISCAL YEAR COMPARED TO APPLICABLE REVENUE
IMMEDIATELY PRECEDING FISCAL YEAR BONUS PERCENTAGE
- ------------------------------------ ------------------
<S> <C>
40% or more increase 100%
35% through 39% increase 75%
25% through 34% increase 50%
10% through 24% increase 40%
0% through 9% increase 20%
Decrease in revenues 0%
</TABLE>
"Cause" means (a) any act by the Employee that is materially adverse to
the best interests of the Company and which, if the subject of a criminal
proceeding, could result in a criminal conviction for a felony or (b) the
negligent or willful failure by the Employee to substantially perform his duties
hereunder, which duties are within the control of the Employee (other than the
failure resulting from the Employee's incapacity due to physical or mental
illness), provided, however, that the Employee shall not be deemed to be
terminated for Cause under this subsection (b) unless and until (1) after the
Employee receives written notice from the Company specifying with reasonable
particularity the actions of Employee which constitute a violation of this
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<PAGE> 3
subsection (b) and (2) within a period of 30 days after receipt of such notice
(and during which the violation is within the control of the Employee), Employee
fails to reasonably and prospectively cure such violation.
"Common Stock" means the Company's common stock, no par value per
share.
An "Event of Default" means the occurrence of any of the following
events prior to the Triggering Date, unless remedied or otherwise cured within
30 days after the Company's receipt of written notice from the Employee of such
event, (a) a breach by the Company of any of its express or implied obligations
under this Agreement, (b) without his prior concurrence, the Employee is
assigned any duties or responsibilities that are inconsistent with his position,
duties, responsibilities or status at the commencement of the term of this
agreement, or his reporting responsibilities or titles in effect at such time
are changed, (c) the Employee's base compensation is reduced or any other
failure by the Company to comply with Section 4, or (d) any change in any
employee benefit plans or arrangements in effect on the date hereof in which the
Employee participates (including without limitation any pension and retirement
plan, savings and profit sharing plan, stock ownership or purchase plan, stock
option plan, or life, medical or disability insurance plan), which would
adversely affect the Employee's rights or benefits thereunder, unless such
change occurs pursuant to a program applicable to all executive officers of the
Company and does not result in a proportionately greater reduction in the rights
of or benefits to the Employee as compared to any other executive officer of the
Company.
"Good Reason" means the occurrence of a Triggering Event (as defined
below) and (a) a breach by the Company of any of its express obligations under
this Agreement, (b) without his prior concurrence, the Employee is assigned any
duties or responsibilities that are inconsistent with his position, duties,
responsibilities or status at the commencement of the term of this Agreement, or
his reporting responsibilities or titles in effect at such time are changed, (c)
the Employee's base compensation is reduced or any other failure by the Company
to comply with Section 4, (d) any change in any employee benefit plans or
arrangements in effect on the date hereof in which the Employee participates
(including without limitation any pension and retirement plan, savings and
profit sharing plan, stock ownership or purchase plan, stock option plan, or
life, medical or disability insurance plan), which would adversely affect the
Employee's rights or benefits thereunder, unless such change occurs pursuant to
a program applicable to all executive officers of the Company and does not
result in a proportionately greater reduction in the rights of or benefits to
the Employee as compared to any other executive officer of the Company, or (e)
without his consent, the Employee is required to permanently office at a
facility which is more than thirty (30) miles from the Company's office
facilities at 17811 Waterview Parkway, Dallas, Texas.
"Triggering Date" means the date of a Triggering Event.
A "Triggering Event" shall be deemed to have occurred if (a) a person
or group (as such terms are used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) directly or
indirectly, of securities of the Company representing more than 20% of
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<PAGE> 4
the combined voting power of the Company's then outstanding securities, or (b)
at any annual or special meeting of shareholders of the Company one or more
directors are elected who were not nominated by management of the Company to
serve on the Board of Directors of the Company, or (c) the Company is merged or
consolidated with another corporation and as a result of such merger or
consolidation less than 51 % of the outstanding voting securities of the
surviving or resulting corporation are owned in the aggregate by the former
shareholders of the Company, other than by a party to such merger or
consolidation or affiliates (within the meaning of the Exchange Act) of any
party to such merger or consolidation, as the same existed immediately prior to
such merger or consolidation, or (d) the Company sells all or substantially all
of its assets to another corporation which is not a wholly-owned subsidiary of
the Company.
2. EMPLOYMENT.
The Company hereby employs the Employee and the Employee hereby accepts
employment on the terms and conditions set forth herein.
3. TERM.
The initial term of this Agreement shall be from September 1, 1998
until February 28, 2001 unless sooner terminated in accordance with the
provisions herein regarding termination. Subject to earlier termination as
provided herein, the initial term of this Agreement shall be automatically
extended for one (1) year from March 1, 2001, unless either the Employee or the
Company gives written notice to the other of intention not to renew this
Agreement six months or more prior to February 28, 2001.
4. COMPENSATION.
(a) Base Salary. For all services rendered by the Employee under this
Agreement, the Company shall pay the Employee a base salary of $196,266.72 per
year. The Company will continue to review the Employee's base salary and
performance annually, and determine the amount of any increase to the Employee's
base salary which is appropriate based on the Company's then current policies
and procedures for reviewing and adjusting the base salaries of its officers.
Such salary shall be payable in equal semi-monthly installments in accordance
with the customary payroll policies of the Company in effect at the time such
payment is made, or as otherwise mutually agreed upon.
(b) Annual Bonus. Effective for the Company's fiscal year ending
February 28, 1999 and continuing with respect to each subsequent fiscal year
thereafter during the term of this Agreement, the Company will pay Employee an
annual bonus equal to the sum of (a) the mathematical product of Employee's base
salary pursuant to Subsection 4(a) for such fiscal year multiplied by the
Applicable Revenue Bonus Percentage and (b) the mathematical product of the
Employee's base salary pursuant to Subsection 4(a) for such fiscal year
multiplied by the Applicable EPS Bonus Percentage. The Employee's bonus pursuant
to this Subsection 4(b) shall be earned as of the end of the Company's fiscal
year and payable within five days after the Company's receipt of its audited
annual financial statements. The formula set forth herein for
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<PAGE> 5
determining annual bonuses shall be adjusted from time to time when and if there
occur stock splits or other changes in capital structure which result in an
increase or decrease in outstanding capital stock of more than 25%. The bonus
discussed in this Section 4(b) shall supercede and replace any other bonus plan
applicable to the Employee prior to the effective date of this Agreement.
(c) Bonus. In addition to the Employee's annual base salary and other
benefits provided for in this Agreement, the Company may pay to the Employee a
discretionary bonus with respect to any completed fiscal year in an amount to be
approved by the Board of Directors of the Company; provided, however, in no
event shall the bonus payable hereunder, if any, exceed Employee's annual base
salary provided for in Section 4(a).
(d) Benefits. The Employee shall be entitled to participate in or
receive benefits under any employee benefit plan or arrangements made available
by the Company in the future to its executive officers and key management
personnel, subject to and on a basis consistent with the terms, conditions and
overall administration of such plan or arrangement. Nothing paid to the Employee
under any plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of the salary and bonuses payable to the
Employee pursuant to Subsections 4(a), (b) and (c).
(e) Expenses. Upon receipt of itemized vouchers, expense account
reports, and supporting documents submitted to the Company in accordance with
the Company's procedures from time to time in effect, the Company shall
reimburse Employee for all reasonable and necessary travel, entertainment, and
other reasonable and necessary business expenses incurred ordinarily and
necessarily by Employee in connection with the performance of his duties
hereunder.
(f) Vacation. Employee shall be vested as a ten-year employee of the
Company for the purpose of the Vacation Policy benefit. Currently, a ten-year
employee is entitled to receive four weeks paid vacation benefit during each
calendar year.
5. POSITION, DUTIES, EXTENT OF SERVICES AND SITUS.
(a) Position and Duties. Employee shall serve as the Chief Financial
Officer, Secretary and Chief Accounting Officer of the Company, accountable only
to the Chairman of the Board and Chief Executive Officer (the "Chairman") of the
Company and, subject to the authority of the Chairman, shall have such powers
and duties as may from time to time be prescribed by the Chairman and provided
that such duties are reasonable and customary for a Chief Financial Officer,
Secretary and Chief Accounting Officer of a public company.
(b) Extent of Services and Situs. The Employee shall devote
substantially all of his business time, attention, and energy to the business
and affairs of the Company and shall not during the term of his employment under
this Agreement engage in any other business activity which could constitute a
conflict of interest, whether or not such business activity is pursued for gain.
profit, or other pecuniary advantage. This shall not be construed as preventing
the
5
<PAGE> 6
Employee from managing his current investments or investing his assets in such
form or manner as will not require any services on the part of the Employee in
the operation and the affairs of the companies in which such investments are
made, subject to the provisions of Sections 6 and 27.
6. COVENANT NOT TO COMPETE.
(a) The Employee acknowledges that (i) as a result of his position with
the Company he will receive specialized and unique training and knowledge
concerning the Company, its business, its customers and the industry in which it
competes, (ii) the Company's business, in large part, depends upon its exclusive
possession and use of the Proprietary Information (as defined in Section 27),
(iii) the Company is entitled to protection against the unauthorized disclosure
or use by Employee of the Proprietary Information or the training and knowledge
received by the Employee and (iv) he has received in this Agreement good and
valuable consideration for the covenants he is making in this Section 6 and in
Section 27. The Company and the Employee acknowledge and agree that the
covenants contained in this Section 6 and in Section 27 are reasonably necessary
for the protection of the Company and are reasonably limited with respect to the
activities they prohibit, their duration, their geographical scope and their
effects on the Employee and the public. The parties acknowledge that the purpose
and effect of the covenants are to protect the Company from unfair competition
by the Employee.
(b) Except as provided in the last sentence of this Section 6(b),
during the period in which the Employee renders services to the Company under
this Agreement and for eighteen (18) months thereafter, the Employee shall not,
without the written consent of the Company, own, manage, operate, control, serve
as an officer, director, employee, partner or consultant of or be connected in
any way with or have any interest in any corporation, partnership,
proprietorship or other entity which carries on business activities in
competition with the Company's activities in any state of the United States or
in any foreign country in which the Company has sold or installed its products
or systems or has definitive plans to sell or install its products at any time
prior to or at the time of the date of termination of the Employee's employment;
except that the Employee may own up to 1% of the shares of any publicly-owned
corporation, provided that none of his other relationships with such corporation
violates such covenant. Notwithstanding the foregoing, the provisions of this
Section 6 shall not apply if the Employee's employment with the Company under
this Agreement is terminated (i) by the Company, unless the Employee is
terminated in accordance with Section 7 or for Cause in accordance with
Subsection 9.1(a) or 9.2(a), or (ii) at the election of the Employee prior to
the Triggering Date after the occurrence of an Event of Default which has not
been waived in writing or on or after the Triggering Date for Good Reason.
(c) The Company and the Employee hereby agree that in the event that
the noncompetition covenants contained herein should be held by any court or
other constituted legal authority of competent jurisdiction to be effective in
any particular area or jurisdiction only if said covenants are modified to limit
their duration, geographical area or scope, then the parties hereto will
consider Section 6 to be amended and modified with respect to that particular
area or jurisdiction so as to comply with the order of any such court or other
constituted legal authority and, as to all other jurisdictions or political
subdivisions thereof, the noncompetition covenants
6
<PAGE> 7
contained herein will remain in full force and effect as originally written. The
Company and the Employee further agree that in the event that the noncompetition
covenants contained herein should be held by any court or other constituted
legal authority of competent jurisdiction to be void or otherwise unenforceable
in any particular area or jurisdiction notwithstanding the operation of this
Section 6(c), then the parties hereto will consider this Section 6 to be amended
and modified so as to eliminate therefrom that particular area or jurisdiction
as to which such noncompetition covenants are so held void or otherwise
unenforceable, and, as to all other areas and jurisdictions covered by the
noncompetition covenants, the terms and provisions hereof shall remain in full
force and effect as originally written.
(d) Employee recognizes and acknowledges that the Company would suffer
irreparable harm and substantial loss if Employee violated any of the terms and
provisions of this Section 6 or Section 27 and that the actual damages which
might be sustained by the Company as the result of any breach of this Section 6
or Section 27 would be difficult to ascertain. Employee agrees, at the election
of the Company and in addition to, and not in lieu of, the Company's right to
terminate Employee's employment and to seek all other remedies and damages which
the Company may have at law and/or equity for such breach, that the Company
shall be entitled to an injunction restraining Employee from breaching any of
the terms or provisions of this Section 6 or Section 27.
7. COMPENSATION IN THE EVENT OF DISABILITY.
(a) Disability. If the Employee becomes disabled during the term of
this Agreement the Company shall cause to be paid to the Employee an amount
equal to his base salary in effect at the time of disability under Subsection
4(a), for the shorter of the duration of the disability or the remainder of the
term of this Agreement and, subject to the provisions of Sections 22 and 25,
with no liability on its part for further payments to the Employee during the
duration of the disability. Subject to Subsection 7(b) below, full compensation
shall be reinstituted upon the Employee's return to employment and resumption of
his duties. Without limiting the scope of the immediately preceding sentence,
and subject to Subsection 7(b) below, if the annual bonus or any discretionary
bonus would otherwise be payable pursuant to Subsections 4(b) or (c) hereof
while the Employee is disabled and the Employee thereafter returns to work
without such disability ever resulting in his Complete Disability (as defined in
Subsection 7(b) hereof), the Company will pay the Employee such annual bonus and
any such discretionary bonus promptly after the Employee has returned to work
for ten consecutive business days. For purposes of this Subsection 7(a) the
Employee shall be deemed "disabled" when, despite any reasonable accommodation
required by law, he is unable, for a period of 90 consecutive days, to perform
his normal duties of employment due to bodily injury or disease or any other
physical or mental disability.
(b) Complete Disability. The Company shall have the right to terminate
the Employee's employment under this Agreement prior to the expiration of the
term upon the "Complete Disability" of the Employee as hereinafter defined
(provided, however, that the obligations of the Company under Subsection 7(a)
shall not terminate). The term "Complete Disability" as used in this Subsection
7(b) shall mean (i) the total inability of the Employee,
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<PAGE> 8
despite any reasonable accommodation required by law, due to bodily injury or
disease or any other physical or mental incapacity, to perform the services
provided for hereunder for a period of 120 days in the aggregate, within any
given period of 180 consecutive days during the term of this Agreement, in
addition to any statutorily required leave of absence, and (ii) where such
inability will, in the opinion of a qualified physician (reasonably acceptable
to Employee), be permanent and continuous during the remainder of his life.
8. COMPENSATION IN THE EVENT OF DEATH.
If the Employee dies during the term of his employment, the Company
shall pay to such person as the Employee shall designate in a notice filed with
the Company, or, if no such person shall be designated, to his estate as a death
benefit, his base salary in effect at the time of his death pursuant to
Subsection 4(a), in equal semi-monthly installments on the first and fifteenth
day of each month immediately succeeding his death, for a period of months (not
exceeding 12) determined by multiplying the number of complete 12-month periods
of employment of the Employee by the Company (whether pursuant to an employment
agreement or not) by two, in addition to any payments the Employee's spouse,
beneficiaries, or estate may be entitled to receive pursuant to any pension or
employee benefit plan or life insurance policy maintained by the Company, and,
except for any obligations of the Company under Sections 22 and 25, all other
obligations of the Company hereunder shall cease at the time of the Employee's
death.
9. TERMINATION.
9.1 Termination Prior to the Triggering Date. (a) Upon at least 30
days' prior written notice to the Employee and prior to the Triggering Date, the
Company may terminate the Employee's employment with the Company under this
Agreement only for Cause or in accordance with Section 7 and, subject to the
provisions of Sections 7, 22 and 25, with no liability on its part for further
payments to the Employee. The Company may effect a termination for Cause
pursuant to this Subsection 9.1(a) only by the affirmative vote of a majority of
the members of the Board of Directors of the Company. In voting upon such
termination for Cause, if the Employee is also a member of the Board of
Directors of the Company, then he may not vote on, and will not be considered
present for any purpose with respect to, a matter presented to the Board of
Directors of the Company pursuant to this Subsection 9.1(a).
(b) Prior to the Triggering Date, the Employee may terminate his
employment with the Company under this Agreement by giving at least 90 days'
prior written notice of his desire to terminate employment to the Board of
Directors of the Company. If the Employee's employment with the Company under
this Agreement is terminated pursuant to this Subsection 9.1(b), the Employee
will continue to accrue and receive his base salary in effect at the time
pursuant to Subsection 4(a) through the date of termination specified in such
notice with no liability on the part of the Company for further payments to the
Employee, subject to the provisions of Sections 22 and 25.
(c) Prior to the Triggering Date, if the Employee's employment with the
Company is terminated by the Company without Cause or if the Employee terminates
his employment with
8
<PAGE> 9
the Company following the occurrence of an Event of Default which has not been
waived in writing by the Employee, the Employee will continue to accrue and
receive his base salary in effect at the time pursuant to Subsection 4(a)
through the date of termination and will be entitled to receive the benefits
provided for under Subsection 10.1 (unless the Employee's employment is
terminated in accordance with Section 7) with no liability on the part of the
Company for further payments to the Employee, subject to the provisions of
Sections 7, 22 and 25.
9.2 Termination On or After the Triggering Date. (a) Upon at least 30
days' prior written notice to the Employee and on or after the Triggering Date,
the Company may terminate the Employee's employment with the Company under this
Agreement only for Cause or in accordance with Section 7 and, subject to the
provisions of Sections 7, 22 and 25, with no liability on its part for further
payments to the Employee. The Company may effect a termination for Cause
pursuant to this Subsection 9.2(a) only by the affirmative vote of two-thirds of
the members of the Board of Directors of the Company. In voting upon such
termination for Cause, if the Employee is also a member of the Board of
Directors of the Company, then he may not vote on, and will not be considered
present for any purpose with respect to a matter presented to the Board of
Directors of the Company pursuant to this Subsection 9.2(a).
(b) On or after the Triggering Date, if the Employee's employment with
the Company is terminated by the Company without Cause or if the Employee
terminates his employment with the Company for Good Reason, the Employee will
continue to accrue and receive his base salary in effect at the time pursuant to
Subsection 4(a) through the date of termination and will be entitled to receive
the payments and benefits provided for under Subsections 10.2 and 10.3 (unless
the Employee's employment is terminated in accordance with Section 7) with no
liability on the part of the Company for further payments to the Employee,
subject to the provisions of Sections 7, 22 and 25.
(c) On or after the Triggering Date, the Employee may terminate his
employment with the Company under this Agreement by giving at least 90 days'
prior written notice of his desire to terminate employment to the Board of
Directors of the Company. If the Employee's employment with the Company under
this Agreement is terminated pursuant to this Subsection 9.2(c), the Employee
will continue to accrue and receive his base salary in effect at the time
pursuant to Subsection 4(a) through the date of termination specified in such
notice with no liability on the part of the Company for further payments to the
Employee, subject to the provisions of Sections 22 and 25.
10. COMPENSATION AFTER CERTAIN TERMINATIONS.
10.1 Remaining Compensation. If the Employee's employment with the
Company is terminated (whether such termination is by the Employee or by the
Company) at any time prior to the Triggering Date for any reason other than (a)
termination by the Company for Cause in accordance with Subsection 9.1(a); (b)
termination by the Company in accordance with Section 7; (c) the Employee's
death; or (d) termination at the election of the Employee pursuant to Subsection
9.1(b) then, within five days after the date of such termination, the Remaining
Compensation (as herein defined) which would have been paid to the Employee
during the
9
<PAGE> 10
remainder of the term of this Agreement if termination had not occurred shall
become due and payable and shall be paid to the Employee in a single lump sum in
cash. For purposes of this Subsection 10.1, the "Remaining Compensation" shall
mean the annual base salary for one year only payable to the Employee pursuant
to Subsection 4(a) at the time of termination plus an amount representing the
value of all employee benefits including, without limitation, any unearned
annual bonuses described in Subsection 4(b), discretionary bonuses and incentive
compensation under plans then in effect. For these purposes, the value of any
unearned annual bonuses and all of such other employee benefits shall be deemed
to be equal to 12 months base salary payable to the Employee pursuant to
Subsection 4(a) at the time his employment is terminated.
10.2 Post Triggering Date Severance Payment. If the Employee's
employment with the Company is terminated (whether such termination is by the
Employee or by the Company) at any time on or within three years after the
Triggering Date for any reason other than (a) termination by the Company for
Cause in accordance with Subsection 9.2(a) or (b) termination by the Company in
accordance with Section 7 or (c) the Employee's death or (d) termination at the
election of the Employee without Good Reason, then, within five days after the
date of such termination, the Company shall pay the Employee a lump sum amount
in cash equal to 2.99 times the Annualized Compensation Amount.
10.3 Gross-Up Payment. In the event that (i) the Employee becomes
entitled to the payments provided under Section 10.2 of this Agreement (the
"Change in Control Payments") and any of the Change in Control Payments will be
subject to the tax (the "Excise Tax") imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), or any successor provision, or
(ii) any payments or benefits received or to be received by the Employee
pursuant to the terms of any other plan, arrangement or agreement (the "Benefit
Payments") will be subject to the Excise Tax, the Company shall pay to the
Employee an additional amount (the "Gross-Up Payment") such that the net amount
retained by the Employee, after deduction of any Excise Tax on the Change in
Control Payments and the Benefit Payments, and any federal, state and local
income tax and Excise Tax upon the payment provided for by this Section 10.3,
shall be equal to the Change in Control Payments and the Benefit Payments,
provided, however, that in determining the amount of the Gross-Up Payment, any
Excise Tax on the Change in Control Payments and the Benefit Payments shall be
determined using a rate no higher that 20%. For purposes of determining whether
any of the Change in Control Payments or the Benefit Payments will be subject to
the Excise Tax and the amount of such Excise Tax, (i) any payments or benefits
received or to be received by the Employee in connection with a change in
control of the Company or the Employee's termination of employment (whether
pursuant to the terms of the agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result in change in control
or any person affiliated with the Company or such persons) shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of Section 280G(b)(1) shall
be treated as subject to the Excise Tax, unless in the opinion of tax counsel
selected by the Company's independent auditors and acceptable to the Employee
such payments or benefits (in whole or in part) do not constitute parachute
payments, or such excess payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of Section
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<PAGE> 11
280G(b)(4) of the Code, (ii) the amount of the Change in Control Payments and
the Benefit Payments that shall be treated as subject to the Excise Tax shall be
equal to the lesser of (A) the total amount of the Change in Control Payments
and the Benefits Payments or (B) the amount of excess parachute payments within
the meaning of Sections 280G(b)(1) and (4) (after applying clause (i), above)
and (iii) the value of any non-cash benefits or any deferred payment or benefit
shall be determined by the Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Employee shall be deemed to
pay federal income taxes at the highest marginal rate of federal income taxation
in the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rates of taxation in the state and
locality of the Employee's residence on the date of termination, net of the
maximum reduction in federal income taxes which could be obtained from deduction
of such state and local taxes. In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time
of termination of the Employee's employment, the Employee shall repay to the
Company at that time that amount of such reduction in Excise Tax as is finally
determined to be the portion of the Gross-Up Payment attributable to such
reduction plus interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Employee's employment (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional gross-up payment to the Employee
in respect of such excess (plus any interest payable with respect to such
excess) at the time that the amount of such excess is finally determined.
11. MITIGATION.
The Employee shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Agreement be reduced by
any compensation earned by the Employee as the result of employment by another
employer after the date of termination of Employee's employment with the
Company, or otherwise.
12. ENTIRE AGREEMENT.
This Agreement embodies the entire agreement and understanding between
the parties hereto with respect to the subject matter hereof and supersedes all
prior negotiations, agreements, and understandings relating to such subject
matter, and may be modified or amended only by an instrument in writing signed
by the parties hereto.
13. LAW TO GOVERN.
This Agreement is executed and delivered in the State of Texas and
shall be governed, construed and enforced in accordance with the laws of the
State of Texas, except as stated in Section 28.
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<PAGE> 12
14. ASSIGNMENT.
This Agreement is personal to the parties, and neither this Agreement
nor any interest herein may be assigned (other than by will or by the laws of
descent and distribution) without the prior written consent of the parties
hereto nor be subject to alienation, anticipation, sale, pledge, encumbrance,
execution, levy, or other legal process of any kind against the Employee or any
of his beneficiaries or any other person. Notwithstanding the foregoing, the
Company shall be permitted to assign this Agreement to any corporation or other
business entity succeeding to substantially all of the business and assets of
the Company by merger, consolidation, sale of assets, or otherwise, if the
Company obtains the assumption of this Agreement by such successor. Failure by
the Company to obtain such assumption prior to the effectiveness of such
succession shall be a breach of this Agreement and shall entitle the Employee to
receive compensation from the Company under this Agreement in the same amount
and on the same terms as he would be entitled to hereunder if he has voluntarily
terminated his employment after the Triggering Date, and, for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Triggering Date.
15. BINDING AGREEMENT.
Subject to the provisions of Section 14 of this Agreement, this
Agreement shall be binding upon and shall inure to the benefit of the Company
and the Employee and their respective representatives, successors, and assigns.
16. REFERENCES AND GENDER.
All references to "Sections" and "Subsections" contained herein are,
unless specifically indicated otherwise, references to sections and subsections
of this Agreement. Whenever herein the singular number is used, the same shall
include the plural where appropriate, and words of either gender shall include
the other gender where appropriate.
17. WAIVER.
No waiver of any right under this Agreement shall be deemed effective
unless the same is set forth in writing and signed by the party giving such
waiver, and no waiver of any right shall be deemed to be a waiver of any such
right in the future. Only the Chief Executive Officer of the Company has
authority to waive any provision of this Agreement.
18. NOTICES.
Except as may be otherwise specifically provided in this Agreement, all
notices required or permitted hereunder shall be in writing and will be deemed
to be delivered when deposited in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, and (i) if to the
Company, if addressed to 17811 Waterview Parkway, Dallas, Texas 75252 and (ii)
if to the Employee, if addressed to 3517 Wentwood Drive, Dallas, Texas 75225, or
at such other
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<PAGE> 13
addresses as may have theretofore been specified by written notice delivered in
accordance herewith.
19. OTHER INSTRUMENTS.
The parties hereto covenant and agree that they will execute such other
and further instruments and documents as are or may become necessary or
convenient to effectuate and carry out the terms of this Agreement.
20. HEADINGS.
The headings used in this Agreement are used for reference purposes
only and do not constitute substantive matter to be considered the terms of this
Agreement.
21. INVALID PROVISION.
Any clause, sentence, provision, section, subsection, or paragraph of
this Agreement held by a court of competent jurisdiction to be invalid, illegal,
or ineffective shall not impair, invalidate, or nullify the remainder of this
Agreement, but the effect thereof shall be confined to the clause, sentence,
provision, section, subsection, or paragraph so held to be invalid, illegal or
ineffective.
22. RIGHTS UNDER PLANS AND PROGRAMS.
Anything in this Agreement to the contrary notwithstanding, no
provision of this Agreement is intended, nor shall it be construed, to reduce or
in any way restrict any benefit to which the Employee may be entitled under any
other agreement, plan, arrangement, or program providing benefits for the
Employee. This Agreement shall not be construed to modify the Employee's right
to receive salary and/or bonuses fully earned pursuant to subsections 4(a), (b)
or (c) of this Agreement prior to any date the Employee's employment with the
Company is terminated.
23. MULTIPLE COPIES.
This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument. The terms of this Agreement
shall become binding upon each party from and after the time that he or it
executed a copy hereof. In like manner, from and after the time that any party
executes a consent or other document, such consent or other document shall be
binding upon such parties.
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<PAGE> 14
24. WITHHOLDING OF TAXES.
The Company may withhold from any amounts payable under this Agreement
all federal, state, city, or other taxes as shall be required pursuant to any
law or government regulation or ruling.
25. LEGAL FEES AND EXPENSES.
The Company shall pay and be responsible for all legal fees and
expenses which the Employee may incur as a result of the Company's failure to
perform under this Agreement or as a result of the Company or any successor
contesting the validity or enforceability of this Agreement.
26. SET OFF OR COUNTERCLAIM.
Except with respect to any claim against or debt or other obligation of
the Employee properly recorded on the books and records of the Company prior to
the Triggering Date, there shall be no right of set off or counterclaim against,
or delay in, any payment by the Company to the Employee or his beneficiaries
provided for in this Agreement in respect of any claim against or debt or other
obligation of the Employee, whether arising hereunder or otherwise.
27. ASSIGNMENT, PROTECTION AND CONFIDENTIALITY OF PROPRIETARY INFORMATION.
The Employee acknowledges and agrees that all items of the Company's
Proprietary Information constitute valuable, special and unique assets and trade
secrets of its business, which provide to the Company a competitive advantage
over others who do not have access thereto and access to which is essential to
the performance of the Employee's duties hereunder. The Employee shall not,
during the term of this Agreement or thereafter, use or disclose any Proprietary
Information that is not otherwise publicly available, in whole or in part, for
his benefit or for the benefit of any other person or party, except for the
Company. As used herein, "Proprietary Information" includes, but is not limited
to, customer lists and prices, whether current or prospective, product designs
or other product information, experimental developments and other research and
development information, testing processes, marketing studies and research
activities, and any other trade secrets concerning the Company, its
shareholders, officers, directors, employees, business prospects, customers,
transactions, finances, affairs, opportunities, operations, properties or
assets. The Employee further agrees that all inventions, devices, compounds,
processes, formulas, techniques, improvements and modifications which he may
develop, in whole or in part, during the term of his employment or through or
with the facilities, equipment or resources of the Company shall be and remain
the sole and exclusive property of the Company. The Employee agrees to deliver
to the Company at any time the Company may request, all memoranda, notes, plans,
records, reports, and other documents (including copies thereof and all
embodiments thereof whether in computerized form or any other medium) relating
to the business or affairs of the Company or its subsidiaries which he may then
possess or have under his control. The Employee shall maintain in good condition
all
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<PAGE> 15
tangible and other forms of Proprietary Information in the Employee's custody or
control until his obligations under the preceding sentence are satisfied. The
Employee agrees to execute all documents and take such other actions as may be
required to comply with this Section.
28. ARBITRATION.
Any dispute arising in connection with this Agreement or in any way
arising out of or related to the employment relationship between the Employee
and the Company, or the termination of that relationship, including any claim of
unlawful discrimination, shall be finally resolved by arbitration in Dallas,
Texas, governed by the Federal Arbitration Act and conducted pursuant to and in
accordance with the National Rules for the Resolution of Employment Disputes of
the American Arbitration Association. Either the Company or the Employee may
request arbitration by sending written notice to the other party. In any such
arbitration, the only issues to be considered and determined by the
arbitrator(s) shall be issues pertaining to legal and equitable rights and
obligations of the parties under this Agreement and any applicable law. A
decision and award of the arbitrator(s) shall be final, and may be entered in
any court having jurisdiction thereof, and application may be made to such court
for judicial acceptance and/or an order enforcing such decision and/or award.
Judicial review of any decision or award shall be in accordance with the Federal
Arbitration Act, except that review of any award of punitive or exemplary
damages shall be conducted as if the award of such damages were made by a jury
sitting in a federal district court in Dallas, Texas. In the event the
arbitrator(s) determine there is a prevailing party in the arbitration, the
prevailing party shall recover from the losing party all costs of arbitration,
including but not limited to the fees of the arbitrator(s) and reasonable
attorneys' fees incurred by the prevailing party. The provisions of this Section
28 shall not be construed to limit or to preclude either party from bringing an
action in any court of competent jurisdiction for injunctive relief.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
INTERVOICE, INC.
By: /s/ DANIEL D. HAMMOND
---------------------------------------
Name: DANIEL D. HAMMOND
Title: Chairman of the Board and
Chief Executive Officer
/s/ ROB-ROY J. GRAHAM
------------------------------------------
ROB-ROY J. GRAHAM
15
<PAGE> 1
EXHIBIT 10.3
INTERVOICE, INC.
1998 STOCK OPTION PLAN
ARTICLE 1. ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT. InterVoice, Inc., a Texas corporation, hereby
establishes the InterVoice, Inc. 1998 Stock Option Plan, as set forth in this
document.
1.2 PURPOSE. The purposes of the Plan are to attract able persons to enter
the employ of the Company, to encourage Employees to remain in the employ of the
Company and to provide motivation to Employees to put forth maximum efforts
toward the continued growth, profitability and success of the Company, by
providing incentives to such persons through the ownership and performance of
the Common Stock of InterVoice. A further purpose of the Plan is to provide a
means through which InterVoice may attract able persons to become directors of
InterVoice and to provide directors of InterVoice with additional incentive and
reward opportunities designed to strengthen their concern for the welfare of
InterVoice and its stockholders. Toward these objectives, Options may be granted
under the Plan to Employees and Outside Directors on the terms and subject to
the conditions set forth in the Plan.
1.3 EFFECTIVE DATE OF PLAN. This Plan shall be effective as of March 26,
1998.
ARTICLE 2. DEFINITIONS
2.1 AFFILIATE. "Affiliate" means a "parent corporation" or a "subsidiary
corporation" of InterVoice, as those terms are defined in Section 424(e) and (f)
of the Code.
2.2 BOARD. "Board" means the Board of Directors of InterVoice.
2.3 CODE. "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor provisions and
regulations thereto.
2.4 COMMITTEE. "Committee" means the Compensation Committee of the Board,
or such other committee of the Board as may be designated by the Board to
administer the Plan; provided that the Committee shall consist of two or more
directors of InterVoice, all of whom are "Non-Employee Directors" within the
meaning of Rule 16b-3 under the Exchange Act. The members of the Committee shall
be appointed from time to time by, and shall serve at the discretion of, the
Board.
2.5 COMMON STOCK. "Common Stock" means the Common Stock, no par value per
share, of InterVoice, or any stock or other securities of InterVoice hereafter
issued or issuable in
<PAGE> 2
substitution or exchange for the Common Stock.
2.6 COMPANY. "Company" means InterVoice and its Affiliates.
2.7 CORPORATE CHANGE. A "Corporate Change" shall be deemed to have
occurred for purposes of the Plan upon (a) the dissolution or liquidation of
InterVoice; (b) a reorganization, merger or consolidation of InterVoice with one
or more corporations (other than a merger or consolidation effecting a
reincorporation of InterVoice in another state or any other merger or
consolidation in which the shareholders of the surviving corporation and their
proportionate interests therein immediately after the merger or consolidation
are substantially identical to the shareholders of InterVoice and their
proportionate interests therein immediately prior to the merger or
consolidation) (collectively, a "Corporate Change Merger"); (c) the sale of all
or substantially all of the assets of InterVoice; or (d) the occurrence of a
Change in Control. A "Change in Control" shall be deemed to have occurred for
purposes of the Plan if (a) individuals who were directors of InterVoice
immediately prior to a Control Transaction shall cease, within two years of such
Control Transaction, to constitute a majority of the Board (or of the Board of
Directors of any successor to InterVoice or to a company which has acquired all
or substantially all its assets) other than by reason of an increase in the size
of the membership of the applicable Board that is approved by at least a
majority of the individuals who were directors of InterVoice immediately prior
to such Control Transaction or (b) any entity, person or Group acquires shares
of InterVoice in a transaction or series of transactions that result in such
entity, person or Group directly or indirectly owning beneficially 50% or more
of the outstanding shares of Common Stock. As used herein, "Control Transaction"
means (a) any tender offer for or acquisition of capital stock of InterVoice
pursuant to which any person, entity or Group directly or indirectly acquires
beneficial ownership of 20% or more of the outstanding shares of Common Stock,
(b) any Corporate Change Merger of InterVoice, (c) any contested election of
directors of InterVoice or (d) any combination of the foregoing, any one of
which results in a change in voting power sufficient to elect a majority of the
Board. As used herein, "Group" means persons who act "in concert" as described
in Sections 13(d)(3) and/or 14(d)(2) of the Exchange Act.
2.8 EFFECTIVE DATE. "Effective Date" means the date an Option is
determined to be effective by the Committee or the Board upon its grant of such
Option.
2.9 EMPLOYEE. "Employee" means any person treated as an employee by
InterVoice or an Affiliate. "Employee" shall not include any person treated by
InterVoice or an Affiliate as an independent contractor.
2.10 EXCHANGE ACT. "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, including rules thereunder and successor
provisions and rules thereto.
2.11 FAIR MARKET VALUE. "Fair Market Value" means the fair market value of
the Common Stock, as determined in good faith by the Committee or, (i) if the
Common Stock is traded in the over-the-counter market, the average of the
representative closing bid and asked
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<PAGE> 3
prices as reported by the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") for the date the Option is granted (or if there was
no quoted price for such date of grant, then for the last preceding business day
on which there was a quoted price), or (ii) if the Common Stock is traded in the
NASDAQ National Market System, the average of the highest and lowest selling
prices for such stock as quoted on the NASDAQ National Market System for the
date the Option is granted (or if there are no sales for such date of grant,
then for the last preceding business day on which there were sales), or (iii) if
the Common Stock is listed on any national stock exchange, the average of the
highest and lowest selling prices for such stock as quoted on such exchange for
the date the Option is granted (or if there are no sales for such date of grant,
then for the last preceding business day on which there were sales).
2.12 INTERVOICE. "InterVoice" means InterVoice, Inc., a Texas corporation,
and any successor thereto.
2.13 OPTION. "Option" means an option to purchase shares of Common Stock
granted to a Participant pursuant to Article 6.
2.14 OPTION AGREEMENT. "Option Agreement" means a written agreement between
InterVoice and a Participant that sets forth the terms, conditions, restrictions
and/or limitations applicable to an Option.
2.15 OUTSIDE DIRECTOR. "Outside Director" means an individual duly elected
or chosen as a director of InterVoice who is not also an Employee.
2.16 PARTICIPANT. "Participant" means any Employee or Outside Director to
whom an Option has been granted under the Plan.
2.17 PLAN. "Plan" means this InterVoice, Inc. 1998 Stock Option Plan.
2.18 RETIREMENT. "Retirement" means the termination of a Participant's
employment or service on or after his or her 65th birthday.
ARTICLE 3. PLAN ADMINISTRATION
3.1 RESPONSIBILITY OF COMMITTEE. Subject to the terms and provisions of
the Plan, including, without limitation, Section 3.6, the Committee shall have
total and exclusive responsibility to control, operate, manage and administer
the Plan in accordance with its terms.
3.2 AUTHORITY OF COMMITTEE. The Committee shall have all the authority
that may be necessary or helpful to enable it to discharge its responsibilities
with respect to the Plan. Without limiting the generality of the preceding
sentence, the Committee shall have the exclusive right, subject to the
provisions of Section 3.6, to: (a) interpret the Plan and the Option Agreements
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<PAGE> 4
executed hereunder; (b) determine eligibility for participation in the Plan; (c)
decide all questions concerning eligibility for, and the size of, Options
granted under the Plan; (d) construe any ambiguous provision of the Plan or any
Option Agreement; (e) prescribe the form of the Option Agreements embodying
Options granted under the Plan; (f) correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Option Agreement; (g) issue
administrative guidelines as an aid to administer the Plan and make changes in
such guidelines as it from time to time deems proper; (h) make regulations for
carrying out the Plan and make changes in such regulations as it from time to
time deems proper; (i) to the extent permitted under the Plan, grant waivers of
Plan terms, conditions, restrictions and limitations; (j) accelerate the vesting
of an Option when such action or actions would be in the best interests of the
Company; (k) grant Options in replacement of Options previously granted under
the Plan or any other employee benefit plan of the Company; and (l) take any and
all other actions it deems necessary or advisable for the proper operation or
administration of the Plan.
3.3 DISCRETIONARY AUTHORITY. Subject to the provisions of Section 3.6, (i)
the Committee shall have full discretionary authority in all matters related to
the discharge of its responsibilities and the exercise of its authority under
the Plan, including, without limitation, its construction of the terms of the
Plan and its determination of eligibility for participation under the Plan, and
(ii) the decisions of the Committee and its actions with respect to the Plan
shall be final, conclusive and binding on all persons having or claiming to have
any right or interest in or under the Plan, including Participants and their
respective estates, beneficiaries and legal representatives.
3.4 ACTION BY THE COMMITTEE. The Committee may act only by a majority of
its members. Any determination of the Committee may be made, without a meeting,
by a writing or writings signed by all of the members of the Committee. In
addition, the Committee may authorize any one or more of its members to execute
and deliver documents on behalf of the Committee.
3.5 DELEGATION OF AUTHORITY. Notwithstanding anything contained in the Plan
to the contrary, the Committee may, in its discretion, delegate some or all of
its authority under the Plan to any person or persons; provided, however, that
any such delegation shall be in writing; and provided further that only the
Committee may grant Options to Employees who are subject to Section 16 of the
Exchange Act.
3.6 BOARD AUTHORITY. Notwithstanding the authority hereby delegated to the
Committee to administer the Plan, the Board shall have sole and exclusive
authority, subject to the express provisions of the Plan, to grant Options to
Outside Directors under the Plan, to determine the terms, conditions,
restrictions and/or limitations applicable to such Options and to make all other
determinations and take any and all other actions it deems necessary or
advisable with respect to such Options. The Board shall have no authority under
the Plan to select and grant Options to Employees, and such authority is vested
exclusively in the Committee.
3.7 LIABILITY; INDEMNIFICATION. No member of the Committee or the Board nor
any person to whom authority has been delegated by the Committee, shall be
personally liable for any
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<PAGE> 5
action, interpretation or determination made in good faith with respect to the
Plan or Options granted hereunder, and each member of the Committee and the
Board shall be fully indemnified and protected by InterVoice with respect to any
liability he or she may incur with respect to any such action, interpretation or
determination, to the extent permitted by applicable law.
ARTICLE 4. ELIGIBILITY
All Employees and Outside Directors are eligible to participate in the
Plan. The Committee shall select, from time to time, Participants from those
Employees, and the Board shall select, from time to time, Participants from
those Outside Directors, who, in the opinion of the Committee or the Board, can
further the Plan's purposes. In making this selection, the Committee and the
Board may give consideration to the functions and responsibilities of the
Participant, his or her past, present and potential contributions to the growth
and success of the Company and such other factors deemed relevant by the
Committee or the Board. Once a Participant is so selected, the Committee or the
Board shall determine the size of Option to be granted to the Participant and
shall establish in the related Option Agreement the terms, conditions,
restrictions and/or limitations applicable to the Option, in addition to those
set forth in the Plan and the administrative rules and regulations, if any,
established by the Committee. No Employee is entitled to receive an Option
unless selected by the Committee, and no Outside Director is entitled to receive
an Option unless selected by the Board.
ARTICLE 5. SHARES SUBJECT TO THE PLAN
5.1 AVAILABLE SHARES. The maximum number of shares of Common Stock that
shall be available for grant of Options under the Plan shall not exceed 500,000,
subject to adjustment as provided in Sections 5.2 and 5.3. Shares of Common
Stock issued pursuant to the Plan may be shares of original issuance or treasury
shares or a combination of the foregoing, as the Board, in its discretion, shall
from time to time determine.
5.2 ADJUSTMENTS FOR RECAPITALIZATIONS AND REORGANIZATIONS.
(a) The shares with respect to which Options may be granted under the
Plan are shares of Common Stock as presently constituted, but if, and
whenever, prior to the expiration or satisfaction of an Option theretofore
granted, InterVoice shall effect a subdivision or consolidation of shares
of Common Stock or the payment of a stock dividend on Common Stock without
receipt of consideration by InterVoice, the number of shares of Common
Stock with respect to which such Option may thereafter be exercised or
satisfied, as applicable, (i) in the event of an increase in the number of
outstanding shares shall be proportionately increased, and the exercise
price per share shall be proportionately reduced, and (ii) in the event of
a reduction in the number of outstanding shares shall be proportionately
reduced, and the exercise price per share shall be proportionately
increased.
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(b) If InterVoice recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise of an Option theretofore granted
the Participant shall be entitled to purchase under such Option, in lieu of
the number of shares of Common Stock then covered by such Option the
number and class of shares of stock or other securities to which the
Participant would have been entitled pursuant to the terms of the
recapitalization if, immediately prior to such recapitalization, the
Participant had been the holder of record of the number of shares of Common
Stock then covered by such Option.
(c) In the event of changes in the outstanding Common Stock by reason
of recapitalizations, reorganizations, mergers, consolidations,
combinations, separations (including a spin-off or other distribution of
stock or property), exchanges or other relevant changes in capitalization
occurring after the date of grant of any Option and not otherwise provided
for by this Section 5.2, any outstanding Options and any Option Agreements
evidencing such Options shall be subject to adjustment by the Committee at
its discretion as to the number, price and kind of shares of Common Stock
subject to, and other terms of, such Options to reflect such changes in the
outstanding Common Stock.
(d) In the event of any changes in the outstanding Common Stock
provided for in this Section 5.2, the aggregate number of shares available
for grant of Options under the Plan may be equitably adjusted by the
Committee, whose determination shall be conclusive. Any adjustment provided
for in this Section 5.2(d) shall be subject to any required stockholder
action.
5.3 ADJUSTMENTS FOR OPTIONS. The Committee shall have full discretion to
determine the manner in which shares of Common Stock available for grant of
Options under the Plan are counted. Without limiting the discretion of the
Committee under this Section 5.3, unless otherwise determined by the Committee,
for the purpose of determining the number of shares of Common Stock available
for grant of Options under the Plan: (a) the grant of an Option shall reduce the
number of shares available for grant of Options under the Plan by the number of
shares subject to such Option and (b) if any Option is canceled or forfeited, or
terminates, expires or lapses, for any reason, the shares then subject to such
Option shall again be available for grant of Options under the Plan.
ARTICLE 6. OPTIONS
6.1 GENERAL. All Options granted under this Plan shall be nonqualified
stock options that are not intended to meet the requirements of Section 422(b)
of the Code.
6.2 TERMS AND CONDITIONS OF OPTIONS. All Options granted under the Plan
shall be subject to the terms, conditions, restrictions and limitations of the
Plan. The Committee or the Board may, in its sole judgment, subject any Option
to such other terms, conditions, restrictions and/or limitations (including, but
not limited to, the time and conditions of exercise or vesting of an Option
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and restrictions on transferability of any shares of Common Stock issued or
delivered pursuant to the exercise of an Option), provided they are not
inconsistent with the terms of the Plan. Options granted under the Plan need
not be uniform. Options granted under the Plan shall be exercisable in whole or
in such installments and at such times as may be determined by the Committee or
the Board. The price at which a share of Common Stock may be purchased upon
exercise of an Option shall be determined by the Committee or the Board, but
such exercise price shall not be less than 100% of the Fair Market Value of a
share of Common Stock on the Effective Date of the Option's grant. The term of
each Option shall be as specified by the Committee or the Board; provided,
however, that, unless otherwise designated by the Committee or the Board, no
Options shall be exercisable later than 10 years from the Effective Date of the
Option's grant.
6.3 EXERCISE OF OPTIONS.
(a) Subject to the terms and conditions of the Plan, Options shall be
exercised by the delivery of a written notice of exercise to InterVoice,
setting forth the number of shares of Common Stock with respect to which
the Option is to be exercised, accompanied by full payment for such shares.
(b) Upon exercise of an Option, the exercise price of the Option shall
be payable to InterVoice in full in cash.
(c) Payment of the exercise price of an Option may also be made, in the
discretion of the Committee, by delivery to InterVoice or its designated
agent of an executed irrevocable option exercise form together with
irrevocable instructions to a broker-dealer to sell or margin a sufficient
portion of the shares with respect to which the Option is exercised and
deliver the sale or margin loan proceeds directly to InterVoice to pay for
the exercise price and any required withholding taxes.
(d) As soon as reasonably practicable after receipt of written
notification of exercise of an Option and full payment of the exercise
price and any required withholding taxes, InterVoice shall deliver to the
Participant, in the Participant's name, a stock certificate or certificates
in an appropriate amount based upon the number of shares of Common Stock
purchased under the Option.
6.4 TERMINATION OF SERVICE. Each Option Agreement shall set forth the
extent to which the Participant shall have the right to exercise the Option
following termination of the Participant's employment or service with the
Company. Such provisions shall be determined in the sole discretion of the
Committee or the Board, need not be uniform among all Options granted under the
Plan and may reflect distinctions based on the reasons for termination of
employment or service. Subject to Section 5.2 and Article 7, in the event that
an Employee's Option Agreement does not set forth such termination provisions,
the following termination provisions shall apply with respect to such Option:
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(a) RETIREMENT, DISABILITY OR DEATH. If the employment or service of a
Participant shall terminate by reason of Retirement, permanent and total
disability (within the meaning of Section 22(e)(3) of the Code) or death,
outstanding Options held by the Participant may be exercised, to the extent
then vested, no more than two years from the date of such termination of
employment or termination of service, unless the Options in any way
expressly provide for earlier termination.
(b) OTHER TERMINATION. If the employment or service of a Participant
shall terminate for any reason other than the reasons set forth in
paragraph (a) above, whether on a voluntary or involuntary basis,
outstanding Options held by the Participant may be exercised, to the extent
then vested, no more than two years from the date of such termination of
employment or termination of service, unless the Options in any way
expressly provide for earlier termination.
(c) TERMINATION FOR CAUSE. Notwithstanding paragraphs (a), (b) and (c)
above, if the employment or service of a Participant shall be terminated by
reason of such Participant's fraud, dishonesty or performance of other acts
detrimental to the Company, all outstanding Options held by the Participant
shall immediately be forfeited to the Company and no additional exercise
period shall be allowed, regardless of the vested status of the Options.
ARTICLE 7. CORPORATE CHANGE
Notwithstanding anything contained in the Plan to the contrary, in the
event of a Corporate Change, unless otherwise provided in the related Option
Agreement, all Options then outstanding shall become exercisable in full and all
restrictions imposed on any Common Stock that may be delivered pursuant to the
exercise of such Options shall be deemed satisfied.
ARTICLE 8. AMENDMENT AND TERMINATION
The Board may at any time suspend, terminate, amend or modify the Plan, in
whole or in part; provided, however, that no amendment or modification of the
Plan shall become effective without the approval of such amendment or
modification by the stockholders of InterVoice if InterVoice, on the advice of
counsel, determines that such stockholder approval is necessary or desirable.
Upon termination of the Plan, the terms and provisions of the Plan shall,
notwithstanding such termination, continue to apply to Options granted prior to
such termination. No suspension, termination, amendment or modification of the
Plan shall adversely affect in any material way any Option previously granted
under the Plan, without the consent of the Participant holding such Option.
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ARTICLE 9. MISCELLANEOUS
9.1 OPTION AGREEMENTS. After the Committee or the Board grants an Option
under the Plan to a Participant, InterVoice and the Participant shall enter into
an Option Agreement setting forth the terms, conditions, restrictions and/or
limitations applicable to the Option and such other matters as the Committee or
the Board may determine to be appropriate. The terms and provisions of the
respective Option Agreements need not be identical. In the event of any conflict
between an Option Agreement and the Plan, the terms of the Plan shall govern.
9.2 NONASSIGNABILITY. Except as otherwise provided in a Participant's
Option Agreement, no Option granted under the Plan may be sold, transferred,
pledged, exchanged, hypothecated or otherwise disposed of, other than by will or
pursuant to the applicable laws of descent and distribution. Further, no such
Option shall be subject to execution, attachment or similar process. Any
attempted sale, transfer, pledge, exchange, hypothecation or other disposition
of an Option not specifically permitted by the Plan or the Option Agreement
shall be null and void and without effect. All Options granted to a Participant
under the Plan shall be exercisable during his or her lifetime only by such
Participant or, in the event of the Participant's legal incapacity, by his or
her guardian or legal representative.
9.3 NO FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued pursuant to any Option granted under the Plan, and no payment or other
adjustment shall be made in respect of any such fractional share.
9.4 WITHHOLDING TAXES. The Company shall be entitled to deduct from any
payment made under the Plan, regardless of the form of such payment, the amount
of all applicable income and employment taxes required by law to be withheld
with respect to such payment, may require the Participant to pay to the Company
such withholding taxes prior to and as a condition of the making of any payment
or the issuance or delivery of any shares of Common Stock under the Plan and
shall be entitled to deduct from any other compensation payable to the
Participant any withholding obligations with respect to Options under the Plan.
9.5 REGULATORY APPROVALS AND LISTINGS. Notwithstanding anything contained
in the Plan to the contrary, InterVoice shall have no obligation to issue or
deliver shares of Common Stock under the Plan prior to (a) the obtaining of any
approval from any governmental agency which InterVoice shall, in its sole
discretion, determine to be necessary or advisable, (b) the admission of such
shares to listing on the stock exchange or stock market on which the Common
Stock may be listed and (c) the completion of any registration or other
qualification of such shares under any Federal or state law or ruling of any
governmental body which InterVoice shall, in its sole discretion, determine to
be necessary or advisable.
9.6 BINDING EFFECT. The obligations of InterVoice under the Plan shall be
binding upon any successor corporation or organization resulting from the
merger, consolidation or other reorganization of InterVoice, or upon any
successor corporation or organization succeeding to all
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or substantially all of the assets and business of InterVoice. The terms and
conditions of the Plan shall be binding upon each Participant and his or her
heirs, legatees, distributees and legal representatives.
9.7 SEVERABILITY. If any provision of the Plan or any Option Agreement is
held to be illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining provisions of the Plan or such agreement, as the case
may be, but such provision shall be fully severable and the Plan or such
agreement, as the case may be, shall be construed and enforced as if the illegal
or invalid provision had never been included herein or therein.
9.8 NO RESTRICTION OF CORPORATE ACTION. Nothing contained in the Plan shall
be construed to prevent InterVoice or any Affiliate from taking any corporate
action (including any corporate action to suspend, terminate, amend or modify
the Plan) that is deemed by InterVoice or such Affiliate to be appropriate or in
its best interest, whether or not such action would have an adverse effect on
the Plan or any Options made or to be made under the Plan. No Participant or
other person shall have any claim against InterVoice or any Affiliate as a
result of such action.
9.9 NOTICES. All notices required or permitted to be given or made under
the Plan or any Option Agreement shall be in writing and shall be deemed to have
been duly given or made if (a) delivered personally, (b) transmitted by first
class registered or certified United States mail, postage prepaid, return
receipt requested, (c) sent by prepaid overnight courier service or (d) sent by
telecopy or facsimile transmission, answer back requested, to the person who is
to receive it at the address that such person has theretofore specified by
written notice delivered in accordance herewith. Such notices shall be effective
(a) if delivered personally or sent by courier service, upon actual receipt by
the intended recipient, (b) if mailed, upon the earlier of five days after
deposit in the mail or the date of delivery as shown by the return receipt
therefor or (c) if sent by telecopy or facsimile transmission, when the answer
back is received. InterVoice or a Participant may change, at any time and from
time to time, by written notice to the other, the address that it or such
Participant had theretofore specified for receiving notices. Until such address
is changed in accordance herewith, notices hereunder or under an Option
Agreement shall be delivered or sent (a) to a Participant at his or her address
as set forth in the records of the Company or (b) to InterVoice at the principal
executive offices of InterVoice clearly marked "Attention: Human Resources
Department."
9.10 GOVERNING LAW. The Plan shall be governed by and construed in
accordance with the internal laws (and not the principles relating to conflicts
of laws) of the State of Texas, except as superseded by applicable federal law.
9.11 NO RIGHT, TITLE OR INTEREST IN COMPANY ASSETS. No Participant shall
have any rights as a stockholder of InterVoice as a result of participation in
the Plan until the date of issuance of a stock certificate in his or her name
and, in the case of Restricted Stock, unless and until such rights are granted
to the Participant under the Plan. To the extent any person acquires a right to
receive payments from the Company under the Plan, such rights shall be no
greater than the rights of an unsecured creditor of the Company, and such person
shall not have any rights in or against any
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specific assets of the Company. All of the Options granted under the Plan shall
be unfunded.
9.12 RISK OF PARTICIPATION. Nothing contained in the Plan shall be
construed either as a guarantee by InterVoice or its Affiliates, or their
respective stockholders, directors, officers or employees, of the value of any
assets of the Plan or as an agreement by InterVoice or its Affiliates, or their
respective stockholders, directors, officers or employees, to indemnify anyone
for any losses, damages, costs or expenses resulting from participation in the
Plan.
9.13 NO GUARANTEE OF TAX CONSEQUENCES. No person connected with the Plan in
any capacity, including, but not limited to, InterVoice and the Affiliates and
their respective directors, officers, agents and employees, makes any
representation, commitment or guarantee that any tax treatment, including, but
not limited to, Federal, state and local income, estate and gift tax treatment,
will be applicable with respect to any Options or payments thereunder made to or
for the benefit of a Participant under the Plan or that such tax treatment will
apply to or be available to a Participant on account of participation in the
Plan.
9.14 OTHER BENEFITS. No Option granted under the Plan shall be considered
compensation for purposes of computing benefits or contributions under any
retirement plan of InterVoice or any Affiliate, nor affect any benefits or
compensation under any other benefit or compensation plan of InterVoice or any
Affiliate now or subsequently in effect.
9.15 CONTINUED EMPLOYMENT. Nothing contained in the Plan or in any Option
Agreement shall confer upon any Participant the right to continue in the employ
of the Company, or interfere in any way with the rights of the Company to
terminate his or her employment at any time, with or without cause.
9.16 MISCELLANEOUS. Headings are given to the articles and sections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction of the Plan or any
provisions hereof. The use of the masculine gender shall also include within its
meaning the feminine. Wherever the context of the Plan dictates, the use of the
singular shall also include within its meaning the plural, and vice versa.
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IN WITNESS WHEREOF, this Plan has been executed to be effective as of the
26th day of March, 1998.
INTERVOICE, INC.
By
Title:
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EXHIBIT 10.4
ASSETS PURCHASE AGREEMENT
This ASSETS PURCHASE AGREEMENT (this "Agreement"), executed as of the 15th day
of September, 1998 by and among INTERVOICE ACQUISITION SUBSIDIARY II, INC., a
Nevada corporation ("Purchaser") that is a wholly owned subsidiary of
INTERVOICE, INC., a Texas corporation ("InterVoice"); DRONEN CONSULTING,
INCORPORATED, d.b.a. DC Systems, an Illinois corporation ("Seller"); and Mark
Dronen, who owns 100% of the outstanding capital stock of Seller (the
"Principal Shareholder");
W I T N E S S E T H:
WHEREAS, Purchaser desires to purchase, and Seller and the Principal
Shareholder desire for Seller to sell, certain of the assets of Seller in
accordance with the terms set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Purchaser, Seller and the Principal Shareholder do hereby agree as follows:
I. AGREEMENT OF SALE AND PURCHASE
1.1 SALE AND PURCHASE. At the closing at Purchaser's offices in
Dallas, Texas at 9:30 a.m., local time, on September 16, 1998 or at such other
time and date as Purchaser, Seller and the Principal Shareholder may otherwise
mutually agree (the "Closing"), and subject to the terms of this Agreement,
Purchaser will purchase from Seller, and Seller will sell to Purchaser, all of
the Purchased Assets (as defined in Section 1.2 hereof) in consideration of (i)
Purchaser's payment to Seller of an aggregate cash consideration of $3 million
(the "Cash Consideration"); (ii) Purchaser's release and forgiveness of the
full remaining heretofore unapplied amount of the Five Hundred Thousand Dollar
($500,000) prepayment previously made by Purchaser and presently held by Seller
pursuant to the terms of that certain OEM Software License Agreement between
the parties dated as of June 8, 1998 (the "OEM Agreement"); and (iii) the
issuance by Purchaser to Seller of the Common Stock (as defined in Section 1.3
hereof). Purchaser will deposit $619,065.99 of the Cash Consideration and
forty thousand (40,000) shares of the Common Stock into escrow at Closing in
accordance with the provisions of Section 5.3. The Cash Consideration payable
at Closing, and not paid into escrow, will be paid by Purchaser to Seller by
wire transfer of immediately available funds to an account or accounts
designated by Seller at least five business days prior to the Closing.
1.2 PURCHASED ASSETS. The assets to be purchased by Purchaser from
Seller (collectively, the "Purchased Assets") are the Software and other
Intellectual Property of Seller
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(as such terms are defined below). The Purchased Assets do not include any
other assets and properties of Seller (collectively, the "Excluded Assets").
The software described on Schedule 1.2 (the "Software") includes without
limitation, (i) all associated object code and source code for such Software;
(ii) all copyrights, trade secrets and inventions included in, or practiced in
connection with, the Software; (iii) all marketing, design, development and use
documentation, specifications, and sales promotion documentation of Seller
(collectively, "Documentation") relating to the Software; and (iv) all Permits
(as such term is defined below) and homologations related to the Software.
1.3 COMMON STOCK. Within three (3) days after the Closing date
Purchaser will cause InterVoice to issue to Seller 75,000 shares of
InterVoice's common stock, no par value per share (the "Common Stock"). The
shares of the Common Stock will not be registered under any state or federal
securities laws.
1.4 LIABILITIES. Purchaser is not assuming from Seller any
liabilities and/or obligations of Seller, including without limitation, any
direct, indirect, contractual, contingent and/or conditional liabilities
and/or obligations of Seller.
1.5 INSTRUMENTS OF CONVEYANCE. At the Closing (and from time to
time thereafter as may be reasonably requested by Purchaser) Seller and the
Principal Shareholder will execute such bills of sale, assignments and other
instruments of conveyance as may be reasonably necessary to transfer the
Purchased Assets to Purchaser.
II. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to, and agrees with, Seller and the Principal
Shareholder that:
2.1 CORPORATE ORGANIZATION. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has all requisite corporate power and authority to own, lease and
operate its property and to carry on its business as now being conducted. No
actions or proceedings to dissolve Purchaser are pending or threatened.
2.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Purchaser has full
corporate power and authority to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery
and performance by Purchaser of this Agreement have been duly authorized by all
necessary corporate action of Purchaser. This Agreement has been duly executed
and delivered by Purchaser and constitutes a valid and legally binding
obligation of Purchaser enforceable against it in accordance with its terms.
2.3 NONCONTRAVENTION. The execution, delivery and performance by
Purchaser of this Agreement and the consummation by it of the transactions
contemplated hereby do not and
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will not conflict with or result in a violation of any provision of its
articles of incorporation or bylaws.
2.4 BROKERAGE FEES. Neither InterVoice, Purchaser nor any of their
respective affiliates has retained any financial advisor, broker, agent or
finder or paid or agreed to pay any financial advisor, broker, agent or finder
on account of this Agreement or any transaction contemplated hereby.
III. REPRESENTATIONS AND WARRANTIES OF SELLER
AND THE PRINCIPAL SHAREHOLDER
Seller and the Principal Shareholder jointly and severally represent and
warrant to, and agree with, Purchaser as set forth in this Article III:
3.1 CORPORATE ORGANIZATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. No
actions or proceedings to dissolve Seller are pending or threatened. The
Principal Shareholder owns all shares of common stock of Seller; such common
stock constitutes all of the issued and outstanding capital stock of Seller;
and, except as set forth on Schedule 3.1., there are no options, rights or
other securities convertible into, or exchangeable for, any capital stock of
Seller. Mark Dronen is the only director of Seller, and such individual was
duly elected and continues to serve as a director of Seller. Seller has no
subsidiary or affiliate.
3.2 QUALIFICATION. Seller is duly qualified or licensed to do
business and is in good standing in the State of Illinois, which is the only
jurisdiction in which it owns, leases, or operates the Purchased Assets or in
which such qualification or licensing is required for the conduct of its
business.
3.3 AUTHORITY RELATIVE TO THIS AGREEMENT. Seller has full
corporate power and authority to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery
and performance by Seller of this Agreement, and the consummation by it of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate action of Seller. This Agreement has been duly executed and delivered
by Seller and the Principal Shareholder and constitutes a valid and legally
binding obligation of Seller and the Principal Shareholder enforceable against
them in accordance with its terms.
3.4 NONCONTRAVENTION. The execution, delivery, and performance by
Seller of this Agreement and the consummation by it of the transactions
contemplated hereby do not and will not (i) conflict with or result in a
violation of any provision of the charter or bylaws of Seller, (ii) conflict
with or result in a violation of any provision of, or constitute (with or
without the giving of notice or the passage of time or both) a default under,
or give rise (with or without the giving of notice or the passage of time or
both) to any right of termination, cancellation, or acceleration under, or
require any consent, approval, authorization or waiver of, or notice to any
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party to, any bond, debenture, note, mortgage, indenture, lease, contract,
agreement or other instrument or obligation to which Seller is a party or by
which Seller, its business or any of the Purchased Assets may be bound or any
permit held by Seller or its business, (iii) result in the creation or
imposition of any Encumbrance upon any of the Purchased Assets, or (iv) violate
any applicable law binding upon Seller, its business or any of the Purchased
Assets, except, in the case of clause (ii) above, for (A) such consents,
approvals, authorizations and waivers that have been obtained and are
unconditional and in full force and effect and such notices that have been duly
given and (B) such consents, approvals, authorizations, waivers and notices
that are disclosed on Schedule 3.4.
3.5 GOVERNMENTAL APPROVALS. No consent, approval, order, or
authorization of, or declaration, filing, or registration with, any
governmental entity is required to be obtained or made by Seller in connection
with the execution, delivery, or performance by Seller of this Agreement or the
consummation by it of the transactions contemplated hereby.
3.6 TITLE TO, AND CONDITION OF, THE PURCHASED ASSETS. Seller is
the sole owner of, and has good and marketable title to, all the Purchased
Assets free and clear of all liens, security interests, restrictions, claims
and encumbrances of any nature whatsoever (collectively, "Encumbrances"),
except as set forth on Schedule 3.6. Seller does not own any real estate. Upon
Seller's transfer of the Purchased Assets to Purchaser pursuant to this
Agreement, Purchaser will have good and marketable title to all the Purchased
Assets free and clear of any Encumbrances. All the Software has been maintained
in accordance with standard industry practice, and is suitable for the purposes
used, and is adequate and sufficient for the normal operation of Seller's
business. The Purchased Assets and their uses conform to all applicable
statutes, laws, rules and regulations, and neither Seller nor the Principal
Shareholder has received any notice to the contrary. The only software, other
than the Software, at any time owned by Seller and/or Principal Shareholder is
set forth on Schedule 3.6.1, and such other software does not include any
functionality which is similar to functionality included in any of the
Software.
3.7 TAX MATTERS. Seller has (and as of the date of Closing will
have) (i) duly filed all federal, state, local and foreign tax returns required
to be filed by or with respect to it with the Internal Revenue Service ("IRS")
or other applicable taxing authority, (ii) paid, or adequately reserved against
in its financial statements, all material taxes due, or claimed by any taxing
authority to be due, from or with respect to it, except taxes that are being
contested in good faith by appropriate legal proceedings and for which adequate
reserves have been set aside as disclosed in the applicable financial
statements delivered to Purchaser pursuant to Section 3.10, and (iii) made all
deposits required with respect to taxes, in each such case to the extent that
the failure to do so would result in the imposition of any Encumbrance on the
Purchased Assets. Except as set forth on Schedule 3.7, there has been no issue
raised or adjustment proposed (and none is pending) by the IRS or any other
taxing authority in connection with any tax returns relating to the Purchased
Assets or the operation of Seller's business or the employment of Seller's
employees. No waiver or extension of any statute of limitations as to any
federal, state, local or foreign tax matter relating to the Purchased Assets or
the operation of Seller's business has been given by or requested from Seller.
Seller has not filed a consent under Section 341(f) of the Internal Revenue
Code of 1986, as amended (the "Code").
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3.8 LEASED PROPERTY. Set forth on Schedule 3.8 is a list and
summary description of the material terms of all leases under which Seller is
the lessee of real or personal property used or held for use in connection with
the operation of its business. Seller has good and valid leasehold interests in
all such properties held by it under lease. Seller is not in breach of or in
default under, nor has any event occurred which (with or without the giving of
notice or the passage of time or both) would constitute a default by Seller
under, any of such leases, and Seller has neither received any notice from, nor
given any notice to, any lessor indicating that it or such lessor is in breach
of or in default under any of such leases. To the best knowledge of both Seller
and the Principal Shareholder, none of the lessors under any of such leases is
in breach thereof or in default thereunder.
3.9 COMPLIANCE WITH LAWS. Seller has complied in all material
respects with all applicable statutes, laws, rules and regulations relating to
the development, distribution, ownership or operation of the Purchased Assets
or the operation of its business (including without limitation applicable laws
relating to securities, properties, business products, manufacturing processes,
advertising and sales practices, employment practices, terms and conditions of
employment, wages and hours, safety, occupational safety, health, environmental
protection, product safety and civil rights), and Seller has not received any
written notice, which has not been dismissed or otherwise disposed of, that
Seller has not so complied. Seller is not charged or, to the best knowledge of
Seller and the Principal Shareholder, threatened with, or, to the best
knowledge of Seller and the Principal Shareholder, under investigation with
respect to, any violation of any applicable law, statute, rule or regulation
relating to any aspect of the ownership or operation of the Purchased Assets or
the operation of its business.
3.10 FINANCIAL STATEMENTS. Seller has delivered to Purchaser
accurate and complete copies of the audited balance sheet of Seller as of
December 31, 1997, and the related audited statements of income and cash
flows/changes in financial position for the twelve-month period then ended (the
"Audited Financial Statements"), certified by Seller's auditor. Seller has
delivered to Purchaser accurate and complete copies of the unaudited balance
sheet of Seller as of July 31, 1998, and the related unaudited statements of
income and cash flows/changes in financial position for the seven-month period
then ended (the "Unaudited Financial Statements"), certified by Seller's chief
financial officer. The Audited Financial Statements and Unaudited Financial
Statements (i) represent actual bona fide transactions, (ii) have been prepared
from the books and records of Seller in conformity with generally accepted
accounting principles applied on a basis consistent with preceding years
throughout the periods involved, and (iii) accurately, completely, and fairly
present in all material respects the financial position of the business of
Seller as of the respective dates thereof and its results of operations and
cash flows/changes in financial position for the periods then ended; provided,
however, that generally accepted accounting principles may require that the
Five Hundred Thousand Dollar ($500,000.00) prepayment referred to in Section
1.1(ii) hereof be subsequently recharacterized as a refundable deposit. The
statements of income included in the Audited Financial Statements and Unaudited
Financial Statements do not contain any items of special or nonrecurring
income, and the balance sheets included in the Audited Financial Statements and
Unaudited Financial Statements do not reflect any write-up or revaluation
increasing the book value of any assets, nor have there been
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any transactions since July 31, 1998 giving rise to special or nonrecurring
income or any such write-up or revaluation.
3.11 SELLER AGREEMENTS.
(a) Listed on Schedule 3.11 are all agreements, arrangements, and
understandings of any nature (written or oral, formal or informal)
(collectively, the "Seller Agreements") to which Seller is a party or by which
Seller is otherwise bound, regardless of amount or subject matter, which
agreements include any agreements that are necessary in order for Seller to
manufacture, make, sell, license and distribute its products and otherwise to
conduct Seller's business as presently conducted, including without limitation
all supply contracts, sales agreements, royalty agreements, license agreements,
purchase orders, service agreements, consulting agreements, development
agreements, leases and agreements with banks and other lenders and/or
investors.
(b) Seller has delivered to Purchaser accurate and complete copies
of the Seller Agreements listed on Schedule 3.11. Each of such Seller
Agreements is a valid and binding agreement of the parties thereto, enforceable
against them in accordance with its terms. No breach or default exists with
respect to any of such Seller Agreements, and no event has occurred which,
after the giving of notice or the passage of time or otherwise, will result in
any such breach or default. Except as disclosed below and on Schedule 3.11,
Seller has fully satisfied all of its obligations (including without
limitation, performance and warranty obligations) under any and all Seller
Agreements which in any way relate to the Software and/or the use, possession,
licensing, distributing, servicing, warranting and/or developing of the
Software. Except as set forth below and on Schedule 3.11, all licensees of any
Software have accepted the Software, and have not made any oral or written
claims that the Software did not or does not conform to applicable
specifications and other documentation (including the Documentation), or that
Seller has not performed, or not satisfactorily performed, its obligations
under a Seller Agreement. Except as set forth below and in Schedule 3.11,
Seller does not have any remaining warranty obligations to any licensee of any
Software, under any Seller Agreement. Seller is in the process of completing
implementation and obtaining acceptance of licensed Software and certain other
equipment, software, and services sold, licensed or delivered to Bankfirst.
Seller and Principal Shareholder represent to Purchaser that Seller will
perform all of its remaining obligations, including without limitation,
performance and warranty obligations, under any and all agreements between
Seller and Bankfirst, all of which agreements are set forth on Schedule 3.11.
Without limiting the foregoing, Seller represents and promises that (i) all
Software, equipment, other software and services at any time sold, licensed or
delivered to Bankfirst by Seller, will be accepted, in accordance with all
applicable agreements, on or before any date required pursuant to any agreement
or other arrangement with Bankfirst, and (ii) Seller will not at any time
default on any of its obligations under the Source Code Escrow Agreement (as
defined below). Seller and Principal Shareholder will use their best efforts to
permit and facilitate (i) the execution and delivery of a mutually acceptable
service agreement between InterVoice and Bankfirst during or after the
expiration of any applicable warranty period for equipment and software
provided to Bankfirst, and (ii) the transfer of the Source Code Escrow
Agreement (the "Source Code Escrow Agreement") among Seller, Bankfirst and the
escrow agent, Momkus Ozog & McCluskey LLC, from Seller to InterVoice. Seller
will promptly notify InterVoice of any claim by Bankfirst that a
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default has occurred under the Source Code Escrow Agreement and/or any other
agreement between Seller and Bankfirst.
(c) Seller has not received notice of any plan or intention of any
other party to any Seller Agreement to exercise any right of offset with
respect to, or any right to cancel or terminate, any Seller Agreement, and
Seller does not know of any fact or circumstance that would justify the
exercise by any such other party of such a right other than the automatic
termination of such Seller Agreement in accordance with its terms.
3.12 INTELLECTUAL PROPERTY. (a) Set forth on Schedule 3.12 is a
list of all patents, trademarks, service marks, trade names, service names,
brand names, copyrights, trade secrets, know-how, technology, inventions,
computer software (including documentation and object and source codes), and
similar rights, and all registrations, applications, licenses, and rights with
respect to any of the foregoing (the "Intellectual Property") relating to or
used or held for use in connection with the distribution, development, use,
licensing and/or operation of any of the Purchased Assets. Schedule 3.12
specifies, as applicable: (i) the nature of such Intellectual Property; (ii)
the owner of any Intellectual Property, other than Seller; (iii) the
jurisdictions by or in which such Intellectual Property has been issued or
registered or in which an application for such issuance or registration has
been filed, including the respective registration or application numbers; and
(iv) all licenses, sublicenses, and other agreements to which Seller is a party
and pursuant to which Seller or any other person is authorized to use such
Intellectual Property, including the identity of all parties thereto, a
description of the nature and subject matter thereof, the applicable royalty,
and the term thereof. Seller does not have, and Seller has not applied for, any
patents or patent registrations.
(b) The Intellectual Property set forth on Schedule 3.12
constitutes all Intellectual Property necessary for the distribution,
development, use, licensing and/or operation of the Purchased Assets. Seller
has good and marketable title to the Intellectual Property. Seller has good and
marketable title to, or is validly licensed to use, all intellectual property
used in connection with its business (including information with respect to any
trademark, service mark or other registrations and any licenses, sublicenses or
other agreements relating to such intellectual property). Without limiting the
foregoing, Seller owns and has good and marketable title to the Software free
and clear of all Encumbrances, except for the lien of Old Kent Bank which will
be released by the lien holder at Closing in accordance with Section 4.2(f) of
this Agreement. Each item of Intellectual Property is in full force and effect,
Seller is in compliance with all its obligations with respect thereto and no
event has occurred which permits, or upon the giving of notice or the passage
of time or both would permit, the revocation or termination of any Intellectual
Property. Except with respect to inquiries made by Galileo International, LLC
in respect of the name of "Apollo", there are no proceedings pending or, to the
best knowledge of Seller and the Principal Shareholder, threatened against
Seller or any direct or indirect customers of Seller, asserting that their
respective use of any such Intellectual Property or any product sold, licensed
or otherwise conveyed by Seller infringes or infringed upon the rights of any
other person or seeking the revocation, termination or concurrent use of any
such Intellectual Property, and there is no basis for any such proceeding. To
the best knowledge of Seller and the Principal Shareholder, none of the
Intellectual Property is being infringed upon by any other person. None
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of such Intellectual Property is subject to any outstanding judgment, order,
writ, injunction or decree of any governmental entity or to any agreement,
arrangement or understanding, written or oral, restricting the scope or use
thereof. At the Closing Purchaser will receive good and marketable title to all
Intellectual Property free and clear of any Encumbrances. Except as expressly
set forth in the Value Added Reseller Agreement between InterVoice and Seller,
as heretofore or hereafter amended, Seller will destroy all copies of Software
in its possession not delivered to Purchaser hereunder, and will not have any
right or license to use the Software.
(c) Without limiting the scope of the representations and
warranties in Section 3.12(a) and (b) made by Seller and the Principal
Shareholder with respect to all the Intellectual Property:
(i) the Software includes all related Documentation,
diagnostic tools and other deliverables necessary or
useful in the use, design, development and/or
maintenance of the Software;
(ii) Seller is the sole owner of the Software and any and
all copyrights thereto;
(iii) the Software will operate in accordance with all of
the Documentation for the Software and the
Documentation truthfully, accurately and completely
describes the design, use and operation of the
Software;
(iv) the licensing, distribution, development, ownership
and use by Purchaser and its customers of the
Software will not infringe upon any intellectual
property rights (whether patent, copyright, trade
secret or otherwise) owned by any other party (it
being recognized that neither Seller nor the
Principal Shareholder is making any representation or
warranty with respect to modifications to the
Software made by Purchaser);
(v) no portion of the Software contains or will contain
any unauthorized code, such as computer viruses,
trojan horses and drop-dead devices;
(vi) the Software coding has been done in accordance with
"best practices" of the computer programming
industry; and
(vii) the Software utilizes a four-digit CCYY format and
will accurately and correctly recognize and process
date information before, on, after and between the
20th and 21st Centuries.
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3.13 LIABILITIES. Seller has no liabilities or obligations (whether
accrued, absolute, contingent, unliquidated, or otherwise, whether or not known
to Seller or the Principal Shareholder, and whether due or to become due),
except liabilities specifically set forth on Schedule 3.13 (the "Liabilities").
Except as set forth on Schedule 3.13, all Liabilities have arisen in the
ordinary course of Seller's business and none of Seller's obligations
thereunder are past due or subject to acceleration, demand for payment or
payment of a penalty.
3.14 LEGAL PROCEEDINGS. There are no lawsuits or other legal
proceedings pending or threatened against or involving Seller or any of its
properties. No judgment, order, writ, injunction or decree of any governmental
entity has been issued or entered against Seller which continues to be in
effect with respect to or affecting the Purchased Assets, and/or the operation
of Seller's business. There are no proceedings pending or, to the best
knowledge of Seller and the Principal Shareholder, threatened seeking to
restrain, prohibit or obtain damages or other relief in connection with this
Agreement or the transactions contemplated hereby.
3.15 EMPLOYEES. Set forth on Schedule 3.15 is a list of the name,
social security number, and dates of employment by Seller of each employee of
Seller as of August 31, 1998, who has been or is in any way involved with the
development, testing and/or implementation of any Software, together with a
description of the position of each such employee and the total amounts of
salary, bonuses, and other compensation paid or payable by Seller to each such
employee for the current fiscal year through August 31st and the immediately
preceding fiscal year.
3.16 EMPLOYEE AND CONTRACTOR CONFIDENTIALITY AND ASSIGNMENT
AGREEMENTS. All current and former employees or contractors of Seller who have
or had reasonable access to any secret, confidential or proprietary information
relating to the Purchased Assets or Seller's business have executed written
confidentiality agreements ("Confidentiality Agreements") with Seller pursuant
to which such employees and contractors have agreed to maintain in confidence
secret, confidential or proprietary information learned or acquired in the
scope of their employment or performance of services for Seller. In addition,
all persons who have performed services for Seller in connection with the
development of Software (including Documentation and object and source codes)
or inventions relating to the Software, are or were employees of Seller at the
time such services were performed, and, except as expressly set forth on
Schedule 3.16, have or had executed written assignment agreements ("Assignment
Agreements") with Seller pursuant to which such persons have assigned any and
all rights in such Software and/or inventions to Seller. Set forth on Schedule
3.16 is a list of all: (i) Confidentiality Agreements, (ii) Assignment
Agreements and (iii) agreements pursuant to which any current or former
employee has agreed not to compete with Seller.
3.17 BOOKS AND RECORDS. All the books and records of Seller
relating to the Purchased Assets or Seller's business, including all personnel
files, employee data and other materials relating to employees of Seller, are
substantially complete and correct, have been maintained in accordance with
good business practice and all applicable laws, and, in the case of the books
of account, have been prepared and maintained in accordance with generally
accepted
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accounting principles consistently applied. Such books and records accurately
and fairly reflect, in reasonable detail, all material transactions, revenues,
expenses, assets and liabilities of Seller with respect to its business.
3.18 SOLVENCY. Seller is not insolvent, nor will Seller be rendered
insolvent by the occurrence of the transactions contemplated by this Agreement.
In addition, immediately after giving effect to the consummation of the
transactions contemplated by this Agreement, (i) Seller will be able to pay its
debts as they become due, and (ii) Seller will not have unreasonably small
capital and (iii) taking into account any pending and threatened litigation,
any final judgments against Seller in actions for money damages are not
reasonably anticipated to be rendered at a time when, or in amounts such that,
Seller will be unable to satisfy any such judgments promptly in accordance with
their terms (taking into account the maximum probable amount of such judgments
in any such actions and the earliest reasonable time at which such judgments
might be rendered). The cash available to Seller, after taking into account all
other anticipated uses of the cash of Seller, will be sufficient to pay all
such judgments promptly in accordance with their terms. As used in this
Section, (x) "insolvent" means that the sum of the present fair saleable value
of Seller's assets (assuming the present fair saleable value of the Purchased
Assets is at least $4.5 million) does not and will not exceed its debts and
other probable liabilities and (y) the term "debts" includes any legal
liability, whether matured or unmatured, liquidated or unliquidated, absolute,
fixed, or contingent, disputed or undisputed, secured or unsecured.
3.19 ERISA. Except as set forth on Schedule 3.19, neither Seller
nor any of its affiliates has ever made or ever been required to make
contributions to any program or arrangement that is an "employee pension
benefit plan," an "employee welfare benefit plan," or a "multi-employer plan,"
as such terms are defined in Sections 3(2), 3(1) and 3(37), respectively, of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Seller and all the affiliates of Seller have paid and discharged promptly when
due all liabilities and obligations arising under ERISA or the Code of a
character which if unpaid or unperformed might result in the imposition of a
lien against any of the Purchased Assets. For purposes of this Section only, an
"affiliate" of any person means any other person which, together with such
person, would be treated as a single employer under Section 414 of the Code.
3.20 PERMITS. Set forth on Schedule 3.20 is a list of all licenses,
permits, franchises, consents, approvals, variances, exemptions, and other
authorizations of or from governmental entities (collectively, "Permits") held
by Seller which relate to Seller's business. Such Permits constitute all the
Permits necessary or required for the ownership and operation of the Purchased
Assets and the conduct of Seller's business. Each of such Permits is in full
force and effect, Seller is in compliance with all its obligations with respect
thereto, and, to the best knowledge of Seller and the Principal Shareholder, no
event has occurred which permits, or with or without the giving of notice or
the passage of time or both would permit, the revocation or termination of any
thereof. No notice has been issued by any governmental entity and no proceeding
is pending or, to the best knowledge of Seller and the Principal Shareholder,
threatened with respect to any alleged failure by Seller to have any Permit.
Except as disclosed on Schedule 3.20, each Permit is freely and fully
assignable to Purchaser without penalty or other adverse consequence.
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3.21 ENVIRONMENTAL MATTERS. (a) Neither Seller nor any property
owned or leased by Seller (the "Property") is in violation of, or subject to
any pending or, to the best knowledge of Seller and the Principal Shareholder,
threatened proceeding under, any applicable statute, law, rule or regulation or
any judgment, order, writ, injunction or decree of any governmental entity
pertaining to health, safety, the environment, Hazardous Substances (as herein
defined) or Solid Waste (as herein defined) (collectively, the "Applicable
Environmental Laws"), including without limitation the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 (as amended,
"CERCLA"), and the Resource Conservation and Recovery Act of 1976, as amended
by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act Amendments
of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as amended,
"RCRA"). No asbestos, material containing asbestos that is or may become
friable, or material containing asbestos deemed hazardous by applicable laws,
has been installed in any Property by Seller or any contractor retained by
Seller or, to the best knowledge of Seller and the Principal Shareholder, by
any owner, lessee or contractor prior to Seller's occupancy of the Property.
(b) To the best knowledge of Seller, the representations and
warranties set forth in this Section 3.21 would continue to be true and correct
following disclosure to the applicable governmental entities of all relevant
facts, conditions and circumstances, if any, pertaining to the Property.
(c) Seller has not obtained and is not required to obtain any
permits to construct, occupy, operate or use any buildings, improvements,
fixtures, equipment or other tangible property forming a part of the Purchased
Assets by reason of any Applicable Environmental Laws.
(d) The terms "Hazardous Substance" and "Release" shall have the
meanings specified in CERCLA, and the terms "Solid Waste" and "Disposal" (or
"Disposed") shall have the meanings specified in RCRA; provided that to the
extent the laws of the jurisdiction in which the Property is located establish
a meaning for the "Hazardous Substance", "Release", "Solid Waste", or
"Disposal" (or "Disposed") which is broader than that specified in either
CERCLA or RCRA, such broader meaning shall apply.
3.22 BROKERAGE FEES. Neither Seller nor the Principal Shareholder
nor any of their respective affiliates has retained any financial advisor,
broker, agent or finder or paid or agreed to pay any financial advisor, broker,
agent or finder on account of this Agreement or any transaction contemplated
hereby.
IV. CONDITIONS PRECEDENT TO CLOSING
4.1 CONDITIONS TO OBLIGATIONS OF SELLER AND THE PRINCIPAL
SHAREHOLDER. The respective obligations of Seller and the Principal Shareholder
to consummate the transactions contemplated by this Agreement shall be subject
to the fulfillment on or prior to the Closing of each of the following
conditions:
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(a) REPRESENTATIONS AND WARRANTIES TRUE. All the representations
and warranties of Purchaser set forth in this Agreement shall
be true and correct in all material respects as of the date
made and as of the Closing.
(b) AGREEMENTS PERFORMED. Purchaser shall have performed all
agreements required by this Agreement to be performed by it on
or prior to the Closing.
(c) CERTIFICATE. Seller and the Principal Shareholder shall have
received a certificate executed by an executive officer of
Purchaser, dated as of the Closing, certifying that the
conditions set forth in Sections 4.1(a) and (b) hereof have
been fulfilled.
(d) SERVICES AGREEMENT. Seller and InterVoice enter into a
mutually acceptable Services Agreement, substantially in the
form of Exhibit 4.1(d) hereto, pursuant to which Seller will
provide certain services.
4.2. CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligation of
Purchaser to consummate the transactions contemplated by this Agreement shall
be subject to the fulfillment on or prior to the Closing of each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. All the representations
and warranties of Seller and the Principal Shareholder set
forth in this Agreement shall be true and correct in all
material respects as of the date made and as of the Closing.
(b) AGREEMENTS PERFORMED. Seller and the Principal Shareholder
shall have performed all agreements required by this Agreement
to be performed by it or him on or prior to the Closing,
including without limitation, delivery of the Software to
Purchaser.
(c) FINANCIAL STATEMENTS. Seller shall have delivered to Purchaser
accurate and complete copies of the unaudited balance sheet of
Seller as of August 31, 1998 and the related unaudited
statements of income and cash flows/changes in financial
position for the eight-month period then ended (the "Unaudited
Closing Financial Statements"), certified by Seller's chief
financial officer. The Unaudited Closing Financial Statements
(i) represent actual bona fide transactions, (ii) have been
prepared from the books and records of Seller in conformity
with generally accepted accounting principles applied on a
basis consistent with preceding years throughout the periods
involved, and (iii) accurately, completely, and fairly present
in all material respects the financial position of the
business of Seller as of the respective dates thereof and its
results of operations and cash flows/changes in financial
position for the periods then ended. The statements of income
included in the Unaudited Closing Financial Statements do not
contain any items of special or nonrecurring income, and the
balance sheets included in the Unaudited Closing Financial
Statements do not reflect any write-up or revaluation
increasing the book value of any assets, nor have there been
any transactions since August 31, 1998 giving rise to special
or nonrecurring income or any such write-up or
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revaluation. Seller and Principal Shareholder represent and
warrant that the Unaudited Closing Financial Statements will
be, true, accurate and complete in all material respects and
that the financial condition of Seller, as set forth in the
Unaudited Closing Financial Statements of Seller, has not
changed in any material respect since August 31, 1998.
(d) CERTIFICATE. Purchaser shall have received a certificate
executed by an executive officer of Seller and by the
Principal Shareholder, dated as of the Closing, certifying
that the conditions set forth in Sections 4.2(a), (b) and (c)
hereof have been fulfilled.
(e) EMPLOYMENT AGREEMENTS. Purchaser shall have received
employment agreements between InterVoice and those four
employees (the "Required Employees") of Seller listed on
Schedule 4.2(e) hereto (which employment agreements shall be
on terms reasonably satisfactory to InterVoice and Purchaser
and will provide for compensation which is equal to or greater
than the respective compensation that is being paid by Seller
to the applicable employees for calendar year 1998).
(f) RELEASE OF LIENS. Any and all Encumbrances on the Purchased
Assets shall have been released and Seller and the Principal
Shareholder shall have provided Purchaser with satisfactory
evidence of each such release.
(g) DUE DILIGENCE. The results of the due diligence review of the
Purchased Assets and the representations made by Seller and
Principal Shareholder in this Agreement, including the facts
and documentation underlining such representations, conducted
by Purchaser subsequent to the date hereof shall be
satisfactory to Purchaser in its reasonable judgment.
(h) OBTAINMENT OF CONSENTS. Seller and the Principal Shareholder
shall have obtained all consents listed on Schedule 3.4,
Schedule 3.11 and Schedule 3.20.
(i) OPINION OF SELLER'S COUNSEL. Purchaser shall have received an
opinion of Momkus Ozog & McCluskey LLC, legal counsel to
Seller and the Principal Shareholder, substantially in the
form of Exhibit 4.2(i) hereto, with respect to such matters as
Purchaser may reasonably request.
(j) SERVICES AGREEMENT. Seller and InterVoice enter into a
mutually acceptable Services Agreement, substantially in the
form of Exhibit 4.1(d) hereto, pursuant to which Seller will
provide certain services.
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V. INDEMNIFICATION
5.1 INDEMNIFICATION BY PURCHASER. Purchaser will indemnify and
hold harmless Seller and the Principal Shareholder and their respective
affiliates (the "Purchaser Indemnity") from and against all losses, claims and
liabilities of any nature whatsoever (including reasonable attorneys' fees and
expenses) (collectively, "Seller Claims") resulting from the breach by
Purchaser of any provision of this Agreement (including without limitation the
representations and warranties set forth in Article II hereof). NOTWITHSTANDING
ANY OTHER PROVISION OF THIS AGREEMENT, PURCHASER'S AGGREGATE LIABILITY UNDER,
AND/OR ARISING IN CONNECTION WITH, THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREUNDER, FOR ANY AND ALL CLAIMS AND LOSSES, INCLUDING WITHOUT
LIMITATION, ANY AND ALL CLAIMS WITH RESPECT TO THE PURCHASER INDEMNITY, AND ANY
AND ALL OTHER CLAIMS FOR ACTUAL, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES,
WILL IN NO EVENT EXCEED $4.5 MILLION.
5.2 INDEMNIFICATION BY SELLER AND THE PRINCIPAL SHAREHOLDER.
Seller and the Principal Shareholder will jointly and severally indemnify and
hold harmless Purchaser and InterVoice and their respective affiliates (the
"Seller Indemnity") from and against all losses, claims and liabilities of any
nature whatsoever (including reasonable attorneys' fees and expenses)
(collectively, "Purchaser Claims") resulting from (i) the breach by Seller
and/or the Principal Shareholder of any provision of this Agreement (including
without limitation the representations and warranties set forth in Article III
hereof) and/or (ii) the conduct of Seller's business prior to the Closing.
NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS AGREEMENT, THE AGGREGATE LIABILITY
OF BOTH SELLER AND THE PRINCIPAL SHAREHOLDER UNDER, AND/OR ARISING IN
CONNECTION WITH, THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREUNDER,
FOR ANY AND ALL CLAIMS AND LOSSES, INCLUDING WITHOUT LIMITATION, ANY AND ALL
CLAIMS WITH RESPECT TO THE SELLER INDEMNITY, AND ANY AND ALL OTHER CLAIMS FOR
ACTUAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, WILL IN NO EVENT EXCEED
$4.5 MILLION.
5.3 ESCROW AGREEMENT. In order (i) to assure that a portion of the
Cash Consideration is used to pay certain creditors of Seller (the "Scheduled
Creditors") and (ii) to secure the obligations (the "Obligations") of
Seller and the Principal Shareholder under this Agreement (including without
limitation their indemnification obligations under Section 5.2 hereof),
Purchaser, Seller and the Principal Shareholder shall enter into an escrow
agreement (the "Escrow Agreement") with Bank One Texas N.A. or such other
escrow agent as Purchaser, Seller and the Principal Shareholder may mutually
agree (the "Escrow Agent"). The Escrow Agreement shall be in such form and
substance as Purchaser, Seller, the Principal Shareholder and the Escrow Agent
may mutually agree consistent with the provisions of this Section 5.3. At the
Closing (i) Purchaser will deposit with the Escrow Agent (a) $619,065.99 of the
Cash Consideration (the "Escrowed Cash"), which consists of the sum of $300,000
and an additional $319,065.99, which is equal to all amounts to be paid to the
Scheduled Creditors as set forth on
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Schedule 5.3 and, (b) 40,000 shares of the Common Stock (the "Escrowed Stock"),
and (ii) Purchaser, Seller and the Principal Shareholder will deliver to the
Escrow Agent a mutually agreed list setting forth the names and addresses of,
and amounts owed by Seller to, each of the Scheduled Creditors. Seller and the
Principal Shareholder represent that the Scheduled Creditors and amounts owed,
as set forth on Schedule 5.3 hereof, include all amounts in excess of $15,000,
which are more than ninety (90) days past due and payable, and/or will become
due and payable, to any creditor of Seller on or before the date of Closing.
Within five business days after the Closing, the Escrow Agent will be required
to pay out of the Escrowed Cash the listed amount owed to each Scheduled
Creditor. Except as otherwise provided in this Section 5.3, the balance of the
Escrowed Cash and all of the Escrowed Stock will remain in escrow for a maximum
of one year after the Closing. Except as otherwise provided in this Section
5.3, if during the duration of the Escrow Agreement Purchaser delivers to the
Escrow Agent an officer's certificate (the "Escrow Claim Certificate"), signed
by both Purchaser and Seller, specifying an unsatisfied Obligation and the
amount thereof, and that Purchaser in good faith believes the amount of the
Obligation has been quantified and the liability associated with such
Obligation has been determined, the Escrow Agent will pay to Purchaser the
amount of such Obligation out of the Escrowed Cash. In the event there is
insufficient Escrowed Cash to satisfy all or any part of an Obligation, the
Escrow Agent will be required, promptly after the expiration of the one-year
holding period set forth in Rule 144 under the Securities Act of 1933 (which
expiration will occur on the first anniversary of the Closing), to sell under
Rule 144 that number of shares of the Escrowed Stock as is necessary for the
Escrow Agent promptly to pay to Purchaser in cash the unsatisfied part of any
Obligation. Notwithstanding the two immediately preceding sentences, if prior
to the expiration of the one-year escrow period Purchaser delivers to Seller
written notice for an Obligation that is not then quantifiable in amount or
with respect to which the liability has not yet been determined (the
"Unliquidated Obligation"), the Escrow Agent shall retain in escrow
indefinitely after the end of such one-year period such amount of Escrowed Cash
and Escrowed Stock as Purchaser shall advise the Seller and the Escrow Agent in
writing is Purchaser's good faith estimate of the amount of Escrowed Cash and
Escrowed Stock reasonably expected to satisfy such Unliquidated Obligation (the
"Estimated Retention"). At such time as the amount of the Unliquidated
Obligation has been quantified and/or the liability has been determined, (i)
Purchaser shall notify the Escrow Agent in an Escrow Claim Certificate, signed
by Purchaser and Seller, to such effect and (ii) the Escrow Agent shall
promptly pay to Purchaser out of the Estimated Retention such portion of the
Escrowed Cash as is necessary, and, if necessary, to sell under Rule 144 such
portion of the Escrowed Stock as is also necessary, promptly to pay to
Purchaser in cash the Unliquidated Obligation. Any Escrowed Cash and/or
Escrowed Stock not applied in the manner set forth in this Section 5.3 shall be
distributed to Seller by the Escrow Agent within five business days after the
first anniversary of the Closing; provided, however, if an Escrow Claim
Certificate was delivered with respect to an Unliquidated Obligation, the
amount (if any) by which the Estimated Retention exceeds the Unliquidated
Obligation shall be distributed by the Escrow Agent to Seller within five
business days after Purchaser has notified the Escrow Agent that the amount of
the Unliquidated Obligation has been quantified and/or the liability has been
determined.
If before, on or after the expiration of the one-year escrow period
(A) Seller and the Principal Shareholder (collectively, the "Selling Parties"),
both, in good faith, dispute (any such
15
<PAGE> 16
dispute, a "Disputed Matter"), in a written notice delivered to Purchaser, (i)
the amount of the Estimated Retention by Purchaser, (ii) any quantification of,
and/or determination of liability for, the Unliquidated Obligation, and/or the
time of occurrence of any such quantification and/or determination, by
Purchaser, or (iii) any assertion by Purchaser in an Escrow Claim Certificate
that Escrow Agent shall make a payment to Purchaser under the Escrow Agreement
because the amount of an Obligation has been quantified and the liability
associated with such Obligation has been determined, or (B) if Purchaser
disputes in good faith any failure or refusal by Seller to sign an Escrow Claim
Certificate, the Selling Parties and Purchaser shall meet in Dallas, Texas, at
a mutually agreed date and time within 30 days after the Selling Parties' or
Purchaser's receipt of notice from the parties requesting such meeting to
resolve a Disputed Matter. If as a result of such meeting or any mutually
agreed subsequent meeting held within 30 days thereafter the Selling Parties
and Purchaser are unable to agree on an appropriate resolution of a Disputed
Matter, then such matter shall be determined by binding arbitration to be
conducted before three arbitrators in Dallas, Texas in accordance with the
Texas Rules of Evidence and, unless inconsistent, the Commercial Arbitration
Rules of the American Arbitration Association as then in effect. The Selling
Parties and Purchaser shall each appoint one arbitrator within 30 days of
receipt from the other party or parties of written notice requesting
arbitration, and such two arbitrators will appoint a third arbitrator within 30
days after the second such arbitrator has been appointed. In the event that
either the Selling Parties or Purchaser shall fail to appoint an arbitrator
within the 30-day period, the arbitrator appointed by the other party or
parties shall serve as sole arbitrator in determining a Disputed Matter. In the
event the two arbitrators appointed by the parties are unable to agree on a
third arbitrator within the required 30-day period, then either such arbitrator
may petition any judge on the United States District Court for the Northern
District of Texas (acting in his or her individual and not judicial capacity)
to appoint such third arbitrator. Any arbitration decision as to a Disputed
Matter shall be final and conclusive upon the Selling Parties and Purchaser.
Seller will promptly sign and deliver any Escrow Claim Certificate presented by
Purchaser unless the Escrow Claim Certificate directly involves a Disputed
Matter which is not subject to, or not yet subject to, an arbitration award in
favor of Purchaser.
For purposes of this Section 5.3, the amount of an Obligation will not
be deemed to be quantified, and liability associated with the Obligation will
not be deemed to be finally determined, so long as a Selling Party is
contesting, in good faith, the amount of, and/or determination of liability
for, such Obligation in a judicial proceeding with the applicable third party,
including any judicial proceeding appealing a trial court's decision, before a
State or Federal Court having competent jurisdiction over the matter. No
payments or distributions will be made by the Escrow Agent to the extent such
payments and/or distributions are subject to a Disputed Matter which is in, or
proceeding towards, arbitration.
5.4 INDEMNITIES FOR SOFTWARE INFRINGEMENT. Without limiting the
scope of the indemnification provisions set forth in Section 5.2 hereof, in the
event a third party infringement claim relating to the Software is sustained in
a final judgment from which no further appeal is taken or possible (and except
to the extent such infringement claim is based upon modifications to the
Software made after the date of Closing), then Seller and the Principal
Shareholder shall, at their sole election and at their expense, (i) procure for
Purchaser the right to own and use the
16
<PAGE> 17
Software; (ii) replace or modify the Software to make it noninfringing; or
(iii) if the options set forth in clauses (i) and (ii) of this Section 5.4 are
not reasonably practicable, require Purchaser to return the Software to Seller
contemporaneous with the full refund and transfer, respectively, to Purchaser
of the Cash Consideration and the Common Stock.
5.5 SELLER BASKET. No Seller Indemnity shall be required to be
made by Seller pursuant to this Article V with respect to any Purchaser Claims
with respect to which Purchaser provides Seller written notice, except to the
extent the aggregate amount of all Purchaser Claims exceeds $100,000.
5.6 PURCHASER BASKET. No Purchaser Indemnity shall be required to
be made by Purchaser pursuant to this Article V with respect to any Seller
Claims with respect to which Seller provides Purchaser written notice, except
to the extent the aggregate amount of all Seller Claims exceeds $100,000.
5.7 TAX MATTERS. Seller, Principal Shareholder, and Purchaser
acknowledge and agree that if any taxing authority in any jurisdiction asserts
that any taxes, interest, penalties and/or other amounts relating thereto are
owed by Seller (collectively, an "Alleged Tax Delinquency"), and as a result of
such assertion, voids or sets aside or attempts to void or set aside the
acquisition of any of the Purchased Assets by Purchaser, and/or imposes or
threatens to impose an Encumbrance on any of the Purchased Assets (any of such
events or actions, a "Payment Trigger"), Seller and Principal Shareholder
hereby authorize Purchaser to pay any or all such Alleged Tax Delinquencies
asserted by any and all applicable taxing authorities for and on behalf of
Seller. Within ten (10) business days of receipt by Seller of reasonable
evidence of the occurrence of a Payment Trigger and payment of an Alleged Tax
Delinquency by Purchaser in response thereto, Seller shall reimburse Purchaser
the full amount of such Alleged Tax Delinquency. Notwithstanding any provision
of this Agreement, Seller, Principal Shareholder and Purchaser acknowledge and
agree that any claim by Purchaser for reimbursement of a payment for an Alleged
Tax Delinquency made in response to the occurrence of a Payment Trigger is a
"Purchaser Claim" for purposes of the Agreement, and is, therefore, subject to
the Seller Indemnity, provided, however, any and all such Purchaser Claims
shall not be subject to Section 5.5 of the Agreement. Accordingly, in all
instances, if reimbursement of an Alleged Tax Delinquency is due and payable to
Purchaser as provided herein, Seller will have to reimburse Purchaser the full
amount of a payment of an Alleged Tax Delinquency without regard to the
aggregate amount of all Purchaser Claims since the date of Closing. The
provisions of this paragraph shall not be construed in any way to obligate
Purchaser to pay any taxes for or on behalf of Seller. Seller agrees to
promptly notify Purchaser in writing of any Payment Trigger and/or any Alleged
Tax Delinquency asserted by any taxing authority, and to promptly provide
Purchaser with all correspondence, documents and other evidence of any such
Payment Trigger and/or Alleged Tax Delinquency in the possession of Seller or
Principal Shareholder. Seller and Principal Shareholder represent and warrant
to Purchaser that, as of the date of execution of this Agreement, they have no
knowledge of any Payment Trigger and/or any Alleged Tax Delinquency asserted
by any taxing authority. Purchaser represents and warrants to Seller and the
Principal Shareholder that neither it nor anyone acting on its behalf shall
initiate any contact with any taxing authority in any jurisdiction with respect
to any matters relating to Seller
17
<PAGE> 18
unless such contact is made in response to an event or action which can
reasonably be construed as a Payment Trigger. In paying an Alleged Tax
Delinquency, Purchaser will not take any action which would compromise Seller's
right to contest such Alleged Tax Delinquency with the applicable taxing
authority.
VI. CERTAIN COVENANTS
6.1 PAYMENT OF OBLIGATIONS. As soon as reasonably possible (and,
in any event, prior to such becoming past due, delinquent or a contractual
breach), Seller and the Principal Shareholder will (i) pay or otherwise satisfy
all of its Liabilities; (ii) perform all obligations of Seller under the Seller
Agreements; and (iii) provide Purchaser with evidence reasonably satisfactory
to it of such payment, satisfaction and performance.
6.2 COVENANT NOT TO COMPETE.
(a) The Principal Shareholder and Seller acknowledge that (i) they
have received specialized and unique knowledge concerning the Software, other
Intellectual Property, and the Purchaser's business, its customers and the
industry in which it competes, (ii) the Purchaser's business, in large part,
depends upon its exclusive ownership of the Software and other Intellectual
Property and possession and use of its proprietary information, (iii) the
Purchaser is entitled to protection against the unauthorized disclosure or use
by Seller and Principal Shareholder of its proprietary information, Software
and other Intellectual Property, and (iv) Principal Shareholder and Seller have
received in this Agreement good and valuable consideration for the covenants
they are making in this Section 6.2. The Purchaser, Seller, and Principal
Shareholder acknowledge and agree that the covenants contained in this Section
6.2 are reasonably necessary for the protection of the Purchaser and are
reasonably limited with respect to the activities they prohibit, their
duration, their geographical scope and their effects on the Seller, Principal
Shareholder and the public. The parties acknowledge that the purpose and effect
of the covenants are to protect the Purchaser from unfair competition by the
Principal Shareholder and Seller.
(b) Except as provided in the next to last sentence of this
Section 6.2(b), during the eighteen (18) month period commencing on the Closing
date, the Seller and Principal Shareholder shall not, without the written
consent of the Purchaser, own, manage, operate, control, serve as an officer,
director, employee, partner or consultant of or be connected in any way with or
have any interest in, any corporation, partnership, proprietorship or other
entity (collectively, "Related Entities"), which develops, sells, licenses or
markets software similar to any of the Software in any state of the United
States or in any foreign country in which the Purchaser has sold or installed
its products or systems or has definitive plans to sell or install its products
at any time prior to or at the time of the date of termination of such
eighteen-month period. The Principal Shareholder may own up to 1% of the shares
of any publicly-owned corporation, provided that none of his other
relationships with such corporation violates such covenant. Notwithstanding
anything in this Agreement to the contrary, Seller and Principal Shareholder
may provide: (a) software integration services for Seller's clients who require
such services to operate their telephone software; and (b) programming services
for Seller's clients
18
<PAGE> 19
who require such services to operate their telephone software, provided (i)
such programming services are rendered independent from, and without reference
to, any Purchased Assets or confidential information of InterVoice or
Purchaser, and (ii) Seller and/or Principal Shareholder, through a Related
Entity or otherwise, will not develop, market, sell, distribute, or license any
software which directly competes with the Software. For purposes of this
subsection 6.2(b), software will only be construed to directly compete with
the Software if it contains all or most of the call processing and/or
interactive voice processing functionality included in the Software.
(c) The Purchaser, Seller, and Principal Shareholder hereby agree
that in the event that the noncompetition covenants contained herein should be
held by any court or other constituted legal authority of competent
jurisdiction to be effective in any particular area or jurisdiction only if
said covenants are modified to limit their duration, geographical area or
scope, then the parties hereto will consider Section 6.2 to be amended and
modified with respect to that particular area or jurisdiction so as to comply
with the order of any such court or other constituted legal authority and, as
to all other jurisdictions or political subdivisions thereof, the
noncompetition covenants contained herein will remain in full force and effect
as originally written. The Purchaser, Seller and Principal Shareholder further
agree that in the event that the noncompetition covenants contained herein
should be held by any court or other constituted legal authority of competent
jurisdiction to be void or otherwise unenforceable in any particular area or
jurisdiction notwithstanding the operation of this Section 6.2(c), then the
parties hereto will consider this Section 6.2 to be amended and modified as to
eliminate therefrom that particular area or jurisdiction as to which such
noncompetition covenants are so held void or otherwise unenforceable, and, as
to all other areas and jurisdictions covered by the noncompetition covenants,
the terms and provisions hereof shall remain in full force and effect as
originally written.
(d) Seller and Principal Shareholder recognize and acknowledge
that the Purchaser would suffer irreparable harm and substantial loss if Seller
or Principal Shareholder violated any of the terms and provisions of this
Section 6.2 and that the actual damages which might be sustained by the
Purchaser as the result of any breach of this Section 6.2 would be difficult to
ascertain. Seller and Principal Shareholder agree, at the election of the
Purchaser, and in addition to and not in lieu of Purchaser's right, to seek all
remedies and damages which the Purchaser may have at law and/or equity for such
breach, that the Purchaser shall be entitled to an injunction restraining
Seller and/or Principal Shareholder from breaching any of the terms or
provisions of this Section 6.2.
6.3 NONINTERFERENCE. Seller and Principal Shareholder will not
interfere with any sale or license of equipment, software (including, after the
Closing date, the Software), and/or services of Purchaser or InterVoice to any
person, including without limitation, a customer of Seller who licensed any
Software prior to the Closing date.
6.4 COOPERATION PRIOR TO CLOSING. Seller and Principal Shareholder
on the one hand, and Purchaser on the other hand, acknowledge and agree to
cooperate with, and provide reasonable assistance to, the other party or
parties in the fulfillment of their conditions and obligations under this
Agreement, including without limitation, Purchaser's due diligence review
19
<PAGE> 20
in connection with warranties and representations made by Seller and Principal
Shareholder and the transactions contemplated by this Agreement. Purchaser will
cooperate with Seller in connection with its due diligence review in order to
avoid harming Seller's relationships with its employees, customers, creditors
and suppliers. This Section 6.4 will not be construed to in any way indicate
that, Seller and Principal Shareholder on the one hand, and Purchaser on the
other hand, is in any way responsible for the representations, warranties,
covenants, conditions or other obligations of the other party or parties.
6.5 THE REQUIRED EMPLOYEES. On and after the date of any Closing,
Seller and Principal Shareholder will take any and all actions and sign and
deliver any and all releases and other documents which are necessary or
desirable to terminate the employment of the Required Employees and Scot
Johnson by Seller and to permit and facilitate their employment by InterVoice.
For a period of eighteen months following the date of Closing, and
notwithstanding any terms of any other agreement, Seller, Principal Shareholder
and any and all affiliates and/or subsidiaries of Seller or Principal
Shareholder, will not directly or indirectly employ any Required Employee or
Scot Johnson, or directly or indirectly solicit for employment any Required
Employee or Scot Johnson.
VII. MISCELLANEOUS PROVISIONS
7.1 TAX ALLOCATIONS. Purchaser, Seller and the Principal
Shareholder will allocate the Cash Consideration, the Common Stock and the
forgiveness of the unapplied amount of the prepayment under the OEM Agreement,
among the various Purchased Assets for purposes of Form 8594 and any other
filings with the IRS in accordance with a tax allocation schedule to be
mutually agreed upon within thirty (30) days of the date of Closing.
7.2 SALES TAX. Seller and the Principal Shareholder will pay any
sales, use or similar tax in connection with Purchaser's purchase of the
Purchased Assets and the transactions contemplated by this Agreement. Seller
has requested and Purchaser will provide, a reseller certificate of InterVoice.
7.3 GOVERNING LAW. This Agreement will be governed by, and
construed in accordance with, the laws of the State of Texas.
7.4 NOTICES. Any notice or other communication required or
permitted by this Agreement shall be in writing and shall be deemed sufficient
if delivered personally, or if transmitted by first class registered or
certified mail, postage prepaid with return receipt requested, or if sent by
prepaid overnight delivery service, or if sent by cable, telegram, telefax or
telex, to the parties at the following addresses (or at such other addresses as
shall be specified by the parties by like notice):
20
<PAGE> 21
If to Purchaser:
InterVoice Acquisition Subsidiary II, Inc.
17811 Waterview Parkway
Dallas, Texas 75252
Attention: Rob-Roy Graham
Chief Financial Officer
With a copy to:
INTERVOICE, INC.
17811 Waterview Parkway
Dallas, Texas 75252
Attention: Dean C. Howell
Vice President and Corporate Counsel
If to Seller and the Principal Shareholder:
Mr. Mark Dronen
DRONEN CONSULTING, INCORPORATED
17W220 22nd Street
Suite 300
Oakbrook Terrace, IL 60181
7.5 COOPERATION. Between the date of this Agreement and the
Closing, Seller and the Principal Shareholder will (i) conduct the business of
Seller in the ordinary course of business and in accordance with past practice;
(ii) obtain Purchaser's prior written approval before selling or disposing of
any material assets or entering into any contract involving the Software, or
that is not terminable without penalty on not more than 30 days notice; (iii)
use their best efforts to obtain for Purchaser any Permits necessary to conduct
the business of Seller and any consents necessary to transfer any part of the
Purchased Assets; and (iv) use their best efforts to retain such employees of
Seller as Purchaser may designate.
7.6 ENTIRE AGREEMENT; NO ASSIGNMENT. This Agreement constitutes
the entire Agreement among Purchaser, Seller and the Principal Shareholder with
respect to the subject matter hereof. This Agreement will be binding upon,
and will inure to the benefit of, Purchaser and Seller and their respective
successors and permitted assigns and the Principal Shareholder and his heirs,
legal representatives and permitted assigns. No party may assign this Agreement
without the prior written consent of the other parties hereto; provided,
however, Purchaser may assign this Agreement or any rights hereunder to
InterVoice. As of the Closing date, the parties acknowledge and agree that the
OEM Agreement is automatically terminated without any further actions by either
party, and neither party shall have any further obligations, including without
limitation, payment obligations, under the OEM Agreement.
21
<PAGE> 22
7.7 SEVERABILITY. If any provision of this Agreement is held to be
unenforceable, this Agreement shall be considered divisible and such provision
shall be deemed inoperative to the extent it is deemed unenforceable, and in
all other respects this Agreement shall remain in full force and effect;
provided, however, if any such provision may be made enforceable by limitation
thereof, such provision shall be deemed to be so limited and shall be
enforceable to the maximum extent permitted by applicable law.
7.8 DELIVERY. The Closing, delivery of this Agreement, and
delivery of the Purchased Assets, will all occur at Purchaser's offices in
Dallas, Texas.
7.9 COUNTERPARTS. This Agreement may be executed by the parties
hereto in one or more counterparts, each of which shall be deemed an original,
and all of which shall constitute one and the same agreement.
IN WITNESS WHEREOF, Purchaser, Seller and the Principal Shareholder
have executed this Agreement as of the date first above written.
INTERVOICE ACQUISITION SUBSIDIARY II, INC.
/s/ ROB-ROY J. GRAHAM
-----------------------------------------
By:
Authorized Officer
"Purchaser"
DRONEN CONSULTING, INCORPORATED
/s/ MARK DRONEN
-----------------------------------------
By:
Authorized Officer
"Seller"
/s/ MARK DRONEN
-----------------------------------------
Mark Dronen
"Principal Shareholder"
22
<PAGE> 23
IN WITNESS WHEREOF, InterVoice has executed this Agreement as of the date first
above written solely for the purpose of acknowledging and agreeing to the
provisions and obligations of Section 1.3 of this Agreement.
INTERVOICE, INC.
By: /s/ ROB-ROY J. GRAHAM
-----------------------------------
Name: Rob-Roy J. Graham
--------------------------------
Title: CFO
--------------------------------
23
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> AUG-31-1998
<CASH> 8,253,878
<SECURITIES> 0
<RECEIVABLES> 35,366,886
<ALLOWANCES> 665,000
<INVENTORY> 9,422,697
<CURRENT-ASSETS> 57,489,800
<PP&E> 48,442,446
<DEPRECIATION> 18,408,270
<TOTAL-ASSETS> 93,264,220
<CURRENT-LIABILITIES> 31,623,873
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0
0
<COMMON> 9,835
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<TOTAL-LIABILITY-AND-EQUITY> 93,264,220
<SALES> 63,070,616
<TOTAL-REVENUES> 63,070,616
<CGS> 25,974,089
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<INCOME-TAX> 3,914,421
<INCOME-CONTINUING> 7,443,728
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