<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 6, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DAVOX CORPORATION
(Exact name of Registrant as Specified in its Charter)
DELAWARE 7373 02-0364368
(State or Other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Classification Code Number) Identification Number)
Incorporation or
Organization)
6 TECHNOLOGY PARK DRIVE
WESTFORD, MASSACHUSETTS 01886
(978) 952-0200
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
ALPHONSE M. LUCCHESE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
6 TECHNOLOGY PARK DRIVE
WESTFORD, MASSACHUSETTS 01886
(978) 952-0200
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
-----------
COPIES TO:
TIMOTHY C. MAGUIRE, ESQ. BRIAN K. BEARD, ESQ.
TESTA, HURWITZ & THIBEAULT, LLP GUNDERSON DETTMER STOUGH VILLENEUVE
HIGH STREET TOWER FRANKLIN & HACHIGIAN, LLP
125 HIGH STREET 8911 CAPITAL OF TEXAS HIGHWAY, SUITE
BOSTON, MASSACHUSETTS 02110 4240
AUSTIN, TEXAS 78759
Approximate date of commencement of the proposed sale to the public: Upon
consummation of the Merger described herein.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE FEE(2)(3)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.10 par value per
share.............................. 2,384,452 shares N/A N/A $49,610
</TABLE>
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(1) Based upon the maximum number of shares that may be issued in the Merger,
assuming the exercise of all AnswerSoft stock options prior to
effectiveness of the Merger.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee and calculated pursuant to Rule 457(f) under the
Securities Act of 1933, as amended, based on the aggregate book value as
of December 31, 1997 of the shares of capital stock of AnswerSoft, Inc. to
be cancelled in the Merger.
(3) The amount of the registration fee includes $15,703.55 previously paid
pursuant to Section 14(a) of the Securities Exchange Act of 1934, as
amended, in connection with the filing by the Registrant and AnswerSoft,
Inc. of a Preliminary Prospectus/Joint Proxy Statement related to the
proposed Merger. In accordance with Rule 0-11(c)(2) under the Securities
Exchange Act of 1934, as amended, and Section 6(b) under the Securities
Act of 1933, as amended, the balance of the filing fee is being submitted
herewith.
-----------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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- -------------------------------------------------------------------------------
<PAGE>
[DAVOX CORPORATION LETTERHEAD LOGO APPEARS HERE]
April 6, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Davox Corporation ("Davox") to be held at 10:00 a.m., Boston time, on May 6,
1998, at the offices of Davox, 6 Technology Park Drive, Westford,
Massachusetts.
At this meeting, you will be asked to approve the issuance of 2,384,452
shares of Davox Common Stock in connection with the merger with AnswerSoft,
Inc. This merger will significantly expand the size, geographic scope and
expansion opportunities available to Davox. The Board of Directors and
management of Davox believe this merger is in the best interests of Davox and
our stockholders and unanimously recommend that you vote to approve the stock
issuance. You should consider carefully the considerations associated with the
merger set forth under "Risk Factors" in the accompanying Joint Proxy
Statement/Prospectus, including in particular the difficulty of integrating the
two companies, the expansion risks and their potential impact on future
operating results, and the increase in the number of shares of Davox Common
Stock eligible for sale.
You will also be asked to elect a Board of Directors for the ensuing year, to
approve an increase in the number of shares of Common Stock available for
issuance under Davox's 1996 Stock Plan, and to ratify the selection of Arthur
Andersen LLP as Davox's auditors for 1998. The Board of Directors unanimously
recommends that you vote FOR each of these proposals.
Details regarding each of the matters to be acted upon at this meeting appear
in the accompanying Joint Proxy Statement/Prospectus. Please give this material
your careful attention.
Whether or not you plan to attend the meeting, please complete, sign and date
the accompanying proxy card and return it in the enclosed postage prepaid
envelope. It is important that your shares be voted whether or not you attend
the meeting in person. If you attend the meeting, you may vote in person even
if you have previously returned your proxy card. Your prompt cooperation will
be greatly appreciated.
Very truly yours,
Alphonse M. Lucchese
Chairman of the Board
and Chief Executive Officer
[DAVOX CORPORATION FOOTER LOGO APPEARS HERE]
<PAGE>
[DAVOX CORPORATION LOGO APPEARS HERE]
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 6, 1998
To The Stockholders of Davox Corporation:
Notice is Hereby Given that the Annual Meeting of Stockholders of Davox
Corporation, a Delaware corporation ("Davox"), will be held at 10:00 a.m.,
Boston time, on May 6, 1998, at the offices of Davox, 6 Technology Park Drive,
Westford, Massachusetts to consider and vote upon the following proposals:
1. To approve the issuance of 2,384,452 shares of Davox Common Stock, par
value $.10 per share (the "Davox Common Stock"), pursuant to the Agreement
and Plan of Merger dated as of March 9, 1998, as amended and restated on
April 6, 1998 (the "Merger Agreement"), among Davox, Duke Acquisition
Corporation ("DAC") and AnswerSoft, Inc. ("AnswerSoft"). The Merger
Agreement provides for the merger of DAC with and into AnswerSoft,
following which AnswerSoft would become a wholly owned subsidiary of Davox.
2. To fix the number of directors constituting the Board of Directors at
four and to elect a Board of Directors for the ensuing year.
3. To approve an increase in the number of shares of Davox Common Stock
available for issuance under the Davox 1996 Stock Plan (the "1996 Stock
Plan") to 1,950,000 shares.
4. To ratify the selection of the firm of Arthur Andersen LLP, as
auditors for the fiscal year ending December 31, 1998.
5. To transact such other business as may properly come before the
meeting or any postponements or adjournments thereof.
Only stockholders of record at the close of business on March 13, 1998 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
All stockholders are cordially invited to attend the meeting in person. To
ensure your representation at the meeting, however, you are urged to sign and
return the enclosed proxy card as promptly as possible in the enclosed
postage-prepaid envelope. You may revoke your proxy in the manner described in
the accompanying Joint Proxy Statement/Prospectus at any time before it has
been voted at the Annual Meeting. Any stockholder attending the Annual Meeting
may vote in person even if he or she has returned a proxy.
By Order of the Board of Directors,
Alphonse M. Lucchese
Chairman of the Board
and Chief Executive Officer
Westford, Massachusetts
April 6, 1998
<PAGE>
[ANSWERSOFT HEADER LOGO APPEARS HERE]
April 6, 1998
Dear AnswerSoft Stockholder:
A Special Meeting of Stockholders (the "Special Meeting") of AnswerSoft,
Inc., a Delaware corporation ("AnswerSoft"), will be held at the offices of
AnswerSoft, 2201 North Central Expressway, Richardson, Texas, on May 6, 1998 at
9:00 a.m. Dallas time.
At the Special Meeting you will be asked to consider and vote upon a proposal
(the "AnswerSoft Merger Proposal") to approve an Amended and Restated Agreement
and Plan of Merger dated April 6, 1998 among AnswerSoft, Davox Corporation, a
Delaware corporation ("Davox"), and Duke Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of Davox ("DAC"), pursuant to which,
among other things:
(a) DAC will be merged with and into AnswerSoft (the "Merger"), following
which AnswerSoft will become a wholly owned subsidiary of Davox;
(b) each share of AnswerSoft common stock, par value $0.01 per share (the
"AnswerSoft Common Stock"), outstanding as of the closing of the Merger
(other than shares that are owned by Davox or any direct or indirect wholly
owned subsidiary of Davox or of AnswerSoft, or shares as to which
dissenters' rights have been perfected under Delaware law) will be
converted into the right to receive 0.1299665 shares of Davox common stock,
$0.10 par value (the "Davox Common Stock") (subject to appropriate
adjustment in the event of a stock split or reverse stock split);
(c) each share of AnswerSoft Series A convertible preferred stock, par
value $0.01 per share (the "AnswerSoft Series A Preferred Stock"),
outstanding as of the closing of the Merger (other than shares that are
owned by Davox or any direct or indirect wholly owned subsidiary of Davox
or of AnswerSoft, or shares as to which dissenters' rights have been
perfected under Delaware law) will be converted into the right to receive
0.1621888 shares of Davox Common Stock (subject to appropriate adjustment
in the event of a stock split or reverse stock split);
(d) each share of AnswerSoft Series B convertible preferred stock, par
value $0.01 per share (the "AnswerSoft Series B Preferred Stock"),
outstanding as of the closing of the Merger (other than shares that are
owned by Davox or any direct or indirect wholly owned subsidiary of Davox
or of AnswerSoft, or shares as to which dissenters' rights have been
perfected under Delaware law) will be converted into the right to receive
0.2137445 shares of Davox Common Stock (subject to appropriate adjustment
in the event of a stock split or reverse stock split); and
(e) all AnswerSoft stock options and warrants, together with the
underlying AnswerSoft stock plans, will be assumed by Davox and converted
into options to purchase shares of Davox Common Stock in accordance with
the conversion ratios set forth above.
At the Special Meeting you will also be asked to consider and vote upon
proposals (the "Option Vesting Proposals") regarding the acceleration of
vesting of options held by certain executive officers of AnswerSoft (the
"AnswerSoft Officers") upon the closing of the Merger. The terms of the options
granted to the AnswerSoft Officers provide that the vesting of the options will
accelerate upon a corporate transaction, such as the Merger. However, under
U.S. tax laws, such acceleration could result in the incurrence of significant
excise taxes to the AnswerSoft Officers and the loss of certain tax deductions
to AnswerSoft unless the AnswerSoft stockholders vote to allow acceleration of
vesting of the options.
YOUR BOARD OF DIRECTORS HAS APPROVED THE MERGER AND THE TRANSACTIONS RELATED
THERETO AND HAS DETERMINED THAT THEY ARE FAIR TO AND IN THE BEST INTERESTS OF
ANSWERSOFT AND ITS STOCKHOLDERS. AFTER CAREFUL CONSIDERATION, YOUR BOARD OF
DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ANSWERSOFT MERGER PROPOSAL
AND THE OPTION VESTING PROPOSALS.
[ANSWERSOFT FOOTER LOGO APPEARS HERE]
<PAGE>
In the materials accompanying this letter, you will find a Notice of Special
Meeting of Stockholders, a Joint Proxy Statement/Prospectus relating to the
actions to be taken by AnswerSoft stockholders at the Special Meeting and a
proxy card. The Joint Proxy Statement/Prospectus more fully describes the
AnswerSoft Merger Proposal and the Option Vesting Proposals and includes
information about AnswerSoft and Davox.
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE SPECIAL MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT WITHOUT DELAY IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO ADDITIONAL POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY THEN WITHDRAW YOUR
PROXY AND VOTE IN PERSON. IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND
VOTED AT THE SPECIAL MEETING.
Sincerely,
David W. Brandenburg
President and Chief Executive
Officer
<PAGE>
[ANSWERSOFT HEADER LOGO APPEARS HERE]
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 6, 1998
----------------
Notice is hereby given that a Special Meeting of Stockholders (the "Special
Meeting") of AnswerSoft, Inc., a Delaware corporation ("AnswerSoft"), will be
held at the offices of AnswerSoft, 2201 North Central Expressway, Suite 200,
Richardson, Texas 75080, on May 6, 1998, at 9:00 a.m., Dallas time, for the
following purposes:
1. To consider and vote upon a proposal (the "AnswerSoft Merger
Proposal") to approve an Amended and Restated Agreement and Plan of Merger
dated April 6, 1998, among AnswerSoft, Davox Corporation, a Delaware
corporation ("Davox"), and Duke Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of Davox ("DAC"), pursuant to
which, among other things:
(a) DAC will be merged with and into AnswerSoft (the "Merger"),
following which AnswerSoft will become a wholly owned subsidiary of
Davox;
(b) each share of AnswerSoft common stock, par value $0.01 per share
(the "AnswerSoft Common Stock"), outstanding as of the closing of the
Merger (other than shares that are owned by Davox or any direct or
indirect wholly owned subsidiary of Davox or of AnswerSoft, or shares as
to which dissenters' rights have been perfected under Delaware law) will
be converted into the right to receive 0.1299665 shares of Davox common
stock, $0.10 par value (the "Davox Common Stock") (subject to
appropriate adjustment in the event of a stock split or reverse stock
split);
(c) each share of AnswerSoft Series A convertible preferred stock, par
value $0.01 per share (the "AnswerSoft Series A Preferred Stock"),
outstanding as of the closing of the Merger (other than shares that are
owned by Davox or any direct or indirect wholly owned subsidiary of
Davox or of AnswerSoft, or shares as to which dissenters' rights have
been perfected under Delaware law) will be converted into the right to
receive 0.1621888 shares of Davox Common Stock (subject to appropriate
adjustment in the event of a stock split or reverse stock split);
(d) each share of AnswerSoft Series B convertible preferred stock, par
value $0.01 per share (the "AnswerSoft Series B Preferred Stock" and
together with the AnswerSoft Series A Preferred Stock, the "AnswerSoft
Preferred Stock," and together with the AnswerSoft Series A Preferred
Stock and the AnswerSoft Common Stock, the "AnswerSoft Capital Stock"),
outstanding as of the closing of the Merger (other than shares that are
owned by Davox or any direct or indirect wholly owned subsidiary of
Davox or of AnswerSoft, or shares as to which dissenters' rights have
been perfected under Delaware law) will be converted into the right to
receive 0.2137445 shares of Davox Common Stock (subject to appropriate
adjustment in the event of a stock split or reverse stock split); and
(e) all AnswerSoft stock options and warrants, together with the
underlying AnswerSoft stock plans, will be assumed by Davox and
converted into options or warrants, as applicable, to purchase shares of
Davox Common Stock in accordance with the conversion ratios set forth
above. The Merger is more fully described in the accompanying Joint
Proxy Statement/Prospectus; and
2. To consider and vote upon proposals (the "Option Vesting Proposals")
regarding the acceleration of vesting of options held by certain executive
officers of AnswerSoft (the "AnswerSoft Officers") upon the closing of the
Merger. The terms of the options granted to the AnswerSoft Officers provide
that the vesting of the options will accelerate upon a corporate
transaction, such as the Merger. However, under U.S. tax laws, such
acceleration could result in the incurrence of significant excise taxes to
the AnswerSoft
[ANSWERSOFT FOOTER LOGO APPEARS HERE]
<PAGE>
Officers and the loss of certain tax deductions to AnswerSoft unless the
AnswerSoft stockholders vote to allow acceleration of vesting of the
options.
3. To transact such other business that may properly come before the
Special Meeting or any postponements or adjournments thereof.
Only stockholders of record at the close of business on March 13, 1998 are
entitled to notice of and to vote at the Special Meeting, or at any
postponements or adjournments thereof. The affirmative vote of a majority of
the outstanding shares of AnswerSoft Capital Stock, including a majority of
the AnswerSoft Preferred Stock, is required to approve the AnswerSoft Merger
Proposal. The affirmative vote of more than seventy-five percent (75%) of the
outstanding shares of AnswerSoft Capital Stock is required to approve each of
the Option Vesting Proposals.
IMPORTANT
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE SPECIAL MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT WITHOUT DELAY IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO ADDITIONAL POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY THEN WITHDRAW YOUR
PROXY AND VOTE IN PERSON. IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND
VOTED AT THE SPECIAL MEETING.
BY ORDER OF THE BOARD OF DIRECTORS,
David W. Brandenburg
President and Chief Executive
Officer
Richardson, Texas
April 6, 1998
PLEASE DO NOT SEND IN ANY
STOCK CERTIFICATES AT THIS TIME.
2
<PAGE>
DAVOX ANSWERSOFT
LOGO LOGO
APPEARS HERE APPEARS HERE
----------------
JOINT PROXY STATEMENT
----------------
DAVOX CORPORATION PROSPECTUS
----------------
This Joint Proxy Statement/Prospectus is being furnished to holders of
common stock, par value $.10 per share ("Davox Common Stock"), of Davox
Corporation, a Delaware corporation ("Davox"), in connection with the
solicitation of proxies by the Board of Directors of Davox (the "Davox Board")
for use at the annual meeting of the stockholders of Davox (the "Davox
Meeting") to be held at 10:00 a.m., Boston time, on May 6, 1998, or at any
adjournments or postponements thereof. The Davox Meeting will be held at the
offices of Davox, 6 Technology Park Drive, Westford, Massachusetts.
This Joint Proxy Statement/Prospectus is also being furnished to holders of
shares of common stock, par value $.01 per share (the "AnswerSoft Common
Stock"), Series A convertible preferred stock, par value $.01 per share (the
"AnswerSoft Series A Preferred Stock") and Series B convertible preferred
stock, par value $.01 per share (the "AnswerSoft Series B Preferred Stock" and
together with the AnswerSoft Series A Preferred Stock, the "AnswerSoft
Preferred Stock," and together with the AnswerSoft Series A Preferred Stock
and the AnswerSoft Common Stock, the "AnswerSoft Capital Stock"), of
AnswerSoft, Inc., a Delaware corporation ("AnswerSoft"), in connection with
the solicitation of proxies by the Board of Directors of AnswerSoft (the
"AnswerSoft Board") for use at the special meeting (the "AnswerSoft Meeting")
of the stockholders of AnswerSoft to be held at 9:00 a.m., Dallas time, on May
6, 1998, or at any adjournments or postponements thereof. The AnswerSoft
Meeting will be held at the offices of AnswerSoft, 2201 North Central
Expressway, Suite 200, Richardson, Texas.
This Joint Proxy Statement/Prospectus constitutes a prospectus of Davox with
respect to 2,384,452 shares of Davox Common Stock to be issued in the merger
(the "Merger") of Duke Acquisition Corporation, a Delaware corporation and
wholly owned subsidiary of Davox ("DAC"), with and into AnswerSoft pursuant to
the Agreement and Plan of Merger dated as of March 9, 1998, as amended and
restated on April 6, 1998 (the "Merger Agreement"), among Davox, DAC and
AnswerSoft. All information contained herein relating to Davox and DAC has
been supplied by Davox and all information contained herein relating to
AnswerSoft has been supplied by AnswerSoft.
----------------
SEE "RISK FACTORS" COMMENCING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED CAREFULLY BY BOTH DAVOX AND ANSWERSOFT STOCKHOLDERS
IN EVALUATING THE PROPOSALS TO BE VOTED ON AT THE DAVOX MEETING AND THE
ANSWERSOFT MEETING AND THE ACQUISITION BY ANSWERSOFT STOCKHOLDERS OF THE
SECURITIES OFFERED HEREBY.
----------------
NEITHER THIS TRANSACTION NOR THE SECURITIES OF DAVOX OFFERED HEREBY HAVE
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
An Annual Report to Stockholders of Davox containing financial statements
for the fiscal year ended December 31, 1997 is being mailed together with this
Joint Proxy Statement/Prospectus to all Davox stockholders entitled to vote at
the Davox Meeting. This Joint Proxy Statement/Prospectus and the accompanying
notice and form of proxy are first being mailed to stockholders of Davox and
AnswerSoft on or about April 6, 1998.
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS APRIL 6, 1998.
<PAGE>
AVAILABLE INFORMATION
Davox is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files
reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information may be inspected and copied at the public reference room of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the public reference facilities at the
Commission's Regional Offices at Seven World Trade Center, 13th Floor, New
York, New York 10048 and North-West Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material may be obtained
at prescribed rates by writing to the Commission, Public Reference Section,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains a website (the "Commission Website") that contains
reports, proxy and information statements and other information regarding
Davox. The address of the Commission Website is http://www.sec.gov. In
addition, material filed by Davox may be inspected at the offices of the
National Association of Securities Dealers, Inc., Market Listing Section, 1735
K Street, N.W., Washington, D.C. 20006.
Davox has filed with the Commission a Registration Statement on Form S-4
(together with any amendments or supplements thereto, the "Registration
Statement") under the Securities Act of 1933 (the "Securities Act") with
respect to the shares of Davox Common Stock to be issued in the Merger. This
Joint Proxy Statement/Prospectus does not contain all the information set
forth in the Registration Statement. Such additional information may be
obtained from the public reference section of the Commission at 450 Fifth
Street, N.W., Washington, D.C., 20549 or on the Commission Website. Statements
contained in this Joint Proxy Statement/Prospectus as to the contents of any
contract or other document referred to herein are not necessarily complete
and, in each instance, reference is made to the copy of such contract or other
documents filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE MATTERS REFERRED TO HEREIN AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY DAVOX OR ANSWERSOFT. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY
PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS SHALL NOT UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following Davox documents filed with the Commission are incorporated by
reference in this Joint Proxy Statement/Prospectus:
1. Davox's Annual Report on Form 10-K for the fiscal year ended December 31,
1997; and
2. Davox's Current Report on Form 8-K dated March 9, 1998.
All documents and reports subsequently filed by Davox pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Joint
Proxy Statement/Prospectus and prior to the consummation of the Merger shall
be deemed to be incorporated by reference in this Joint Proxy
Statement/Prospectus and to be part hereof from the dates of filing of such
documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Joint Proxy Statement/Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Joint Proxy Statement/Prospectus.
This Joint Proxy Statement/Prospectus incorporates documents by reference
which are not presented herein or delivered herewith. Such documents (other
than exhibits to such documents unless such exhibits are
2
<PAGE>
specifically incorporated by reference) are available to any person, including
any beneficial owner of Davox Common Stock or AnswerSoft Capital Stock, to
whom this Joint Proxy Statement/Prospectus is delivered, upon written or oral
request, without charge, in the case of documents relating to Davox or DAC,
directed to Davox Corporation, 6 Technology Park Drive, Westford,
Massachusetts 01886 (telephone number 978-952-0200), attention: Investor
Relations, or, in the case of documents relating to AnswerSoft, directed to
AnswerSoft, Inc., 2201 North Central Expressway, Suite 200, Richardson, Texas
75080 (telephone number 972-997-8300), attention: Investor Relations. In order
to assure timely delivery of the requested material before the Davox Meeting
and the AnswerSoft Meeting, any request should be made prior to April 24,
1998.
TRADEMARKS
Davox, Unison, SMC and Continuum are registered trademarks of Davox, and
In/Unison, Unison Strategist, Unison Tactician, Unison Precision Dial, Rules-
Based, OneStation, Smart Access, SmartACD, LYRICall, ComposeIt and Selectview
are trademarks of Davox. AnswerSoft, SoftPhone, Memplus and Sixth Sense are
registered trademarks of AnswerSoft, and Intuition, A&Design, Concerto,
Shadow, Technology Access Modules, TAMs, AnswerPartners and SmartRoute are
trademarks of AnswerSoft. This Joint Proxy Statement/Prospectus also may
include other trademarks and trade names which are the property of their
respective owners.
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This Joint Proxy Statement/Prospectus contains and incorporates by reference
certain "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act with respect to Davox and
AnswerSoft. All statements other than statements of historical facts included
or incorporated by reference into this Joint Proxy Statement/Prospectus,
including those regarding expected benefits and synergies of the proposed
Merger, market trends, financial position, business strategy, projected costs
and plans and objectives of management for future operations, are forward-
looking statements. In general, such statements are identified by the use of
forward-looking words or phrases including, but not limited to, "intended,"
"will," "should," "could," "may," "expects," and "anticipates," or the
negative thereof or variations thereon or similar terminology. These forward-
looking statements are based on current expectations. Although Davox and
AnswerSoft believe that the expectations reflected in their respective
forward-looking statements are reasonable, there can be no assurance that such
expectations will prove to be correct. Because forward-looking statements
involve risks and uncertainties, actual results could differ materially.
Important factors that could cause actual results to differ materially from
Davox's or AnswerSoft's expectations ("Cautionary Statements") are disclosed
under "Risk Factors," and elsewhere in this Joint Proxy Statement/Prospectus,
including, without limitation, in conjunction with the forward-looking
statements included in this Joint Proxy Statement/Prospectus, and from time to
time in Davox's Commission reports and other filings. These forward-looking
statements represent the judgment of Davox and AnswerSoft as of the date of
this Joint Proxy Statement/Prospectus. All subsequent written and oral
forward-looking statements attributable to Davox or AnswerSoft or persons
acting on behalf of Davox or AnswerSoft are expressly qualified in their
entirety by the Cautionary Statements. Davox and AnswerSoft disclaim, however,
any intent or obligation to update their respective forward-looking
statements.
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TABLE OF CONTENTS
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AVAILABLE INFORMATION...................................................... 2
INCORPORATION OF DOCUMENTS BY REFERENCE.................................... 2
TRADEMARKS................................................................. 3
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS..................... 3
SUMMARY.................................................................... 6
The Companies............................................................ 6
Risk Factors............................................................. 7
The Merger............................................................... 7
The Stockholder Meetings................................................. 13
SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA.................. 15
DAVOX SELECTED HISTORICAL FINANCIAL DATA................................... 15
ANSWERSOFT SELECTED HISTORICAL FINANCIAL DATA.............................. 16
SELECTED HISTORICAL AND PRO FORMA COMBINED CONSOLIDATED FINANCIAL DATA..... 16
COMPARATIVE PER SHARE DATA................................................. 17
RISK FACTORS............................................................... 18
Risks Relating to the Merger............................................. 18
Risks Relating to Davox, AnswerSoft and the Combined Company............. 19
THE STOCKHOLDER MEETINGS................................................... 25
General.................................................................. 25
Matters to be Considered at the Meetings................................. 25
Record Dates; Voting at the Meetings..................................... 25
Votes Required........................................................... 26
Proxies.................................................................. 26
THE MERGER................................................................. 28
Background of the Transaction............................................ 28
Reasons for the Merger; Recommendations of the Board of Directors........ 30
Opinion of Davox's Financial Advisor..................................... 34
Conduct of the Business of the Combined Company Following the Merger..... 38
Interests of Certain Persons in the Transaction.......................... 38
Participation Agreement.................................................. 39
Affiliate Agreements..................................................... 40
Accounting Treatment..................................................... 40
Certain Federal Income Tax Considerations................................ 40
Dissenters' Rights of AnswerSoft Stockholders............................ 42
No Dissenters' Rights for Davox Stockholders............................. 44
THE MERGER AGREEMENT....................................................... 44
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS.......................... 48
INFORMATION CONCERNING DAVOX............................................... 53
Davox Business........................................................... 53
Davox Selected Consolidated Financial Data............................... 61
Davox Management's Discussion and Analysis of Financial Condition and Re-
sults of Operations..................................................... 62
Davox Management......................................................... 66
Compensation Committee Report on Executive Compensation.................. 70
Principal Stockholders of Davox.......................................... 72
Performance Graph of Davox............................................... 74
Certain Relationships and Related Transactions of Davox.................. 75
Price Range of Davox Common Stock........................................ 75
INFORMATION CONCERNING ANSWERSOFT.......................................... 76
AnswerSoft Business...................................................... 76
AnswerSoft Selected Consolidated Financial Data.......................... 84
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AnswerSoft Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................. 85
AnswerSoft Management................................................... 90
Principal Stockholders of AnswerSoft.................................... 96
COMPARISON OF RIGHTS OF HOLDERS OF ANSWERSOFT CAPITAL STOCK AND DAVOX
COMMON STOCK............................................................. 98
Directors............................................................... 98
Stockholders............................................................ 98
Amendment of Certificate of Incorporation............................... 99
Preference and Other Rights of Certain Holders of AnswerSoft Stock...... 99
Dividends and other Distributions....................................... 99
Indemnification......................................................... 99
DESCRIPTION OF DAVOX CAPITAL STOCK........................................ 100
Davox Common Stock...................................................... 100
Delaware Law and Certain Davox Charter and By-Law Provisions............ 100
Transfer Agent and Registrar............................................ 101
LEGAL MATTERS............................................................. 101
EXPERTS................................................................... 101
OTHER MATTERS TO BE CONSIDERED AT THE DAVOX MEETING....................... 102
Election of Directors to the Davox Board................................ 102
Board of Directors Meetings and Committees.............................. 102
Director Compensation................................................... 103
Approval of Increase of Number of Shares under the Davox 1996 Stock
Plan................................................................... 103
Description of the 1996 Stock Plan...................................... 103
Certain Federal Tax Information......................................... 105
Ratification of Selection of Auditors................................... 107
Other Matters........................................................... 107
OTHER MATTERS TO BE CONSIDERED AT THE ANSWERSOFT MEETING.................. 107
Approval of Option Vesting Proposals.................................... 107
EXPENSES AND SOLICITATION................................................. 109
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE................... 109
STOCKHOLDER PROPOSALS..................................................... 109
INDEX TO FINANCIAL STATEMENTS............................................. F-1
ANNEX A--Amended and Restated Agreement and Plan of Merger, dated as of
April 6, 1998 among Davox Corporation, Duke Acquisition Corporation and
AnswerSoft, Inc.......................................................... A-1
ANNEX B--Participation Agreement, dated as of March 9, 1998 among Davox
Corporation, Duke Acquisition Corporation and the Major Stockholders (as
defined therein)......................................................... B-1
ANNEX C--Opinion of Piper Jaffray Inc. ................................... C-1
ANNEX D--Delaware General Corporation Law, Section 262.................... D-1
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SUMMARY
The following is a summary of certain information contained elsewhere in this
Joint Proxy Statement/Prospectus and is qualified in its entirety by reference
to the full text of this Joint Proxy Statement/Prospectus and the exhibits
hereto. Stockholders are urged to read this Joint Proxy Statement/Prospectus
and the accompanying exhibits in their entirety. Capitalized terms not defined
in this Summary have the meanings assigned to them elsewhere in this Joint
Proxy Statement/Prospectus. All share and per share amounts for Davox contained
in this Joint Proxy Statement/Prospectus have been adjusted for all periods to
give effect to Davox's three-for-two stock split effected in the form of a 50%
stock dividend on May 28, 1997.
THE COMPANIES
Davox
Davox is principally a software and systems integration company that
develops, markets, implements, supports and services management systems for
call center operations. These call center operations are responsible for
business applications including credit/collections, customer service, telephone
sales, and fund raising. Davox's Unison brand call management systems assist
calling operations, integrate existing voice and data systems, manage outbound
and inbound calling applications and focus on improving the quality of each
customer contact, as well as the quantity of calls handled. This increased
productivity and efficiency, documented by Davox users, has resulted in lower
labor costs, increased revenue and/or increased transaction capacity for the
user organization, and improved service levels. Davox systems include
intelligent outbound calling, inbound call handling, inbound/outbound call
blending and call center network management.
Davox, through its direct sales force and through its third party
distribution channel, has provided unified call center solutions to banks,
consumer finance organizations, retailers, entertainment companies,
telemarketing organizations, telecommunications companies, and utilities. Among
Davox's current customers are: British Telecom, Chemical Bank, General Electric
Capital Corporation ("GECC"), Household Finance, NationsBank, May Companies,
AT&T, NYNEX, Precision Response Corporation, Superstar Satellite Entertainment,
Gottschalks Department Stores, USAA Federal Savings Bank, TeleTech Holding,
Unitel Corporation, and WGBH television.
Davox was incorporated in Massachusetts in 1981 and reorganized in Delaware
in 1982. Davox's executive offices are located at 6 Technology Park Drive,
Westford, Massachusetts 01886, and its telephone number is (978) 952-0200.
AnswerSoft
AnswerSoft delivers second generation CTI solutions incorporating standards-
based IAA software that is designed to be rapidly deployed in the business call
center. AnswerSoft's products enable organizations to make each interaction
with its customers more effective, whether by telephone, fax, e-mail or the
Internet, by connecting diverse applications to data residing across the
enterprise. AnswerSoft's products are designed to allow companies to rapidly
design and deploy systems that automate a range of business processes for the
purpose of understanding, monitoring and enhancing each customer relationship
that enable CSRs to be more effective.
AnswerSoft sells its products primarily through an indirect sales channel
consisting of telecommunications equipment vendors, systems integrators and
distributors, and has formed strategic partnerships with major providers of
telephony systems, including Lucent Technologies, Northern Telecom, Siemens and
Ericcson Networks AB. AnswerSoft's customers include companies in various
industries, including computer and electronics manufacturing, financial
services, healthcare, insurance, telecommunications and transportation.
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AnswerSoft was incorporated in Delaware in 1993. AnswerSoft's executive
offices are located at 2201 North Central Expressway, Suite 200, Richardson,
Texas 75080, and its telephone number is (972) 997-8300.
DAC
DAC is a wholly owned subsidiary of Davox organized for the purpose of
effecting the acquisition of AnswerSoft. Other than in connection with the
Merger, it has not engaged in any activities and it has no material assets or
liabilities. DAC's executive offices are located at 6 Technology Park Drive,
Westford, Massachusetts 01886, and its telephone number is (978) 952-0200.
RISK FACTORS
Davox and AnswerSoft stockholders should carefully consider the investment
considerations set forth under "Risk Factors" in connection with their
evaluation of the proposed Merger and issuance of Davox Common Stock in
connection therewith, including in particular the difficulty of integrating the
two companies, the potential failure to achieve the beneficial synergies
expected to result from the Merger, the expansion risks and their potential
impact on future operating results and the increase in the number of shares of
Davox Common Stock eligible for sale.
THE MERGER
Effect of Merger
Upon the consummation of the Merger, DAC, a wholly owned subsidiary of Davox,
will merge with and into AnswerSoft, and AnswerSoft will continue as the
surviving corporation and a wholly owned subsidiary of Davox. The Merger will
become effective (the "Effective Time") upon the filing of the certificate of
merger with the Secretary of State of Delaware. Assuming all conditions to the
Merger are satisfied or waived prior thereto, it is anticipated that the
Effective Time will occur promptly after receipt of stockholder approvals,
expected to be on or about May 6, 1998. In the event that the Merger is not
consummated on or before July 31, 1998, the Merger Agreement may be terminated
by either party. See "The Merger Agreement--Termination; Amendment."
Exchange Ratios
As a result of the Merger, each outstanding share of AnswerSoft Capital Stock
(other than shares as to which dissenters' rights have been perfected) will be
converted into the right to receive a fraction of a share of Davox Common Stock
in accordance with the exchange ratios set forth below (the "Exchange Ratios"),
and each outstanding option or warrant to purchase AnswerSoft Capital Stock
will be assumed by Davox and will become an option to purchase Davox Common
Stock, with appropriate adjustments to be made to the number of shares issuable
thereunder and the exercise price thereof based on the Exchange Ratios. The
Merger Agreement provides for the issuance of an aggregate of 2,384,452 shares
of Davox Common Stock, including shares which will be subject to outstanding
AnswerSoft options and warrants. The Exchange Ratios have been fixed based on
the greater of $30.75 and the average of the last reported sales prices of
shares of Davox Common Stock on the Nasdaq National Market for the 20
consecutive trading days ending on and including the fifth trading day
preceding March 9, 1998 (the "Average Price"). As calculated, the Average Price
is $31.03438. The following table sets forth the Exchange Ratios for the shares
of AnswerSoft Capital Stock:
Exchange Ratios for:
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AnswerSoft Common Stock........................................ 0.1299665
AnswerSoft Series A Preferred Stock............................ 0.1621888
AnswerSoft Series B Preferred Stock............................ 0.2137445
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Because each share of AnswerSoft Preferred Stock is exchangeable in the
Merger for a larger fraction of a share of Davox Common Stock than would be
receivable by the holder thereof if he converted it into AnswerSoft Common
Stock prior to the Merger, AnswerSoft does not expect any AnswerSoft Preferred
Stock to be converted into AnswerSoft Common Stock prior to the Merger.
As of February 28, 1998, there were outstanding 1,366,314 shares of
AnswerSoft Common Stock (4,207,785 shares assuming the exercise or conversion
of all options and securities exercisable for or convertible into AnswerSoft
Common Stock), 8,555,000 shares of AnswerSoft Series A Preferred Stock
(8,615,000 shares assuming the exercise of outstanding warrants) and 2,060,047
shares of AnswerSoft Series B Preferred Stock.
No fractional shares of Davox Common Stock will be issued in the Merger. Each
AnswerSoft stockholder who would otherwise be entitled to a fraction of a share
of Davox Common Stock will instead receive an amount in cash equal to such
fraction multiplied by the Average Price.
Upon the consummation of the Merger, Davox will have approximately 14,293,504
shares of Common Stock outstanding (assuming the exercise of all options and
warrants to purchase AnswerSoft Capital Stock), 2,384,452 (or approximately
16.7%) of which will be held by former holders of shares of AnswerSoft Capital
Stock and options and warrants to acquire AnswerSoft Capital Stock. See "The
Merger Agreement--Treatment of AnswerSoft Stock Options and Warrants."
Reasons for the Merger
Joint. The Boards of Directors of Davox and AnswerSoft have determined that
the combined company would have the potential to realize long-term improved
operating and financial results and a stronger competitive position than either
company might achieve independently. Davox and AnswerSoft believe that there is
a tight strategic fit between Davox's and AnswerSoft's businesses, and that the
differences between the companies' historical approaches--in market focus,
product features and service design, and industry emphasis--make the business
combination complementary. Davox and AnswerSoft believe that the Merger will
provide greater opportunities to develop business relationships, license
technology, and engage in other strategic combinations or transactions
involving their respective products, services, and technologies than would be
the case if the companies otherwise independently engaged in these activities.
In this way, the Merger could provide Davox with the range of products and
services required to play a defining role in the market for call center
management solutions. See "The Merger--Reasons for the Merger; Recommendations
of the Boards of Directors."
Davox. In addition to the anticipated joint benefits described above, the
Davox Board believes that the Merger will be beneficial to Davox because of the
addition of AnswerSoft's inbound-focused products to Davox's products and
Davox's expectation that the combined company will have a more complete
portfolio of integrated best-of-breed call center management products, greater
resources, increased research and development capabilities and the ability to
compete more effectively with competitors having greater resources and broader
product offerings than Davox on a stand-alone basis. See "The Merger--Reasons
for the Merger; Recommendations of the Boards of Directors."
AnswerSoft. In addition to the anticipated joint benefits described above,
AnswerSoft's Board believes that the Merger will offer AnswerSoft a number of
advantages, including decreasing AnswerSoft's dependence on its indirect sales
channel by leveraging Davox's existing direct sales force, providing AnswerSoft
with access to Davox's installed base of customers, allowing the combined
companies to offer a more complete call center solution, enabling AnswerSoft to
enhance its ability to capitalize on additional opportunities, providing
increased investment liquidity to AnswerSoft's stockholders at a higher
valuation than its other alternatives, and providing such liquidity through a
tax-free reorganization. See "The Merger--Reasons for the Merger;
Recommendations of the Boards of Directors."
The Davox and AnswerSoft Boards recognize that the potential benefits of the
Merger may not be realized. Risks associated with the Merger include the
diversion of the attention of the management of both companies
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resulting from the need to integrate the two companies and the increase in the
number of shares of Davox common stock eligible for sale. See "Risk Factors."
For a discussion of certain benefits to AnswerSoft affiliates resulting from
the Merger, see "The Merger--Interests of Certain Persons in the Transaction"
and "--Conduct of the Business of the Combined Company Following the Merger."
RECOMMENDATIONS OF THE DAVOX AND ANSWERSOFT BOARDS OF DIRECTORS
Davox. The Davox Board has unanimously approved the issuance of Davox Common
Stock in the Merger and believes that such issuance is in the best interests of
Davox and its stockholders. The Davox Board unanimously recommends that its
stockholders vote FOR approval of the issuance of Davox Common Stock in the
Merger. See "The Merger--Davox's Reasons for the Merger." For a brief
description of the other matters to be considered at the Davox Meeting and the
recommendations of the Davox Board with respect thereto, see "Other Matters to
Be Considered At the Davox Meeting."
AnswerSoft. The AnswerSoft Board has approved the Merger Agreement and the
Merger and believes that the Merger Agreement and the Merger are fair and in
the best interests of AnswerSoft and its stockholders. The AnswerSoft Board
recommends that its stockholders vote FOR approval of the Merger Agreement and
the Merger. See "The Merger--Background of the Transaction," and "--
AnswerSoft's Reasons for the Merger." For a brief description of other matters
to be considered at the AnswerSoft Meeting and the recommendations of the
AnswerSoft Board with respect thereto, see "Other Matters to Be Considered At
the AnswerSoft Meeting."
VOTES REQUIRED
Davox. The affirmative vote of a majority of the votes cast by holders of
Davox Common Stock entitled to vote thereon at the Davox Meeting (at which
there must be a quorum) is required to approve the issuance of the shares of
Davox Common Stock pursuant to the Merger Agreement. If the holders of Davox
Common Stock do not approve the issuance of Davox Common Stock in the Merger,
the Merger will not occur and Davox intends to continue to conduct its business
as currently conducted. See "The Stockholder Meetings--Matters to be Considered
at the Meetings--Davox," "--Votes Required" and "Davox Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
AnswerSoft. The affirmative vote of (a) AnswerSoft stockholders owning of
record a majority of the issued and outstanding shares of AnswerSoft Capital
Stock, voting together as a single class and (b) AnswerSoft stockholders owning
of record a majority of the issued and outstanding shares of AnswerSoft
Preferred Stock, voting together as a single class is required to approve and
adopt the Merger Agreement and approve the Merger on behalf of AnswerSoft. In
addition, the affirmative vote of AnswerSoft stockholders owning of record more
than seventy-five percent (75%) of the issued and outstanding shares of
AnswerSoft Capital Stock (including any shares actually owned or constructively
owned by or for the individuals whose Option Vesting Proposals are being voted
on, such as shares owned by the individuals' spouses, children or parents),
voting together as a single class, is required to approve the acceleration of
vesting of options held by certain executive officers of AnswerSoft (the
"Option Vesting Proposals"). As of February 28, 1998, there were 1,366,314
shares of AnswerSoft Common Stock and 10,615,047 shares of AnswerSoft Preferred
Stock outstanding, each of which will be entitled to one vote on each matter
acted upon at the AnswerSoft Meeting. As of such date, directors, executive
officers and certain major stockholders of AnswerSoft and their affiliates, all
of whom are contractually committed to vote in favor of the Merger, were the
beneficial owners of 85.9% of all outstanding shares of AnswerSoft Capital
Stock, voting together as a single class and 92.3% of all outstanding shares of
AnswerSoft Preferred Stock, voting together as a single class. As of February
28, 1998, directors, executive officers and major stockholders of AnswerSoft
and their affiliates holding more than 75% of the outstanding shares of
AnswerSoft Capital Stock are contractually committed to vote in favor of the
Option Vesting Proposals; provided that the outstanding shares used to
determine the votes for the Option Vesting Proposals exclude any AnswerSoft
Capital Stock actually or constructively owned by or for the AnswerSoft
Officers (such as shares owned by any
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AnswerSoft Officer or any AnswerSoft Officer's spouse, children or parents).
See "The Stockholder Meetings--Votes Required" and "The Merger--Participation
Agreement" and "Other Matters To Be Considered at the AnswerSoft Meeting."
The Merger will not occur if the requisite percentage of shares of AnswerSoft
are not voted in favor of the Merger. In that event, AnswerSoft will continue
to operate as a separate company. If AnswerSoft's stockholders do not vote to
approve the Merger and AnswerSoft is involved in a "change in control" (as
defined in the Merger Agreement) within six months after the Merger Agreement
is terminated, then AnswerSoft is required to pay Davox $3 million. See "The
Merger Agreement."
OPINION OF DAVOX'S FINANCIAL ADVISOR
Piper Jaffray Inc. ("Piper Jaffray") has acted as financial advisor to Davox
in connection with the Merger and has delivered to the Davox Board its written
opinion dated March 9, 1998 to the effect that, as of such date, the aggregate
consideration to be paid in the Merger pursuant to the Merger Agreement dated
as of March 9, 1998 for the AnswerSoft Common Stock and the AnswerSoft
Preferred Stock, taken as a whole, is fair to Davox from a financial point of
view. In reaching its conclusion, among other things, Piper Jaffray analyzed
comparable public company valuations, selected acquisitions, the relative
contributions of Davox and AnswerSoft to the combined company and the trading
history of Davox Common Stock. Davox has paid Piper Jaffray a fee of $100,000
in connection with the delivery of the opinion referred to above. The full text
of the opinion of Piper Jaffray, setting forth assumptions made, matters
considered and limits of the review undertaken, is attached as Annex C to this
Joint Proxy Statement/Prospectus and should be read in its entirety. See "The
Merger--Opinion of Davox's Financial Advisor."
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
As of February 28, 1998, AnswerSoft's officers and directors and their
affiliates beneficially owned (as defined in the rules promulgated under the
Exchange Act) an aggregate of 6,974,969 shares of AnswerSoft Capital Stock.
Based upon the closing price of Davox Common Stock on March 30, 1998 of
$29.625, the aggregate dollar value of the Davox Common Stock to be received by
AnswerSoft officers and directors and their affiliates is approximately $34.9
million.
Davox proposes to enter into employment agreements with certain of the
AnswerSoft officers and certain other key employees following the Merger.
Pursuant to the proposed employment agreement, each of such persons would be
offered an option to purchase shares of Davox Common Stock after the Merger is
consummated. Davox proposes to grant an option to purchase a number of shares
of Davox Common Stock not to exceed 50,000 shares with respect to any one such
AnswerSoft employee. Pursuant to the proposed employment agreement, each of
such AnswerSoft employees would receive severance pay and benefit continuation
for a period not to exceed six months should his or her employment be
terminated following the Merger. The proposed employment agreement also imposes
certain obligations on such AnswerSoft employees, including an agreement not to
compete with the business of Davox, AnswerSoft or the combined company
following cessation of employment for a period of 12 months. See "The Merger--
Interests of Certain Persons in the Transaction" and "--Conduct of the Business
of the Combined Company Following the Merger."
CONDUCT OF THE BUSINESS OF THE COMBINED COMPANY FOLLOWING THE MERGER
It is currently anticipated that after the Merger, the businesses currently
operated by AnswerSoft will continue to be headquartered in AnswerSoft's
current offices in Richardson, Texas. Management intends to take advantage of
sales and expense related synergies incident to the Merger. Davox does not
currently anticipate any material reduction in administrative resources. Davox
is unable to estimate the value of any such synergies. There can be no
assurance that any such synergies will be realized.
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MARKET VALUE OF SECURITIES
Davox Common Stock is traded on the over-the-counter market and is quoted on
the Nasdaq National Market under the symbol DAVX. On March 9, 1998, the last
full trading day immediately preceding the public announcement of the execution
of the Merger Agreement, the closing price of Davox Common Stock was $34.875
per share. On March 30, 1998, the closing price of Davox Common Stock was
$29.625 per share. For additional information concerning the historical market
value of Davox Common Stock, see "Information Concerning Davox--Price Range of
Davox Common Stock."
No established trading market exists for AnswerSoft Capital Stock.
ASSUMPTION OF OPTIONS AND WARRANTS
Upon the consummation of the Merger, Davox will assume all options and
warrants to purchase AnswerSoft Capital Stock outstanding immediately prior to
such time. As of the Effective Time, each option and warrant so assumed will be
exercisable for a number of shares of Davox Common Stock equal to the number of
shares of AnswerSoft Capital Stock such holder had a right to acquire pursuant
to the exercise of such option or warrant immediately prior to such time
multiplied by the applicable Exchange Ratio. The exercise price per share of
Davox Common Stock of the assumed options and warrants will also be adjusted by
dividing the exercise price per share of AnswerSoft Capital Stock immediately
prior to the Effective Time by the applicable Exchange Ratio. See "The Merger
Agreement."
CONDITIONS TO THE MERGER
The respective obligations of Davox and AnswerSoft to consummate the Merger
are subject to certain conditions, including approval of the Merger and the
Merger Agreement by AnswerSoft's stockholders, approval by Davox's stockholders
of the issuance of the shares of Davox Common Stock in the Merger, Davox being
able to account for the transaction using the pooling-of-interests method of
accounting, the holders of not more than 5% of the outstanding shares of
AnswerSoft Capital Stock exercising dissenters' rights and certain other
conditions customary in transactions of this nature. See "The Merger
Agreement--Conditions to the Merger."
TERMINATION
The Merger Agreement may be terminated, including by mutual consent of Davox
and AnswerSoft or by either party (so long as it is not the cause of the
delay), if the Merger is not consummated on or before July 31, 1998. If (a) the
Merger Agreement is terminated because of a material breach by AnswerSoft of
the Merger Agreement, because of the failure of the stockholders of AnswerSoft
to approve the Merger and the Merger Agreement, because of a material breach of
certain agreements by AnswerSoft stockholders, or because AnswerSoft has
received a proposal from another potential acquiror and the AnswerSoft Board of
Directors withdraws its approval of the Merger and (b) AnswerSoft is involved
in a change in control (as defined in the Merger Agreement) within six months
after such termination, then AnswerSoft is required to pay Davox $3 million.
See "The Merger Agreement."
MERGER EXPENSES
All fees and expenses incurred by Davox in connection with the Merger
Agreement and the transactions contemplated thereby will be paid by Davox, and
all fees and expenses incurred by AnswerSoft in connection with the Merger
Agreement and the transactions contemplated thereby will be paid by AnswerSoft.
Davox currently expects that its fees and expenses will be approximately $1
million, and AnswerSoft currently expects that its fees and expenses will be
approximately $500,000. Notwithstanding the foregoing, if the Merger Agreement
is terminated by Davox or AnswerSoft because of a material breach by the other
of the Merger Agreement, or because of the failure of the other's stockholders
to approve the Merger Agreement and the
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transactions contemplated thereby, or by Davox because of a material breach by
AnswerSoft's stockholders of certain agreements, then Davox (in the case of
such a breach or failure by AnswerSoft or its stockholders) or AnswerSoft (in
the case of such a breach or failure by Davox or its stockholders) shall be
entitled to reimbursement from the other for all fees and expenses incurred by
it in connection with the Merger Agreement and the transactions contemplated
thereby. See "The Merger Agreement."
PARTICIPATION AGREEMENT
Simultaneously with the execution of the Merger Agreement, the executive
officers, directors and major stockholders of AnswerSoft and certain of their
affiliates entered into an agreement (the "Participation Agreement") with Davox
pursuant to which such stockholders have agreed, among other things, to vote in
favor of the Merger and the Merger Agreement and not to sell or dispose of (i)
their shares of AnswerSoft Capital Stock prior to the Merger or (ii) their
shares of Davox Common Stock following the Merger, except in compliance with
restrictions imposed by the securities laws and the pooling-of-interests method
of accounting. As of February 28, 1998, such executive officers, directors and
major stockholders and their affiliates beneficially own 493,846 shares of
AnswerSoft Common Stock, 6,925,000 shares of AnswerSoft Series A Preferred
Stock and 1,733,990 shares of AnswerSoft Series B Preferred Stock, representing
36.1%, 91.8% and 94.4% of the outstanding shares of such stock, respectively,
and 85.9% of the outstanding shares of AnswerSoft Capital Stock. See "The
Merger--Participation Agreement."
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling-of-interests for accounting
and financial reporting purposes. Consummation of the Merger is conditioned
upon receipt by Davox and AnswerSoft of opinions of their independent public
accountants that such accounting method is appropriate. See "The Merger--
Accounting Treatment."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The Merger is intended to qualify as a reorganization under Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"). If the Merger
constitutes a reorganization within the meaning of the Code, no gain or loss
will be recognized by AnswerSoft stockholders, except to the extent of cash
received. See "The Merger--Certain Federal Income Tax Consequences."
DISSENTERS' RIGHTS
Holders of shares of AnswerSoft Capital Stock who do not vote in favor of the
Merger may, under certain circumstances and by following procedures prescribed
by the Delaware General Corporation Law, exercise appraisal rights and receive
"fair value" for their shares of AnswerSoft Capital Stock, as determined by the
Delaware Court of Chancery. These procedures include, among others, the
requirements that a dissenting AnswerSoft stockholder (i) make written demand
to AnswerSoft for appraisal rights before the AnswerSoft stockholders' meeting
and (ii) not vote in favor of the Merger at such meeting. The failure of
dissenting AnswerSoft stockholders to follow the required procedures may result
in the termination or waiver of such rights. Consummation of the Merger is
conditioned upon holders of not more than 5% of the outstanding shares of
AnswerSoft Capital Stock exercising their dissenters, rights. See "The Merger--
Dissenter's Rights of AnswerSoft Stockholders."
Holders of Davox Common Stock do not have appraisal rights in connection with
the Merger.
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EXCHANGE OF ANSWERSOFT STOCK CERTIFICATES
At or promptly after the Effective Time, American Stock Transfer and Trust
Company (the "Exchange Agent") will deliver a letter of transmittal with
instructions to all holders of record of shares of AnswerSoft Capital Stock for
use in exchanging their certificates representing shares of such AnswerSoft
Capital Stock for certificates representing shares of Davox Common Stock and
cash for fractional shares if applicable. CERTIFICATES SHOULD NOT BE
SURRENDERED BY THE HOLDERS OF ANSWERSOFT CAPITAL STOCK UNTIL SUCH HOLDERS
RECEIVE THE LETTER FROM THE EXCHANGE AGENT.
THE STOCKHOLDER MEETINGS
Date, Time and Places of the Meetings
The Annual Meeting of the stockholders of Davox (the "Davox Meeting") will be
held on May 6, 1998, at 10:00 a.m., Boston Time, at the offices of Davox, 6
Technology Park Drive, Westford, Massachusetts.
The Special Meeting of the stockholders of AnswerSoft (the "AnswerSoft
Meeting") will be held on May 6, 1998 at 9:00 a.m., Dallas Time, at the offices
of AnswerSoft, 2201 North Central Expressway, Suite 200, Richardson, Texas.
Matters to be Considered at the Meetings
The Davox Meeting. At the Davox Meeting, the stockholders of Davox will be
asked to consider and vote upon proposals: (i) to approve the issuance of
2,384,452 shares of Davox Common Stock to stockholders of AnswerSoft pursuant
to the Merger Agreement; (ii) to elect a Board of Directors for the ensuing
year; (iii) to approve an increase in the number of shares of Davox Common
Stock available for issuance under the Davox 1996 Stock Plan; (iv) to ratify
the selection of Arthur Andersen LLP, independent public accountants, as
auditors for the fiscal year ending December 31, 1998; and (v) to transact such
other business as may properly come before the meeting or any postponements or
adjournments thereof. See "The Stockholder Meetings--Matters to be Considered
at the Meetings."
The AnswerSoft Meeting. At the AnswerSoft Meeting, the holders of shares of
AnswerSoft Capital Stock will be asked to consider and vote upon proposals (i)
to approve and adopt the Merger Agreement (included as Annex A to this Joint
Proxy Statement/Prospectus and incorporated herein by reference) and to approve
the Merger, (ii) to approve the Option Vesting Proposals and (iii) to transact
such other business as may be incidental to such transaction. See "The
Stockholder Meetings--Matters to be Considered at the Meetings."
Record Date
Davox. Only holders of record of Davox Common Stock at the close of business
on March 13, 1998 are entitled to notice of and to vote at the Davox Meeting.
AnswerSoft. Only holders of record of AnswerSoft Capital Stock at the close
of business on March 13, 1998 are entitled to notice of and to vote at the
AnswerSoft Meeting.
Votes Required
Davox. The affirmative vote of a majority of the votes cast by holders of
Davox Common Stock entitled to vote thereon at the Davox Meeting (at which
there must be a quorum) is required in connection with the issuance of the
shares of Davox Common Stock pursuant to the Merger Agreement, the approval of
the increase of shares under the 1996 Stock Plan and to ratify the selection of
the auditors. The election of directors will be
13
<PAGE>
determined by a plurality of the votes cast by holders of Davox Common Stock
entitled to vote thereon at the Davox Meeting (at which there must be a
quorum). As of March 2, 1998, there were 11,909,052 shares of Davox Common
Stock outstanding, each of which will be entitled to one vote on each matter
acted upon at the Davox Meeting. As of March 1, 1998, directors and executive
officers of Davox and their affiliates were the beneficial owners of Davox
Common Stock representing approximately 12.5% of the outstanding shares of
Davox Common Stock. See "The Stockholder Meetings--Votes Required."
AnswerSoft. The affirmative vote of (a) AnswerSoft stockholders owning of
record a majority of the issued and outstanding shares of AnswerSoft Capital
Stock, voting together as a single class and (b) AnswerSoft stockholders owning
of record a majority of the issued and outstanding shares of AnswerSoft
Preferred Stock, voting together as a single class is required to approve and
adopt the Merger Agreement and approve the Merger on behalf of AnswerSoft. In
addition, the affirmative vote of AnswerSoft stockholders owning of record more
than seventy-five percent (75%) of the issued and outstanding shares of
AnswerSoft Capital Stock (excluding any shares actually owned or constructively
owned by or for the individuals whose Option Vesting Proposals are being voted
on, such as shares owned by the individuals, the individuals' spouses, children
or parents), voting together as a single class, is required to approve each
Option Vesting Proposal. As of February 28, 1998, there were 1,366,314 shares
of AnswerSoft Common Stock and 10,615,047 shares of AnswerSoft Preferred Stock
outstanding, each of which will be entitled to one vote on each matter to be
acted upon at the AnswerSoft Meeting. As of such date, directors, executive
officers and major stockholders of AnswerSoft and their affiliates, all of whom
are contractually committed to vote in favor of the approval and adoption of
the Merger Agreement and approval of the Merger, were the beneficial owners of
85.9% of all outstanding shares of AnswerSoft Capital Stock, voting together as
a single class and 92.3% of all outstanding shares of AnswerSoft Preferred
Stock, voting together as a single class. As of February 28, 1998, directors,
executive officers and major stockholders of AnswerSoft and their affiliates
holding more than 75% of the outstanding shares of AnswerSoft Capital Stock are
contractually committed to vote in favor of the Option Vesting Proposals;
provided that the outstanding shares used to determine the votes for the Option
Vesting Proposals exclude any AnswerSoft Capital Stock actually owned or
constructively owned by or for the AnswerSoft Officers (such as shares owned by
any AnswerSoft Officer or any AnswerSoft Officer's spouse, children or
parents). See "The Merger--Participation Agreement." and "The Stockholder
Meetings--Votes Required."
14
<PAGE>
SELECTED HISTORICAL AND PRO FORMA COMBINED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
The following selected historical financial data of Davox and AnswerSoft have
been derived from their respective historical financial statements, and should
be read in conjunction with such consolidated financial statements and the
notes thereto, included elsewhere in this Joint Proxy Statement/Prospectus. The
selected pro forma financial information is derived from the unaudited pro
forma combined condensed financial statements, which give effect to the Merger
as a pooling of interests and should be read in conjunction with such unaudited
pro forma statements and the notes thereto included in this Joint Proxy
Statement/Prospectus. For purposes of the pro forma operating data, Davox's
consolidated financial statements for the three fiscal years ended December 31,
1995, 1996 and 1997 have been combined with the AnswerSoft consolidated
financial statements for the three fiscal years ended December 31, 1995, 1996
and 1997. The pro forma information is presented for illustrative purposes only
and is not necessarily indicative of the operating results or financial
position that would have occurred if the Merger had been consummated at the
beginning of the periods indicated, nor is it necessarily indicative of future
operating results or financial position.
DAVOX SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
HISTORICAL CONDENSED
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenues................ $33,756 $30,047 $37,556 $53,642 $76,815
Income (loss) from oper-
ations................. 405 (5,787) 4,919 8,991 18,934
Income (loss) before
provision for income
taxes.................. 425 (5,750) 5,340 10,128 20,886
Net income (loss)....... 385 (5,750) 4,806 9,115 18,380
Earnings per share(1):
Basic................. 0.05 (0.67) 0.48 0.85 1.60
Diluted............... 0.04 (0.67) 0.42 0.74 1.45
Weighted average shares
outstanding(1):
Basic................. 7,898,361 8,533,095 10,077,380 10,730,760 11,522,057
Diluted............... 8,663,963 8,533,095 11,565,830 12,285,244 12,663,245
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
HISTORICAL CONDENSED
CONSOLIDATED BALANCE
SHEET DATA:
Working capital......... $ 3,627 $ 1,807 $ 8,589 $18,710 $48,804
Total assets............ 17,681 14,777 20,825 39,729 75,168
Total stockholders' eq-
uity................... 8,881 5,492 10,912 22,835 54,157
</TABLE>
- --------
(1) See Note 1 of Notes to "Consolidated Financial Statements of Davox"
included elsewhere in this Joint Proxy Statement/Prospectus.
15
<PAGE>
ANSWERSOFT SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1994 1995 1996 1997
------- ------- ------- ---------
<S> <C> <C> <C> <C>
HISTORICAL CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS DATA(1):
Total revenue........................... $ 36 $ 1,041 $ 3,457 $ 6,738
Net loss................................ (3,305) (2,171) (482) (3,459)
Basic and diluted loss per common
share(2)............................... (7.61) (4.33) (0.79) (3.37)
Weighted average shares outstanding(2).. 434,020 501,058 607,141 1,026,561
<CAPTION>
AS OF DECEMBER 31,
------------------------------------
1994 1995 1996 1997
------- ------- ------- ---------
<S> <C> <C> <C> <C>
HISTORICAL CONDENSED CONSOLIDATED BAL-
ANCE SHEET DATA(1):
Working capital ........................ $ 5,007 $ 2,709 $ 2,419 $ 4,043
Total assets............................ 5,499 3,291 4,749 6,392
Redeemable preferred stock.............. 8,480 8,480 8,480 13,911
Total stockholders' deficit............. (3,300) (5,468) (5,946) (9,693)
</TABLE>
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA(3)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS DATA:
Revenues..................................... $38,597 $57,099 $83,553
Income from operations....................... 2,565 8,429 15,396
Income before provision for income taxes..... 3,194 9,646 17,427
Net income................................... 2,850 8,681 15,336
Earnings per share(4):
Basic...................................... 0.25 0.73 1.19
Diluted.................................... 0.22 0.64 1.07
Weighted average shares outstanding(4):
Basic...................................... 11,280,129 11,947,297 12,940,211
Diluted.................................... 12,845,770 13,593,082 14,269,865
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
<S> <C>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET DATA:
Working capital.............................................. $52,847
Total assets................................................. 81,560
Total stockholders' equity................................... 58,375
</TABLE>
- --------
(1) AnswerSoft was incorporated on July 20, 1993; however, operations did not
commence until 1994.
(2) See Note 1 of Notes to "Consolidated Financial Statements of AnswerSoft"
included elsewhere in this Joint Proxy Statement/Prospectus.
(3) Davox and AnswerSoft estimate they will, together, incur aggregate direct
transaction costs of approximately $1.5 million associated with the Merger,
which will be charged to operations of the combined company upon,
consummation of the Merger. In addition, it is expected that after the
Merger, the combined company will incur an additional significant charge to
operations, which is not currently reasonably estimable, to reflect costs
associated with integrating the two companies. The Unaudited Pro Forma
Combined Condensed Statement of Operations and Balance Sheet Data do not
include the aggregate direct transaction costs or the additional
significant charge relating to integrating the two companies. See
"Unaudited Pro Forma Combined Condensed Financial Information" and
accompanying notes thereto.
(4) See Note 1 of Notes to "Consolidated Financial Statements of Davox" and
Note 1 of Notes to "Consolidated Financial Statements of AnswerSoft"
included elsewhere in this Joint Proxy Statement/Prospectus.
16
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share data of Davox and
AnswerSoft and combined per share data on an unaudited pro forma basis after
giving effect to the Merger on a pooling of interest basis of accounting
assuming that one share of Davox Common Stock will be issued in exchange for
0.1299665, 0.1621888 and 0.2137445 shares of AnswerSoft Common Stock and
options to purchase Common Stock, Series A Preferred Stock and warrants to
purchase Series A Preferred Stock, and Series B Preferred Stock, respectively,
in the Merger. This data should be read in conjunction with the selected
historical consolidated financial data, the unaudited pro forma combined
condensed financial information and the separate historical consolidated
financial statements of Davox and AnswerSoft and notes thereto, included
elsewhere in this Joint Proxy Statement/Prospectus. The pro forma combined
consolidated financial data are not necessarily indicative of the operating
results that would have been achieved had the Merger been consummated as of the
beginning of the periods presented and should not be construed as
representative of future operations.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
HISTORICAL--DAVOX:
Earnings per share
Basic.................................................... $0.48 $0.85 $1.60
Diluted.................................................. 0.42 0.74 1.45
Book value per share(3).................................... 1.06 2.06 4.56
HISTORICAL--ANSWERSOFT:
Basic and diluted loss per common share.................... (4.33) (0.79) (3.37)
Book value per share(3).................................... (9.45) (9.44) (7.16)
PRO FORMA COMBINED EARNINGS PER SHARE(1):
Per Davox share
Basic.................................................... 0.25 0.73 1.19
Diluted.................................................. 0.22 0.64 1.07
Equivalent per AnswerSoft share(2)
Basic.................................................... 0.04 0.11 0.19
Diluted.................................................. 0.03 0.10 0.17
</TABLE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997
-----------------
<S> <C>
PRO FORMA COMBINED BOOK VALUE PER SHARE(4):
Per Davox share............................................... $4.21
Equivalent per AnswerSoft share(2)............................ 0.68
</TABLE>
- --------
(1) Davox and AnswerSoft estimate they will, together, incur aggregate direct
transaction costs of approximately $1.5 million associated with the Merger,
which will be charged to operations of the combined company upon
consummation of the Merger. In addition, it is expected that after the
Merger, the combined company will incur an additional significant charge to
operations, which is not currently reasonably estimable, to reflect costs
associated with integrating the two companies. The pro forma combined net
income and book value per share information does not include the aggregate
direct transaction costs or the additional significant charge relating to
integrating the two companies. See "Unaudited Pro Forma Combined Condensed
Financial Information" and accompanying notes thereto.
(2) The AnswerSoft equivalent pro forma combined per share shown amounts are
calculated by multiplying the Davox combined pro forma per share amounts by
a blended Exchange Ratio.
(3) Davox and AnswerSoft historical book value per share is computed by
dividing stockholders' equity (deficit) by the number of shares of common
stock outstanding at the end of each period.
(4) The pro forma combined book value per share is computed by dividing pro
forma stockholders' equity by the pro forma number of shares of common
stock outstanding at the end of the period.
17
<PAGE>
RISK FACTORS
The following risk factors should be considered by holders of AnswerSoft
Capital Stock in evaluating whether to approve and adopt the Merger Agreement
and thereby acquire shares of Davox Common Stock and by holders of Davox
Common Stock in evaluating whether to approve the issuance of shares of Davox
Common Stock pursuant to the Merger Agreement. These factors should be
considered in conjunction with the other information included and incorporated
by reference in this Joint Proxy Statement/Prospectus. This Joint Proxy
Statement/Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934. Actual results could differ materially from those projected in
these forward-looking statements as a result of a variety of factors,
including those set forth below and elsewhere in this Joint Proxy
Statement/Prospectus.
RISKS RELATING TO THE MERGER
INTEGRATION OF OPERATIONS AND TECHNOLOGIES. Achieving the anticipated
benefits of the Merger will depend in part upon whether the integration of the
two companies' businesses is accomplished in an efficient and effective
manner, and there can be no assurance as to the extent that this will occur,
if at all. The combination of the two companies will require, among other
things, integration of the companies' respective products, technologies,
management information systems, distribution channels and key personnel and
the coordination of their sales, marketing and research and development
efforts. There can be no assurance that such integration will be accomplished
smoothly or successfully, if at all. If significant difficulties are
encountered in the integration of the existing products or technologies or the
development of new products and technologies, resources could be diverted from
new product development, and delays in new product introductions could occur.
Successful integration of the two companies' sales and marketing organizations
will require the sales and marketing personnel of each company to learn about
the often technically-complex products, services and technologies of the other
company. There can be no assurance that the combined company will be able to
take full advantage of the combined sales forces' efforts. The difficulties of
integrating Davox and AnswerSoft may be increased by the necessity of
coordinating organizations with distinct cultures and widely dispersed
operations. Davox and a majority of its employees are located in
Massachusetts, while AnswerSoft and a majority of its employees are located in
Texas. The integration of operations and technologies following the Merger
will require the dedication of management and other personnel which may
distract their attention from the day-to-day business of the combined company,
the development or acquisition of new technologies, and the pursuit of other
business acquisition opportunities. Failure to successfully accomplish the
integration and development of the two companies' operations and technologies
would likely have a material adverse effect on the combined company's
business, financial condition and results of operations. In addition, as
commonly occurs with mergers of technology companies, during the pre-merger
and integration phases, aggressive competitors may undertake initiatives to
attract customers through various incentives which could have a material
adverse effect on the business, results of operations and financial conditions
of Davox, AnswerSoft and/or the combined company.
FAILURE TO ACHIEVE BENEFICIAL SYNERGIES. The managements of Davox and
AnswerSoft have entered into the Merger Agreement with the expectation that
the Merger will result in beneficial synergies. See "The Merger--Reasons for
the Merger; Recommendations of the Boards of Directors." Achieving these
anticipated synergies will depend on a number of factors including, without
limitation, the successful integration of Davox's and AnswerSoft's operations
and general and industry-specific economic factors. Even if Davox and
AnswerSoft are able to integrate their operations and economic conditions
remain stable, there can be no assurance that the anticipated synergies will
be achieved. The failure to achieve such synergies could have a material
adverse effect on the business, results of operations and financial condition
of the combined company.
CUSTOMERS. There can be no assurance that customers of Davox and AnswerSoft
will continue their current and historical buying patterns without regard to
the Merger. Certain customers may defer purchasing decisions as they evaluate
the proposed Merger, the combined company's future product strategy and
current and anticipated product offerings of competitors. Customers may
ultimately decide to purchase competitors' products in lieu of the combined
company's products. AnswerSoft and, to a lesser extent, Davox have each
18
<PAGE>
historically depended upon a limited number of customers for a significant
portion of its business. Consequently, decisions by a relatively small number
of customers to defer their purchasing decisions or to purchase products
elsewhere could have a material adverse effect on the business, results of
operations and financial condition of the combined company.
DEPENDENCE ON RETENTION AND INTEGRATION OF KEY EMPLOYEES. The success of the
combined company is dependent on the retention and integration of the key
management, sales, marketing, engineering and other technical employees of
Davox and AnswerSoft. Competition for qualified personnel in the call center
industry is very intense, and competitors may use aggressive tactics to
recruit key employees during the period leading up to the Merger and during
the integration phase following the Merger. Stock options, which generally
become exercisable only over a period of several years of employment, serve as
an important incentive for retaining key employees. In accordance with their
original terms, stock options held by AnswerSoft optionees will be fully
exercisable upon the consummation of the Merger, thus potentially reducing the
retention incentive provided by such options. While it is anticipated that the
combined company will implement retention arrangements for its key employees,
there can be no assurance that key employees will remain with the combined
company. The loss of services of any of the key employees of the combined
company could materially and adversely affect the combined company's business,
financial condition and results of operation. See "The Merger--Interests of
Certain Persons in the Transaction."
RISKS ASSOCIATED WITH FIXED EXCHANGE RATIOS. As a result of the Merger, each
outstanding share of AnswerSoft Common Stock, AnswerSoft Series A Preferred
Stock and AnswerSoft Series B Preferred Stock will be converted into the right
to receive 0.1299665, 0.1621888 and 0.2137445 of a share of Davox Common
Stock, respectively. Because the Exchange Ratios are fixed, they will not
increase or decrease due to fluctuations in the market price of Davox Common
Stock. The specific dollar value of the consideration to be received by
AnswerSoft stockholders in the Merger will depend on the market price of Davox
Common Stock at the Effective Time. In the event that the market price of
Davox Common Stock decreases or increases prior to the Effective Time, the
market value at the Effective Time of the Davox Common Stock to be received by
AnswerSoft stockholders in the Merger would correspondingly decrease or
increase. In addition, if the Closing Average Price, as defined in the Merger
Agreement, is less than .75 times the Average Price or more than 1.25 times
the Average Price, AnswerSoft and Davox, respectively, may terminate the
Merger Agreement. See "The Merger Agreement--Conditions to the Merger." The
market price of Davox Common Stock as of a recent date is set forth herein
under "Market Price Information." Davox and AnswerSoft stockholders are
advised to obtain recent market quotations for Davox Common Stock. Davox
Common Stock historically has been subject to substantial price volatility. No
assurance can be given as to the market price of Davox Common Stock at any
time before the Effective Time or at any time thereafter. See "Price Range of
Davox Common Stock."
SUBSTANTIAL EXPENSES RESULTING FROM THE MERGER. Davox and AnswerSoft
estimate they will incur direct transaction costs relating primarily to
regulatory filing costs, and the fees of financial advisors, attorneys,
accountants and financial printers of approximately $1.5 million in the
aggregate associated with the Merger, which will be charged to operations upon
consummation of the Merger. Davox and AnswerSoft expect the combined company
to incur an additional significant charge to operations, which is not
currently reasonably estimable, in the quarter in which the Merger is
consummated, to reflect costs associated with integrating the two companies.
There can be no assurance that the combined company will not incur additional
material charges in subsequent quarters to reflect additional costs associated
with the Merger.
RISKS RELATING TO DAVOX, ANSWERSOFT AND THE COMBINED COMPANY
GENERAL RISKS. The future operating results of Davox, AnswerSoft and the
combined company may be affected by various trends and factors, some of which
are beyond the control of Davox, AnswerSoft or the combined company, which
affect their current and combined operations. Such trends and factors include,
but are not limited to, adverse changes in conditions in the specific markets
for Davox's and AnswerSoft's products, conditions in the broader market for
call center products and services, and conditions in the domestic or global
economy generally; fluctuations in foreign exchange rates; and other factors,
including those listed below. Davox
19
<PAGE>
and AnswerSoft participate in a highly volatile and rapidly growing industry
which is characterized by vigorous competition for market share and rapid
technological development carried out amidst uncertainty over adoption of
industry standards, customer requirements and demand and protection of
intellectual property rights. This could result in aggressive pricing
practices and growing competition from both start-up and well-capitalized
companies. The ability of Davox, AnswerSoft and the combined company to
compete in this environment depends upon a number of competitive and market
factors and is subject to the risks set forth in this Joint Proxy
Statement/Prospectus and other factors beyond the control of the management
teams of the respective companies.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. Davox and, to a lesser extent,
AnswerSoft have experienced quarterly growth in net sales principally due to
increased market acceptance of their products and the expansion of their
product lines and distribution channels. Due to the rapidly changing nature of
the markets for Davox's and AnswerSoft's products, as well as the likelihood
of increased competition, there can be no assurance that Davox's and/or
AnswerSoft's rates of growth in net sales will continue. Davox's, AnswerSoft's
and the combined company's quarterly operating results may be affected by a
wide variety of factors, including competition, the mix of products sold, the
mix of distribution channels employed, success in developing, introducing and
shipping new products, price reductions for products, changes in the levels of
inventory held by third party resellers, the timing of orders from and
shipments to customers, seasonality and general economic conditions. A
significant portion of AnswerSoft's revenues and, to a lesser extent, Davox's
revenues, in prior periods has been derived from relatively large sales to a
limited number of customers, and therefore the failure of the combined company
to secure expected large sales may have a material adverse impact on the
results of operations of the combined company. Davox and AnswerSoft each
expects that its gross margins and the gross margins of the combined company
could be adversely affected in future periods by competitive pricing
pressures. In addition, Davox's, AnswerSoft's and the combined company's use
of third parties to distribute their products to certain end-user customers
may adversely affect their gross margins. Quarterly sales and operating
results of Davox, AnswerSoft and the combined company will generally depend on
the volume and timing of and ability to fulfill orders received within the
quarter, which are difficult to forecast. Historically, a substantial portion
of AnswerSoft's revenue resulted from orders received and shipments made
during the latter part of the quarter. Significant portions of Davox's and
AnswerSoft's expense levels are relatively fixed in advance based in large
part on their respective forecasts of future sales. If sales are below
expectations in any given quarter, the adverse impact of the shortfall on the
operating results of Davox, AnswerSoft or the combined company may be
magnified to the extent the respective company is unable to adjust spending to
compensate for the shortfall. Davox, AnswerSoft or the combined company may
also increase spending in response to competition or to pursue new market
opportunities. Accordingly, there can be no assurance that any of them will be
able to achieve and/or sustain profitability in the future, particularly on a
quarter-to-quarter basis.
NEW PRODUCT DEVELOPMENT AND TIMELY INTRODUCTION OF NEW AND ENHANCED
PRODUCTS. The markets for Davox's and AnswerSoft's products are, and the
markets for the combined company's products will be, characterized by rapidly
changing technologies, evolving industry standards, frequent new product
introductions and short product life cycles. Inherent in the product
development process are a number of risks. The development of new,
technologically advanced products is a complex and uncertain process requiring
high levels of innovation, as well as the accurate anticipation of
technological and market trends. The introduction of new or enhanced products
also may require Davox, AnswerSoft and/or the combined company to manage the
transition from older products in order to minimize disruption in customer
ordering patterns, to avoid excessive levels of older product inventories and
to ensure that adequate supplies of new products can be delivered to meet
customer demand. There can be no assurance that Davox, AnswerSoft and/or the
combined company will successfully develop, introduce or manage the transition
of new products. Products may contain undetected or unresolved software or
hardware errors when they are first introduced or as new versions are
released. There can be no assurance that, despite extensive testing, software
or hardware errors will not be found in new products or upgrades after
commencement of commercial shipments of new or enhanced products. The
inability of such products to gain market acceptance or problems associated
with new product transitions could have a material adverse effect on the
business, results of operations and financial condition of Davox, AnswerSoft
and/or the combined company.
20
<PAGE>
COMPETITION. The market for call center management solutions is highly
competitive and subject to rapid technological change. Many of Davox's and
AnswerSoft's current and potential competitors have longer operating
histories, significantly greater financial, technical and marketing resources,
greater name recognition and a larger installed customer base than Davox and
AnswerSoft have, or the combined company will have. In addition, many of these
competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements, and to devote greater
resources to the development, promotion and sale of their products than Davox,
AnswerSoft or the combined company. Furthermore, Davox and AnswerSoft may face
additional competition from other established and emerging companies, which
may choose to enter the market by developing products that compete with those
offered by the combined company or by acquiring companies, businesses,
products or product lines that compete with the combined company. It is also
possible that alliances among competitors may emerge and rapidly acquire
significant market share. Davox and AnswerSoft also believe that competition
will increase as a result of consolidation in the call center technology
industry. There can be no assurance that the combined company's current or
potential competitors will not develop or acquire products comparable or
superior to those developed by the combined company, combine or merge to form
significant competitors, or adapt more quickly than the combined company to
new technologies, evolving industry trends and changing customer requirements.
Increased competition could result in price reductions, reduced margins or
loss of market share, any of which could materially and adversely affect the
combined company's business, operating results and financial condition. There
can be no assurance that the combined company will be able to compete
successfully against current and future competitors or that competitive
pressures faced by the combined company will not have a material adverse
effect on its business, operating results and financial condition. If the
combined company is unable to compete successfully against current and future
competitors, the combined company's business, operating results and financial
condition will be materially and adversely affected.
MANAGEMENT OF GROWTH. Davox and AnswerSoft are currently experiencing rapid
growth and expansion, which has placed, and will continue to place, a
significant strain on their respective administrative, operational and
financial resources and increased demands on their respective systems and
controls. This growth has resulted in a continuing increase in the level of
responsibility for existing and new management personnel of both companies.
Continued growth of Davox, AnswerSoft and/or the combined company would
require each of them to recruit and hire a substantial number of new
engineering, technical support, sales, marketing and managerial personnel.
Competition for such highly-qualified personnel is intense. There can be no
assurance that Davox, AnswerSoft and the combined company will be successful
at hiring or retaining these personnel. The ability of Davox, AnswerSoft and
the combined company to manage their growth successfully will also require
each of them to continue to expand and improve their respective operational,
management and financial systems and controls and to expand their respective
manufacturing capacities. If management is unable to manage growth
effectively, the business, results of operations and financial condition of
Davox, AnswerSoft and/or the combined company could be materially and
adversely affected.
RELIANCE ON THIRD PARTY RESELLERS, DISTRIBUTORS AND JOINT MARKETERS. Both
Davox and AnswerSoft utilize resellers ("Resellers"), distributors and joint
marketers to assist in the marketing, reselling, sublicensing and distribution
of their respective products. Davox derives a portion of its revenues from
such third party distribution channels and AnswerSoft derives substantially
all of its revenues from such third party distribution channels. Davox and
AnswerSoft anticipate that the combined company will derive a significant
portion of its revenues from such third party distribution channels. The
Resellers, distributors and joint marketers generally offer products of
several different companies, including products that are competitive with
Davox's and AnswerSoft's products. Accordingly, there is a risk that these
Resellers, distributors and joint marketers may give higher priority to
products of other suppliers, thus reducing their efforts to sell Davox's,
AnswerSoft's and/or the combined company's products. Any special distribution
arrangements and product pricing arrangements that Davox, AnswerSoft or the
combined company may implement in one or more distribution channels for
strategic purposes could adversely affect gross profit margins for each of
their products. There can be no assurance that any of such Resellers,
distributors or joint marketers will continue to market Davox's, AnswerSoft's
or the combined company's products. Further, the inability to recruit or
contract with new
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third party distribution channel partners, or the loss of, or a significant
reduction in revenues from, the current Resellers, distributors and joint
marketers could have a material adverse effect on the combined company's
business, results of operations and financial condition.
DEPENDENCE ON KEY PERSONNEL. Davox's, AnswerSoft's and the combined
company's success depends to a significant degree upon the continuing
contributions of their respective key management, sales, marketing and product
development personnel. Davox and AnswerSoft do not have employment contracts
with their key personnel. The loss of key management, sales, marketing or
technical personnel could adversely affect Davox, AnswerSoft and/or the
combined company. The future success of Davox, AnswerSoft and the combined
company will depend in large part upon their ability to attract and retain
highly-skilled engineering, managerial, sales and marketing personnel.
Competition for such highly-qualified personnel is intense, and there can be
no assurance that Davox, AnswerSoft or the combined company will be successful
in attracting and retaining such personnel. Failure to attract and retain key
personnel could have a material adverse effect on the business, results of
operations and financial condition of Davox, AnswerSoft and/or the combined
company.
DEPENDENCE ON PROPRIETARY TECHNOLOGY. The success and ability to compete of
Davox, AnswerSoft and the combined company will depend in part upon each of
their proprietary technologies and continued development and acquisition of
additional proprietary technologies. Davox and AnswerSoft rely, and the
combined company will rely, on a combination of contractual rights, trade
secrets, patents, trademarks, copyrights and non-disclosure agreements to
protect their respective property and/or proprietary rights. Davox currently
holds several United States patents and has several patent applications
pending. AnswerSoft has a number of patent applications that are currently
pending for certain of its existing products. There can be no assurance that
patents will be issued with respect to pending or future patent applications
of Davox, AnswerSoft and/or the combined company or that Davox's, AnswerSoft's
or the combined company's patents will be upheld as valid or will prevent the
development of competitive products. In addition, Davox and AnswerSoft have
generally entered into confidentiality or license agreements with their
employees, Resellers, distributors, customers and potential customers and have
limited access to the distribution of their software, documentation and other
proprietary information. There can be no assurance that the steps taken by
Davox, AnswerSoft and the combined company to protect their proprietary rights
will be adequate to prevent misappropriation of their technologies or that
competitors or strategic partners will not independently develop technologies
that are substantially equivalent or superior to their technology. In
addition, the laws of some countries do not protect proprietary rights to the
same extent as do the laws of the United States. Davox, AnswerSoft and the
combined company are also subject to the risk of adverse claims and litigation
alleging infringement of the intellectual property rights of others. From time
to time, Davox and AnswerSoft have received claims of infringement of other
parties' proprietary rights. Although Davox and AnswerSoft believe that all
such claims received to date are immaterial, there can be no assurance that
third parties will not assert infringement claims in the future with respect
to current or future products of Davox, AnswerSoft and/or the combined company
or that any such claims will not require Davox, AnswerSoft and/or the combined
company to enter into license arrangements or result in protracted and costly
litigation, regardless of the merits of such claims. No assurance can be given
that any necessary licenses will be available or that, if available, such
licenses can be obtained on commercially reasonable terms.
LIMITED OPERATING HISTORY; HISTORY OF LOSSES. AnswerSoft has a limited
operating history and has experienced significant quarterly fluctuations in
revenues, making operating results difficult to predict. AnswerSoft has
realized a net loss in each year since its inception and expects lower first
quarter of 1998 revenues, and therefore expects to realize a net loss in the
first quarter of 1998 in excess of the net losses realized in the prior
quarter and in the same quarter for the prior year. In addition, AnswerSoft
experienced lower revenues in the third quarter of 1997 compared to the second
quarter of 1997. There can be no assurance that AnswerSoft's revenues will
increase in the future. AnswerSoft does not expect to achieve profitability in
the near future and there can be no assurance that it will ever become
profitable, or that AnswerSoft will sustain any profitability, if achieved.
The limited operating history of AnswerSoft makes the prediction of results of
future operations difficult if not impossible, and AnswerSoft's prospects must
be considered in light of the risks, cost
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and difficulties frequently encountered by emerging companies, particularly
companies in the competitive call center technology industry. See "Information
Concerning AnswerSoft--AnswerSoft Management's Discussion and Analysis of
Financial Condition and Results of Operations."
INTERNATIONAL SALES. Davox's international sales accounted for approximately
18%, 14% and 12% of net sales in 1997, 1996 and 1995, respectively.
AnswerSoft's international sales accounted for approximately 11%, 2% and 0% of
net sales in 1997, 1996 and 1995, respectively. International sales are
expected to continue to account for a significant portion of Davox's,
AnswerSoft's and the combined company's net sales in future periods.
International sales are subject to certain inherent risks, including
unexpected changes in regulatory requirements and tariffs, difficulties in
staffing and managing foreign operations, longer payment cycles, problems in
collecting accounts receivable and potentially adverse tax consequences. Davox
and AnswerSoft both depend on third party resellers for a substantial portion
of their international sales. Certain of these third party resellers also act
as resellers for competitors of Davox and AnswerSoft and could devote greater
effort and resources to marketing competitive products. The loss of certain of
these third party resellers could have a material adverse effect on the
business and results of operations of Davox, AnswerSoft and/or the combined
company. Although Davox's and AnswerSoft's sales are, and the combined
company's sales will likely be, denominated in U.S. dollars, fluctuations in
currency exchange rates could cause Davox's products to become relatively more
expensive to customers in a particular country, leading to a reduction in
sales or profitability in that country. Furthermore, future international
activity may result in foreign currency denominated sales, and, in such event,
gains and losses on the conversion to U.S. dollars of accounts receivable and
accounts payable arising from international operations may contribute to
fluctuations in results of operations of Davox, AnswerSoft and/or the combined
company. In addition, sales in Europe and certain other parts of the world
typically are adversely affected in the third quarter of each calendar year as
many customers and end-users reduce their business activities during the
summer months. These seasonal factors may have a material adverse effect on
the business, results of operations and financial condition of Davox,
AnswerSoft and/or the combined company.
VOLATILITY OF STOCK PRICE. Davox's Common Stock has experienced significant
price volatility, and such volatility may occur in the future, particularly as
a result of quarter-to-quarter variations in the actual or anticipated
financial results of Davox, AnswerSoft and/or the combined company or of other
companies in the call center industry, announcements by Davox, AnswerSoft
and/or the combined company or their competitors regarding new product
introductions or other developments affecting Davox, AnswerSoft and/or the
combined company, or changes in financial estimates by public market analysts.
In addition, the market has experienced extreme price and volume fluctuations
that have affected the market price of many technology companies' stocks and
that have been unrelated or disproportionate to the operating performance of
these companies. These broad market fluctuations may adversely affect the
market price of Davox's Common Stock. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has often been instituted against such a company. Although
Davox has not been a party to such litigation in the past, such litigation
could result in substantial costs and a diversion of management's attention
and resources, which would have a material adverse effect on the operating
results and financial condition of Davox, AnswerSoft or the combined company,
as applicable.
EFFECT OF ANTITAKEOVER PROVISIONS OF DELAWARE LAW AND DAVOX'S CHARTER
DOCUMENTS. Upon consummation of the Merger, the stockholders of AnswerSoft
will become stockholders of Davox, a corporation governed by the laws of
Delaware. Davox is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("DGCL"), which has the effect of restricting changes
in control of a company. These and other provisions of Delaware law applicable
to Davox along with Davox's charter documents may have the effect of delaying,
deterring or preventing changes in control or management of Davox. These
provisions could also limit the price that certain investors might be willing
to pay in the future for shares of Davox Common Stock. In addition, holders of
AnswerSoft Preferred Stock will lose the preferences of AnswerSoft Preferred
Stock under the AnswerSoft charter documents as to class voting, distributions
and liquidations. Following the Merger, the contractual rights of certain
AnswerSoft stockholders, including anti-dilution and registration rights, will
be terminated or rendered ineffective. See "The Merger--Dissenters' Rights of
AnswerSoft Stockholders" and "Comparison of Rights of Holders of AnswerSoft
Capital Stock and Davox Common Stock."
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SHARES ELIGIBLE FOR FUTURE SALE. If the Merger is consummated, Davox will
issue to stockholders of AnswerSoft an aggregate of 2,384,452 shares of Davox
Common Stock (including shares of Davox Common Stock issuable upon exercise of
options to purchase AnswerSoft Common Stock and warrants to purchase
AnswerSoft Preferred Stock assumed by Davox in the Merger). Such stockholders
have not previously had the opportunity to sell their shares in the public
markets. Immediately upon consummation of the Merger, approximately 14% of
such shares will be freely tradeable. As a result, substantial sales of Davox
Common Stock could occur immediately after the Merger. Following the
publication of financial results covering at least 30 days of post-Merger
combined operations, the remaining shares issued in the Merger to persons who
may be deemed affiliates of AnswerSoft could be publicly sold pursuant to Rule
145, subject to the volume and other limitations thereof, and substantially
all of the outstanding shares of Davox Common Stock may be publicly sold.
Future sales of a substantial number of such shares of Davox Common Stock
could adversely affect the market price for Davox Common Stock and the ability
of stockholders to sell their stock.
IMPACT OF YEAR 2000 ISSUE. The Year 2000 issue results from computer
programs written using two digits rather than four to define the applicable
year. Any of Davox's computer programs or AnswerSoft's internal systems that
have date-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities. The current version of
AnswerSoft's software products are written to use four digits to recognize
dates and as such the occurrence of the date January 1, 2000 will not, by
itself, cause the current version of AnswerSoft's software products licensed
to its customers to materially fail to operate in accordance with published
specifications for such products, provided that all other software, scripts,
hardware and products used in combination with the Company's software properly
exchange date data with the Company's software.
Davox and AnswerSoft are in the process of conducting assessments of their
respective computer information systems and are beginning to take the
necessary steps to determine the nature and extent of the work required to
make their systems Year 2000 compliant, where necessary. These steps will
require Davox and may require AnswerSoft to modify, upgrade or replace some of
their respective internal financial and operational systems. Davox and
AnswerSoft continue to evaluate the estimated cost of bringing all internal
systems, equipment and operations into Year 2000 compliance, but neither
company has finished determining the total cost of these compliance efforts.
While these efforts may involve additional costs, Davox and AnswerSoft
believe, based upon currently available information, that these costs will not
have a material adverse effect on the business, financial condition or results
of operations of Davox, AnswerSoft or the combined company. However, if these
efforts are not completed on time, or if the cost of updating or replacing
Davox's or AnswerSoft's information systems, if necessary, exceeds their
current estimates, the Year 2000 issue could have a material adverse impact on
the business, financial condition or results of operations of Davox,
AnswerSoft or the combined company.
Davox and AnswerSoft also intend to determine the extent to which Davox and
AnswerSoft may be vulnerable to any failures by their major suppliers,
distributors and service providers to remedy their own Year 2000 issues, and
are in the process of initiating formal communications with these parties. In
addition, AnswerSoft is in the process of obtaining Year 2000 compliance
certificates from its suppliers of internally used software for mission
critical applications. At this time Davox and AnswerSoft are unable to
estimate the nature or extent of any potential adverse impact resulting from
the failure of third party suppliers, distributors and service providers to
achieve Year 2000 compliance, although they do not currently anticipate that
they will experience any material shipment delays from their major product
suppliers or any material sales delays from their major distributors due to
Year 2000 issues. However, there can be no assurance that these third parties
will not experience Year 2000 problems or that any problems would not have a
material effect on Davox's, AnswerSoft's or the combined company's product
supply and distribution channels. Because the cost and timing of Year 2000
compliance by third parties such as suppliers, distributors and service
providers is not within Davox's, AnswerSoft's or the combined company's
control, no assurance can be given with respect to the cost or timing of such
efforts or any potential adverse effects on Davox, AnswerSoft or the combined
company of any failure by these third parties to achieve Year 2000 compliance.
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THE STOCKHOLDER MEETINGS
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to holders of Davox
Common Stock in connection with the solicitation of proxies by the Davox Board
for use at the Davox Meeting to be held at the offices of Davox, 6 Technology
Park Drive, Westford, Massachusetts, at 10:00 a.m., Boston Time, on May 6,
1998, or at any adjournments or postponements thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting of Stockholders.
This Joint Proxy Statement/Prospectus is also being furnished to holders of
AnswerSoft Capital Stock in connection with the solicitation of proxies by the
AnswerSoft Board for use at the AnswerSoft Meeting to be held at the offices
of AnswerSoft, 2201 North Central Expressway, Suite 200, Richardson, Texas, at
9:00 a.m., Dallas Time, on May 6, 1998, or at any adjournments or
postponements thereof, for the purposes set forth herein and in the
accompanying Notice of Special Meeting of Stockholders.
MATTERS TO BE CONSIDERED AT THE MEETINGS
Davox. At the Davox Meeting, holders of record of Davox Common Stock as of
the close of business on March 13, 1998, will be asked to consider and vote
upon proposals: (i) to approve the issuance of 2,384,452 shares of Davox
Common Stock pursuant to the Merger Agreement; (ii) to elect four directors to
the Davox Board; (iii) to approve an increase in the number of shares of Davox
Common available for issuance under 1996 Stock Plan to 1,950,000 shares; (iv)
to ratify the selection of Arthur Andersen LLP, independent public
accountants, as auditors for the fiscal year ending December 31, 1998; and (v)
to transact such other business as may properly come before the Davox Meeting
or any adjournments or postponements thereof.
AnswerSoft. At the AnswerSoft Meeting, holders of record of AnswerSoft
Capital Stock as of the close of business on March 13, 1998, will be asked to
consider and vote upon proposals (i) to approve and adopt the Merger Agreement
and approve the Merger, (ii) to approve the Option Vesting Proposals and (iii)
to transact such other business as may be incidental to such transaction.
RECORD DATES; VOTING AT THE MEETINGS
Davox. The Davox Board has fixed March 13, 1998 as the record date (the
"Davox Record Date") for the determination of Davox stockholders entitled to
notice of and to vote at the Davox Meeting. Accordingly, only holders of
record of Davox Common Stock as of the close of business on the Davox Record
Date will be entitled to notice of, and to vote at, the Davox Meeting. As of
March 13, 1998, there were 11,918,940 shares of Davox Common Stock
outstanding, held by approximately 296 holders of record. Each record holder
of Davox Common Stock on the Davox Record Date is entitled to cast one vote
per share, exercisable in person or by properly executed proxy, on each matter
properly submitted for a vote of the stockholders of Davox at the Davox
Meeting. The presence, in person or by properly executed proxy, of holders of
a majority of the outstanding shares of Davox Common Stock entitled to vote at
the Davox Meeting is necessary to constitute a quorum at the Davox Meeting.
AnswerSoft. The AnswerSoft Board has fixed March 13, 1998 as the record date
(the "AnswerSoft Record Date") for the determination of holders of AnswerSoft
Capital Stock entitled to notice of and to vote at the AnswerSoft Meeting.
Accordingly, only holders of record of shares of AnswerSoft Capital Stock as
of the close of business on the AnswerSoft Record Date will be entitled to
notice of, and to vote at, the AnswerSoft Meeting. As of March 13, 1998, there
were 1,379,064 shares of AnswerSoft Common Stock and 10,615,047 shares of
AnswerSoft Preferred Stock outstanding, held by approximately 82 holders of
record. Each record holder of shares of AnswerSoft Capital Stock on the
AnswerSoft Record Date is entitled to cast one vote per share as specified
below under "Votes Required," exercisable in person or by properly executed
proxy, on each matter properly submitted for a vote of the stockholders of
AnswerSoft at the AnswerSoft Meeting. The presence, in person or by properly
executed proxy, of the holders of a majority of the outstanding shares of
AnswerSoft
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Capital Stock entitled to vote at the AnswerSoft Meeting is necessary to
constitute a quorum at the AnswerSoft Meeting.
VOTES REQUIRED
Davox. The affirmative vote of a majority of the votes cast by holders of
Davox Common Stock entitled to vote thereon at the Davox Meeting (at which
there must be a quorum) is required in connection with the issuance of the
shares of Davox Common Stock pursuant to the Merger Agreement, the increase in
the number of shares of Davox Common Stock available for issuance under
Davox's 1996 Stock Plan to 1,950,000 shares, and to ratify the selection of
the auditors. The election of directors will be determined by a plurality of
the votes cast by holders of Davox Common Stock entitled to vote thereon at
the Davox Meeting (at which there must be a quorum). An automated system
administered by Davox's transfer agent will tabulate the votes. The vote on
each matter submitted to Davox's stockholders will be tabulated separately.
Votes withheld from any nominee for election as director, as well as
abstentions and broker "non-votes" with respect to all other matters being
submitted to stockholders, are counted as present or represented for purposes
of determining the presence or absence of a quorum for the meeting. A "non-
vote" occurs when a nominee holding shares for a beneficial owner votes on one
proposal, but does not vote on another proposal because, in respect of such
other proposal, the nominee does not have discretionary voting power and has
not received instructions from the beneficial owner. With respect to the
effect on the outcome of the vote on such proposals, abstentions will have the
effect of negative votes and broker non-votes will have no impact on the
outcome of the vote as they are not considered shares entitled to vote.
As of March 2, 1998, directors and executive officers of Davox and their
affiliates were the owners of Davox Common Stock representing approximately
12.5% of the outstanding shares of Davox Common Stock.
AnswerSoft. The affirmative vote of (a) AnswerSoft stockholders owning of
record a majority of the issued and outstanding shares of AnswerSoft Capital
Stock, voting together as a single class and (b) AnswerSoft stockholders
owning of record a majority of the issued and outstanding shares of AnswerSoft
Preferred Stock, voting together as a single class, is required to approve and
adopt the Merger Agreement and approve the Merger on behalf of AnswerSoft. In
addition, the affirmative vote of AnswerSoft stockholders owning of record
more than seventy-five percent (75%) of the issued and outstanding shares of
AnswerSoft Capital Stock, voting together as a single class, is required to
approve each Option Vesting Proposal; provided that the shares of AnswerSoft
Capital Stock actually owned or constructively owned by or for the AnswerSoft
Officers (including any shares owned by any AnswerSoft Officer's spouse,
children or parents) shall not be counted as outstanding stock for purposes of
determining the vote for the Option Vesting Proposals. AnswerSoft will
tabulate the votes of the AnswerSoft stockholders. Abstentions will be counted
for purposes of determining whether a quorum is present at the AnswerSoft
Meeting. With respect to the effect on the outcome of the vote on such
proposals, abstentions will have the effect of negative votes.
As of February 28, 1998, directors, executive officers and major
stockholders of AnswerSoft and their affiliates, all of whom are contractually
committed to vote in favor of the Merger, were the owners of 85.9% of all
outstanding shares of AnswerSoft Capital Stock, voting together as a single
class, and 92.3% of all outstanding shares of AnswerSoft Preferred Stock,
voting together as a single class. As of February 28, 1998, directors,
executive officers and major stockholders of AnswerSoft and their affiliates
holding more than 75% of the outstanding shares of AnswerSoft Capital Stock
are contractually committed to vote in favor of the Option Vesting Proposals;
provided that the outstanding shares used to determine the votes for the
Option Vesting Proposals exclude any AnswerSoft Capital Stock actually owned
or constructively owned by or for the AnswerSoft Officers (such as shares
owned by any AnswerSoft Officer or any AnswerSoft Officer's spouse, children
or parents). See "The Merger--Participation Agreement."
PROXIES
All shares of Davox Common Stock and all shares of AnswerSoft Capital Stock
that are entitled to vote and are represented at their respective Meetings by
properly executed proxies received prior to or at their
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respective Meetings and not duly and timely revoked, will be voted at such
Meetings in accordance with the instructions indicated on such proxies. If no
such instructions are indicated, such proxies will be voted:
(a) In the case of the Davox Meeting, (i) FOR the approval of the issuance
of 2,384,452 shares of Davox Common Stock pursuant to the Merger Agreement;
(ii) FOR the election of Alphonse M. Lucchese, Michael D. Kaufman, Walter J.
Levison and R. Scott Asen as directors to the Davox Board; (iii) FOR the
approval of the increase in the number of shares of Davox Common available for
issuance under Davox's 1996 Stock Plan to 1,950,000 shares; and (iv) FOR the
ratification of the selection of Arthur Andersen LLP as Davox's auditors for
the fiscal year ending December 31, 1998; and
(b) In the case of the AnswerSoft Meeting, FOR the approval and adoption of
the Merger Agreement, FOR the approval of the Merger and FOR the approval of
the Option Vesting Proposals.
If any other matters are properly presented for consideration at either
Meeting (or any adjournments or postponements thereof) including, among other
things, consideration of a motion to adjourn or postpone either Meeting to
another time and/or place (including, without limitation, for the purpose of
soliciting additional proxies), the persons named in the enclosed forms of
proxy and voting thereunder will have the discretion to vote on such matters
in accordance with their best judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of Davox or AnswerSoft, as the case may be, or before the
taking of the vote at the relevant Meeting, a written notice of revocation
bearing a later date than the proxy, (ii) duly executing a later dated proxy
relating to the same shares and delivering it to the Secretary of Davox or
AnswerSoft, as the case may be, before the taking of the vote at the relevant
Meeting or (iii) attending the relevant Meeting and voting in person (although
attendance at the Meeting will not in and of itself constitute a revocation of
a proxy). Any written notice of revocation or subsequent proxy should be sent
so as to be delivered, in the case of the holders of Davox Common Stock, to
Davox, 6 Technology Park Drive, Westford, Massachusetts 01886, Attention:
Secretary, and in the case of holders of AnswerSoft Capital Stock to
AnswerSoft, 2201 North Central Expressway, Suite 200, Richardson, Texas 75080,
Attention: Secretary, or hand-delivered to the Secretary of Davox or
AnswerSoft, as the case may be, at or before the taking of the vote at the
relevant Meeting.
Davox and AnswerSoft will each bear their respective costs of solicitation
of proxies from their stockholders. In addition to solicitation by use of the
mails, proxies may be solicited by directors, officers, employees or agents of
Davox and AnswerSoft in person or by telephone, telegram or other means of
communication. Such directors, officers, employees and agents will not be
additionally compensated, but may be reimbursed for reasonable out-of-pocket
expenses in connection with such solicitation. Arrangements will also be made
with custodians, nominees and fiduciaries for forwarding of proxy solicitation
materials to beneficial owners of shares held of record by such custodians,
nominees and fiduciaries, and Davox and AnswerSoft will reimburse such
custodians, nominees and fiduciaries for reasonable expenses incurred in
connection therewith.
----------------
ANSWERSOFT STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS.
----------------
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THE MERGER
The following discussion summarizes the proposed Merger and related
transactions. The following is not, however, a complete statement of all
provisions of the Agreement and related agreements. Detailed terms of and
conditions to the Merger and certain related transactions are contained in the
Agreement, a conformed copy of which is attached to this Joint Proxy
Statement/Prospectus as Annex A. Reference is also made to the other Annexes
hereto. Statements made in this Joint Proxy Statement/Prospectus with respect
to the terms of the Merger and such related transactions are qualified in
their respective entireties by reference to the more detailed information set
forth in the Agreement and the other Annexes hereto. This section contains
forward-looking statements that involve risks and uncertainties. Actual
results could differ materially from those anticipated in these forward-
looking statements as a result of certain factors, including those set forth
in "Risk Factors" and elsewhere herein.
BACKGROUND OF THE TRANSACTION
Late in 1997, Davox determined that because of increasing competition within
the call center management market, rapid technological developments and the
globalization of the call center market opportunity, successful companies in
this market would forge strategic business alliances and explore corporate
mergers and acquisitions as a strategy to acquire products, technologies and
market share. During this time period, Davox hired Louis Marianacci as
President and charged him with responsibility for Davox's international
operation, as well as for developing and implementing strategic business
alliances and exploring potential acquisition opportunities.
Mr. Marianacci had become familiar with AnswerSoft's business, technology
and products during his tenure as Vice President of Customer Sales and Service
at Lucent Technologies' Call Center business unit. On or about January 8,
1998, Mr. Marianacci called Jeanne Bayless, Chairman of AnswerSoft, to discuss
potential synergies between Davox and AnswerSoft.
On January 12, Ms. Bayless called Mr. Marianacci and proposed that she and
David Brandenburg, President and Chief Executive Officer of AnswerSoft, visit
with Mr. Marianacci and Alphonse M. Lucchese, Chief Executive Officer and
Chairman of Davox. On January 14, Mr. Marianacci and Douglas Smith, Vice
President, Sales & Marketing of Davox, met with Mr. Brandenburg and Ms.
Bayless. The group discussed potential synergies between the organizations and
discussed the possibility of a business combination transaction.
On January 15, Mr. Lucchese, Mr. Marianacci, Mr. Brandenburg and Ms. Bayless
met to further discuss a potential business combination. The group ended the
discussions as a result of fundamental disagreements with respect to potential
terms of such a transaction, including the economic terms.
Over the ensuing week, officers of Davox and officers of AnswerSoft
discussed a potential OEM relationship, although each party independently
recognized that a merger continued to be a possibility. On or about January
23, Davox sent John Cambray, Vice President, Development of Davox, to
AnswerSoft to evaluate AnswerSoft's technology and to confirm that a business
combination was still a possibility.
On or about January 25, Davox contacted Robert Dunn, Partner of the Catalyst
Group, and engaged Catalyst to perform a due diligence investigation of
AnswerSoft. The Catalyst Group is an independent third party consulting firm
that specializes in performing independent due diligence activities on behalf
of potential acquirors.
On January 29, Davox held a regularly scheduled Board of Directors meeting
at which all of its Directors were present along with a representative of
Testa, Hurwitz & Thibeault, LLP (TH&T), Davox's outside counsel. The potential
combination with AnswerSoft was discussed and the Board of Directors provided
its approval for Davox to proceed with discussions and further due diligence
concerning a potential business combination.
On or about February 3, Davox sent to AnswerSoft a financial and legal due
diligence checklist. Over the next few weeks, AnswerSoft responded with
documents and engaged in discussions relating to the due diligence checklist.
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On February 11, Mr. Dunn traveled to AnswerSoft and performed his
independent analysis of AnswerSoft. Mr. Lucchese, Mr. Marianacci, and John J.
Connolly, Chief Financial Officer and Vice President of Finance of Davox, met
with Mr. Brandenburg, Ms. Bayless, and Richard Connelly, Chief Financial
Officer of AnswerSoft, to discuss the potential acquisition.
On February 12, Mr. Lucchese, Mr. Marianacci, and John Connolly traveled to
AnswerSoft in order to evaluate business plans, products, strategies and
potential synergies between the companies. Following extensive discussions of
AnswerSoft's business plans, strategies and synergies, pricing was discussed
and the parties reached a preliminary, conditional understanding on a price
range for the business combination, conditioned on continued due diligence and
the preparation of documentation which was acceptable to both parties. Each
member of Davox's Board of Directors was called to verify that the
preliminary, conditional pricing discussions were acceptable to the Davox
Board of Directors and each agreed that Davox should proceed with discussions,
due diligence and the preparation of documentation. The AnswerSoft Board
directed AnswerSoft management to proceed with discussions and the preparation
of documentation.
On February 17 and 18, Davox sent a diligence team to AnswerSoft
headquarters to conduct an extensive due diligence review. The team consisted
of representatives of Davox's inside legal and accounting staff, as well as
representatives from TH&T and Arthur Andersen LLP, Davox's independent public
accountants.
On February 20, Mr. Dunn formally presented to Davox executive management
his assessment of AnswerSoft. Mr. Dunn indicated that there could be
substantial synergies between Davox and AnswerSoft. Davox's executive
management team asked Mr. Dunn for further information and additional
AnswerSoft customer references.
On February 23, Davox engaged Piper Jaffray Inc. to act as its financial
advisor in connection with the possible strategic business combination with
AnswerSoft.
On February 23, Davox provided to AnswerSoft a draft of the Merger Agreement
which led to subsequent discussions between counsel to Davox and counsel to
AnswerSoft regarding the proposed structure and other principal terms of the
Agreement.
From February 24 through March 9, Davox and AnswerSoft, together with their
respective legal and financial advisors, continued to negotiate the terms of
definitive agreements relating to the transaction, including the terms of the
Participation Agreement, the termination rights relating to the Merger
Agreement, the conditions upon which any break-up fees would be payable and
the amount of such fees, and the representations, warranties and covenants to
be included in the Merger Agreement.
On February 25, Mr. Lucchese and Mr. Connolly traveled to Dallas to meet
with management of AnswerSoft to discuss in greater detail AnswerSoft's 1998
business plan.
On February 26, the AnswerSoft Board met and discussed the potential merger.
The AnswerSoft Board authorized AnswerSoft management to continue to pursue
the potential transaction.
On or about March 1, Mr. Dunn provided additional information to Davox
management and favorable customer references.
On March 3, the AnswerSoft Board held an informal meeting for management to
provide an update on the status and business terms of the Merger. Mr. Smith
and Mr. Marianacci met with Richard Dural, Vice President of Worldwide Sales
of AnswerSoft, to further evaluate AnswerSoft's sales plan.
On the afternoon of March 4, the Davox Board met at Davox's offices in
Westford, Massachusetts, with one Director participating by telephone
conference call. Senior management of Davox reported on the status of
negotiations with respect to the business terms of the Merger. In addition,
there was a discussion regarding the potential market reaction to the proposed
combination and the impact of the Exchange Ratios based on the then
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current trading price for Davox Common Stock. Davox's legal counsel reviewed
for the Davox Board the proposed terms of the Agreement and related documents.
Piper Jaffray made a presentation to the Davox Board regarding the
consideration to be paid in the Merger pursuant to the Merger Agreement to be
executed as of March 9, 1998 and reviewed its preliminary financial analyses
and other information with respect to the companies. Based on its preliminary
analyses, Piper Jaffray indicated it expected to be able to render a favorable
opinion concerning the fairness from a financial point of view to Davox of the
aggregate consideration proposed to be paid for AnswerSoft Common Stock and
AnswerSoft Preferred Stock in the Merger. After careful consideration and
conditioned on the receipt of a written favorable opinion from Piper Jaffray,
the Davox Board unanimously voted to approve the Merger, Merger Agreement in
the form executed on March 9, 1998, and the related transaction documents.
On March 6, the AnswerSoft Board held a meeting via telephonic conference
call. Senior management of AnswerSoft reported on the status of negotiations
with respect to the business terms of the Merger. AnswerSoft's legal counsel
reviewed for the AnswerSoft Board the proposed terms of the Merger Agreement
in the form executed on March 9, 1998, the Participation Agreement and related
documents. The Board also discussed potential alternatives to the Merger.
After full discussion of these and other factors, the AnswerSoft Board
unanimously voted to approve the Merger, the Merger Agreement in the form
executed on March 9, 1998, and the related transaction documents.
In the evening on March 9, following receipt of the Piper Jaffray fairness
opinion described above and final approval by the Davox Board and the
AnswerSoft Board, the Merger Agreement in the form executed on March 9, 1998,
and related agreements were executed by both companies and they issued a joint
press release.
On April 1 through 3, officers of Davox met with officers of AnswerSoft to
review AnswerSoft's preliminary financial results for the first quarter of
1998. Based on this review, the officers of Davox and AnswerSoft agreed to
present to their respective Boards for approval an amendment and restatement
of the Merger Agreement executed on March 9, 1998 to adjust the aggregate
consideration from $76 million to $74 million.
On April 3, the AnswerSoft board held a meeting via telephonic conference
call. Senior management of AnswerSoft reviewed AnswerSoft's preliminary
financial results for the first quarter of 1998 and the proposed amendment and
restatement of the Merger Agreement. After full discussion of these and other
factors, the AnswerSoft Board approved the Merger Agreement as amended and
restated.
On April 6, the Davox Board held a meeting via telephonic conference call.
Senior management of Davox reviewed AnswerSoft's preliminary financial results
for the first quarter of 1998 and the proposed amendment and restatement of
the Merger Agreement. After full discussion of these and other factors, the
Davox Board approved the Merger Agreement as amended and restated.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
Certain statements made in the following paragraphs regarding the potential
benefits that could result from the Merger are forward-looking statements
based on current expectations and entail various risks and uncertainties that
could cause actual results to differ materially from those expressed in such
forward-looking statements. Such risks and uncertainties are set forth under
"Risk Factors" and elsewhere in this Joint Proxy Statement/Prospectus.
Joint Reasons for the Merger
The Boards of Directors of Davox and AnswerSoft have determined that the
combined company would have the potential to realize long-term improved
operating and financial results and a stronger competitive position than
either company might achieve independently. Davox and AnswerSoft believe that
there is a tight strategic fit between Davox's and AnswerSoft's businesses,
and that the differences between the companies' historical approaches--in
market focus, product features and service design, and industry emphasis--make
the business
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combination complementary. Davox and AnswerSoft believe that the Merger will
provide greater opportunities to develop business relationships, license
technology, and engage in other strategic combinations or transactions
involving their respective products, services, and technologies than would be
the case if the companies otherwise independently engaged in these activities.
In this way, the Merger could provide Davox with the range of products and
services required to play a defining role in the market for call center
management solutions.
Each of Davox and AnswerSoft has identified additional potential mutual
benefits of the Merger that they believe will contribute to the success of the
combined company. These potential benefits include principally the following:
. Best-of-Breed Call Center Management Solutions. Davox is a leading
provider of management systems principally for outbound call center
operations, including business applications such as credit/collections,
telephone sales and marketing and fundraising. AnswerSoft provides
advanced communications systems and solutions principally for in-bound
operations within a call center, including telephone sales and customer
service and support. The combination of Davox and AnswerSoft is expected
to create a company able to provide superior solutions across the
breadth of the call center.
. Shared Strategic Vision. The management teams of Davox and AnswerSoft
share a common strategic vision of creating a combined company that is
the provider of choice for purchasers of call center management
products. Both companies believe that call center infrastructures will
continue to require best-of-breed technology such as AnswerSoft's
Concerto product line and Davox's Unison product line including recently
announced LYRICall and In/Unison products. The combination of the
products and technologies of both companies, in addition to the
leadership each company has in different market segments, will position
the combined company to serve a broad base of customers with industry-
leading technology to meet their call center needs.
. Improved Ability to Compete. Davox and AnswerSoft believe that the
growth of call centers, coupled with the need to improve call center
productivity by integrating inbound and outbound applications, is
driving demand among the largest users for single-vendor solutions.
Davox and AnswerSoft further believe that other call center product
vendors are attempting to meet these needs by developing and acquiring
new products and technologies to enable them to offer integrated product
sets designed to provide end-to-end solutions. Davox and AnswerSoft
believe that the combined company, with the combined breadth of product
offerings, industry experience, sales and marketing capability and
financial and other resources, will be able to compete more effectively
in the rapidly evolving and highly competitive market for call center
solutions and respond more effectively to technological change and
evolving customer needs.
Davox and AnswerSoft have each identified additional reasons for the Merger.
Each Board of Directors has recognized that the potential benefits of the
Merger may not be realized. See "Risk Factors."
Davox's Reasons for the Merger
In addition to the anticipated joint benefits described above, the Davox
Board believes that the following are additional reasons the Merger will be
beneficial to Davox and additional reasons for the stockholders of Davox to
vote FOR the proposals set forth herein:
. The addition of AnswerSoft's in-bound-focused products to Davox's
products will help meet an increasingly important customer requirement
in the call center management market that is currently not fully met by
the Davox product family.
. The combined company will have a more complete portfolio of integrated
best-of-breed call center management products, greater resources, and
increased research and development than Davox on a stand-alone basis.
The combined company is expected to be able to compete more effectively
with competitors having greater resources and broader product offerings
than Davox on a stand-alone basis.
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. Davox will have the opportunity to expand its market presence through
AnswerSoft's customer base of telecommunications providers, computer and
electronics manufacturers and insurance and financial services
companies.
. Combining Davox's and AnswerSoft's products and technologies will enable
the combined company to offer to the existing customer bases of Davox
and AnswerSoft a more complete end-to-end call center management
solution. The Davox Board believes that the broader portfolio of
products offered by the combined company will better position the
combined company to maintain Davox's status as a key vendor.
. In the face of an increasingly competitive industry, Davox must continue
to invest in industry-leading technology. The Davox Board believes that
the combined company will be in a stronger competitive position than
Davox alone to effectively meet the industry's technology challenges and
evolving customer demands.
. The management teams of the combined company will have greater depth of
knowledge of the call center industry and technologies than that of
either company standing alone.
In the course of its deliberations during the Davox Board meeting held on
March 4, 1998, the Davox Board reviewed with Davox management a number of
additional factors relevant to the Merger, including (i) historical
information concerning AnswerSoft's and Davox's respective businesses,
prospects, financial performance and condition, operations, technology,
management and competitive position; (ii) Davox management's view as to the
financial condition, results of operations and businesses of Davox and
AnswerSoft before and after giving effect to the Merger based on management
due diligence and earnings estimates; (iii) current market conditions and
historical market prices, volatility and trading information with respect to
Davox Common Stock; (iv) the relationship between the market value of Davox
Common Stock to be issued in exchange for each share of AnswerSoft Common
Stock and AnswerSoft Preferred Stock and a comparison of comparable merger
transactions; (v) the belief that the terms of the Merger Agreement, including
the parties' representations, warranties and covenants, and the conditions to
their respective obligations, are reasonable; (vi) preliminary financial
analyses and other information with respect to the companies presented by
Piper Jaffray in its Board presentation; (vii) the impact of the Merger on
Davox's customers, business partners and employees; (viii) the compatibility
of the respective business philosophies and corporate cultures of Davox and
AnswerSoft; (ix) the management resources available to address the management
needs of the combined company and such management's experience at managing
operations at different locations and integrating acquisitions; and (x)
reports from management, legal and financial advisors as to the results of
their due diligence investigation of AnswerSoft. The Davox Board also
considered the terms of the proposed Agreement regarding AnswerSoft's rights
to consider and negotiate other acquisition proposals in certain
circumstances, as well as the possible effect of the provisions regarding the
termination fee. In addition, the Davox Board noted that the Merger is
expected to be accounted for as a pooling-of-interests and that no goodwill is
expected to be created on the books of Davox as a result thereof.
The Davox Board also identified and considered a variety of potentially
negative factors in its deliberations concerning the Merger, including, but
not limited to: (i) the risk that the potential benefits sought in the Merger
might not be fully realized; (ii) the possible adverse impact that
AnswerSoft's near-term operating results could have on Davox; (iii) the
difficulty of managing separate operations at different geographic locations;
(iv) the risk that despite the efforts of the combined company, key technical,
marketing and management personnel might not choose to remain employed by the
combined company; (v) the risk that the operations of the two companies would
not be successfully integrated; (vi) the possibility that the Merger might not
be consummated and the effect of public announcement of the Merger on (a)
Davox's revenues and operating results; (b) Davox's ability to attract and
retain key management, marketing, and technical personnel; and (c) progress of
certain development projects; (vii) the potential dilutive effect of the
issuance of Davox Common Stock in the Merger; (viii) the potential negative
impact on Davox's business and financial results in the near term arising from
Davox management's focus on completing the Merger; (ix) the substantial
charges expected to be incurred, primarily in the quarter ending June 30,
1998, in connection with the Merger, including costs of integrating the
businesses and transaction expenses arising from the Merger; and (x) the risks
described under "Risk Factors" herein.
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The Davox Board believed that certain of these risks were unlikely to occur,
while others could be avoided or mitigated by the combined company, and that,
overall, these risks were outweighed by the potential benefits of the Merger.
The foregoing discussion of the information and factors considered by the
Davox Board is not intended to be exhaustive but is believed to include all
material factors considered by the Davox Board. In view of the variety of
factors considered in connection with its evaluation of the Merger, the Davox
Board did not find it practicable to and did not quantify or otherwise assign
relative weight to the specific factors considered in reaching its
determination. In addition, individual members of the Davox Board may have
given different weight to different factors.
AnswerSoft's Reasons for the Merger
In addition to the anticipated joint benefits described above, the
AnswerSoft Board believes that the following are additional reasons the Merger
will be beneficial to AnswerSoft and additional reasons for the stockholders
of AnswerSoft to vote FOR the proposals set forth herein:
. Liquidity to AnswerSoft Stockholders. The Merger will provide
AnswerSoft's stockholders, optionholders and warrantholders liquidity
for their equity interests. The Merger was considered in view of a
variety of alternatives and the AnswerSoft Board concluded that no other
company offered the same strategic fit or would offer benefits
comparable to those of Davox. The Merger is also expected to be treated
as a tax-free exchange under Section 368 of the Code.
. Access to Davox's Customer Base. The Merger will enable AnswerSoft's
product suite to access the installed base of customers of Davox's
existing products. AnswerSoft believes that access to Davox's customer
base is increasingly essential in the market for call center solutions.
. Access to Davox's Direct Sales Force. The Merger will also provide
AnswerSoft with access to Davox's direct sales channel. The combined
company can thereby leverage Davox's direct sales channel and
AnswerSoft's indirect sales channels to bring AnswerSoft's product suite
to a greater number of customers than would have been possible prior to
the Merger.
. Integrated Suite of Call Center Solutions. AnswerSoft has a product
suite that it believes complements that of Davox. AnswerSoft expects
that the combined company will be able to offer customers a more
complete suite of call center solutions. AnswerSoft believes that the
ability to offer a more comprehensive solution is and will continue to
be essential to remain competitive in this market.
In the course of its deliberations during AnswerSoft Board meetings held on
February 26, 1998, March 6, 1998 and April 3, 1998 and during an informal
Board meeting on March 3, 1998 the AnswerSoft Board reviewed with AnswerSoft
management a number of additional factors relevant to the Merger, including
(i) historical information concerning AnswerSoft's and Davox's respective
businesses, prospects, financial performance and condition, operations,
technology, management and competitive position, including reports filed by
Davox with the Commission concerning results of operations during the most
recent fiscal year and fiscal quarter; (ii) AnswerSoft management's view as to
the financial condition, results of operations and businesses of AnswerSoft
before and after giving effect to the Merger based on management due diligence
and earnings estimates; (iii) current market conditions and historical market
prices, volatility and trading information with respect to Davox Common Stock;
(iv) the consideration to be received by AnswerSoft stockholders in the Merger
and the relationship between the market value of Davox Common Stock to be
issued in exchange for AnswerSoft Common Stock and a comparison of comparable
merger transactions; (v) the belief that the terms of the Merger Agreement,
including the parties' representations, warranties and covenants, and the
conditions to their respective obligations, are reasonable; (vi) AnswerSoft
management's view as to the prospects of AnswerSoft as an independent company;
(vii) AnswerSoft management's view as to the potential for other third parties
to enter into strategic relationships with or to acquire AnswerSoft; (viii)
the impact of the Merger on AnswerSoft's customers and employees; and (ix) the
potential long-term appreciation in value to AnswerSoft's stockholders and
strategic positioning of Davox resulting from the synergies between the two
companies. The AnswerSoft Board also considered the terms of the proposed
Agreement regarding AnswerSoft's rights to consider and
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negotiate other acquisition proposals in certain circumstances, as well as the
possible effect of the provisions regarding the termination fee. In addition,
the AnswerSoft Board noted that the Merger is expected to be accounted for as
a pooling-of-interests and that no goodwill is expected to be created on the
books of Davox as a result thereof.
The AnswerSoft Board also identified and considered a variety of potentially
negative factors in its deliberations concerning the Merger, including, but
not limited to: (i) the risk that the potential benefits sought in the Merger
might not be fully realized; (ii) the possibility that the Merger might not be
consummated and the effects of public announcement of the Merger on (a)
AnswerSoft's sales and operating results; (b) AnswerSoft's ability to attract
and retain key management, marketing, and technical personnel; and (c)
progress of certain development projects; (iii) the potential dilutive effect
of the issuance of Davox Common Stock in the Merger; (iv) the substantial
charges expected to be incurred, primarily in the quarter ending June 30,
1998, in connection with the Merger, including costs of integrating the
businesses and transaction expenses arising from the Merger; (v) the risk that
despite the efforts of Davox, key technical and management personnel might not
remain employed by Davox; and (vi) the risks described under "Risk Factors"
herein. The AnswerSoft Board believed that these risks were outweighed by the
potential benefits of the Merger.
OPINION OF DAVOX'S FINANCIAL ADVISOR
This section contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including
those set forth in "Risk Factors" and elsewhere herein.
Piper Jaffray was retained by Davox on February 23, 1998 to assist Davox in
its evaluation of a proposed business combination with AnswerSoft and, at the
request of Davox's Board, to render an opinion to Davox's Board concerning the
fairness, from a financial point of view, of the consideration to be paid in
the proposed transaction.
Piper Jaffray delivered to Davox's Board on March 9, 1998, its written
opinion (the "Opinion"), to the effect that, as of the date of the Opinion,
based on and subject to the assumptions, factors and limitations set forth in
the Opinion and as described below, the consideration proposed to be paid to
the holders of outstanding AnswerSoft Common Stock and AnswerSoft Preferred
Stock taken as a whole in the Merger pursuant to the Merger Agreement dated as
of March 9, 1998 was fair, from a financial point of view, to Davox. A copy of
the Opinion is attached as Annex C to this Joint Proxy Statement/Prospectus
and is incorporated herein by reference. Davox's stockholders are urged to
read the attached Opinion in its entirety.
Piper Jaffray was not requested and did not make any recommendation to
Davox's Board as to the form or amount of the consideration to be paid in the
Merger, which was determined through negotiations between the parties to the
Merger. The Opinion was rendered to Davox's Board and does not constitute a
recommendation to any stockholder of Davox as to how such stockholder should
vote at the Davox Meeting. The Opinion does not address Davox's underlying
business decision to proceed with or effect the Merger.
In arriving at the Opinion, Piper Jaffray reviewed (i) the draft of the
Merger Agreement dated March 8, 1998, (ii) certain information relative to the
business, financial condition and operations of AnswerSoft, (iii) certain
internal financial planning information of AnswerSoft on a stand-alone basis
furnished by management of AnswerSoft and revised by management of Davox, (iv)
certain financial and securities data of AnswerSoft and companies deemed
similar to AnswerSoft or representative of the business sector in which
AnswerSoft operates, (v) to the extent publicly available, the financial terms
of certain acquisition transactions deemed comparable to the Merger, (vi)
certain publicly available information relative to the business, financial
condition and operations of Davox, (vii) certain publicly available financial
and securities data of Davox and companies deemed similar to Davox or
representative of the business sector in which Davox operates and (viii)
certain internal financial information of Davox on a stand-alone basis and as
a combined company with AnswerSoft prepared for financial planning purposes
and furnished by the management of AnswerSoft. In addition, Piper
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Jaffray engaged in discussions with members of management of Davox and
AnswerSoft concerning the respective financial conditions, current operating
results and business outlook of Davox and AnswerSoft and the plans and
business outlook for the combined company following the Merger.
On March 4, 1998, Piper Jaffray prepared and delivered to Davox's Board
certain written materials containing various preliminary analyses and other
information material to the Opinion. These analyses and other information were
updated for purposes of rendering the Opinion as of March 9, 1998. The
following is a summary of these updated materials.
Davox Market Overview. Piper Jaffray reviewed selected market data relating
to ownership, price and volume for Davox Common Stock. In addition, Piper
Jaffray reviewed the relative stock performance of Davox in comparison to a
select group of comparable companies more fully described below and the Nasdaq
Composite Index for the period March 6, 1995 to March 6, 1998.
As part of its analysis of Davox, Piper Jaffray compared various operating
and valuation data of Davox with that of a select group of seven computer
telephony/call center industry companies (Aspect Telecommunications, EIS
International, Genesys Telecommunications Laboratories, GeoTel Communications,
Melita International, Mosaix and Applied Voice Technology). This comparable
company group was comprised of publicly traded companies with a market
capitalization greater than $50 million competing in the computer
telephony/call center industry. This analysis produced selected valuation data
based on the closing price of Davox of $34.78 per share on March 6, 1998 as
follows: market price to latest 12 months ("LTM") earnings for the comparable
companies ranged from 13.2x to 106.3x, with a mean and median of 40.0x and
30.5x, respectively, and for Davox 34.1x; market price to 1998 calendar
estimate for the comparable companies ranged from 11.5x to 68.4x, with a mean
and median of 33.2x and 23.8x, respectively, and for Davox 26.6x; market price
to 1999 calendar estimate for the comparable companies ranged from 9.7x to
50.5x, with a mean and median, respectively, of 25.5x and 20.9x, respectively,
and for Davox 23.2x; company value (market capitalization plus debt less cash)
to LTM revenue for the comparable companies ranged from 0.8x to 15.8x, with a
mean and median of 5.2x and 3.0x, respectively, and for Davox 4.6x; company
value to 1998 calendar year estimate revenue for comparable companies ranged
from 0.7x to 9.1x, with a mean and median of 3.5x and 2.3x; respectively, and
for Davox 3.5x; company value to 1999 calendar year estimate revenue for
comparable companies ranged from 0.6x to 6.0x, with a mean and median of 2.5x
and 1.8x, respectively, and for Davox 2.8x; and company value to LTM operating
income for the comparable companies ranged from 8.4x to 27.3x, with a mean and
median of 18.1x and 18.9x, respectively, and for Davox 18.7x. Earning and
revenue estimates for Davox and the comparable companies were derived from
publicly available analyst reports.
Implied Aggregate Consideration. Based on the terms of the Merger Agreement
as executed on March 9, 1998, Piper Jaffray calculated the aggregate number of
shares of Davox Common Stock to be issued to holders of AnswerSoft Common
Stock and AnswerSoft Preferred Stock in the Merger, or 2.44 million shares.
Using the Davox Common Stock price at March 6, 1998, Piper Jaffray calculated
an aggregate implied value of the consideration to be issued of $84.90 million
and an implied company value for AnswerSoft of $82.11 million.
Comparable Public Company Analysis. Piper Jaffray compared certain financial
information and valuation ratios relating to AnswerSoft to corresponding data
and ratios from a group of selected publicly traded companies deemed
comparable to AnswerSoft. This group was identical to the comparable company
group used for purposes of comparable company analysis of Davox, except that
Davox was added to the group. For purposes of analysis, Piper Jaffray compared
the multiples implied by the aggregate consideration in the Merger to the
calculated valuation multiples for the comparable companies. This analysis
produced multiples of selected valuation data as follows: equity value to LTM
earnings for the comparable companies ranged from 13.2x to 106.3x, with a mean
and median of 39.2x and 32.2x, respectively, and for AnswerSoft was not
meaningful; equity value to 1998 calendar year estimated earnings for
comparable companies ranged from 11.5x to 68.4x, with a mean and median of
32.4x and 25.1x, respectively, and for AnswerSoft was not meaningful; equity
value to 1999 calendar year estimated earnings for comparable companies ranged
from 9.7x to 51.0x, with a mean and median of 25.0x and 21.0x, respectively,
and for AnswerSoft 36.2x; company value to LTM revenue for the
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comparable companies ranged from 0.8x to 15.8x, with a mean and median of 5.1x
and 3.3x, respectively, and for AnswerSoft to 12.1x; company value to calendar
1998 revenue estimate for the comparable companies ranged from 0.7x to 9.1x,
with a mean and median of 3.5x and 2.5x, and for AnswerSoft 5.9x; company
value to calendar 1999 revenue estimate for the comparable companies ranged
from 0.6x to 6.0x, with a mean and median of 2.5x and 2.0x, respectively, and
for AnswerSoft 2.8x; and estimated 1999 price to earnings ratio as a
percentage of three to five year growth plan for the comparable companies
ranged from 51.1% to 99.4%, with a mean and median of 74.9% and 66.6%,
respectively, and for AnswerSoft 55.7%.
AnswerSoft Stand-Alone Discounted Cash Flow Analysis. Piper Jaffray
estimated the present value of the projected future cash flows of AnswerSoft
on a stand-alone basis using internal financial planning data prepared by
AnswerSoft management and revised by Davox management for the years ending
December 31, 1998 through 2000. Piper Jaffray applied a range of terminal
value multiples of forecasted 2000 earnings before interest and taxes of 10.0x
to 14.0x and a range of discount rates of 20% to 30%. This analysis yielded a
range of estimated present values of aggregate equity of approximately $64.7
million to $110.2 million.
Comparable Transaction Analysis. Piper Jaffray reviewed certain merger
transactions which it deemed comparable in whole or in part to the Merger.
Piper Jaffray analyzed nine completed transactions involving the combination
of companies in SIC codes for prepackaged software and telephone and telegraph
apparatus, announced between January 1, 1996 and March 6, 1998 with a total
deal value in excess of $5.0 million. Piper Jaffray calculated the multiple of
company value to LTM revenue (the only valuation multiple for which meaningful
data was available) for the comparable transactions ranging from 0.5x to
10.7x, with a mean and median of 3.5x and 2.5x, respectively, and for the
Merger 12.1x.
Accretion/Dilution Analysis. Piper Jaffray examined the hypothetical pro
forma effect of the Merger on the combined company's earnings per share for
the fiscal years ending December 31, 1998 through 2000, with synergies
anticipated by Davox management from incremental revenue and cost savings
generated from reductions in cost of services and research and development and
other selling, general and administrative savings. Piper Jaffray performed
this analysis with and without the benefit of estimated net operating loss
carryforwards ("NOL"). The analysis indicated that the Merger is anticipated
to be dilutive to projected combined company earnings per share in fiscal 1998
without NOL and with NOL by (8.4%) and (4.7%), respectively, and accretive in
fiscal 1999 and 2000 by amounts ranging from 3.8% to 15.2%. The actual
operating and financial results achieved by the combined company may vary from
projected results and variations may be material as a result of business and
market risks, the timing and amount of synergies, the costs associated with
achieving such synergies and other factors.
Contribution Analysis. Piper Jaffray also analyzed the expected
contributions of each of Davox and AnswerSoft to revenue, operating income,
pre-tax income and net income of the combined company for the years ending
December 31, 1998 through 2000 based on Davox's financial planning data with
and without anticipated synergies. Incremental contribution arising from
anticipated synergies was allocated to AnswerSoft for purposes of this
analysis. The analysis indicated that during these periods AnswerSoft would
contribute to the combined entity revenues ranging from 15.1% to 24.7% with
synergies and 11.9% to 23.4% without synergies, operating income ranging from
10.1% to 27.2% with synergies and 0.1% to 21.5% without synergies, pre-tax
income ranging from 7.9% to 26.0% with synergies and 0.1% to 20.5% without
synergies, and net income ranging from 7.4% to 26.0% with synergies and 0.1%
to 20.5% without synergies. Former AnswerSoft stockholders will account for
approximately 15.8% of the ownership of the combined company.
In reaching its conclusion as to the fairness of the aggregate consideration
to be paid to holders of AnswerSoft Common Stock and AnswerSoft Preferred
Stock in the Merger pursuant to the Merger Agreement dated as of March 9, 1998
and in its presentation to Davox's Board, Piper Jaffray did not rely on any
single analysis or factor described above, assign relative weights to the
analyses or factors considered by it, or make any conclusions as to how the
results of any given analysis, taken alone, supported its Opinion. The
preparation of a fairness opinion is a complex process and not necessarily
susceptible to partial analyses or summary description. Piper Jaffray believes
that its analyses must be considered as a whole and that selecting portions of
its analyses and of the factors considered by it, without considering all
factors and analyses, would create a misleading view of the processes
underlying the Opinion. The analyses of Piper Jaffray are not necessarily
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indicative of actual values or future results, which may be significantly more
or less favorable than suggested by such analyses. Analyses relating to the
value of companies do not purport to be appraisals or valuations or
necessarily reflect the price at which companies may actually be sold. No
company or transaction used in any comparable analysis as a comparison is
identical to Davox, AnswerSoft or the Merger. Accordingly, an analysis of the
results is not mathematical; rather, it involves complex considerations and
judgments concerning differences in the various characteristics of the
comparable companies and other factors that could affect the public trading
value of the comparable companies to which Davox and AnswerSoft were compared.
For purposes of the Opinion, Piper Jaffray relied upon and assumed the
accuracy, completeness and fairness of the financial and other information
made available to it and did not assume responsibility independently to verify
such information. Piper Jaffray relied upon the assurances of the respective
managements of Davox and AnswerSoft that the information provided by Davox and
AnswerSoft had a reasonable basis and, with respect to financial planning
data, products and technologies under development and other business outlook
information, reflected the best available estimates, and that they were not
aware of any information or fact that would make the information provided to
Piper Jaffray incomplete or misleading. Financial planning data was prepared
based on numerous variables and assumptions that are inherently uncertain,
including, without limitation, factors related to general economic and
competitive conditions, and actual results could vary significantly from those
set forth in such financial planning data. Upon the advice of Davox and
AnswerSoft and their legal and accounting advisors, Piper Jaffray assumed (i)
the Merger would be treated as a "pooling-of-interests" for accounting
purposes and (ii) the Merger would qualify as a reorganization within the
meaning of Section 368(a) of the Code.
Piper Jaffray assumed that, in the course of obtaining the necessary
regulatory approvals for the Merger, no restrictions, including any
divestiture requirements will be imposed that will have a material adverse
effect on the Combined Company. Piper Jaffray's opinion is limited to the
aggregate consideration to be paid to the holders of AnswerSoft Common Stock
and AnswerSoft Preferred Stock in the Merger pursuant to the Merger Agreement
dated as of March 9, 1998 and Piper Jaffray made no analysis of, or
distinction between, any separate class of capital stock of AnswerSoft.
In arriving at the Opinion, Piper Jaffray did not perform and was not
provided any appraisal or valuation of specific assets or liabilities
(contingent or otherwise) of Davox or AnswerSoft and expressed no opinion
regarding the liquidation value of any entity. Piper Jaffray did not make any
physical inspection of the properties or assets of AnswerSoft or Davox. No
other limitations were imposed by Davox on the scope of Piper Jaffray's
investigation or the procedures to be followed in rendering its Opinion. Piper
Jaffray expressed no opinion as to the price at which shares of Davox Common
Stock have traded or at which shares of Davox Common Stock may trade at any
future time. The Opinion is based upon information available to Piper Jaffray
and the facts and circumstances as they existed and were subject to evaluation
on the date of the Opinion. Events occurring after such date could materially
affect the assumptions used in preparing the Opinion. Piper Jaffray was not
requested to opine and did not opine on the fairness of the consideration to
be paid pursuant to the Amended and Restated Merger Agreement dated as of
April 6, 1998.
Piper Jaffray, as a customary part of its investment banking business, is
engaged in the evaluation of businesses and their securities in connection
with mergers and acquisitions, underwritings and other distributions of
securities, private placements and evaluations for estate, corporate and other
purposes. Davox's Board selected Piper Jaffray because of its expertise,
reputation and familiarity with Davox and the telecommunications software
industry. Piper Jaffray makes a market in Davox Common Stock and provides
research coverage for Davox. In the ordinary course of its trading activities,
Piper Jaffray and its affiliates may, from time to time, have a long or short
position in and buy and sell Davox securities, which positions, on occasion,
may be material in size relative to the volume of trading activity.
For rendering its services to Davox's Board in connection with the Merger,
Davox paid Piper Jaffray $100,000 for rendering the Opinion upon rendering the
Opinion, which fee was not contingent upon consummation of the Merger. Whether
or not the Merger is consummated, Davox has agreed to pay the reasonable out-
of-pocket expenses of Piper Jaffray and to indemnify Piper Jaffray against
certain liabilities incurred (including liabilities under the federal
securities laws) in connection with the engagement of Piper Jaffray by Davox.
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CONDUCT OF THE BUSINESS OF THE COMBINED COMPANY FOLLOWING THE MERGER
It is currently anticipated that after the Merger, the businesses currently
operated by AnswerSoft will continue to be headquartered in AnswerSoft's
current headquarters in Richardson, Texas.
Davox management intends to take advantage of synergies incident to the
Merger, such as increased purchasing power for supplies and insurance. Davox
does not currently anticipate any material reduction in administrative
resources. Davox is unable to estimate the value of any such synergies. There
can be no assurance that any such synergies will be realized.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTIONS
In considering the recommendations of the AnswerSoft Board, AnswerSoft
stockholders should be aware that AnswerSoft's officers and members of the
AnswerSoft Board will have certain interests in the Merger as a result of
their status as stockholders plus certain interests in addition to the
interests of stockholders generally.
Stock Option Plan. Under the AnswerSoft 1994 Stock Plan (the "1994 Plan"),
officers of AnswerSoft, including David W. Brandenburg, Jeanne A. Bayless,
Richard Connelly, Richard E. Dural and Robert A. Young (collectively, the
"AnswerSoft Officers"), hold outstanding options granted under the 1994 Plan.
Pursuant to the 1994 Plan and the Merger Agreement, Davox will assume all
outstanding options under the 1994 Plan and such new options will become
exercisable for a number of shares of Davox Common Stock equal to the number
of shares of AnswerSoft Common Stock purchasable under the original option
multiplied by the Exchange Ratio and rounded down to the nearest whole number
and at an exercise price calculated by dividing the original exercise price by
the Exchange Ratio and rounding up to the nearest whole cent. Each officer,
employee or consultant who exercises his or her AnswerSoft options prior to
the Merger will receive in the Merger shares of Davox Common Stock, which
stock will be freely tradable immediately following the consummation of the
Merger, subject only to contractual restrictions on the AnswerSoft Officer's
ability to resell the Davox Common Stock and the limitations set forth under
Rule 145 under the Securities Act of 1933. The Merger will constitute a
"corporate transaction" of AnswerSoft with respect to all AnswerSoft Options
outstanding under the 1994 Stock Plan. See "Effect of Transactions on
AnswerSoft Employees and AnswerSoft Benefit Plans." Pursuant to the terms of
the 1994 Plan, all AnswerSoft Options outstanding prior to the Effective Time
that had not previously become exercisable and vested will become fully
exercisable and vested in connection with the Merger. Accordingly, the
authorization and adoption of the Merger Agreement by AnswerSoft stockholders
will, if the Merger is consummated, have the following consequences with
respect to such AnswerSoft Options:
(a) all such AnswerSoft Options that had not previously become exercisable
and vested will become fully exercisable and vested in connection with
the Merger;
(b) all such AnswerSoft Options outstanding after the Merger will be
assumed by Davox; and
(c) each officer, employee or consultant who exercises his or her
AnswerSoft Options will receive in exchange in the Merger shares of
Davox Common Stock, and each officer's, employee's or consultant's
AnswerSoft Options will be assumed in the Merger and become exercisable
for shares of Davox Common Stock, which stock will be freely tradable
immediately following the consummation of the Merger, subject to
contractual restrictions on an officer's ability to resell the Davox
Common Stock and the limitations set forth under Rule 145 under the
Securities Act.
As of February 28, 1998, options to purchase a total of 2,841,471 shares of
AnswerSoft Common Stock, at exercise prices ranging from $0.10 to $0.26 per
share, were held by approximately 70 AnswerSoft employees, former employees,
directors and consultants. Of the options so held, options to purchase a total
of 2,461,969 shares at prices ranging from $0.10 to $0.26 per share were
unvested at February 28, 1998 and will become vested in connection with the
Merger.
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Set forth below is a table showing, for certain of AnswerSoft's officers,
the total number of shares subject to options (vested and unvested) held by
the officer as of February 28, 1998, the range of exercise prices under such
options and the number of option shares that will become vested as a result of
the Merger (not including vested shares and shares that will become vested
between February 28, 1998 and the closing of the Merger).
<TABLE>
<CAPTION>
TOTAL NUMBER NO. OF OPTION SHARES
NAME OF OPTION SHARES EXERCISE PRICES TO VEST ON MERGER
---- ---------------- --------------- --------------------
<S> <C> <C> <C>
David W. Brandenburg..... 1,010,153 $ 0.26 1,010,153
Jeanne A. Bayless........ 619,055 $0.10--$0.26 311,604
Richard Connelly......... 190,000 $0.10--$0.26 142,980
Richard E. Dural......... 180,000 $0.10--$0.26 149,850
Robert A. Young.......... 170,000 $0.10--$0.26 132,500
</TABLE>
Employment Agreements. AnswerSoft has extended offer letters to each of the
AnswerSoft Officers, which in each case establish a base salary level and
provide for certain other employee benefits, including option grant proposals.
In the case of Ms. Bayless, the offer letter extended to her by AnswerSoft
provides that, Ms. Bayless will receive a severance payment equal to six
months of her salary and twelve months of continuation of certain employee
benefits upon the termination of her employment for any reason. Should Ms.
Bayless' employment be terminated, including by voluntary termination, either
before or after the Merger, Ms. Bayless will receive the severance benefit
provided in her offer letter.
Davox proposes to enter into employment agreements with certain of the
AnswerSoft Officers and certain other key employees following the Merger.
Pursuant to the proposed employment agreement, each of such persons would be
offered an option to purchase shares of Davox Common Stock after the Merger is
consummated. Davox proposes to grant an option to purchase a number of shares
of Davox Common Stock not to exceed 50,000 shares with respect to any of such
persons. Pursuant to the proposed employment agreement, each of such persons
would receive severance pay and benefit continuation for a period not to
exceed six months should his or her employment be terminated following the
Merger. The proposed employment agreement also imposes certain obligations on
such persons, including an agreement not to compete with the business of
Davox, AnswerSoft or the combined company following cessation of employment
for a period of 12 months.
Employee Benefits. The Merger Agreement provides that following the
Effective Time, Davox will provide benefits to AnswerSoft's employees and
officers that are substantially identical to the benefits provided to
similarly situated employees of Davox and Davox will grant all AnswerSoft
employees credit for all service (to the same extent as service with Davox is
taken into account with respect to similarly situated employees of Davox) with
AnswerSoft prior to the Effective Time for (i) eligibility and vesting
purposes and (ii) for purposes of vacation accrual after the Effective Time as
if such service with AnswerSoft was service with Davox. Where applicable with
respect to any medical or dental benefit plan of Davox and to the extent
permitted under such plan, Davox will waive any pre-existing condition
exclusion and actively-at-work requirements and provide that any covered
expenses incurred on or before the Effective Time by an employee or an
employee's covered dependents shall be taken into account for purposes of
satisfying applicable deductible, coinsurance and maximum out of pocket
provisions after the Effective Time to the same extent as such expenses are
taken into account for the benefit of similarly situated employees of Davox.
Pursuant to the Merger Agreement, prior to the Effective Time, Davox will
consult with appropriate officers of AnswerSoft with respect to the benefits
that will be provided to AnswerSoft's employees and officers by Davox.
Indemnification. The AnswerSoft Certificate of Incorporation also provides
for indemnification of directors under certain circumstances.
PARTICIPATION AGREEMENT
Simultaneously with the execution of the Merger Agreement, officers,
directors and major stockholders of AnswerSoft and their affiliates who
beneficially owned (as defined in the rules promulgated under the Exchange
Act) 493,846 shares of AnswerSoft Common Stock, 6,925,000 shares of AnswerSoft
Series A Preferred Stock
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and 1,733,990 shares of AnswerSoft Series B Preferred Stock, representing
35.8%, 80.9% and 84.2% of the outstanding shares of such stock, respectively,
entered into the Participation Agreement with Davox. Under the Participation
Agreement, such stockholders have agreed, among other things, to vote in favor
of the Merger and the Merger Agreement, to vote in favor of the Option Vesting
Proposals, and not to sell or dispose of their shares of AnswerSoft Capital
Stock prior to the Merger or Davox Common Stock following the Merger except in
compliance with restrictions imposed by the securities laws and the pooling-
of-interests method of accounting. The full text of the Participation
Agreement is attached hereto as Annex B.
AFFILIATE AGREEMENTS
Certain affiliates of Davox shall enter into agreements in which they shall
agree not to sell or dispose of shares of Davox Common Stock owned by them
except in compliance with restrictions imposed by the pooling-of-interests
method of accounting.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling-of-interests for accounting
and financial reporting purposes. Consummation of the Merger is conditioned
upon receipt by Davox and AnswerSoft of opinions, of their respective
independent public accountants that such accounting method is appropriate.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain material federal income tax
considerations relevant to the Merger that are applicable to holders of
AnswerSoft Capital Stock. This discussion is based on currently existing
provisions of the Code, existing Treasury Regulations thereunder and current
administrative rulings and court decisions, all of which are subject to
change. Any such change, which may or may not be retroactive, could alter the
tax consequences to Davox, AnswerSoft and AnswerSoft's stockholders as
described herein.
AnswerSoft stockholders should be aware that this discussion does not deal
with all federal income tax considerations that may be relevant to particular
AnswerSoft stockholders in light of their particular circumstances, such as
stockholders who are dealers in securities, who are subject to the alternative
minimum tax provisions of the Code, who are foreign persons or entities, who
are financial institutions or insurance companies, who do not hold their
AnswerSoft shares as capital assets, who acquired their shares in connection
with stock option or stock purchase plans or in other compensatory
transactions, who hold AnswerSoft Capital Stock as part of an integrated
investment (including a "straddle") comprised of shares of AnswerSoft Capital
Stock and one or more other positions, or who may hold AnswerSoft Capital
Stock subject to the constructive sale provisions of Section 1259 of the Code.
In addition, the following discussion does not address the tax consequences of
the Merger under foreign, state or local tax laws, the tax consequences of
transactions effectuated prior or subsequent to, or concurrently with, the
Merger (whether or not any such transactions are undertaken in connection with
the Merger), including without limitation any transaction in which AnswerSoft
shares are acquired or shares of Davox Common Stock are disposed of (including
without limitation any return to Davox of some or all of the Escrow Shares
pursuant to the terms of the Merger Agreement or Escrow Agreement), or the tax
consequences to holders of options, warrants or similar rights to acquire
AnswerSoft Capital Stock, including the assumption by Davox of outstanding
options and subscriptions to acquire AnswerSoft Capital Stock. ACCORDINGLY,
ANSWERSOFT STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICABLE FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE MERGER.
Consummation of the Merger is conditioned upon receipt by Davox and
AnswerSoft of opinions (the "Tax Opinions") from Testa, Hurwitz & Thibeault,
LLP and Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP,
respectively, that the Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code (a "Reorganization"). Assuming the
Merger is a Reorganization, then, subject to the
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assumptions, limitations and qualifications referred to herein and in the Tax
Opinions, the Merger should result in the following federal income tax
consequences:
(i) No gain or loss should be recognized by holders of AnswerSoft Capital
Stock solely upon their receipt in the Merger of Davox Common Stock in
exchange therefor (except to the extent of cash received in lieu of a
fractional share of Davox Common Stock).
(ii) The aggregate tax basis of the Davox Common Stock received by
AnswerSoft stockholders in the Merger (including any fractional share of
Davox Common Stock not actually received and any Escrow Shares held
pursuant to the Escrow Agreement) should be the same as the aggregate tax
basis of the AnswerSoft Capital Stock surrendered in exchange therefor.
(iii) The holding period of the Davox Common Stock received by each
AnswerSoft stockholder in the Merger should include the period for which
the AnswerSoft Capital Stock surrendered in exchange therefor was
considered to be held.
(iv) Cash payments received by holders of AnswerSoft Capital Stock in
lieu of a fractional share should be treated as if such fractional share of
Davox Common Stock had been issued in the Merger and then redeemed by
Davox. An AnswerSoft stockholder receiving such cash should recognize
capital gain or loss, upon such payment, measured by the difference (if
any) between the amount of cash received and the basis in such fractional
share.
(v) Holders of AnswerSoft Capital Stock who exercise dissenters' rights
with respect to their shares of AnswerSoft Capital Stock and who receive
payment for the shares in cash should generally recognize gain or loss
measured by the difference between the amount of cash received and the
stockholder's basis in the shares surrendered, provided that the payment is
neither essentially equivalent to a dividend within the meaning of Section
302 of the Code nor has the effect of a distribution of a dividend within
the meaning of Section 356(a)(2) of the Code (collectively, a "Dividend
Equivalent Transaction"). A sale of AnswerSoft Capital Stock pursuant to an
exercise of dissenters' rights will generally not be a Dividend Equivalent
Transaction if, as a result of such exercise, the stockholder exercising
dissenters' rights owns no shares of AnswerSoft Capital Stock (either
actually or constructively within the meaning of Section 318 of the Code)
immediately after the Merger. If, however, a stockholder's sale for cash of
AnswerSoft Capital Stock pursuant to an exercise of dissenters' rights is a
Dividend Equivalent Transaction, then such stockholder may recognize
ordinary income for federal income tax purposes in an amount equal to the
entire amount of cash so received.
Even if the Merger qualifies as a Reorganization, a recipient of shares of
Davox Common Stock could recognize gain to the extent that such shares were
considered to be received in exchange for services or property (other than
solely AnswerSoft Capital Stock). All or a portion of such gain may be taxable
as ordinary income. Gain could also have to be recognized to the extent that
an AnswerSoft stockholder was treated as receiving (directly or indirectly)
consideration other than Davox Common Stock in exchange for such shareholder's
AnswerSoft Capital Stock.
The parties will not request a ruling from the Internal Revenue Service (the
"IRS") in connection with the Merger. AnswerSoft stockholders should be aware
that the Tax Opinions do not bind the IRS and the IRS is therefore not
precluded from successfully asserting a contrary opinion. In addition, the Tax
Opinions are subject to certain assumptions, limitations and qualifications,
including but not limited to the truth and accuracy of certain representations
made by Davox, AnswerSoft and DAC in certain certificates to be delivered to
counsel by the respective managements of Davox, AnswerSoft and DAC.
A successful IRS challenge to the Reorganization status of the Merger as a
result of a failure to meet any of the requirements of a Reorganization would
result in AnswerSoft stockholders recognizing taxable gain or loss with
respect to each share of AnswerSoft Capital Stock surrendered equal to the
difference between the stockholder's basis in such share and the fair market
value, as of the Effective Time, of the Davox Common Stock received in
exchange therefor. In such event, a stockholder's aggregate basis in the Davox
Common Stock
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so received would equal its fair market value as of the Effective Time, and
the stockholder's capital gains holding period for such stock would begin the
day after the Merger.
Certain of the payments due to AnswerSoft stockholders under the Merger
Agreement may be subject to "backup withholding" at the rate of 31% for
Federal income tax purposes unless certain requirements are satisfied. In
order to avoid backup withholding, an AnswerSoft stockholder must complete
Form W-8 (if the stockholder is a nonresident alien individual or foreign
entity) or Form W-9 (if the stockholder is a United States resident or
domestic entity). Form W-8 and Form W-9 are enclosed with the proxy card.
DISSENTERS' RIGHTS OF ANSWERSOFT STOCKHOLDERS
If the Merger is consummated, dissenting holders of AnswerSoft Capital Stock
who follow the procedures specified in Section 262 of the General Corporation
Law of the State of Delaware (the "DGCL") are entitled to have their shares of
AnswerSoft Capital Stock appraised by the Delaware Court of Chancery (the
"Court") and to receive the "fair value" of such shares ("Dissenting Shares")
in cash as determined by the Court in lieu of the consideration that such
stockholder would otherwise be entitled to receive pursuant to the Merger
Agreement.
The following is a brief summary of Section 262, which sets forth the
procedures for dissenting from the Merger and demanding statutory appraisal
rights, if such rights are available. This summary does not purport to be a
complete statement of the provisions of the DGCL relating to the rights of
AnswerSoft stockholders to an appraisal of the value of their shares and is
qualified in its entirety by reference to Section 262, the full text of which
is attached as Annex D. Failure to follow these procedures exactly could
result in the loss of appraisal rights. This Joint Proxy Statement/Prospectus
constitutes notice to holders of AnswerSoft Capital Stock concerning the
availability of appraisal rights under Section 262. Under Section 262, a
stockholder of record wishing to assert appraisal rights must hold the shares
of stock on the date of making a demand for appraisal rights with respect to
such shares and must continuously hold such shares through the Effective Time
of the Merger.
Stockholders who desire to exercise their appraisal rights must satisfy all
of the conditions of Section 262. A written demand for appraisal of shares
must be delivered to AnswerSoft before the taking of the vote on the Merger.
This written demand for appraisal of shares must be in addition to and
separate from any proxy vote abstaining from or voting against the Merger. Any
such abstention or vote against the Merger will not constitute a demand for
appraisal within the meaning of Section 262.
Stockholders electing to exercise their appraisal rights under Section 262
must not vote for approval of the Merger. If a stockholder returns a signed
proxy but does not specify a vote against approval of the Merger or a
direction to abstain, the proxy will be voted for approval of the Merger,
which will have the effect of waiving that stockholder's appraisal rights.
A demand for appraisal must be executed by or for the stockholder of record,
fully and correctly, as such stockholder's name appears on the share
certificate. If the shares are owned of record in a fiduciary capacity, such
as by a trustee, guardian or custodian, this demand must be executed by or for
the fiduciary. If the shares are owned by or for more than one person, as in a
joint tenancy or tenancy in common, such demand must be executed by or for all
joint owners. An authorized agent, including an agent for two or more joint
owners, may execute the demand for appraisal for a stockholder of record;
however, the agent must identify the record owner and expressly disclose the
fact that, in exercising the demand, he is acting as agent for the record
owner. A person having a beneficial interest in AnswerSoft Capital Stock held
of record in the name of another person, such as a broker or nominee, must act
promptly to cause the record holder to follow the steps summarized below and
in a timely manner to perfect whatever appraisal rights the beneficial owners
may have.
A record owner, such as a broker, who holds AnswerSoft Capital Stock as a
nominee for others may exercise his right of appraisal with respect to the
shares for all or less than all of the beneficial owners of shares as to which
he is the record owner. In such case, the written demand must set forth the
number of shares covered
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by such demand. Where the number of shares is not expressly mentioned, the
demand will be presumed to cover all shares outstanding in the name of such
record owner.
An AnswerSoft stockholder who elects to exercise appraisal rights should
mail or deliver his written demand to AnswerSoft at its address at 2201 North
Central Expressway, Suite 200, Richardson, Texas 75080, Attention: Secretary.
The written demand for appraisal should specify the stockholder's name and
mailing address, and that the stockholder is thereby demanding appraisal of
his or her AnswerSoft Capital Stock. Within ten days after the Effective Time
of the Merger, AnswerSoft must provide notice of the Effective Time of the
Merger to all of its stockholders who have complied with Section 262 and have
not voted for approval of the Merger.
Within 120 days after the Effective Time of the Merger, any stockholder who
has satisfied the requirements of Section 262 may deliver to AnswerSoft a
written demand for a statement listing the aggregate number of shares not
voted in favor of the Merger and with respect to which demands for appraisal
have been received and the aggregate number of holders of such shares.
Within 120 days after the Effective Time of the Merger (but not thereafter),
either AnswerSoft or any stockholder who has complied with the required
conditions of Section 262 may file a petition in the Court demanding a
determination of the value of the Dissenting Shares. AnswerSoft has no present
intention to file such a petition if demand for appraisal is made.
Upon the filing of any petition by a stockholder in accordance with Section
262, service of a copy must be made upon AnswerSoft, which must, within 20
days after service, file in the office of the Register of Chancery in which
the petition was filed, a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
AnswerSoft. If a petition is filed by AnswerSoft, the petition must be
accompanied by the verified list. The Register of Chancery, if so ordered by
the Court, will give notice of the time and place fixed for the hearing of
such petition by registered or certified mail to AnswerSoft and to the
stockholders shown on the list at the addresses therein stated, and notice
will also be given by publishing a notice at least one week before the day of
the hearing in a newspaper of general circulation published in the City of
Wilmington, Delaware, or such publication as the Court deems advisable. The
forms of the notices by mail and by publication must be approved by the Court,
and the costs thereof shall be borne by AnswerSoft.
If a petition for an appraisal is filed in a timely fashion, after a hearing
on the petition, the Court will determine which stockholders are entitled to
appraisal rights and will appraise the shares owned by these stockholders,
determining the fair value of such shares, exclusive of any element of value
arising from the accomplishment or expectation of the Merger, together with a
fair rate of interest to be paid, if any, upon the amount determined to be the
fair value. In determining fair value, the Court is to take into account all
relevant factors. In Weinberger v. UOP, Inc., et al., the Delaware Supreme
Court stated that "proof of value by any techniques or methods which are
generally considered acceptable in the financial community and otherwise
admissible in court" should be considered, and that "fair price obviously
requires consideration of all relevant factors involving the value of a
company." The Delaware Supreme Court stated that, in making a determination of
fair value, the agency fixing the value must consider market value, asset
value, dividends, earnings prospects, the nature of the enterprise and any
other facts which could be ascertained as of the date of the merger and which
throw any light on future prospects of the merged corporation. In Weinberger,
the Delaware Supreme Court held that the "elements of future value, including
the nature of the enterprise, which are known or susceptible of proof as of
the date of the merger and not the product of speculation, may be considered."
In addition, the Delaware Supreme Court has determined that the statutory
appraisal remedy, depending upon the factual circumstances, may or may not be
a stockholder's exclusive remedy in connection with a merger.
AnswerSoft stockholders considering seeking appraisal of their shares should
note that the fair value of their shares determined under Section 262 could be
more, the same or less than the consideration they would receive pursuant to
the Merger Agreement if they did not seek appraisal of their shares. The costs
of the appraisal proceeding may be determined by the Court and taxed against
the parties as the Court deems equitable under the
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circumstances. Upon application of a dissenting stockholder, the Court may
order that all or a portion of the expenses incurred by any dissenting
stockholder in connection with the appraisal proceeding, including reasonable
attorneys' fees and the fees and expenses of experts, be charged pro rata
against the value of all shares entitled to appraisal. In the absence of a
determination or assessment, each party bears his own expense.
Any stockholder who has duly demanded appraisal in compliance with Section
262 will not, after the Effective Time of the Merger, be entitled to vote for
any purpose the shares subject to demand or to receive payment of dividends or
other distributions on such shares, except for dividends or distributions
payable to stockholders of record at a date prior to the Effective Time of the
Merger.
At any time within 60 days after the Effective Time of the Merger, any
stockholder will have the right to withdraw his demand for appraisal and to
accept the terms offered in the Merger Agreement. After this period, a
stockholder may withdraw his demand for appraisal and receive payment for his
shares as provided in the Merger Agreement only with the consent of
AnswerSoft. If no petition for appraisal is filed with the Court within 120
days after the Effective Time of the Merger, stockholders' rights to appraisal
(if available) will cease. Inasmuch as AnswerSoft has no obligation to file
such a petition, any stockholder who desires a petition to be filed is advised
to file it on a timely basis. No petition timely filed in the Court demanding
appraisal may be dismissed as to any stockholder without the approval of the
Court, which approval may be conditioned upon such terms as the Court deems
just.
NO DISSENTERS' RIGHTS FOR DAVOX STOCKHOLDERS
Holders of Davox Common Stock do not have appraisal rights in connection
with the Merger.
THE MERGER AGREEMENT
Davox, DAC and AnswerSoft have entered into the Merger Agreement, which
provides that DAC will be merged with and into AnswerSoft, with AnswerSoft as
the surviving corporation and a wholly owned subsidiary of Davox. The
following description of the Merger Agreement is only a summary and does not
purport to be complete and is qualified in its entirety by reference to the
complete text of the Merger Agreement, which is attached to this Joint Proxy
Statement/Prospectus as Annex A and incorporated by reference herein.
Effective Time of Merger. The Merger Agreement provides that the Merger will
become effective upon the filing of a certificate of merger with the Secretary
of State of the State of Delaware (the "Effective Time"). See "Conditions to
the Merger." It is currently anticipated that if all conditions of the Merger
have been fulfilled or waived, the Effective Time will occur on or about May
6, 1998.
Manner and Basis of Converting Shares.
As a result of the Merger, each outstanding share of AnswerSoft Capital
Stock (other than shares as to which appraisal rights have been exercised)
will be converted into the right to receive a fraction of a share of Davox
Common Stock in accordance with the exchange ratios set forth below (the
"Exchange Ratios"), and each outstanding option or warrant to purchase
AnswerSoft Capital Stock will be assumed by Davox and will become an option to
purchase Davox Common Stock, with appropriate adjustments to be made to the
number of shares issuable thereunder and the exercise price thereof based on
the Exchange Ratios. The Merger Agreement provides for the issuance of an
aggregate of 2,384,452 shares of Davox Common Stock, including shares which
will be subject to outstanding AnswerSoft options and warrants. The Exchange
Ratios have been fixed based on the greater of $30.75 and the average of the
last reported sales prices of shares of Davox Common Stock on the Nasdaq
National Market for the 20 consecutive trading days ending on and including
the fifth trading day preceding March 9, 1998 (the "Average Price"). As
calculated, the Average Price is $31.03438. The following table sets forth the
Exchange Ratios for the shares of AnswerSoft Capital Stock:
44
<PAGE>
Exchange Ratios for:
<TABLE>
<S> <C>
AnswerSoft Common Stock........................................ 0.1299665
AnswerSoft Series A Preferred Stock............................ 0.1621888
AnswerSoft Series B Preferred Stock............................ 0.2137445
</TABLE>
Because each share of AnswerSoft Preferred Stock is exchangeable in the
Merger for a larger fraction of a share of Davox Common Stock than would be
receivable by the holder thereof if he converted it into AnswerSoft Common
Stock prior to the Merger, AnswerSoft does not expect any AnswerSoft Preferred
Stock to be converted into AnswerSoft Common Stock prior to the Merger.
As of February 28, 1998, there were outstanding 1,366,314 shares of
AnswerSoft Common Stock (4,207,785 shares assuming the exercise or conversion
of all options and securities exercisable for or convertible into AnswerSoft
Common Stock), 8,555,000 shares of AnswerSoft Series A Preferred Stock
(8,615,000 shares assuming the exercise of outstanding warrants) and 2,060,047
shares of AnswerSoft Series B Preferred Stock.
No fractional shares of Davox Common Stock will be issued in the Merger.
Each AnswerSoft stockholder who would otherwise be entitled to a fraction of a
share of Davox Common Stock will instead receive an amount in cash without
interest equal to such fraction multiplied by the Average Price.
At the Effective Time, each holder of AnswerSoft Capital Stock shall cease
to have any rights as a stockholder of AnswerSoft, except such rights as a
dissenting stockholder may have, if any. See "The Merger-Dissenters' Rights of
AnswerSoft Stockholders." Promptly after the Effective Time, the Exchange
Agent will deliver to each AnswerSoft stockholder of record a letter of
transmittal with instructions to be used by such stockholder in surrendering
certificates which, prior to the Merger, represented shares of AnswerSoft
Capital Stock. Pending delivery of certificates formerly representing shares
of AnswerSoft Capital Stock, any dividends payable to holders of record of
shares of Davox Common Stock as of any time subsequent to the Effective Time
will be held by the Exchange Agent. Such dividends will be paid, without
interest, to the persons entitled thereto upon delivery of such AnswerSoft
Capital Stock certificates to the Exchange Agent.
CERTIFICATES SHOULD NOT BE SURRENDERED BY THE HOLDERS OF ANSWERSOFT CAPITAL
STOCK UNTIL SUCH HOLDERS RECEIVE THE LETTER OF TRANSMITTAL FROM THE EXCHANGE
AGENT.
Upon the surrender of a certificate representing shares of AnswerSoft
Capital Stock to the Exchange Agent, together with a duly executed letter of
transmittal, the holder of such certificate will be entitled to receive in
exchange therefor the number of shares of Davox Common Stock to which the
holder of AnswerSoft Capital Stock is entitled pursuant to the provisions of
the Merger Agreement. In the event of a transfer of ownership of shares of
AnswerSoft Capital Stock which is not registered on the stock transfer records
of AnswerSoft, the appropriate number of shares of Davox Common Stock may be
delivered to a transferee if the certificate representing such shares of
AnswerSoft Capital Stock is presented to the Exchange Agent properly endorsed,
together with the related letter of transmittal and accompanied by all
documents required to evidence and effect such transfer and to evidence that
any applicable stock transfer taxes have been paid.
Until a certificate representing shares of AnswerSoft Capital Stock has been
surrendered to the Exchange Agent, each such certificate will be deemed at any
time after the Effective Time of the Merger to represent only the right to
receive upon such surrender the number of shares of Davox Common Stock to
which the stockholder is entitled under the Merger Agreement.
Treatment of AnswerSoft Stock Options and Warrants. At the Effective Time,
each outstanding option to purchase shares of AnswerSoft Common Stock, and
each outstanding warrant to purchase shares of AnswerSoft Preferred Stock,
whether vested or unvested, will be assumed by Davox. Each AnswerSoft option
and warrant assumed by Davox under the Merger Agreement will continue to have,
and be subject to, the same terms and conditions such option or warrant had,
or was subject to, immediately prior to the Effective Time. As of the
45
<PAGE>
Effective Time, each option or warrant so assumed will be exercisable for a
number of shares of Davox Common Stock equal to the number of shares of
AnswerSoft Capital Stock such holder had a right to acquire pursuant to an
exercise of such option or warrant immediately prior to such time multiplied
by the applicable Exchange Ratio. The per share exercise price for the shares
of Davox Common Stock issuable upon exercise of such assumed option or warrant
will be the exercise price per share of AnswerSoft Common Stock or AnswerSoft
Preferred Stock at which such option or warrant was exercisable immediately
prior to the Effective Time divided by the applicable Exchange Ratio, but
shall not be less than $.10.
After the Effective Time, Davox will issue to each holder of an outstanding
option or warrant a document evidencing the foregoing assumption of such
option or warrant by Davox. It is the intention of Davox and AnswerSoft that
the assumption by Davox of options that qualify as incentive stock options
under Section 422 of the Code will qualify as a transaction to which Section
424(a) of the Code applies so that their eligibility for favorable tax
treatment shall not be impaired.
Conduct of AnswerSoft's and Davox's Business Prior to the Merger. Pursuant
to the terms of the Merger Agreement, each of AnswerSoft and Davox has agreed
that until the Effective Time or the earlier termination of the Merger
Agreement, it will conduct its operations in the ordinary course of business
in a manner consistent with its past practices. In addition, AnswerSoft has
agreed that it will not, without the written consent or approval of Davox, (a)
amend its certificate of incorporation or by-laws, (b) issue or redeem any
capital stock or (c) take certain other actions normally restricted in
negotiated merger agreements, such as increasing the compensation of its
directors, officers and employees (except in the ordinary course in certain
circumstances), incurring significant additional debt or selling or acquiring
significant assets, or paying any dividends to its stockholders. Furthermore,
AnswerSoft has agreed that prior to the Effective Time it will use reasonable
efforts to terminate all agreements to which AnswerSoft is a party giving
AnswerSoft security holders any registration or co-sale rights or rights of
first refusal, or relating to the voting of AnswerSoft securities or giving
such security holders any right to consent to any action taken by AnswerSoft.
Conditions to the Merger. The respective obligations of Davox and AnswerSoft
to consummate the Merger are subject to the satisfaction of a number of
conditions, including but not limited to the following: (a) the Merger
Agreement and the transactions contemplated thereby shall have been approved
and adopted by the requisite vote of the stockholders of each of Davox and
AnswerSoft; (b) no litigation, proceeding or investigation shall be pending
with respect to the Merger, which litigation or proceeding if resolved
substantially in accordance with plaintiff's demand, would be reasonably
likely to have a material adverse effect on Davox and no order or decree
restraining or enjoining consummation of the Merger or placing any limitation
upon such consummation shall be in place; (c) Davox and AnswerSoft shall have
obtained all requisite authorizations, consents and approvals of federal,
state and local governmental agencies and authorities to consummate the
Merger; and (d) Davox and AnswerSoft shall have no basis for believing the
Merger will not be accounted for using the pooling-of-interests method of
accounting.
In addition, the obligation of Davox to consummate the Merger is further
subject to the satisfaction of a number of conditions, unless waived in
writing by Davox, including but not limited to the following: (a) the receipt
by Davox of a comfort letter from AnswerSoft's independent public accountants
in customary form with respect to certain financial information relating to
AnswerSoft; (b) the performance of the Participation Agreement by certain
stockholders of AnswerSoft; (c) holders of not more than 5% of AnswerSoft
Capital Stock shall have exercised appraisal rights pursuant to Section 262 of
the DGCL; (d) the representations and warranties of AnswerSoft set forth in
the Merger Agreement shall be true and correct in all material respects; (e)
AnswerSoft shall be in compliance in all material respects with the terms,
covenants, and conditions to be performed by it pursuant to the Merger
Agreement; (f) there shall have been no material adverse change in
AnswerSoft's financial condition, results of operations, business, properties,
assets or operations taken as a whole; (g) Davox shall have received an
opinion from AnswerSoft's counsel in form and substance satisfactory to Davox;
and (h) the Closing Average Price, as defined in the Agreement, shall not be
more than 1.25 times the Average Price.
46
<PAGE>
In addition, the obligation of AnswerSoft to consummate the Merger is
further subject to the satisfaction of a number of conditions, unless waived
in writing by AnswerSoft, including but not limited to (a) the representations
and warranties of Davox set forth in the Merger Agreement shall be true and
correct in all material respects; (b) Davox shall be in compliance in all
material respects with the terms, covenants, and conditions to be performed by
it pursuant to the Merger Agreement; (c) there shall have been no material
adverse change in Davox's financial condition, results of operations business,
properties, assets or operations, taken as a whole; (d) AnswerSoft shall have
received an opinion from Davox's counsel in form and substance satisfactory to
AnswerSoft; and (e) the Closing Average Price, as defined in the Agreement,
shall not be less than .75 times the Average Price.
At any time prior to the Effective Time, either AnswerSoft or Davox may, to
the extent legally allowed, waive compliance with any of the terms or
conditions contained in the Merger Agreement.
Termination; Amendment. The Merger Agreement provides that it may be
terminated at any time prior to the Effective Time (a) by mutual written
agreement of Davox and AnswerSoft, (b) by either party (provided such party is
not responsible for the delay) if the Merger is not consummated in accordance
with the terms of the Merger Agreement on or before July 31, 1998, (c) by
either party, if such party is not in material breach of its obligations under
the Agreement, if the other materially breaches a representation, warranty or
agreement in the Merger Agreement, (d) by either party, if such party is not
in material breach of its obligations under the Agreement, if the other
party's stockholders fail to approve the Merger, or (e) by Davox if there is a
material breach of the Participation Agreement by certain parties thereto; (f)
by Davox in the event Davox is advised by Arthur Andersen LLP that it believes
the Merger will not be treated as a "pooling-of-interests" for accounting
purposes, or (g) by either party if AnswerSoft receives a proposal for an
Acquisition Transaction (as defined in the Merger Agreement) and the
AnswerSoft Board in connection therewith withdraws or modifies its approval
and recommendation of the Merger Agreement.
If (a) the Merger Agreement is terminated because of a material breach by
AnswerSoft of the Merger Agreement, because of the failure of the stockholders
of AnswerSoft to approve the Merger and the Merger Agreement, or because of a
material breach of the Participation Agreement by certain AnswerSoft
stockholders and (b) AnswerSoft is involved in a "change in control" (as
defined in the Merger Agreement) within six months after such termination,
then AnswerSoft is required to pay Davox $3 million.
The Merger Agreement may be amended, to the extent legally allowed, by the
mutual written consent of the Davox Board and the AnswerSoft Board.
Expenses. All fees and expenses incurred by Davox in connection with the
Merger Agreement and the transactions contemplated thereby will be paid by
Davox, and all fees and expenses incurred by AnswerSoft in connection with the
Merger Agreement and the transactions contemplated thereby will be paid by
AnswerSoft. Notwithstanding the foregoing, if the Merger Agreement is
terminated by Davox or AnswerSoft because of a material breach by the other of
the Merger Agreement, because of the failure of the other stockholders to
approve the Merger Agreement and the transactions contemplated thereby, or
because of AnswerSoft's having received a proposal for an Acquisition
Transaction, or by Davox because of a material breach by AnswerSoft's
stockholders of the Participation Agreement, then Davox (in the case of such a
breach or failure by AnswerSoft or its stockholders) or AnswerSoft (in the
case of such a breach or failure by Davox or its stockholders) shall be
entitled to reimbursement for all fees and expenses incurred by it in
connection with the Merger Agreement and the transactions contemplated
thereby.
47
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL INFORMATION
FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
have been prepared to give effect to the merger, using the pooling of
interests method of accounting.
The unaudited pro forma combined condensed financial statements reflect
certain assumptions deemed probable by Davox regarding the Merger (e.g., that
share information used in the unaudited pro forma information approximates
actual share information at the effective date). No adjustments to the
unaudited pro forma combined condensed financial information have been made to
account for different possible results in connection with the foregoing, as
Davox believes that the impact on such information of the varying outcomes,
individually or in the aggregate would not be materially different.
The unaudited pro forma combined condensed balance sheet as of December 31,
1997 gives effect to the Merger as if it had occurred on December 31, 1997,
and combines the audited consolidated balance sheet of Davox and the audited
consolidated balance sheet of AnswerSoft as of December 31, 1997.
The unaudited pro forma combined condensed statements of operations combine
the historical consolidated statements of operations of Davox and AnswerSoft
for each of the three years ended December 31, 1997, in each case as if the
Merger had occurred at the beginning of the periods presented.
Davox and AnswerSoft estimate that they will incur direct transaction costs
of approximately $1.5 million associated with the Merger, which will be
charged to operations upon consummation of the Merger. In addition, it is
expected that following the Merger, the combined company will incur an
additional significant charge to operations, which is not currently reasonably
estimable, to reflect costs associated with integrating the two companies.
There can be no assurance that the combined company will not incur additional
charges to reflect costs associated with the Merger or that management will be
successful in its efforts to integrate the operations of the two companies.
Such unaudited pro forma combined condensed financial information is
presented for illustrative purposes only and is not necessarily indicative of
the financial position or results of operations that would have actually been
reported had the Merger occurred at the beginning of the periods presented,
nor is it necessarily indicative of future financial position or results of
operations. These unaudited pro forma combined condensed financial statements
are based upon the respective historical consolidated financial statements of
Davox and AnswerSoft and should be read in conjunction with the respective
historical consolidated financial statements and notes thereto of Davox and
AnswerSoft included elsewhere in this Joint Proxy Statement/Prospectus, and do
not incorporate, nor do they assume, any benefits from cost savings or
synergies of operations of the combined company.
48
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
DAVOX ANSWERSOFT ADJUSTMENTS COMBINED
------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......... $25,366 $3,273 $ -- $28,639
Short-term investments............ 23,802 -- -- 23,802
Accounts receivable, net.......... 10,359 2,240 -- 12,599
Deferred tax asset................ 9,319 -- -- 9,319
Prepaid expenses and other current
assets........................... 969 154 -- 1,123
------- ------ -------
Total current assets............ 69,815 5,667 -- 75,482
------- ------ -------
Property and equipment, net......... 4,585 663 -- 5,248
------- ------ ------- -------
Other assets, net................... 768 62 -- 830
------- ------ ------- -------
Total assets.................... $75,168 $6,392 $ -- $81,560
======= ====== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................. $ 4,987 $ 260 $ -- $ 5,247
Accrued expenses.................. 10,223 614 -- 10,837
Customer deposits................. 2,018 -- -- 2,018
Deferred revenue, current......... 3,783 572 -- 4,355
Current portion of long-term
obligations...................... -- 178 -- 178
------- ------ ------- -------
Total current liabilities....... 21,011 1,624 -- 22,635
------- ------ ------- -------
Long-term obligations, less current
portion............................ -- 297 -- 297
------- ------ -------
Deferred revenue, noncurrent........ -- 253 -- 253
------- ------ -------
Preferred stock, $0.01 par value.... -- 13,911 (13,911) --
Stockholders' equity:
Common stock, $0.10 par value..... 1,186 13 226 1,425
Additional paid-in capital........ 57,758 117 13,685 71,560
Cumulative translation
adjustment....................... -- 7 -- 7
Amounts due from officer.......... -- (414) -- (414)
Accumulated deficit............... (4,763) (9,416) -- (14,179)
------- ------ ------- -------
54,181 (9,693) 13,911 58,399
Less--treasury stock, at cost.... (24) -- -- (24)
------- ------ ------- -------
Total stockholders' equity...... 54,157 (9,693) 13,911 58,375
------- ------ ------- -------
$75,168 $6,392 $ -- $81,560
======= ====== ======= =======
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
49
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenue................................... $ 38,597 $ 57,099 $ 83,553
----------- ----------- -----------
Cost of revenue........................... 17,164 22,232 28,029
----------- ----------- -----------
Gross profit............................ 21,433 34,867 55,524
Research, development and engineering ex-
penses................................... 4,901 6,733 10,418
Selling, general and administrative ex-
penses................................... 13,967 19,705 29,710
----------- ----------- -----------
Total operating expenses................ 18,868 26,438 40,128
----------- ----------- -----------
Income from operations.................... 2,565 8,429 15,396
Interest income, net...................... 629 1,217 2,031
----------- ----------- -----------
Income before provision for income taxes.. 3,194 9,646 17,427
Provision for income taxes................ 344 965 2,091
----------- ----------- -----------
Net income.............................. $ 2,850 $ 8,681 $ 15,336
=========== =========== ===========
Earnings per share:
Basic................................... $ 0.25 $ 0.73 $ 1.19
Diluted................................. $ 0.22 $ 0.64 $ 1.07
Weighted average shares outstanding:
Basic................................... 11,280,129 11,947,297 12,940,211
Diluted................................. 12,845,770 13,593,082 14,269,865
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
50
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(1) MERGER SHARES ISSUED
These unaudited pro forma combined financial statements reflect the issuance
of 2,384,452 shares of Davox Common Stock in exchange for an aggregate of
14,882,832 shares of AnswerSoft Common Stock, on a fully diluted basis, which
includes the Preferred Stock on an as converted basis, and the outstanding
options and warrants (outstanding as of March 9, 1998) in connection with the
Merger, based on the Exchange Ratios set forth in the following table:
<TABLE>
<S> <C> <C>
AnswerSoft Series A Preferred Stock and warrants, out-
standing as of
March 9, 1998......................................... 8,615,000
Exchange Ratio......................................... 0.1621888
---------
Number of shares of Davox Common Stock exchanged..... 1,397,257
AnswerSoft Series B Preferred Stock, outstanding as of
March 9, 1998......................................... 2,060,047
Exchange Ratio......................................... 0.2137445
---------
Number of shares of Davox Common Stock exchanged..... 440,324
AnswerSoft Common Stock and options, outstanding as of
March 9, 1998......................................... 4,207,785
Exchange Ratio......................................... 0.1299665
---------
Number of shares of Davox Common Stock exchanged..... 546,871
----------
Total Number of shares of Davox Common Stock
Exchanged........................................... 2,384,452
Number of shares of Davox Common Stock outstanding as
of December 31, 1997.................................. 11,864,216
----------
Number of shares of Combined Company Common Stock out-
standing after completion of the Merger............... 14,248,668
==========
</TABLE>
(2) MERGER RELATED EXPENSES
Davox and AnswerSoft estimate they will incur direct transaction costs of
approximately $1.5 million associated with the Merger consisting of
transaction fees for investment bankers, attorneys, accountants, financial
printing and other related charges. These nonrecurring transaction costs will
be charged to operations upon consummation of the Merger. These direct
transaction costs have not been reflected in the unaudited pro forma combined
condensed financial statements.
It is expected that following the Merger, the combined company will incur
additional significant charges to operations, which are not currently
reasonably estimable, to reflect costs associated with integrating the two
companies. These charges have not been reflected in the unaudited pro forma
combined condensed financial statements. There can be no assurance that the
combined company will not incur additional charges to reflect costs associated
with the Merger or that management will be successful in its efforts to
integrate the operations of the two companies.
(3) MERGER CONFORMITY ADJUSTMENTS
The unaudited pro forma combined condensed financial statements do not
include adjustments to conform the accounting policies of AnswerSoft to those
followed by Davox. The nature and extent of such adjustments, if any, will be
based upon further analysis and are not expected to be material.
(4) EARNINGS PER SHARE
The pro forma net earnings per share reflect: (i) the weighted average
number of shares of Davox Common Stock that would have been outstanding if the
Merger occurred at the beginning of the periods presented based
51
<PAGE>
upon the conversion of each share of AnswerSoft Common Stock, AnswerSoft
Series A Preferred Stock and AnswerSoft Series B Preferred Stock into shares
of Davox Common Stock, assuming Exchange Ratios of 0.1299665, 0.1621888 and
0.2137445, respectively (in each case assuming an Average Share Price equal to
$31.03438 and 14,882,832 fully diluted shares of AnswerSoft Common Stock), and
(ii) the dilutive impact of stock options and warrants using the treasury
stock method. All AnswerSoft options and warrants to purchase AnswerSoft
Common Stock are assumed to be converted into options to purchase Davox Common
Stock at an exchange ratio of 0.1299665 shares of Davox Common Stock for each
share of AnswerSoft Common Stock before application of the treasury stock
method.
(5) RECLASSIFICATIONS
Certain financial statement balances of AnswerSoft have been reclassified to
conform with the Davox financial statement presentation.
52
<PAGE>
INFORMATION CONCERNING DAVOX
DAVOX BUSINESS
GENERAL
Davox is principally a software and systems integration company that
develops, markets, implements, supports and services management systems for
call center operations. These call center operations are responsible for
business applications including credit/collections, customer service,
telephone sales and fund raising. Davox's Unison brand call management systems
assist calling operations, integrate existing voice and data systems, manage
outbound and inbound calling applications and focus on improving the quality
of each customer contact, as well as the quantity of calls handled. This
increased productivity and efficiency, documented by Davox users, has resulted
in lower labor costs, increased revenue and/or increased transaction capacity
for the user organization, and improved service levels. Davox systems include
intelligent outbound calling, inbound call handling, inbound/outbound call
blending and call center network management.
Davox, through its direct sales force and through its third party
distribution channel, has provided unified call center solutions to banks,
consumer finance organizations, retailers, entertainment companies,
telemarketing organizations, telecommunications companies and utilities. Among
Davox's current customers are: British Telecom, Chemical Bank, General
Electric Capital Corporation ("GECC"), Household Finance, NationsBank, May
Companies, AT&T, NYNEX, Precision Response Corporation, Superstar Satellite
Entertainment, Gottschalks Department Stores, USAA Federal Savings Bank,
TeleTech Holding, Unitel Corporation, and WGBH television.
OVERVIEW
Today's businesses realize that their most important asset and source for
additional business is their customer; therefore, within most corporations,
several departments are in almost constant contact with buyers or users of
their goods or services. These departments, or call centers, place and/or
receive phone calls, e-mail and faxes supplying information to or receiving
information from the customer, or processing account information from a
database. The mission of call center management is to increase the
productivity of telephone agents, improve the efficiency of the calling
operation and enhance the quality of customer service.
To achieve the mission of the call center, businesses have invested in
different types of technology to accommodate different types of customer
contact, such as incoming and outgoing calls. However, these discrete
proprietary systems result in an environment characterized as "islands of
technology" which limit the productivity and efficiency of the call center and
may degrade customer service. The majority of today's businesses are under
economic and competitive pressure to protect their investment in technology
and require a method for integrating existing disparate technologies. By
integrating these technologies, a business can share its resources and provide
its customers a higher quality of service.
Davox recognized the growing demand for systems that would unify these
disparate resources and calling applications. To deliver the level of
integration necessary to unite a business' customer contact applications,
Davox introduced in late 1993 the Unison call center management system which
represented a new generation technology for the outbound call center market.
UNISON FAMILY OF CALL CENTER MANAGEMENT SOLUTIONS
Unison technology today is incorporated into systems specifically designed
for call centers with outbound, inbound and inbound/outbound call blended
requirements. This Unison family of call center management systems combines
open system, client/server, and relational database technology with
sophisticated applications.
Davox currently markets three distinct Unison products:
. Unison call center management system for credit/collections
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<PAGE>
. Unison call center management system for telemarketing
. IN/UNISON call center management system for inbound call centers
Davox also offers optional Unison SCALE (Seamless Call and Agent Load
Equalization) software functionality that incorporates computer telephony
integration to blend inbound and outbound calls, allowing a single agent to
efficiently handle both types of calls.
UNISON APPLICATIONS SOFTWARE
. UNISON STRATEGIST Applications Software lets supervisors specify and
modify comprehensive calling strategies.
. UNISON TACTICIAN Applications Software makes it easy for supervisors to
monitor agent productivity during individual campaigns and shift
resources quickly when needed.
. UNISON PRECISION DIAL Applications Software streamlines call center
operations by allowing the supervisor to control the parameters that
affect the actual call placement, freeing agents to focus on engaging in
productive conversations with customers.
THE UNISON OPEN SYSTEMS ENVIRONMENT
A single Unison-based agent workstation can handle voice/data tasks
associated with calls--incoming or outgoing, regardless of point of origin.
The system tracks all calls in real-time, allowing managers to identify
quickly both positive and negative trends as they develop. As a result,
adjustments can be made instantly to correct unfavorable trends and exploit
positive ones.
One characteristic of the Unison system is its Rules-Based management
software which allows a call center manager to design, adjust, refine and
implement calling strategies in real-time. With this Rules-Based management
capability, the Unison system's user can target outbound calling campaigns
based on user-defined criteria such as location, income level, or outstanding
balance.
This capability also allows call centers to match specific customers with
telephone agents who have the necessary skills to handle these customer
accounts. For example, foreign language speaking agents can be automatically
assigned to handle calls to or from households where only that language is
spoken; or agents skilled in handling a specific product can be assigned to
those accounts.
Using the Unison system's Rules-Based management capability, a call center
manager can set the calling "rules" for each campaign, such as:
. The order in which phone numbers will be called;
. Acceptable talk time;
. The time of day clients will be called;
. Acceptable after work call time; and
. Which accounts will be called.
The Unison system monitors each campaign in real-time, notifying the call
center's supervisors immediately if performance deviates from the prescribed
norm, enabling the supervisor to take immediate corrective action. The Rules-
Based management capability provides Unison system users with real-time
information to adapt their system "on the fly" to changing priorities within
the call center. Unison users have reported that this Rules-Based management
capability also helps them to maintain compliance with FTC/FCC regulations.
KEY FUNCTIONALITY FOR MANAGING THE CALL CENTER
The SMART MANAGEMENT CENTER ("SMC") console is the central management engine
which implements the Unison system's Rules-Based management strategies and a
broad range of software-driven
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features that allow the intelligent, strategic integration of call center
resources. The SMC (a UNIX) RISC-based management system built on the Sun
Microsystems, Inc. ULTRA architecture) manages, monitors, processes, reports,
communicates, integrates and controls a broad range of telephony and data-
oriented call center tasks--all in real-time and using a friendly, point-and-
click graphical user interface. The SMC utilizes limited run time Sybase
Incorporated relational database management software which supports the Rules-
Based management capability and is integral to call center improvements in the
areas of quality contact, productivity, effectiveness and resource management.
Davox's ONESTATION software product provides universal agent audio
connectivity to an existing PBX/ACD. In conjunction with installed data
resources, ONEStation functionality allows agents to access available voice
and data resources from any single existing workstation located anywhere in
Davox's data network.
Davox's SMART ACCESS software product provides a flexible management network
allowing users to:
.Access, monitor and control multiple calling sites in real-time
.Distribute information and outbound call campaigns to any center on the
network
CALL MANAGEMENT FEATURES AUTOMATE, STREAMLINE OUTBOUND OPERATIONS
The Unison system's sophisticated dial and pacing technology, campaign flow,
dynamic campaign generation and filter capabilities streamline outbound call
operations by automating a number of time-consuming processes. Supervisors
control the parameters that affect the actual call placement, freeing agents
to focus on engaging in productive conversations with customers. Layered upon
this powerful dialing engine is Davox's broad array of real-time campaign
management/measurement capabilities.
INTELLIGENT INTEGRATION OPTIONS FOR CALL BLENDING
Because Davox understands that a single call blending solution may not be
appropriate for every call center, Davox offers both a Computer Telephony
Integration ("CTI") and a non-CTI Unison system option.
Davox's Unison SCALE software is available for call centers that wish to
utilize CTI for their call handling. With Unison SCALE functionality, all
designated agents function as both inbound and outbound agents, and the
movement of those agents from inbound to outbound calls is automatic; no
separate login procedures are required. The standard Unison system campaign
management capabilities are available to Unison SCALE users. In addition,
Unison agent management and real-time voice and data reporting features are
available for inbound as well as outbound agents.
Davox's SMART ACD software product provides non-CTI inbound/outbound
notification. Smart ACD software:
.Interfaces with a call center's existing ACD and PBX
.Monitors all designated ACD queues and displays inbound traffic
information in real-time
. Automatically and intelligently instructs agents to handle ACD queues
and outbound calling lists as necessary to maximize productivity while
maintaining the proper service levels
WEB-BASED BROWSER TECHNOLOGY TO BUILD AND DEPLOY APPLICATIONS
In 1997, Davox introducted the LYRICall application and script design
software that became commercially available in the first quarter of 1998.
Davox believes this is the first product of its kind to bring browser-based
technology to the call center agent's desktop.
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LYRICall software incorporates Web-based browser technology that gives call
center management the ability to easily build and then deploy robust,
platform-independent agent applications. LYRICall software can be used in
dedicated inbound, outbound, or blended call center environments.
LYRICall software utilizes open Internet standards such as HTML, browser
technology and Java computing. By incorporating these standards, LYRICall
software distinguishes itself as a platform-independent product that enables
users to create an application once and then run it on most devices and
operating systems. LYRICall software can run on any device capable of running
a Netscape browser and Java script, including PCs, UNIX workstations and
network computers.
LYRICall software gives non-programmers the ability to build applications.
Those designing these applications are guided through application creation
using templates, wizards and intuitive point-and-click operations. This highly
intuitive browser interface guides agents through each call, allowing them to
work more productively and effectively.
LYRICall software offers telemarketing, collections, support and other
customer service oriented call centers a practical tool for meeting a wide
range of business requirements.
REPORTING SOLUTIONS FOR CALL CENTER PRODUCTIVITY
Davox has always understood that running an effective call center requires
more than simply developing calling strategies and automating operations. At
the heart of a call center's success is its ability to obtain and analyze data
in a timely fashion. In 1997, Davox announced two new product options designed
to significantly broaden Davox's Unison system's reporting capabilities.
COMPOSE IT software, which became commercially available in the first
quarter of 1998, provides a number of pre-designed, standard call center
reports for routine reporting needs. It also features a user-friendly
graphical interface that allows custom report generation with point-and-click
navigation. Users can create, edit, save, print and export reports--without
learning Structured Query Language ("SQL") commands or turning to the IS
department.
SELECTVIEW software is an open database connectivity ("ODBC") product that
allows users to create custom reports (based on Unison system activity) from a
PC running either Microsoft Windows 95, Windows 3.1, or Windows NT. As an ODBC
standards-based tool, the SelectView application offers an easy way to combine
Unison system data with information from a wide variety of databases on PC,
mini, and mainframe platforms.
RELIABILITY AT THE HEART OF THE SYSTEM
In 1997, Davox took steps to identify technology that would provide an
enhanced level of system reliability. In the fourth quarter, Davox selected
for inclusion into its Unison systems a technology that spreads data across
multiple disks and provides a mechanism for reconstruction of data in the
event of damage to any single disk. Known as Redundant Array of Inexpensive
Disks ("RAID"), this technology became commercially available in the first
quarter of 1998 as an option to Unison systems. This technology is designed to
reconstruct data and ensure the integrity of a customer's file while at the
same time providing high availability of the Unison system.
UNISON SYSTEM PRICING
The Unison system price begins at approximately $90,000. Specific and
variable customer requirements, such as the number of agent positions, extent
of inbound integration and multi-site connectivity determine actual Unison
system prices.
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MARKETS AND APPLICATIONS
Davox markets its unified call center solutions to corporations that rely
heavily on the telephone to conduct business with their customers. These
corporations have typically made large investments in building inbound and/or
outbound calling operations. The function of these operations is to place and
receive customer calls. In many cases, these calling operations are
responsible for specific business applications such as collections, customer
service, fund-raising or telephone sales.
Davox believes that Unison systems can significantly increase productivity
in many applications where repetitive tasks can be automated. Additionally,
Davox believes that its products are well suited to meet evolving CTI
standards due to their multi-protocol capabilities, integrated voice functions
and flexible software design.
SIGNIFICANT CUSTOMER
In 1997, Davox's largest single customer was Datapoint (a distributor of
Davox products to British Telecom), accounting for 11% of total revenue. In
1996, GE Capital Corporation was the largest single customer, accounting for
4% of total revenue, and in 1995 AT&T was Davox's largest single customer,
accounting for 12% of Davox's total revenue. Total revenue from Davox's top
three customers amounted to 20% of total revenue in 1997, 12% of total revenue
in 1996 and 20% of total revenue in 1995. Davox believes that its dependence
on any one end user customer is not likely to increase significantly as Davox
continues to penetrate the broader call center market and expand its alternate
distribution channels.
MARKETING AND SALES
Davox takes a solutions-oriented approach to marketing its Unison systems.
The integration and management capabilities of the systems are presented as
tools to help customers meet their business goals and objectives for customer
service. This approach has two major benefits:
. First, as Davox's relationship with a customer grows, Davox is able to
increase sales by developing additional call center capabilities for the
customer.
. Second, Davox can identify additional applications in other areas of the
customer's business.
Additionally, by focusing on common applications and identifying industries
with similar organizational or functional structures, Davox can address new
markets with relatively small incremental development costs and a short
training period for its sales force.
Davox's sales force follows a disciplined selling program that focuses on
selling business solutions, rather than stressing the features of individual
products. Having identified departments in which Unison systems may provide
significant productivity increases, Davox sales representatives and technical
consultants (system/application specialists) work with the customer to analyze
the business and production objectives for the calling operation. This
consultative "team" approach is best suited to establish a long-term
relationship with the customer.
Davox continues to expand market penetration through its Business Partners
Program. Davox licenses its products through a third-party distribution
channel through referral, joint marketing, distributor and reseller
relationships. Examples of third-party partners include telecommunication
system manufacturers, software vendors and systems integrators. Davox plans to
continue to expand its Business Partners Program, with particular emphasis on
customer contact software vendors and telecommunication system providers.
NORTH AMERICAN OPERATIONS--In North America, Davox markets its products
primarily through a direct sales force with contributions from the Business
Partners Program. Direct sales personnel are supported by a team of marketing
professionals based at Davox's headquarters.
. In 1997, Davox signed distribution agreements with Lucent Technologies
Inc. and Siemens Business Communication Systems to resell the Unison
system as the preferred call center management system each will offer
their customers in the United States and Canada.
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INTERNATIONAL OPERATIONS--Davox manages international activities for several
global regions. Davox's products are offered in Europe, Latin America, South
Africa, and the Pacific Rim primarily through a series of mostly nonexclusive
distribution agreements.
. In 1997, Davox significantly expanded the human and technical resources
located at its European subsidiary headquarters in the United Kingdom
that provides direct marketing, technical support, and service to its
United Kingdom and European customers.
. Also in 1997, Davox established a subsidiary in Mexico to bring direct
marketing and technical support to Davox's customers in that country.
In connection with sales outside the United States, Davox products are
subject to regulation by foreign governments, which requires Davox to follow
certification procedures for some countries. Failure to obtain necessary local
country approvals or certifications will restrict Davox's ability to sell into
some countries. International product revenue was $13.9 million, $7.6 million
and $4.5 million or 18%, 14% and 12% of total revenue in 1997, 1996, and 1995,
respectively.
CONTINUUM CUSTOMER SUPPORT AND SERVICE
Davox provides maintenance and systems integration services that include not
only call center system installation and training, but also:
. Call center network planning, design and implementation services
. Professional services that include call center consulting, custom
application design, and development services
Davox customer support is comprised of:
. Support teams responsible for ongoing account management and customer
satisfaction of the installed base
. On-site hardware support and either on-site or remote software support
as required
. A Worldwide Support Center located in the corporate offices in Westford,
Massachusetts, that provides centralized access to hardware and software
support as required on a worldwide basis to end-users and distributors
. Software services that enhance or modify current systems
. Professional services that deliver consulting and customized project
services as required
. Training for customers' and distributors' personnel, delivered both in
Davox's Acton, Massachusetts, training facility and at customer sites
WORLD CLASS TRAINING CENTER--Responding to increased demand for educational
services, Davox in 1997 opened a state-of-the-art training facility in Acton,
only minutes from Davox's Westford corporate headquarters. The opening of the
new facility caps a year that saw significant investments in sophisticated
technology and people aimed at expanding the instructional services Davox
offers its customers.
PROFESSIONAL SERVICES ADDS TO ITS OFFERINGS--As call center technologies
continue to evolve, many customers are finding that they lack the internal
resources needed to implement these technologies effectively. In early 1997,
Davox introduced a new Professional Services program staffed by specialists
with the integration, networking, hardware and software skills required to
support Davox's customers' in-house resources. During the year, Davox expanded
those offerings and resources to include consulting in system implementation,
script and graphical interface development, call center operations and call
center management.
HARDWARE SUPPORT--Under the terms of an agreement with Grumman Systems
Support Corporation ("GSSC"), a wholly-owned subsidiary of Northrop Grumman
Corp., GSSC delivers hardware support services
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for the Unison system and older CAS and SMC product lines within the
continental United States and Canada while Davox continues to deliver software
support services. In addition, GSSC provides network design and systems
integration services allowing Davox to focus its expertise on customizing
advanced calling centers for its clients.
CUSTOMER SERVICE REVENUE--Customer service revenue accounted for $23.8
million or 31.0% of Davox's total revenue in 1997, an increase of $7.4 million
from $16.5 million or 30.7% of Davox's total revenue in 1996, and an increase
of $9.6 million from $14.2 million or 37.7% of Davox's total revenue in 1995.
Customer service revenue as a percentage of total revenue decreased in 1996 as
compared to 1995 due largely to a 59% increase in product revenue in 1996.
RESEARCH, DEVELOPMENT AND ENGINEERING
Davox employs an open system, client/server, relational database approach in
developing its unified call center solutions. The platform selected for this
approach is the Sun ULTRA family of workstations from Sun Microsystems Inc.
Davox's development efforts are focused on enhancing and expanding the
functionality of the Unison system. Davox currently anticipates that areas of
potential product development may include integration links to additional call
center telephony components and the development of additional telephone
management and reporting capabilities.
Davox's continued success depends on, among other factors, maintaining close
working relationships with its customers and resellers and anticipating and
responding to their evolving applications needs. Davox is committed to the
development of new products, the improvement of existing products and the
continuing evaluation of new technologies.
During 1997, 1996 and 1995, Davox's research, development and engineering
costs were approximately $8.5 million, $5.9 million and $4.0 million,
respectively, representing approximately 11.0%, 10.9% and 10.7%, respectively,
of total revenue during these periods. In the future, Davox expects to incur
approximately the same level of research, development and engineering
expenditures as a percentage of total revenue as it did during 1997. In
addition, Davox did not capitalize any of its software development costs in
1997 or 1996.
OPERATIONS
While the majority of Davox's hardware needs are met by readily available
off-the-shelf technology, a small portion remains proprietary. These
proprietary hardware components are manufactured by third-party contractors,
and Davox believes there are many qualified vendors for these services.
Davox's production process consists primarily of final test, quality assurance
and systems integration that occurs at its Westford facility.
Davox attempts to maintain multiple sources of supply for key items and
believes it has adequate sources of supply for its expected needs. While any
of these sources could be replaced if necessary, Davox might face significant
delays in establishing replacement sources or in modifying its products to
incorporate replacement components or software code. There can be no assurance
that Davox will not suffer delays resulting from non-performance by its
vendors or cost increases due to a variety of factors, including component
shortages or changes in laws or tariffs applicable to items imported by Davox.
COMPETITION
Davox systems compete against various outbound, inbound and blend calling
systems. Traditional outbound-centric call center management companies, such
as Mosaix (formerly Digital Systems International), Melita International
Corporation, EIS International, as well as inbound call center management
solution providers, such as Aspect Telecommunications, GeoTel and Genesys
Telecommunications Laboratories, Inc. Each company offers products with
varying levels of functionality in terms of system management, integration and
workstation support.
Certain of Davox's current and potential competitors are larger companies
that have greater financial, technical and marketing resources. It is possible
that competitors could produce products that perform the same or similar
functions as those performed by Davox's products.
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Davox believes that the principal factors affecting competition are ease of
use and range of functionality, speed and ease of implementation, reliability,
performance, price and customer service, and that Davox competes favorably as
to these factors.
RELIANCE ON INTELLECTUAL PROPERTY
Davox relies on a combination of patent, copyright, trademark, contract and
trade secret laws to establish and protect its proprietary rights in its
technology. Davox owns and licenses a number of patents relating to predictive
dialing, real-time telecommunication management and user interfaces. Software
products are furnished under software license agreements that grant customers
licenses to use, rather than to own, the products. The license agreements
contain provisions protecting Davox's ownership of the underlying technology.
Upon commencement of employment, employees execute an agreement under which
inventions developed during the course of employment will, at the election of
Davox, be assigned to Davox, and which further prohibits disclosure of
confidential Company information. In addition, effective protection of
intellectual property rights may be limited or unavailable in certain foreign
countries. There can be no assurances that the steps taken by Davox in this
regard will be adequate to prevent misappropriation of its technology or that
Davox's competitors will not independently develop technologies that are
substantially equivalent of superior to Davox's technology.
EMPLOYEES
As of December 31, 1997, Davox had 315 full-time employees, of whom 27 were
engaged in operations, 203 in sales, marketing and customer support, 56 in
research, development and engineering and 29 in general and administrative
functions. Davox's ability to attract and retain qualified personnel is
essential to its continued success. None of Davox's employees is represented
by a collective bargaining agreement, nor has Davox ever experienced any work
stoppage. Davox believes that its employee relations are good.
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DAVOX SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain condensed consolidated financial data
with respect to Davox for each of the five years in the period ended December
31, 1997:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
DATA:
Total revenue.......... $ 76,815 $ 53,642 $ 37,556 $ 30,047 $ 33,756
Cost of revenue........ 26,550 21,577 16,451 16,234 17,488
---------- ---------- ---------- --------- ---------
Gross profit.......... 50,265 32,065 21,105 13,813 16,268
Research, development
and engineering
expenses.............. 8,479 5,861 4,020 3,540 3,391
Selling, general and
administrative
expenses.............. 22,852 17,213 12,166 12,681 12,472
Restructuring costs.... -- -- -- 3,379 --
---------- ---------- ---------- --------- ---------
Income (loss) from
operations............ 18,934 8,991 4,919 (5,787) 405
Interest income, net... 1,952 1,137 421 -- 20
---------- ---------- ---------- --------- ---------
Income (loss) before
provision for income
taxes................. 20,886 10,128 5,340 (5,750) 425
Provision for income
taxes................. 2,506 1,013 534 -- 40
---------- ---------- ---------- --------- ---------
Net income (loss)..... $ 18,380 $ 9,115 $ 4,806 $ (5,750) $ 385
========== ========== ========== ========= =========
Earnings per share
Basic.................. $ 1.60 $ .85 $ .48 $ (.67) $ .05
========== ========== ========== ========= =========
Diluted................ $ 1.45 $ .75 $ .42 $ (.67) $ .04
========== ========== ========== ========= =========
Weighted average shares
outstanding
Basic.................. 11,522,057 10,730,760 10,077,380 8,533,095 7,898,361
========== ========== ========== ========= =========
Diluted................ 12,663,245 12,285,244 11,565,830 8,533,095 8,663,963
========== ========== ========== ========= =========
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONDENSED CONSOLIDATED
BALANCE SHEET DATA:
Working capital....... $ 48,804 $ 18,710 $ 8,589 $ 1,807 $ 3,627
Total assets.......... 75,168 39,729 20,825 14,777 17,681
Long-term debt........ -- -- 45 138 96
Stockholders' equity.. 54,157 22,835 10,912 5,492 8,881
</TABLE>
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DAVOX MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All statements contained herein that are not historical facts, including,
but not limited to, statements regarding anticipated future capital
requirements, Davox's future development plans, Davox's ability to obtain
debt, equity or other financing, and Davox's ability to generate cash from
operations, are based on current expectations. These statements are forward
looking in nature and involve a number of risks and uncertainties, as more
fully described under "Risk Factors." Actual results may differ materially.
The following table sets forth, for the periods indicated, the percentage of
revenue represented by items as shown in Davox's Consolidated Statements of
Operations. This table should be read inconjunction with the Selected
Financial Data, Consolidated Financial Statements and Notes to Consolidated
Financial Statements contained elsewhere herein.
PERCENTAGE OF TOTAL REVENUE FOR THE
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Product revenue............................................ 69.0% 69.3% 62.3%
Service revenue............................................ 31.0 30.7 37.7
----- ----- -----
Total revenue.............................................. 100.0 100.0 100.0
Cost of revenue............................................ 34.6 40.2 43.8
----- ----- -----
Gross profit............................................... 65.4 59.8 56.2
Research, development and engineering expenses............. 11.0 10.9 10.7
Selling, general and administrative expenses............... 29.7 32.1 32.4
----- ----- -----
Income from operations..................................... 24.7 16.8 13.1
Interest income............................................ 2.5 2.1 1.1
----- ----- -----
Income before provision for income taxes................... 27.2 18.9 14.2
Provision for income taxes................................. 3.3 1.9 1.4
----- ----- -----
Net income................................................. 23.9% 17.0% 12.8%
----- ----- -----
</TABLE>
Total revenue was approximately $76.8 million, $53.6 million and $37.6
million for the fiscal years ended December 31, 1997, 1996 and 1995,
respectively. Total revenue increased 43.2% for the year ended December 31,
1997 compared to the same period in 1996 and increased 42.8% in fiscal year
1996 compared to fiscal year 1995. Total cost of revenues as a percentage of
total revenue was 34.6% in fiscal year 1997, 40.2% in fiscal year 1996 and
43.8% in fiscal year 1995.
Product revenue was approximately $53.0 million, $37.2 million and $23.4
million in fiscal years 1997, 1996 and 1995, respectively. Product revenue
increased by 42.5% from 1996 to 1997 and increased 59.0% from 1995 to 1996.
These increases were caused by increased demand for the Unison call center
management system, especially the telemarketing and collections capabilities,
as well as the inbound/outbound call blending capabilities in 1997.
Cost of product revenue as a percentage of product revenue was 22.4%, 29.3%
and 30.6% in fiscal years 1997, 1996 and 1995, respectively. The continued
improvements in product margin in 1997 represent the increased volume of
product shipments relative to fixed costs, and a higher margin product mix.
Service revenue was approximately $23.8 million, $16.5 million, and $14.2
million in fiscal years 1997, 1996 and 1995, respectively. Service revenue
increased 44.7% from 1996 to 1997 and 16.2% from 1995 to 1996. The increases
in 1997 and 1996 were due to an increase in maintenance revenue related to the
growth in the
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installed base of Davox's products in recent years and increased installation
and training revenue related to the increased volume of product shipments.
Cost of service revenue as a percentage of service revenue was 61.6%, 64.9%
and 65.6% in 1997, 1996 and 1995, respectively. The decreases as a percentage
of service revenue were primarily attributable to the higher service revenue
relative to fixed costs.
Revenue from Davox's largest single customer in each of 1997, 1996 and 1995
was 11%, 4% and 12% of total revenue, respectively. Revenue from Davox's three
largest customers amounted to 20% of total revenue in 1997, 12% of total
revenue in 1996 and 20% of total revenue in 1995. Davox intends to broaden its
base of existing and new customers by penetrating new markets, expanding its
direct international sales force and using alternate channels of distribution,
thereby decreasing its dependence on its largest end user customers.
Research, development and engineering expenses were approximately $8.5
million, $5.9 million and $4.0 million, representing 11.0%, 10.9% and 10.7% of
total revenue during 1997, 1996 and 1995, respectively. These increases were
primarily attributable to higher payroll and related expenses resulting from
personnel increases in 1996 and 1997.
Selling, general and administrative ("SG&A") expenses were approximately
$22.9 million, $17.2 million and $12.2 million, representing 29.7%, 32.1% and
32.4% of total revenue during 1997, 1996 and 1995, respectively. The absolute
dollar increases were primarily attributable to increased payroll and related
expenses resulting from personnel increases, and direct and indirect selling
expenses related to the increased revenue. The decreases as a percentage of
revenue in 1997 and 1996 were mostly attributable to the significant increase
in revenues.
Interest income, derived primarily from money market instruments and
investments in commercial paper and government securities, increased 70.4%
from 1996 to 1997 and 159.9% from 1995 to 1996. These increases were due
primarily to the significantly higher average cash and cash equivalent and
marketable securities balances from year to year, and, to a lesser extent, due
to higher interest rates.
INCOME TAXES
Davox's effective income tax rate in 1997 was approximately 12%. This is
lower than the combined federal and statutory tax rates due primarily to
utilization and recognition of net operating loss carryforwards. Davox's
provision for income taxes in 1996 and 1995 was at the federal and state
minimum rates. Davox believes that the effective tax rate will increase
significantly in 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997, Davox's principal sources of liquidity were its
cash and cash equivalent balances of approximately $25.4 million, and its
marketable securities of approximately $23.8 million. As of the end of fiscal
1996, Davox's cash and cash equivalent balances were approximately $21.3
million, and its marketable securities were approximately $9.8 million. The
overall increase in cash and cash equivalents and marketable securities was
due primarily to the favorable operating results, collection of deferred
annual maintenance contracts, and proceeds from exercises of stock options. In
addition, Davox has an agreement for a working capital line of credit with a
bank for up to $2.0 million based on eligible receivables, as defined. There
were no outstanding balances as of December 31, 1997 or 1996 under this line
of credit.
Davox's primary investing activities were purchases and sales of marketable
securities and purchases of property and equipment. Property and equipment
investments were approximately $3.9 million in 1997 compared to approximately
$4.1 million in 1996. Purchases and sales of marketable securities generated a
net cash outflow of approximately $14.0 million in 1997 compared to a net cash
outflow of approximately $9.8 million in 1996.
Cash provided by financing activities is generated primarily from proceeds
from exercises of stock options. Proceeds from exercises of stock options were
approximately $12.7 million in 1997 compared to approximately $1.8 million in
1996.
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Working capital as of December 31, 1997 was approximately $48.8 million as
compared to approximately $18.7 million as of December 31, 1996. Total assets
as of December 31, 1997 were approximately $75.2 million compared to
approximately $39.7 million as of December 31, 1996. The increase from 1996 to
1997 was primarily attributable to increases in cash and cash equivalents,
marketable securities and accounts receivable due to the favorable operating
results for 1997, as well as the recognition of a deferred tax asset in 1997.
Management believes, based on the current operating plan, that Davox's
existing cash and cash equivalents, marketable securities, cash generated from
operations and amounts available under its working capital line of credit will
be sufficient to meet the Davox's cash requirements for the foreseeable
future.
IMPACT OF INFLATION
Davox believes that inflation did not have a material effect on the results
of operations in 1997.
NEW ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income.
SFAS No. 130 requires disclosure of all components of comprehensive income on
an annual and interim basis. Comprehensive income is defined as the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from nonowner sources. SFAS No. 130 is effective for
fiscal years beginning after December 15, 1997. Management does not expect the
adoption of this standard to have a material impact on Davox and its
operations.
In July 1997, the FASB issued SFAS No. 131, Disclosures About Segments of
Enterprise and Related Information. SFAS No. 131 requires certain financial
and supplementary information to be disclosed on an annual and interim basis
for each reportable segment of an enterprise. SFAS No. 131 is effective for
fiscal years beginning after December 15, 1997. Unless impracticable,
companies would be required to restate prior period information upon adoption.
Management does not expect the adoption of this standard to have a material
impact on Davox and its operations.
IMPACT OF YEAR 2000 ISSUE
The Year 2000 issue results from computer programs written using two digits
rather than four to define the applicable year. Any of Davox's computer
programs that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
Davox is in the process of conducting an assessment of its computer
information systems and is beginning to take the necessary steps to determine
the nature and extent of the work required to make its systems Year 2000
compliant, where necessary. These steps will require Davox to modify, upgrade
or replace some of its internal financial and operational systems. Davox
continues to evaluate the estimated cost of bringing all internal systems,
equipment and operations into Year 2000 compliance, but has not yet finished
determining the total cost of these compliance efforts. While these efforts
will involve additional costs, Davox believes, based upon currently available
information, that these costs will not have a material adverse effect on its
business, financial condition or results of operations. However, if these
efforts are not completed on time, or if the cost of updating or replacing
Davox's information systems exceeds Davox's current estimates, the Year 2000
issue could have a material adverse impact on Davox's business, financial
condition or results of operations.
Davox also intends to determine the extent to which Davox may be vulnerable
to any failures by its major suppliers, distributors and service providers to
remedy their own Year 2000 issues, and is in the process of initiating formal
communications with these parties. At this time Davox is unable to estimate
the nature or extent of any potential adverse impact resulting from the
failure of third party suppliers, distributors and service
64
<PAGE>
providers to achieve Year 2000 compliance, although Davox does not currently
anticipate that it will experience any material shipment delays from its major
product suppliers or any material sales delays from its major distributors due
to Year 2000 issues. However, there can be no assurance that these third
parties will not experience Year 2000 problems or that any problems would not
have a material effect on Davox's product supply and distribution channels.
Because the cost and timing of Year 2000 compliance by third parties such as
suppliers, distributors and service providers is not within Davox's control,
no assurance can be given with respect to the cost or timing of such efforts
or any potential adverse effects on Davox of any failure by these third
parties to achieve Year 2000 compliance.
65
<PAGE>
DAVOX MANAGEMENT
MANAGEMENT
Davox's current directors and executive officers and their ages are as
follows:
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION WITH DAVOX
---- --- ---------------------------------------------------
<S> <C> <C>
Alphonse M. Lucchese.... 62 Chairman and Chief Executive Officer
Louis Marianacci........ 43 President
Douglas W. Smith........ 55 Vice President, Sales and Marketing
John J. Connolly........ 41 Vice President, Finance and Chief Financial Officer
James F. Mitchell....... 51 Senior Vice President and Chief Technical Officer
Mark Donovan............ 43 Vice President, Operations
John E. Cambray......... 42 Vice President, Product Development
Douglas P. Langenberg... 52 Vice President, Customer Services
Richard P. Santos....... 61 Vice President, International Operations
R. Scott Asen (1)(2).... 53 Director
Michael D. Kaufman
(1)(2)................. 62 Director
Walter J. Levison
(1)(2)................. 79 Director
</TABLE>
- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Alphonse M. Lucchese has served as Chairman and Chief Executive Officer
since July 1994, and also served as President from July 1994 until January
1998. Mr. Lucchese joined Davox following seven years as President and Chief
Executive Officer at Iris Graphics, a manufacturer of high quality color
printers. Prior to joining Iris, Mr. Lucchese had served as Vice President of
Sales at Xyvision, Inc., a manufacturer of computer-integrated publishing
systems sold to Fortune 500 companies, commercial printers and typesetters,
and government agencies. Mr. Lucchese was Vice President of Sales for Davox
Corporation from 1983 until 1984. Earlier, he had spent six years at Raytheon
Data Systems, where he attained the position of Vice President and General
Manager of Northeastern Operations. Following service in the U.S. Army during
the mid-1950s, Mr. Lucchese began his professional career at IBM as a systems
engineer, later moving into the position of marketing representative.
Louis Marianacci was named President of Davox and officially joined Davox in
January 1998. Mr. Marianacci's primary focus is on defining and executing
Davox's international growth strategy, third-party relationship program, and
acquisition strategy. Prior to joining Davox, Mr. Marianacci was Vice
President of Customer Sales and Service at Lucent Technologies' Call Center
business unit from 1995 to 1997. Prior to joining Lucent, Mr. Marianacci was
Vice President, Worldwide Industry Marketing Transportation at AT&T Global
Information Systems from 1994 to 1995. He also held executive management
positions of increasing responsibility at Unisys Corporation from 1989 to
1993, Control Data Corporation from 1981 to 1988, and Ultramar Canada, Inc.
from 1976 to 1981.
Douglas W. Smith has served as Vice President, Sales and Marketing since
September 1, 1994. Mr. Smith is responsible for Davox's direct and reseller
sales in both the United States and Canada, as well as product and industry
marketing, sales support and marketing communications. Mr. Smith joined Davox
in 1994, following seven years at Iris Graphics where he contributed to that
company's extraordinary growth. Prior to joining Iris, Mr. Smith worked for
nearly 20 years in sales, managerial, and executive-level capacities for
General Electric Information Systems, Honeywell Information Systems, Raytheon
Data Systems, and Phoenix Data Systems.
John J. Connolly has served as Vice President, Finance and Chief Financial
Officer since August 1, 1994, and was elected Treasurer in January 1997. Mr.
Connolly joined Davox from Iris Graphics where he had been Vice President of
Finance since 1989. Prior to joining Iris, Mr. Connolly held finance and
accounting positions of increasing responsibilities at Instrumentation
Laboratory, a manufacturer of medical equipment.
66
<PAGE>
James F. Mitchell is a founder of Davox and has served as Senior Vice
President and Chief Technical Officer since 1983. From September 1993 to
August 1994, Mr. Mitchell managed the domestic sales operations of the
Company. From 1981 to 1983, he was Vice President, Engineering of Davox. Prior
to joining Davox in 1981, Mr. Mitchell served as Manager of Systems
Development at Applicon, Inc., a producer of CAD/CAM products.
Mark Donovan has served as Vice President, Operations since August 1994.
Since joining Davox in 1983, Mr. Donovan has held management positions of
increasing responsibility, including Vice President, Customer Service. He has
also held various materials and manufacturing management positions within
Davox. Prior to joining Davox, Mr. Donovan held various management positions
with Applicon, Inc. and Raytheon Corporation.
John E. Cambray has served as Vice President, Product Development since
August 1993. Mr. Cambray has been with Davox since early 1982 and has held
various software development and engineering management positions during this
time. Prior to joining Davox, Mr. Cambray held various design and management
positions with FASFAX Corporation and Sanders Associates.
Douglas P. Langenberg has served as Vice President, Customer Services since
May 1996. Mr. Langenberg joined Davox following four years at Stratus
Computer, Inc., where he held the position of Vice President, Customer
Services. Prior to joining Stratus, Mr. Langenberg held executive-level
positions with Apollo Computer, Inc. and Digital Equipment Corporation, as
well as founding and serving as principal in a service-oriented consulting
firm.
Richard P. Santos has served as Vice President of International Operations
since May 1996. In this position, Mr. Santos is responsible for Davox's
international sales and support activities. His duties also include management
and development of Davox's distribution channels into its key international
markets, including Europe, Latin America, Asia/Pacific Rim, Middle East, and
Africa. Mr. Santos brings to Davox nearly 35 years of domestic and
international experience in management, sales, marketing, and business
development. Prior to joining Davox, he held senior level business development
and management positions with several leading high-technology companies,
including President and Chief Executive Officer of Monet, Inc., President of
Pako Corporation, and co-founder and Senior Vice President of Iris Graphics.
R. Scott Asen has been a Director of Davox since April 1992. Mr. Asen has
been President of Asen & Co., Inc., an investment management firm, since 1983.
He is also a general partner of Pioneer Associates, L.P. and Pioneer IV, L.P.,
each a venture capital fund, a general partner of AB Associates, LP and a
manager-member of Pioneer III-A, LLP and Pioneer III-B, LLP, each an
investment management entity. Mr. Asen currently serves as a director of
Barringer Laboratories, Inc. and SeaMED Corporation.
Michael D. Kaufman has been a Director of Davox since 1982. Since 1987, Mr.
Kaufman has served as the managing general partner of MK Global Ventures, MK
GVS Fund and MK GVD Fund, each of which is an investment company and a
stockholder of Davox, and MK Global Ventures II, also an investment company.
Mr. Kaufman currently serves as a director of Document Technologies, Inc.,
DISC, Inc., Erox Corp., Proxim, Inc., Hypermedia Communications, Inc. and
Asante Technologies, Inc.
Walter J. Levison has been a Director of Davox since June 1994. Mr. Levison
has been a general partner of the Aegis Venture Funds, a group of limited
partnerships, since 1982. Mr. Levison formerly served as a director of Chipcom
Corporation and Scitex Corporation, and currently serves as a director of D.M.
Management Company.
67
<PAGE>
EXECUTIVE COMPENSATION
The following table shows compensation information with respect to services
rendered to Davox in all capacities during the years ended December 31, 1997,
1996 and 1995 for (i) the individual who served as the Chief Executive Officer
as of December 31, 1997 and (ii) the other four most highly compensated
executive officers of Davox (collectively with the Chief Executive Officer,
the "Davox Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION(1) COMPENSATION(2)
---------------------- ---------------
AWARDS
---------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND OPTIONS/ COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(3) SARS(#) ($)
- ------------------------ ---- ----------- ------------ --------------- -------------
<S> <C> <C> <C> <C> <C>
Alphonse M.
Lucchese(4)............ 1997 330,000 230,672 299,999/0 0
Chairman, President and 1996 297,504 211,524 0 0
Chief Executive Officer 1995 265,008 224,190 0 1,515(5)
James F. Mitchell....... 1997 165,000 48,060 15,000/0 0
Senior Vice President
and 1996 159,000 47,105 0 0
Chief Technical Officer 1995 159,000 56,048 0 0
Douglas W. Smith........ 1997 160,000 93,201 59,999/0 0
Vice President--Sales
and 1996 146,259 85,913 0 0
Marketing 1995 130,672 92,122 0 0
John J. Connolly........ 1997 156,250 45,508 59,999/0 0
Vice President--Finance
and 1996 141,250 41,845 0 0
Chief Financial Officer 1995 126,250 44,502 0 0
John E. Cambray......... 1997 145,000 33,787 29,999/0 0
Vice President--Develop-
ment 1996 131,208 31,227 0 0
1995 122,000 34,404 0 0
</TABLE>
- --------
(1) Excludes perquisites and other personal benefits, the aggregate annual
amount of which for each officer was less than the lesser of $50,000 or
10% of the total salary and bonus reported.
(2) Davox did not grant any restricted stock awards or stock appreciation
rights ("SARs") or make any long term incentive plan payouts during the
fiscal years ended December 31, 1997, 1996 and 1995.
(3) Indicates bonus payments earned by the Davox Named Officers in the year
indicated, for services rendered in such year, some of which were paid in
the next subsequent year.
(4) Mr. Lucchese served as President of Davox until January 12, 1998.
(5) Consists of life insurance premiums paid by Davox.
68
<PAGE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Shown below is information with respect to options to purchase Davox Common
Stock granted to the Davox Named Officers during the fiscal year ended
December 31, 1997 under Davox's stock option plans. No stock appreciation
rights were granted to these individuals during such year.
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS/SARS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTION/SARS EMPLOYEES IN BASE PRICE ------------------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) EXPIRATION DATE 5%($) 10%($)
- ---- ----------- ---------------- ----------- ---------------- ----- ---------------
<S> <C> <C> <C> <C> <C> <C>
Alphonse M. Lucchese.... 299,000/0 31%/0% 24.33 April 24, 2007 4,574,998 11,593,949
James F. Mitchell....... 15,000/0 .02/0 24.33 April 24, 2007 229,515 581,636
John E. Cambray......... 15,000/0 .02/0 26.25 January 23, 2007 247,627 627,536
14,999/0 .02/0 24.33 April 24, 2007 229,500 581,597
John J. Connolly........ 59,999/0 .06/0 24.33 April 24, 2007 918,044 2,326,506
Douglas W. Smith........ 59,999/0 .06/0 24.33 April 24, 2007 918,044 2,326,506
</TABLE>
OPTION EXERCISES AND YEAR-END VALUES
Shown below is information with respect to (i) exercises of stock options by
the Davox Named Officers during the fiscal year ended December 31, 1997, and
(ii) unexercised options outstanding at December 31, 1997, including the value
of such unexercised in-the-money options at December 31, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY
DECEMBER 31, 1997 OPTIONS/SARS AT
(#)(1) DECEMBER 31, 1997($)(2)
SHARES
ACQUIRED
ON VALUE
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------ ----------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Alphonse M. Lucchese.... 262,000 7,295,948.09 262,029/0 398,177/0 7,185,651.86/0 6,351,451.75/0
James F. Mitchell....... 56,250 1,583,231.46 1,875/0 41,250/0 15,546.94/0 945,156.39/0
John E. Cambray......... 29,063 797,455.50 3,748/0 39,376/0 27,485.42/0 576,647.45/0
John J. Connolly........ 32,586 936,857.64 7,715/0 84,934/0 68,774.96/0 1,441,231.82/0
Douglas W. Smith........ 91,512 2,625,927.34 27,498/0 91,422/0 681,337.17/0 1,636,803.56/0
</TABLE>
- --------
(1) Options granted to the Davox Named Officers become fully vested
immediately prior to the merger, consolidation, liquidation or sale of
substantially all of the assets of Davox and terminate immediately after
the effective date of such merger, consolidation, liquidation or sale. The
Merger will not accelerate the vesting schedule of any Davox options.
(2) Value is based on the difference between the option exercise price and the
fair market value of Davox's Common Stock on December 31, 1997 ($36.625
per share, the last reported sales price of Davox's Common Stock on the
Nasdaq National Market System on December 31, 1997) multiplied by the
number of shares underlying the option.
69
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Davox's executive compensation program is administered by the three member
Compensation Committee of the Board of Directors (the "Compensation
Committee"). The three members of the Compensation Committee are non-employee
Directors. Pursuant to the authority delegated by the Board of Directors, the
Compensation Committee establishes each year the compensation of the Chief
Executive Officer, and together with the Chief Executive Officer, establishes
the compensation of the other executive officers of Davox.
Under the supervision of the Compensation Committee, Davox developed and
implemented the 1997 Management Compensation Plan for the Chief Executive
Officer and certain of the executive officers of Davox (the "Plan"). The Plan
is designed to reward executive officers whose performance yields improvement
in corporate operating results, market share and shareholder value. The
ultimate goal of the Plan is to align the interests of management with those
of the stockholders. Compensation under the Plan is comprised of cash
compensation in the form of annual base salary, incentive compensation in the
form of performance-based cash bonuses, and long-term incentive compensation
in the form of stock options.
In setting cash compensation levels for executive officers (including the
Chief Executive Officer), the Compensation Committee takes into account such
factors as: (i) Davox's past financial performance and future expectations,
(ii) the general and industry-specific business environment and (iii)
corporate and individual performance goals. The base salaries are established
at levels comparable to the amounts paid to senior executives with comparable
qualifications, experience and responsibilities at other companies located in
the northeastern United States of similar size and engaged in a similar
business to that of Davox.
Incentive compensation in the form of performance-based bonuses for the
Chief Executive Officer and Davox's other executive officers is based upon
management's success in meeting Davox's financial and strategic goals as well
as meeting individual performance goals. Target levels of revenue and net
income were set at the time the Plan was established, and bonuses were
allocated to the Chief Executive Officer and certain other executive officers
contingent upon the achievement of the target levels. In addition, based on
Davox's exceeding both target revenues and target net income, the Compensation
Committee awarded additional discretionary bonuses to the executive officers
in the same proportion as bonuses were allocated under the Plan.
Mr. Alphonse Lucchese is the Chief Executive Officer and a director of
Davox, and was, during fiscal 1997, President of Davox. His fiscal 1997
performance was evaluated on the basis of the factors described above
applicable to executive officers generally. His base salary was based on a
number of factors, including the base salaries of executives performing
similar functions for peer companies. The annual bonus and stock option grant
components of his compensation, as well as his salary, reflect Davox's
financial performance, the continued introduction and commercialization of new
products and progress toward achieving business goals, the achievement by Mr.
Lucchese of other non-financial goals and (particularly with respect to the
stock option grant component) Davox's desire to provide additional incentives
for Mr. Lucchese's continued employment inasmuch as Mr. Lucchese held few
vested options. In assessing Mr. Lucchese's performance for fiscal 1997, the
Compensation Committee took into account the degree to which the financial and
non-financial goals on which his compensation was based had been achieved.
Incentive compensation in the form of stock options is designed to provide
long term incentives to executive officers and other employees, to encourage
the executive officers and other employees to remain with Davox and to enable
optionees to develop and maintain a significant, long-term stock ownership
position in Davox's Common Stock. The Compensation Committee grants stock
options to Davox's executive officers in consideration of the strategic goals
and direction of Davox. Davox's 1996 Stock Plan (the "1996 Plan"),
administered by the Board of Directors, is the vehicle for the granting of
stock options.
The 1996 Plan permits the Board of Directors to grant stock options to
eligible employees, including executive officers. Options become exercisable
in increments over time, contingent upon continued employment. The value
realizable from exercisable options is dependent upon the extent to which
Davox's performance is reflected in the market price of Davox's Common Stock
at any particular point in time.
70
<PAGE>
Davox also maintains the 1991 Employee Stock Purchase Plan (the "Stock
Purchase Plan") in which all executives may participate on the same terms as
non-executive employees who meet applicable eligibility criteria. The Stock
Purchase Plan provides for the sale of shares of Davox's Common Stock to
employees (as defined in the Stock Purchase Plan) of Davox pursuant to non-
transferable options at less than fair market value. Employees who own 5% or
more of the Common Stock of Davox and non-employee directors are not eligible
to participate in the Stock Purchase Plan. As of the date hereof, 62,929
shares of Common Stock have been issued under the Stock Purchase Plan.
The Revenue Reconciliation Act of 1993 generally limits Davox's ability to
deduct for federal income tax purposes compensation in excess of $1,000,000
per executive for the Chief Executive Officer and four additional executive
officers who are highest paid and employed at year end, except to the extent
such excess constitutes performance-based compensation. The policy of the
Board of Directors and the Compensation Committee is to qualify future
compensation arrangements to ensure deductibility, except in those cases where
the Board of Directors determines it is advantageous to use an alternative
approach.
The Compensation Committee is satisfied that the executive officers of Davox
are dedicated to achieving significant improvements in the long-term financial
performance of Davox and that the compensation policies and programs
implemented and administered have contributed and will continue to contribute
towards achieving this goal.
This report has been submitted by the members of the Compensation Committee:
R. Scott Asen
Michael D. Kaufman
Walter J. Levison
71
<PAGE>
PRINCIPAL STOCKHOLDERS OF DAVOX
The following table sets forth, as of March 1, 1998 (except as noted below),
certain information regarding the ownership of shares of Davox's Common Stock
by (i) each person who, to the knowledge of Davox, owned beneficially more
than 5% of the shares of Common Stock of Davox outstanding at such date, (ii)
each Director and nominee of Davox, (iii) each Davox Named Officer and (iv)
all Directors, nominees and Executive Officers as a group:
<TABLE>
<CAPTION>
PERCENT OF CLASS
------------------------------------
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) BEFORE THE MERGER AFTER THE MERGER**
- -------------------- ----------------------- ----------------- ------------------
<S> <C> <C> <C>
Pilgrim Baxter & 1,209,500(2) 10.2% 8.5%
Associates, Ltd. ......
825 Duportail Road
Wayne, PA 19087
Entities and individuals 1,012,700(3) 8.5% 7.1%
associated with
FMR Corp. .............
82 Devonshire Street
Boston, MA 02109
Nicholas--Applegate 810,350(4) 6.8% 5.7%
Capital Management.....
600 West Broadway, 29th
Floor
San Diego, CA 92101
Provident Investment 787,446(5) 6.6% 5.5%
Counsel, Inc. .........
300 North Lake Avenue
Pasadena, CA 91101
Alphonse M. Lucchese.... 318,618(6) 2.6% 2.2%
R. Scott Asen........... 438,091(7) 3.7% 3.1%
Michael D. Kaufman...... 560,136(8) 4.7% 3.9%
Walter J. Levison....... 26,250(9) * *
John E. Cambray......... 24,737(10) * *
John J. Connolly........ 31,433(11) * *
James F. Mitchell....... 49,772(12) * *
Douglas W. Smith........ 54,458(13) * *
All Directors, Nominees
and Executive
Officers as a group (12
Persons)............... 1,561,683(14) 12.5% 10.2%
</TABLE>
- --------
* Less than 1.0%
** Assumes the issuance of 2,384,452 shares of Davox Common Stock pursuant to
the Merger Agreement, the maximum number of shares that may be issued
pursuant to the Merger Agreement.
(1) Except as otherwise noted, each person or entity named in the table has
sole voting and investment power with respect to the shares. Includes all
shares which the named person has the right to acquire within 60 days
following March 1, 1998.
(2) Pilgrim Baxter & Associates, Ltd. ("PBA") is an investment advisor
registered under the Investment Advisors Act of 1940. PBA has sole power
to direct the vote with respect to 1,021,950 of such shares and shared
power to direct the vote with respect to 187,550 of such shares. This
information is as of December 31, 1997 and is based on Schedule 13G dated
February 9, 1998 filed by PBA.
(3) FMR Corp. ("FMR") has no power to direct the vote with respect to 958,700
of such shares. this information is as of December 31, 1997 and is based
on Schedule 13G dated February 14, 1998 filed by FMR.
(4) Nicholas--Applegate Capital Management ("NACM") is an investment advisor
registered under the Investment Advisors Act of 1940. NACM has sole power
to direct the vote with respect to 625,300 of such
72
<PAGE>
shares, and shared power to direct the vote with respect to 1,350 of such
shares. This information is as of December 31, 1997 and is based on
Schedule 13G dated February 3, 1998 filed by NACM.
(5) Provident Investment Counsel, Inc. ("PIC") is an investment advisor
registered under the Investment Advisors Act of 1940. PIC has no power to
direct the vote with respect to 55,050 of such shares. This information is
as of December 31, 1997 and is based on Schedule 13G dated February 2,
1998 filed by PIC.
(6) Includes 318,618 shares subject to options held by Mr. Lucchese
exercisable within 60 days of March 1, 1998.
(7) Includes 16,500 shares owned by Asen and Co. f/b/o SDFJ, Inc., 2,250
shares owned by an individual to whom Mr. R. Scott Asen, a Director of
Davox, provides certain advisory services and 4,500 shares held by the IRA
of an individual to whom Mr. Asen provides certain advisory services, all
of such shares as to which Mr. Asen disclaims beneficial ownership. Also
includes 392,341 shares individually owned by Mr. Asen and 22,500 shares
subject to options held by Mr. Asen that are exercisable within 60 days of
March 1, 1998.
(8) Includes 334,270 shares held by MK Global Ventures and 99,518 shares held
by MK GVS Fund. Mr. Michael D. Kaufman, a Director of Davox, is the sole
general partner of the sole general partner of each of MK Global Ventures
and MK GVS Fund. Mr. Kaufman disclaims beneficial ownership of all shares
held by MK Global Ventures and MK GVS Fund. Also includes 111,348 shares
individually owned by Mr. Kaufman and 15,000 shares subject to options
held by Mr. Kaufman that are exercisable within 60 days of March 1, 1998.
(9) Includes 26,250 shares subject to options held by Mr. Levison which will
be exercisable within 60 days of March 1, 1998.
(10) Includes 7,498 shares subject to options held by Mr. Cambray exercisable
within 60 days of March 1, 1998.
(11) Includes 31,433 shares subject to options held by Mr. Connolly
exercisable within 60 days of March 1, 1998.
(12) Includes 31,875 shares subject to options held by Mr. Mitchell
exercisable within 60 days of March 1, 1998
(13) Includes 54,458 shares subject to options held by Mr. Smith exercisable
within 60 days of March 1, 1998.
(14) Includes 547,945 shares subject to options held by officers and Directors
which are exercisable within 60 days of March 1, 1998. Also includes
shares held by entities associated with Messrs. Kaufman and Asen as
described in footnotes 7 and 8.
73
<PAGE>
PERFORMANCE GRAPH OF DAVOX
The following graph compares the yearly percentage change in the cumulative
total stockholder return on Davox's Common Stock for the five fiscal years
ended December 31, 1997, with the cumulative total return on (i) the Nasdaq
Market Index and (ii) a broad peer group index prepared by Media General
consisting of Nasdaq listed companies grouped under SIC Code 7373, Computer
Integrated Systems Design. The comparison assumes $100 was invested on December
31, 1992 in Davox's Common Stock and in each of the foregoing indices and
assumes reinvestment of dividends, if any.
LOGO
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG DAVOX CORPORATION,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/31/94 12/30/95 12/29/96 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Davox Corporation......... 100.00 222.21 238.88 527.76 1,833.28 2,173.84
Nasdaq Market Index....... 100.00 119.95 125.94 163.35 202.99 248.30
Peer Group Index.......... 100.00 111.33 106.50 171.74 182.29 217.83
</TABLE>
The stock price performance shown on the graph above is not necessarily
indicative of future price performance. Information used in the graph was
obtained from Media General Financial Services, a source believed to be
reliable; however, Davox is not responsible for any errors or omissions in such
information.
74
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF DAVOX
Davox has adopted a policy that all transactions between Davox and its
officers, directors, principal stockholders and their affiliates be on terms
no less favorable to Davox than could be obtained from unrelated third parties
and that any loans by Davox to officers, directors, principal stockholders and
their affiliates must be approved by a majority of the outside independent and
disinterested directors. Mr. Paul Lucchese, Esq., son of Mr. Alphonse M.
Lucchese, is a member of Davox's legal staff and received $104,515 in total
compensation during the fiscal year ended December 31, 1997. QCC, Inc., a
corporation of which Mr. Alphonse M. Lucchese, Jr., son of Mr. Alphonse M.
Lucchese, is a fifty-percent stockholder, provided consulting services to
Davox in connection with Management Information Systems and other development
matters and received an aggregate of $448,000 in connection therewith during
the fiscal year ended December 31, 1997.
PRICE RANGE OF DAVOX COMMON STOCK
Davox Common Stock is traded in the over-the-counter market and is quoted on
the Nasdaq National Market under the symbol DAVX. The following table sets
forth the reported high and low closing sale prices per share of Davox Common
Stock for the periods indicated:
<TABLE>
<CAPTION>
DAVOX COMMON
STOCK PRICES
-------------
QUARTER ENDED HIGH LOW
- ------------- ------ ------
<S> <C> <C>
Calendar 1996:
March 31........................................................ $12.25 $ 7.50
June 30......................................................... 21.67 11.50
September 30.................................................... 26.17 15.83
December 31..................................................... 30.17 20.50
Calendar 1997:
March 31........................................................ $30.17 $16.67
June 30......................................................... 35.88 20.00
September 30.................................................... 38.63 27.75
December 31..................................................... 39.75 25.13
Calendar 1998:
March 31........................................................ $35.50 $23.50
</TABLE>
On March 9, 1998, the last business day preceding public announcement of the
Merger, the closing sale price of the Davox Common Stock was $34.88. On March
31, 1998, the closing sale price of the Davox Common Stock was $31.13 per
share. As of March 31, 1998, there were approximately 302 record holders of
Davox Common Stock.
Davox has never paid dividends on its common stock and does not anticipate
the payment of dividends in the near future. It has been the policy of the
Board of Directors of Davox to retain earnings to support operations and to
finance continued growth of its business rather than to pay dividends. Any
future payment of cash dividends of Davox would be determined by its Board of
Directors in light of circumstances then existing, including its growth,
profitability, financial condition and results of operations, and such other
factors as the Davox Board deems relevant.
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INFORMATION CONCERNING ANSWERSOFT
ANSWERSOFT BUSINESS
GENERAL
AnswerSoft, Inc. ("AnswerSoft" or the "Company") develops and markets
software products which address the inter-application automation ("IAA") needs
of the business call center. The Company was founded in 1993 and released its
first products for general availability in 1994. Today the Company has six
products focused on enhancing the interaction between a business and its
customers by way of the business call center. AnswerSoft sells its products
primarily through an indirect sales channel consisting of telecommunications
equipment vendors, systems integrators and distributors, and has formed
strategic partnerships with major providers of telephony systems, including
Lucent Technologies, Northern Telecom, Siemens and Ericcson Networks AB.
AnswerSoft's customers include companies in various industries, including
computer and electronics manufacturing, financial services, healthcare,
insurance, telecommunications and transportation.
OVERVIEW
In a highly competitive, global marketplace, superior customer service is an
important competitive advantage. A business that can maximize the value of
each interaction with its customers can develop and enhance customer
relationships and differentiate its products and services from its
competitors. As customer information demands increase and as more customers
interact with organizations by voice, the Internet, e-mail, fax and other
contact channels, successful organizations must be able to access and quickly
gather widely distributed customer data in order to provide a high level of
customer service.
Telephone-based, customer call centers are a primary channel through which
many companies interact with their customers. Companies have traditionally
viewed call centers as "cost centers" and have focused on increasing the
number of transactions handled by each customer service representative ("CSR")
in order to minimize the operational costs of the call center. Initial call
center automation systems, such as voice response units, automatic call
distributors ("ACD") and smart switches, were deployed to increase the number
of telephone calls that could be handled by a CSR. In such an environment,
customer service depends on specialized CSR training and is constrained by a
CSR's inability to access information residing elsewhere in the enterprise. As
a result, customers frequently experience less than adequate service resulting
in high customer turnover.
First generation technologies of computer telephony integration ("CTI"),
such as proprietary software links of the telephone switch to telephony
servers, have enabled call centers to improve customer service. However, first
generation systems have significant limitations. In a typical first generation
system, a customer call is connected to a CSR through an information interface
which typically accesses single applications or databases. These systems
create "islands of information" that are disconnected from other resources
across the enterprise. First generation system implementations involve highly
customized, proprietary software development, can take six months to a year to
deploy, are costly to maintain and are subject to a high risk of product
obsolescence. As a result, critical business and customer information often
cannot be readily shared or effectively used and companies implementing these
solutions have only a limited ability to provide a comprehensive, enterprise-
wide customer service solution.
THE ANSWERSOFT SOLUTION
AnswerSoft believes that the future of the call center industry is being
driven by four critical factors. The first factor is the need for rapid
deployment of solutions to quickly gain the benefits and competitive advantage
that new technology can provide. Second, there is an increasing emphasis on
quick and substantial return-on-investment. Third is the need to protect
legacy systems while planning for future growth using standards-based
solutions. Last, substantial competitive advantage can be derived from rapidly
linking and sharing information across the enterprise. AnswerSoft believes
that these factors increasingly will be addressed by second generation CTI
technologies incorporating a new category of standards-based software, known
as Inter-Application
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Automation ("IAA") software, that links multiple applications, data sources
and corporate and customer information across the enterprise.
AnswerSoft delivers second generation CTI solutions incorporating standards-
based IAA software that is designed to be rapidly deployed in the business
call center. AnswerSoft's products enable organizations to make each
interaction with its customers more effective, whether by telephone, fax, e-
mail or the Internet, by connecting diverse applications to data residing
across the enterprise. AnswerSoft's products are designed to allow companies
to rapidly design and deploy systems that automate a range of business
processes for the purpose of understanding, monitoring and enhancing each
customer relationship that enable CSRs to be more effective.
AnswerSoft's Concerto family of call center solutions incorporate second
generation CTI technologies, such as smart screen pops, intelligent routing,
real-time data mining and web-enabled call center solutions. AnswerSoft has
developed these technologies on an automation engine that integrates with
enterprise systems through technology enabling software modules called
"Technology Access Modules" or "TAMs." AnswerSoft also provides easy-to-use
customization tools and software applications that integrate with a Company's
existing infrastructure, including legacy systems. Businesses maintain their
existing investment in infrastructure systems and data while gaining the
ability to rapidly deploy an automation solution tailored to the specific
business rules of the enterprise. AnswerSoft's core technology is its
automation engine which utilizes easy-to-use scripting tools for
customization. All AnswerSoft products are compliant with open standards for
telephony, data and communications. Applications are designed using the
Windows Open Services Architecture ("WOSA") further simplifying and speeding
access to information.
AnswerSoft's standards-based approach is designed to minimize installation
and deployment issues and a key benefit of AnswerSoft's IAA solution is its
ability to be rapidly deployed. Unlike first generation systems for which
average implementation can take up to six months to a year for basic
functionality, AnswerSoft has designed its systems to allow customers to
accelerate their return-on-investment. During the last year, the average
deployment cycle for AnswerSoft's comprehensive customer service solutions was
twenty-eight (28) days from the date that the implementation started.
THE ANSWERSOFT STRATEGY
AnswerSoft seeks to be a leading worldwide provider of IAA applications
software. AnswerSoft's strategy includes the following key elements:
Provide Industry-Leading, Technologically Advanced Products
AnswerSoft believes that providing technologically advanced products built
on leading edge technologies has been and will continue to be essential to
remain competitive. AnswerSoft has incorporated sophisticated technologies
into its IAA products, such as smart screen pops, intelligent routing, real-
time data mining and web-enabled call center solutions. AnswerSoft will
continue to devote substantial resources to product development in order to
offer a range of products that provide comprehensive IAA solutions and
incorporate new technologies as they evolve.
Focus on Open Systems and Standards-Based Solutions
Call centers typically incorporate a broad array of disparate systems,
databases, and applications software. AnswerSoft believes that IAA solutions
must be based on open architectures and standards-based technologies in order
to leverage legacy systems and provide access to third-party applications.
AnswerSoft's products are designed to be compatible with open standards such
as Telephony Applications Programming Interface ("TAPI"), Telephony Services
Application Programming Interface ("TSAPI"), WOSA and Open Database
Connectivity Standard ("ODBC"). AnswerSoft intends to continue to enhance its
products to be fully compatible with emerging standards in order to offer
solutions that interface with a broad array of call center system
configurations.
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Offer Rapid Deployment and Prompt Return-on-Investment
AnswerSoft believes that rapid deployment and prompt return-on-investment
are critical characteristics of an IAA solution. Among the technologies that
AnswerSoft has developed to enable rapid deployment of its solutions are the
TAMs built into its automation engine. TAMs shield the user from the
complexities of the underlying architecture of these systems for more rapid
and cost-effective implementation, and enable AnswerSoft's solutions to
interface with and leverage legacy systems and third party applications for
prompt return-on-investment. In addition, AnswerSoft has developed an easy-to-
use scripting language that provides AnswerSoft and its users with the
flexibility to quickly tailor a solution to their particular needs. AnswerSoft
will continue to focus on rapid deployment and measurable return-on-investment
as a means of differentiating its products and solutions in an increasingly
competitive market for call center solutions.
Further Partnerships with Other Leading Providers
AnswerSoft intends to devote substantial efforts to its recently announced
AnswerPartners Alliance Program as a means of offering companies the most
comprehensive call center automation solutions. The AnswerPartners Alliance
was designed as a multi-tiered program to reflect the broad range of
technologies and numerous market segments emerging in the call center
industry. Through AnswerSoft's Software Alliance, Platform Alliance, and
Consulting and Systems Integration Alliance, AnswerSoft's strategy is to link
and forge relationships that AnswerSoft believes will lead to cooperative
technology development efforts, OEM agreements, sales referral agreements and
cooperative marketing activities.
Leverage Web Technology to Offer Comprehensive Customer Service Solutions
AnswerSoft believes that the Internet will continue to be an increasingly
important means of interaction between companies and their customers. As a
result, comprehensive customer service solutions must integrate web-based
communications with telephone, fax, e-mail and other forms of customer
communications. AnswerSoft's recently introduced Sixth Sense Web product is
designed to enable Internet-based customer service. AnswerSoft intends to
continue to devote resources to enhancing its existing products, such as Sixth
Sense Web, and to develop new products to focus on this opportunity.
PRODUCTS
AnswerSoft's products allow an organization to manage customer-to-company
interactions to increase productivity, reduce costs and achieve greater
customer satisfaction and loyalty. AnswerSoft's products are sold on a price-
per-seat basis with prices ranging from $450 to $2,245 depending on the
products purchased and discounts for quantity of seats and products purchased.
The following products comprise AnswerSoft's Concerto family of call center
automation solutions:
. SIXTH SENSE, AnswerSoft's flagship product, automates agent workflow
throughout a customer call by accessing data and applications relevant
to a specific customer, and then automatically presenting relevant data
to a CSR. Sixth Sense analyzes each call in real-time and takes action
based on user-defined rules to determine the caller's identity and
needs. Sixth Sense's intelligent data mining capability gives CSRs
context-sensitive information and customer-specific prompts, allowing a
CSR to service the customer's particular needs.
. SMARTROUTE intelligently routes calls based on call data and information
from customer records by matching this data to the "best-agent"
destination. SmartRoute culls information about each customer, then
accesses ODBC-compliant customer records from across the enterprise to
make routing decisions. Applying scripted business rules, SmartRoute
uses account information, call history, other customer data, CSR
attributes, CSR status, and other information to make an appropriate
match between a customer and the best available CSR. These scripted
business rules can be customized to fit a call center's particular
needs.
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. SOFTPHONE AGENT consolidates and simplifies call management and control
by allowing agents to monitor work modes and call center activity on the
agent desktop. Through a graphical user interface, a CSR has access to
dynamic call control buttons that make telephone functions easy to use.
By providing access to call functions on-screen, SoftPhone Agent enables
CSRs to perform routine tasks more efficiently.
. SHADOW is a call center management tool that provides analysis and
reporting of both telephony and business data associated with call
center and web activity. Shadow integrates call center device data with
business data to enhance the value of the information gathered. Shadow
tracks and delivers call statistics in real-time, enabling call center
managers to improve productivity by adjusting workflows and resources.
Shadow monitors Private Branch Exchange ("PBX") activity and collects
data by device, queue and agents and generates real-time and historical
reports based on a number of parameters. It then associates that data
with business data, such as revenue information and other efficiency
measurements. Shadow then archives this data on an ODBC-compliant
database, allowing call centers to compare real-time information with
historical data.
. SIXTH SENSE WEB delivers customer and transaction-specific information
to a user's Web browser, integrating web activity with customer center
systems. This Web-enabled automation engine allows customers to get
information and perform transactions via the Internet. Sixth Sense Web
dynamically generates Web pages to be delivered to an agent's desktop
via any standard Web browser. As the agent selects or links buttons
within the page, Sixth Sense Web generates new pages or objects and
delivers them in real-time.
. SCRIPT TOOLKIT provides a GUI-based script builder and text-based script
editor used for deploying the business workflows in a call center. The
Toolkit delivers a Visual Basic-like scripting tool that allows an
integrator to rapidly connect events with business processes.
CUSTOMERS
AnswerSoft's customers are companies that pursue a customer-centric
strategy: they leverage superior customer service to strengthen their market
position, retain existing customers and generate revenue. AnswerSoft's
customers compete in markets, such as computer and electronics manufacturing,
financial services, healthcare, insurance, telecommunications and
transportation, characterized by fierce competition and product/service
parity. Though market dynamics vary, AnswerSoft's customers confront a similar
challenge: how to harness the power of leading computing and
telecommunications technologies to differentiate themselves from competitors
through superior customer service.
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The following is a representative list of customers that accounted for more
than $4,853,402 in total revenue (license and service) to AnswerSoft since
January 1995 (through December 31, 1997):
Computer & Electronics Insurance and Financial Services
Manufacturing
Aetna US Healthcare
Allied Signal American General Corporation
Aerospace Improvement ARI - Automotive Retail Inc.
BP America Center Diversified Investment Advisors
Caterpillar, Inc. First USA
Champion International Pitney Bowes Credit Corp.
Compaq Computer Prime Option
Corporation Prudential Insurance Company of
Electronic Data America
Systems The Money Store
Gateway 2000 Texas Commerce Bank N.A., Inc.
GE Capital US Bank
Avnet
Sonoco
SuperValu
Tennant Company
Thomson Consumer
Electronics
Telecommunications Utilities
Alliance Data Systems Southern Company (and the following
American Mobile subsidiaries):
Satellite Georgia Power Company
Corporation Mississippi Power Company
Harte Hanks Tennessee Valley Authority
KPMG Peat Marwick
Knight Ridder, Inc. Healthcare
METROCALL, Inc.
Precision Response AHN Partners, LP
Corp. Group Health Cooperative
SNET Mobility Neumours Children's Clinic
St. Paul Pioneer Press
Uarco
SALES AND MARKETING
AnswerSoft's sales and marketing strategy is to target business call centers
through its worldwide sales organization and a broad range of industry
partners, including telecommunications equipment vendors, systems integrators,
and distributors. An important component to AnswerSoft's sales and marketing
strategy is AnswerSoft's strategic partnerships with the major providers of
telephony systems, including Lucent Technologies, Northern Telecom, Siemens
and Ericcson Networks AB. AnswerSoft's sales force works in conjunction with
these partners to sell, distribute and deploy its call center solutions. These
partnerships span the range from joint sales and marketing agreements to
cooperative technology development.
AnswerSoft's sales organization markets its products and services worldwide.
As of December 31, 1997, the sales force consisted of 15 sales representatives
worldwide, of whom 13 were in the United States. Sales representatives are
assigned quotas and compensated for all revenues, direct and indirect,
generated within their assigned territories.
AnswerSoft's worldwide headquarters is located in Richardson, Texas.
AnswerSoft also has sales and support offices in the metropolitan areas of
Atlanta, Georgia; Boston, Massachusetts; Chicago, Illinois; Denver, Colorado;
Los Angeles, California; New York, New York; San Francisco, California and
Washington, D.C.
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AnswerSoft's European operations center is located in Redding, England;
AnswerSoft's Asia Pacific operations center is located in Singapore. Revenues
outside of the United States accounted for 11%, 2% and 0%, respectively, of
AnswerSoft's total revenues for the years ended December 31, 1997, 1996 and
1995, respectively.
PRODUCT SUPPORT AND TECHNICAL SERVICES
AnswerSoft's Technical Services Division offers a range of programs that
assist customers in adopting automation technology and deploying AnswerSoft
solutions in the call center. This organization is staffed with systems and
applications specialists with practical experience developing customized
solutions in workflow automation and application design. These specialists
have in-depth knowledge of AnswerSoft products and the ability to understand
specific and unique requirements of a particular call center (both technically
and operationally). This coverage spans the full deployment process, from
requirements analysis through implementation and support. These professionals
can be called upon at the initial planning stage or at any time during
implementation to ensure that the technology deployed will be optimized at
each call center. AnswerSoft support services are also on-line to meet a full
range of product support needs. AnswerSoft's support services organization
consists of experienced software developers with expertise in client/server
computing and telecommunications. A variety of training classes for end users,
administrators, and programmers are available at AnswerSoft's headquarters or
can be conducted at customer locations. Moreover, to facilitate bringing
technology on-line, AnswerSoft builds into its products intelligent error
messaging that states the nature of an impending problem, locates it within
the infrastructure, and identifies the best resource to contact for problem
resolution. Finally, all AnswerSoft products support remote diagnostics and
service.
ARCHITECTURE
The AnswerSoft architecture consists of two layers: a central automation
engine that integrates with a company's enterprise systems and simultaneously
monitors the organization's communications and computer systems, and TAMs,
prepackaged links to existing data exchange and technology standards, that
reside between AnswerSoft's applications and an organization's telephony and
information systems.
The software automation engine is capable of handling thousands of
simultaneous data and voice transactions per minute. It caches precompiled
processes to provide high-speed operation, and can "data-mine" or extract
needed information from data sources within the enterprise. Once an event
occurs (such as an incoming call or Web inquiry), the automation engine makes
decisions based upon rules that the user has defined using AnswerSoft's
scripting tools. Rules can readily be scripted to automatically determine
where the call should be routed, what data should accompany it and how the
agent should service the customer. After this data is processed by the
automation engine, applications take action to perform the appropriate task
such as retrieving data or launching a customer support application. Workflow
customization is accomplished by the AnswerSoft Script Toolkit.
AnswerSoft's automation engine and applications integrate with a company's
enterprise systems through TAMs. TAMs play a critical role in the rapid
deployment and integration of Concerto into call center environments. TAMs
shield the user from the need to understand details of emerging technologies
(such as ODBC, HLLAPI, MAPI, or Active X) typically required to achieve
integration. TAMs monitor enterprise systems such as PBXs, ACDs and Web sites
for automation triggering events which in turn associates events with call
center automation scripts to invoke business processes. AnswerSoft's TAMs
provide an insulation layer from the anomalies and transaction processing
weaknesses of third party technologies.
RESEARCH AND DEVELOPMENT
AnswerSoft believes that strong product development capabilities are
essential to maintaining the competitiveness of its current product suite and
adding new features and functionality to AnswerSoft applications. AnswerSoft's
product development team consists of professionals with expertise in software,
telecommunications and computer hardware. Since its founding, AnswerSoft has
believed that this combination
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of diverse technical and communications expertise contributes to the
functionality of its software products and thereby provides AnswerSoft with a
significant competitive advantage.
Research and development expenses were approximately $1,939,000, $872,000,
and $881,000 for the fiscal years ended December 31, 1997, 1996 and 1995,
respectively. AnswerSoft's total research and development staff consisted of
22 employees as of December 31, 1997. AnswerSoft expects that it will continue
to increase research and development expenditures in the future. See
"AnswerSoft Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The market for AnswerSoft's products are, and the markets for AnswerSoft's
products will be characterized by rapidly changing technologies, evolving
industry standards, frequent new product introductions and short product life
cycles. Inherent in the product development process are a number of risks. The
development of new, technologically advanced products is a complex and
uncertain process requiring high levels of innovation, as well as the accurate
anticipation of technological and market trends. The introduction of new or
enhanced products also may require AnswerSoft to manage the transition from
older products in order to minimize disruption in customer ordering patterns,
to avoid excessive levels of older product inventories and to ensure that
adequate supplies of new products can be delivered to meet customer demand.
There can be no assurance that AnswerSoft will successfully develop, introduce
or manage the transition of new products. Products may contain undetected or
unresolved software or hardware errors when they are first introduced or as
new versions are released. There can be no assurance that, despite extensive
testing, software or hardware errors will not be found in new products or
upgrades after commencement of commercial shipments of new or enhanced
products. The inability of such products to gain market acceptance or problems
associated with new product transitions could have a material adverse effect
on the business, results of operations and financial condition of AnswerSoft.
See "Risk Factors--New Product Development and Timely Introduction of New and
Enhanced Products."
COMPETITION
The market for AnswerSoft's software products is highly competitive and
subject to rapid technological change. AnswerSoft's principal competition
currently comes from different market segments including computer telephony
platform developers, computer telephony applications software developers and
telecommunications equipment vendors. These competitors include Genesys
Telecommunication Laboratories, Nabnasset Corporation and Spanlink
Communications, as well as IBM and Hewlett-Packard. Many of AnswerSoft's
current and potential competitors have longer operating histories,
significantly greater financial, technical and marketing resources, greater
name recognition and a larger installed customer base than AnswerSoft has. In
addition, many of these competitors may be able to respond more quickly to new
or emerging technologies and changes in customer requirements, and to devote
greater resources to the development, promotion and sale of their products
than AnswerSoft. Furthermore, AnswerSoft may face additional competition from
other established and emerging companies, which may choose to enter the market
by developing products that compete with those offered by AnswerSoft or by
acquiring companies, businesses, products or product lines that compete with
AnswerSoft. It is also possible that alliances among competitors may emerge
and rapidly acquire significant market share. AnswerSoft also believes that
competition will increase as a result of consolidation in the call center
technology industry. There can be no assurance that AnswerSoft's current or
potential competitors will not develop or acquire products comparable or
superior to those developed by AnswerSoft, combine or merge to form
significant competitors, or adapt more quickly than AnswerSoft to new
technologies, evolving industry trends and changing customer requirements.
Increased competition could result in price reductions, reduced margins or
loss of market share, any of which could materially and adversely affect
AnswerSoft's business, operating results and financial condition. There can be
no assurance that AnswerSoft will be able to compete successfully against
current and future competitors or that competitive pressures faced by
AnswerSoft will not materially adversely affect its business, financial
condition and results of operations. If AnswerSoft is unable to compete
successfully against current and future competitors, the combined company's
business, operating results and financial condition will be materially and
adversely affected.
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INTELLECTUAL PROPERTY
The success and ability of AnswerSoft to compete will depend in part upon
its proprietary technologies and continued development and acquisition of
additional proprietary technologies. AnswerSoft relies on a combination of
contractual rights, trade secrets, patents, trademarks, copyrights and non-
disclosure agreements to protect its respective proprietary rights. AnswerSoft
currently has a number of patent applications that are currently pending for
certain of its existing products. There can be no assurance that patents will
be issued with respect to pending or future patent applications of AnswerSoft.
In addition, AnswerSoft has generally entered into confidentiality or license
agreements with its employees, resellers, distributors, customers and
potential customers and has limited access to the distribution of its
software, documentation and other proprietary information. There can be no
assurance that the steps taken by AnswerSoft to protect its proprietary rights
will be adequate to prevent misappropriation of its technologies or that
competitors or strategic partners will not independently develop technologies
that are substantially equivalent or superior to its technology. In addition,
the laws of some countries do not protect proprietary rights to the same
extent as do the laws of the United States. AnswerSoft is also subject to the
risk of adverse claims and litigation alleging infringement of the
intellectual property rights of others. There can be no assurance that third
parties will not assert infringement claims in the future with respect to
current or future products of AnswerSoft or that any such future claims will
not require AnswerSoft to enter into license arrangements or result in
protracted and costly litigation, regardless of the merits of such claims. No
assurance can be given that any necessary licenses will be available or that,
if available, such licenses can be obtained on commercially reasonable terms.
See "Risk Factors--Dependence on Proprietary Technology."
There has also been a substantial amount of litigation in the software
industry regarding intellectual property rights. There can be no assurance
that third parties will not in the future claim infringement by AnswerSoft
with respect to current or future products, trademarks or other proprietary
rights. AnswerSoft expects that software product developers will increasingly
be subject to infringement claims as the number of products and competitors in
AnswerSoft's industry segment grows and the functionality of products in
different industry segments overlaps. Any such claims, with or without merit,
could be time-consuming, result in costly litigation, cause product shipment
delays or require AnswerSoft to enter into royalty or licensing agreements.
Such royalty or licensing agreements, if required, may not be available on
terms acceptable to AnswerSoft or at all, which could have a material adverse
effect on AnswerSoft's business, financial condition and results of
operations.
EMPLOYEES
At December 31, 1997, AnswerSoft had 74 employees worldwide, of which 22
were primarily engaged in research and development, 12 in technical service,
29 in sales and marketing and 11 in finance and administration. Continued
growth of AnswerSoft would require recruitment and hiring of a substantial
number of new engineering, technical support, sales, marketing and managerial
personnel. Competition for such highly qualified personnel is intense. There
can be no assurance that AnswerSoft will be successful at hiring or retaining
these personnel. Failure to attract and retain key personnel could have a
material adverse effect on the business, results of operations and financial
condition of AnswerSoft. See "Risk Factors--Dependence on Key Personnel."
FACILITIES
AnswerSoft's worldwide headquarters is located in approximately 25,700
square feet of office space Richardson, Texas under a lease, which expires on
January 14, 2002. AnswerSoft also leases space for its sales and support
office in the metropolitan areas of: Boston, Massachusetts; Chicago, Illinois;
New York, New York; San Francisco, California and Washington, D.C. AnswerSoft
believes that its existing facilities are adequate for its current needs and
that additional space will be available as needed.
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ANSWERSOFT SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain selected condensed consolidated
financial data with respect to AnswerSoft for each of the four years in the
period ended December 31, 1997:
<TABLE>
<CAPTION>
(1) YEARS ENDED DECEMBER 31,
--------------------------------------------------
1997 1996 1995 1994
----------- ----------- ----------- -----------
CONDENSED CONSOLIDATED
STATEMENT OF
OPERATIONS DATA:
<S> <C> <C> <C> <C>
Total revenue............. $ 6,738,113 $ 3,456,870 $ 1,040,728 $ 36,015
Cost of revenue .......... 1,478,658 654,538 711,931 --
----------- ----------- ----------- -----------
Gross profit............ 5,259,455 2,802,332 328,797 36,015
Costs and expenses........ 8,797,113 3,364,422 2,682,182 3,348,066
----------- ----------- ----------- -----------
Loss from operations...... (3,537,658) (562,090) (2,353,385) (3,312,051)
Net loss.................. $(3,458,965) $ (481,928) $(2,170,549) $(3,304,810)
Basic and diluted loss per
common share ............ $ (3.37) $ (0.79) $ (4.33) $ (7.61)
Weighted average shares
outstanding.............. 1,026,561 607,141 501,058 434,020
CONDENSED CONSOLIDATED
BALANCE SHEET
DATA:
Working capital......... $ 4,042,986 $ 2,419,416 $ 2,708,616 $ 5,006,883
Total assets............ 6,392,339 4,748,730 3,291,026 5,498,723
Long-term debt.......... 297,008 -- 5,295 17,326
Preferred stock......... 13,911,122 8,480,000 8,480,000 8,480,000
Stockholders' deficit... (9,692,902) (5,945,566) (5,467,811) (3,300,470)
</TABLE>
- --------
(1) Prior to December 31, 1995 the Company was a development stage enterprise
and prior to March 10, 1994 the Company had no significant operations.
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ANSWERSOFT MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
References in this section to the "Company" shall be deemed to refer to
AnswerSoft. All statements contained herein that are not historical facts,
including but not limited to, statements regarding anticipated future capital
requirements, the Company's future development plans, the Company's intent to
broaden its customer base and decrease its reliance on its largest customers,
the Company's ability to obtain debt, equity or other financing, and the
Company's ability to generate cash from operations, are based on current
expectations. These statements are forward looking in nature and involve a
number of risks and uncertainties, as more fully described under "Risk
Factors." Actual results may differ materially.
The following table sets forth, for the periods indicated, the percentage of
total revenue represented by items as shown in the Company's Consolidated
Statement of Operations. This table should be read in conjunction with the
Consolidated Financial Statements and Notes to Consolidated Financial
Statements contained elsewhere herein.
PERCENTAGE OF TOTAL REVENUE FOR THE
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Total revenue
Product.................................................. 79% 74% 23%
Product support and services............................. 21 26 77
--- --- ----
100 100 100
--- --- ----
Cost of revenue
Product.................................................. 3 3 3
Product support and services............................. 19 16 65
--- --- ----
22 19 68
--- --- ----
Gross profit............................................... 78 81 32
--- --- ----
Costs and expenses
Sales and marketing...................................... 75 56 126
Software development..................................... 29 25 85
General and administrative............................... 27 16 47
--- --- ----
131 97 258
Loss from operations....................................... (53) (16) (226)
Interest income, net....................................... 1 2 20
--- --- ----
Loss before income taxes................................... (52) (14) (206)
Income taxes............................................... 0 0 3
--- --- ----
Net loss................................................... (52)% (14)% (209)%
=== === ====
</TABLE>
The Company develops, markets and supports inter-application automation
software products within the worldwide computer telephony integration market
with a primary focus on the business call center and the interaction between a
business and its customers. The Company was founded in 1993, began development
activities in 1994 and shipped its first product in late 1994. During 1995 the
Company transitioned from a development stage enterprise to a software
products and services company. As a result, the components of the Company's
revenue transitioned from primarily customer contract development services to
revenue derived from software product shipments and the associated revenue
from product support and services contracts.
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<PAGE>
Total revenue was $6,738,113, $3,456,870, and $1,040,728 for the years ended
December 31, 1997, 1996, and 1995, respectively. Total revenue grew 195% in
1997 over 1996, and 332% in 1996 over 1995. Losses from operations of
$3,537,658, $562,090, and $2,353,385 were recorded in 1997, 1996 and 1995,
respectively. These losses were the result of the Company's development stage
operations in 1995 and were the result of personnel costs in 1996 and 1997
associated with the addition of development and support resources, and
building a sales and marketing organization. While the Company intends to
maintain the current level of resources to develop and enhance products and to
generate revenues, no assurances can be given that the Company will be
successful in achieving profitability on a quarterly or annual basis.
Revenue is generated by the Company's sales organization and indirect sales
channels including resellers, distributors and strategic partners. Revenue
from the Company's indirect sales channels in 1997, 1996, and 1995 was 47%,
48%, and 0% of total revenue, respectively. The Company generated 65% of its
1997 revenue from two customers. In 1996, one customer provided 35% of the
Company's revenue. In 1995, 81% of the Company's revenue was generated by five
customers. The Company's future revenue growth is dependent upon certain
business partners. Certain of the partners offer products competitive with
those of the Company and contracts with these partners do not provide for
minimum orders. Consequently, the loss of these distributors could have a
material adverse affect on the Company's results of operations and financial
condition. The Company intends to broaden its base of existing and new
customers by enhancing existing products, introducing new products, initiating
an international sales and marketing presence, and building alternate channels
of distribution, thereby decreasing its dependence on certain customers and
distributors. There can be no assurance that the Company will be successful in
these efforts. Revenues generated outside North America represented 11%, 2%,
and 0% of total revenues in 1997, 1996 and 1995, respectively.
Product revenue consists of license fees from software products licensed
through the Company's sales organization and indirect sales channels. Product
revenue was $5,307,222, $2,565,957, and $240,803 in 1997, 1996 and 1995,
respectively. Product revenue grew by 207% from 1996 to 1997 and grew 1066%
from 1995 to 1996. The increase in 1997 was primarily due to revenue from new
products introduced in 1997, new indirect sales channels, and more sales
representatives employed to sell the Company's products. The increase in 1996
was mainly attributable to new products introduced in 1996 and the Company's
transition from a development stage enterprise in 1995 to an operating company
in 1996.
Cost of product revenue as a percentage of product revenue was 3%, 4% and
14% in 1997, 1996 and 1995 respectively. Cost of product revenue consists of
third party royalties, costs of software media and user guides, packaging
materials and labor and overhead associated with shipping the product. Except
for third party royalties which relate to the sale of one of the Company's
products, the cost of product revenue tends to be fixed and an insignificant
component of the cost of sale.
Product support and services revenue was $1,430,891, $890,913, and $799,925
in 1997, 1996 and 1995, respectively. Product support and services revenue
consists of fees from post contract customer support services, installation
and implementation services, training and education, and in 1996 and 1995, it
also included revenue from contract development service fees of $353,325 and
$688,463, respectively. Product support and services revenue increased 61%
from 1996 to 1997, and 11% from 1995 to 1996. The increases in 1997 and 1996
were due to increases in post contract product support revenue primarily due
to an increase in the installed customer base, as well as higher installation
and implementation revenue and to an increase in the number of professional
services projects in 1997 partially offset by lower education and training
revenue. There was no contract development revenue in 1997. In 1996 and 1995,
40% and 86%, respectively, of the product support and services revenue related
to contract development services activities.
Cost of product support and services revenue as a percentage of service
revenue was 91%, 63%, and 85% in 1997, 1996 and 1995, respectively. The
increase in cost of product support and services revenue in 1997 over 1996 was
primarily due to an increase in the numbers of employees dedicated to customer
support, training and education, and professional services. The cost of
product support and services revenue increased as a percent of revenue
primarily due to lower revenue from training and education fees, and lower
margins on projects where
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<PAGE>
consulting firms were used to meet customer commitments. Costs related to
contract development services $154,148 and $417,064 in 1996 and 1995,
respectively.
Sales and marketing expenses were $5,036,145, $1,939,435, and $1,316,533,
representing 75%, 56%, and 127% of total revenue during 1997, 1996, and 1995,
respectively. The increase in 1997 over 1996, and also
in 1996 over 1995, was primarily attributable to increased payroll, related
benefit expenses and one time hiring costs associated with an increase in the
number of sales and marketing personnel in an effort to increase revenue, and
commissions and travel expenses related to the increased revenue generation.
In addition, marketing expenses increased due to higher advertising and
promotional expenses associated with new product releases in 1997. Although
the Company expects the absolute amount of sales and marketing expenses to
continue to rise in future periods, the Company expects sales and marketing
costs to decrease as a percent of revenue to the extent that the Company is
able to increase revenue. There can be no assurance, however, that increased
spending in sales and marketing will result in increased revenue.
Software development expenses were $1,939,366, $872,460, and $880,726,
representing 29%, 25%, and 85% of total revenue during 1997, 1996 and 1995,
respectively. The increase in 1997 was primarily attributable to personnel
increases and related payroll, benefits and one time hiring expenses. During
1997, the Company released new versions of Sixth Sense and SoftPhone Agent as
well as new product introductions of Shadow and Sixth Sense Web. In addition,
certain of the Company's products were ported to an additional major telephone
switch platform. Development expenses as a percent of revenue are expected to
decline in the future to the extent that the Company is able to increase
product revenue but that the absolute dollars spent will increase in future
periods.
General and administrative expenses were $1,821,602, $552,527, and $484,923
in 1997, 1996 and 1995, respectively, representing 27%, 16%, and 47% of
revenue in 1997, 1996 and 1995, respectively. The increase in general and
administrative expense in 1997 is primarily due to payroll, benefits and one
time hiring costs associated with personnel increases, higher rent expense for
the Company's new office facilities, and higher overall operating costs due to
the personnel increases in all departments. The increase in 1996 and 1995 is
primarily due to higher overall operating costs due to personnel additions.
Interest income, derived primarily from money market instruments, increased
21% from 1996 to 1997, due to higher average balances of cash invested.
Interest income declined in 1996 from 1995 due to lower average balances of
invested cash. Interest expense increased $19,078 from 1996 to 1997 due to
higher average amounts borrowed under the Company's line of credit. Interest
expense in 1995 and 1996 was immaterial.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997 the Company's principal sources of liquidity were
its cash and cash equivalent balances of approximately $3,273,323, accounts
receivable of $2,240,092, and approximately $2,300,000 available under the
Company's lines of credit. At the end of 1996, the Company's cash and cash
equivalent balances were $2,942,179. Net cash used in operations was
$4,483,699, primarily a result of cash inflows from a 195% growth in 1997
revenues over 1996 offset by cash outflows due to increases in payroll,
benefits and one time hiring costs associated with a 147% increase in
personnel. Net cash used in investing activities represented $681,097 of
capital expenditures to support the personnel additions in 1997. Net cash
provided by financing activities of $5,495,940 represents $5,000,000 proceeds
from the Series B Preferred Stock offering in July 1997, borrowings of
$475,213 for capital expenditures and proceeds from the exercise of stock
options, offset by payments on a capital lease obligation.
The Company has an agreement for an accounts receivable line of credit with
a bank for up to $1,000,000 based on eligible receivables (as defined in the
line of credit) and a $2,000,000 equipment line of credit with the same bank.
At December 31, 1997 there was $475,213 outstanding under the equipment line
of credit and no amounts outstanding under the accounts receivable line of
credit. The Company also has a standby letter of credit of $100,000 with the
landlord of its office facilities. No amounts were drawn against this standby
letter of credit
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<PAGE>
at December 31, 1997. The Company leases certain furniture and equipment with
an original net book value of $484,486 under a Master Lease agreement entered
into in 1996. In addition, the Company has obligations under various
facilities leases. See Note 10 to Notes to Consolidated Financial Statements.
Working capital as of December 31, 1997 was $4,042,986 as compared to
$2,419,416 as of December 31, 1996. Accounts receivable days outstanding was
120 days as compared to 123 days in 1996. Accounts receivable days outstanding
will tend to be high for the Company due to higher deferrals of post contract
customer support revenue in 1997, extended payment terms under an agreement
with the Company's largest distributor and a large portion of the Company's
revenue is shipped in the latter part of each quarter. At December 31, 1997
approximately 81% of the Company's accounts receivable are considered current
under the terms of the related contracts. Total assets at December 31, 1997
were approximately $6,392,339 compared to $4,748,730 at December 31, 1996. The
increase in total assets from 1996 to 1997 was primarily attributable the cash
proceeds from the Series B Preferred Stock offering, increased cash
collections on higher revenue offset by higher operating cash outflows due to
the increase in personnel from 30 at December 31, 1996 to 74 at December 31,
1997.
AnswerSoft's management believes that if the Merger is not consummated, the
Company is likely to need additional financing in the near future in order to
meet its cash requirements. There can be no assurance that the Company will be
able to obtain financing on terms favorable to the Company and its
stockholders, or at all, and such financing could be dilutive to the Company's
stockholders to the extent that it involves issuances of additional shares of
the Company's capital stock.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company's future results may be subject to substantial risks and
uncertainties. The Company is dependent upon the ability of certain third
parties to distribute and market its products. While the Company believes that
revenue from third party distributors could be replaced through revenue from a
direct sales organization, the Company might face significant delays in
achieving revenue targets and may incur additional costs in establishing new
distribution channels. There can be no assurance that the Company will not
suffer delays resulting from non-performance by its distribution partners due
to a variety of factors, including, but not limited to less reliance on the
Company's products as an add-on component to the switch vendors sales,
technology changes and advances that might diminish the demand for the
Company's products and the possibility that the distribution partners may
develop or purchase competing technology. Also, the Company relies on certain
intellectual property protections to preserve its intellectual property
rights. Any invalidation of the Company's intellectual property rights or
lengthy and expensive defense of those rights could have a material adverse
affect on the financial position and results of operations of the Company. The
development of new products, the improvement of existing products and the
continuing evaluation of new technologies is critical to the Company's
success. Successful product development and introduction depends upon a number
of factors, including anticipating and responding to the evolving applications
needs of customers and partners, timely completion and introduction of new
products and enhancements, and market acceptance of the Company's products.
The telecommunications industry is extremely competitive. Certain current and
potential competitors of the Company are more established, benefit from
greater market recognition and have substantially greater financial,
development and marketing resources than the Company.
The Company's quarterly and annual operating results are affected by a wide
variety of factors that could materially adversely affect revenue and
profitability, including the timing of customer and distributor orders; the
Company's ability to introduce new products on a timely basis; introduction of
products and technologies by the Company's competitors; and market acceptance
of the Company's products. As a result of the foregoing and other factors, the
Company may experience material fluctuations in future operating results on a
quarterly or annual basis which could materially and adversely affect its
business, financial condition and results of operations.
NEW ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income.
SFAS No. 130 requires disclosure of all components of comprehensive income on
an annual and interim basis. Comprehensive income
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is defined as the change in equity of a business enterprise during a period
from transactions and other events and circumstances from nonowner sources.
SFAS No. 130 is effective for fiscal years beginning after December 15, 1997.
Management does not expect the adoption of this standard to have a material
impact on the Company and its operations.
In October 1997 the FASB approved the American Institute of Certified Public
Accountants Statement of Position ("SOP 97-2"), "Software Revenue
Recognition," which will be effective for transactions occurring after
December 31, 1997. The Company's adoption of SOP 97-2 is not expected to have
a material impact on the financial position or results of operations of the
Company; however, to date, implementation guidance is minimal and the Company
has not completed its evaluation of the effect of the new standard on future
revenue recognition.
IMPACT OF YEAR 2000 ISSUE
The Year 2000 issue results from computer programs written using two digits
to recognize a year (e.g. 1997 is recognized by the two digits 97). When the
two digits 00 are used in a computer program the year recognized will be the
year 1900 rather than the year 2000. AnswerSoft's products are written to use
four digits to recognize dates and as such the occurrence of the date January
1, 2000 will not, by itself, cause the current version of the Company's
software products licensed to its customers to materially fail to operate in
accordance with published specifications for such products, provided that all
other software, scripts, hardware and products used in combination with the
Company's software properly exchange date data with the Company's software. In
addition, the Company is in the process of obtaining Year 2000 compliance
certificates from its suppliers of internally used software for mission
critical applications. However, there can be no assurance that these third
parties will not experience Year 2000 problems or that any problems would not
have a material effect on the Company's operations. Because the cost and
timing of Year 2000 compliance by third parties such as suppliers,
distributors and service providers is not within the Company's control, no
assurance can be given with respect to the cost or timing of such efforts or
any potential adverse effects on the Company of any failure by these third
parties to achieve Year 2000 compliance.
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<PAGE>
ANSWERSOFT MANAGEMENT
The following table sets forth information as of February 28, 1998 regarding
the directors and executive officers of AnswerSoft who will become officers of
AnswerSoft, a wholly owned subsidiary of Davox upon consummation of the
Merger. Each of the current executive officers and employees of AnswerSoft
will be employed by AnswerSoft, a wholly owned subsidiary of Davox following
the Merger.
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION WITH ANSWERSOFT
---- --- --------------------------------
<S> <C> <C>
Jeanne A. Bayless.... 39 Chairman of the Board and Director
David W. Branden-
burg................ 53 President and Chief Executive Officer and Director
Richard Connelly..... 46 Chief Financial Officer
Robert A. Young...... 37 Vice President of Marketing
Richard E. Dural..... 51 Vice President of Worldwide Sales
</TABLE>
Ms. Bayless co-founded AnswerSoft in January 1993, has served as a director
of AnswerSoft since that time, has served as Chairman of the Board since April
1997 and served as AnswerSoft's President and Chief Executive Officer from
formation of AnswerSoft through October 1997. Ms. Bayless holds a B.S. in
computer science from Texas A&M University and an M.S. in management from the
University of Texas at Dallas.
Mr. Brandenburg joined AnswerSoft as its President and Chief Executive
Officer and as a director in November 1997. From August 1990 to June 1995, Mr.
Brandenburg served in roles as President, Vice Chairman and Chief Operations
Officer for InterVoice, Inc., an interactive voice response and enhanced
services company. Mr. Brandenburg is a director of InterVoice, Inc. Mr.
Brandenburg holds a B.S. in electrical engineering from the University of
Michigan and an M.S. in electrical engineering from Southern Methodist
University.
Mr. Connelly joined AnswerSoft as its Chief Financial Officer in April 1997.
From June 1987 to April 1997, Mr. Connelly served in various positions at
Sterling Software, Inc., a software and services company, including Vice
President-Controller, Vice President-Treasurer and as Group Vice President,
Finance & Administration for the Systems Management Group. Mr. Connelly holds
a B.S. in accountancy from the University of Illinois, an M.S. in finance from
the University of Texas at Dallas, and is a Certified Public Accountant.
Mr. Young joined AnswerSoft as its Vice President of Marketing in April
1997. From August 1995 to March 1997, Mr. Young served as Vice President of
Marketing and then as Vice President of Products at Cardinal Technologies,
Inc., a modem company. From August 1989 to July 1995, Mr. Young served in
various marketing and product development positions at Novell, Inc., an
operating system software company, including Vice President of Marketing for
Novell's NetWare Division. Mr. Young holds a B.S. in business administration
from California State University, Chico and an M.B.A. from the Marriott
Graduate School of Management at Brigham Young University.
Mr. Dural joined AnswerSoft as its Vice President of International Sales in
April 1997 and has served as Vice President of Worldwide Sales since June of
1997. From October 1994 to April 1997, Mr. Dural was a principal at STM
Consulting, a technology consulting firm. From August 1990 to September 1994,
Mr. Dural served in various positions for Retix Corporation, an open
networking products company, initially as a Senior Vice President,
International Sales and then as Senior Vice President, Worldwide Sales.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by those of the
following officers employed by AnswerSoft and who will be employed by Davox:
AnswerSoft's Chief Executive Officer and the four other executive officers
whose salary and bonus for the 1997 fiscal year was in excess of $100,000
(collectively, the "AnswerSoft Named Officers") for services rendered in all
capacities to AnswerSoft and its subsidiaries for that fiscal year:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------ ------------------
NUMBER OF
OTHER ANNUAL SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION UNDERLYING OPTIONS
--------------------------- ---- -------- ------------ ------------------
<S> <C> <C> <C> <C>
David W. Brandenburg......... 1997 $ 29,905 $ 0 1,369,699
President and Chief
Executive Officer
Jeanne A. Bayless............ 1997 155,139(1) 0 619,055
Chairman
Richard E. Dural............. 1997 176,205(2) 9,132(3) 180,000
Vice President of Worldwide
Sales
Richard Connelly............. 1997 96,829 0 190,000
Chief Financial Officer and
Secretary
Robert A. Young.............. 1997 111,149 87,180(4) 170,000
Vice President of Marketing
</TABLE>
- --------
(1) Salary includes amounts deferred under AnswerSoft's 401(k) Plan.
(2) Includes commissions of $69,954 earned in 1997.
(3) Represents housing allowance.
(4) Represents reimbursement of moving expense and tax gross-up.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the stock option grants
made to each of the AnswerSoft Named Officers for the fiscal year ended
December 31, 1997. No stock appreciation rights were granted to these
individuals during such year.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(4)
-------------------------------------------------- ----------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE OR
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION
NAME (#)(1) FISCAL YEAR(2) ($/SH)(3) DATE 5%($) 10%($)
---- ---------- -------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
David W. Brandenburg.... 171,212(5) 5.43 0.26 11/02/07 27,995 70,946
171,212(6) 5.43 0.26 11/02/07 27,995 70,946
136,970(7) 4.34 2.60 11/03/07 98,390 217,416
222,576(8) 7.05 0.26 11/02/07 36,394 92,229
667,729 21.16 0.26 11/02/07 109,182 276,689
Jeanne A. Bayless....... 115,740(9) 3.67 0.10 04/22/07 7,279 18,446
311,604 9.87 0.26 11/02/07 50,951 129,120
191,711(9) 6.08 0.26 11/02/07 31,347 79,440
Richard E. Dural........ 111,322 3.53 0.10 04/24/07 7,001 17,742
68,678 2.18 0.26 11/30/07 11,230 28,458
Richard Connelly........ 173,610 5.50 0.10 04/24/07 10,918 27,669
16,390 0.52 0.26 11/30/07 2,680 6,792
Robert A. Young......... 150,000 4.75 0.10 04/24/07 9,433 23,906
20,000 0.63 0.26 11/30/07 3,270 8,287
</TABLE>
- --------
(1) Except as otherwise noted, each of the options listed in the table is an
option to purchase AnswerSoft Common Stock and becomes exercisable as to
25% of the option shares upon completion of one year of service from the
vesting date and the balance in a series of equal monthly installments
over the next 36 months of service thereafter. The option will vest upon
an acquisition of AnswerSoft by merger, consolidation, asset sale, or
disposition of 50% or more of the voting power of AnswerSoft's Capital
Stock. Each option has a maximum term of ten (10) years, subject to
earlier termination in the event of the optionee's cessation of employment
with AnswerSoft.
(2) Based on options to purchase an aggregate of 3,018,524 shares of
AnswerSoft Common Stock granted under the 1994 Stock Plan plus options to
purchase 136,970 shares of AnswerSoft Series B Preferred Stock granted.
(3) The exercise price may be paid in cash, in shares of AnswerSoft's Common
Stock valued at fair market value on the exercise date or through a
cashless exercise procedure involving a same-day sale of the purchased
shares.
(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Commission. There can be no assurance
provided to any executive officer or any other holder of AnswerSoft's
securities that the actual stock price appreciation over the 10-year
option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market price of the capital stock appreciates
over the option term, no value will be realized from the option grants
made to the executive officers.
(5) The option fully vests on November 3, 2000.
(6) The option fully vests on November 3, 2001.
(7) The option listed in the table is an option to purchase shares of
AnswerSoft Series B Preferred Stock and was fully exercisable at grant.
The option was exercised in full by optionee's delivery of his full-
recourse promissory note.
(8) The option listed in the table was fully exercisable at grant and was
exercised in full by optionee's delivery of his full-recourse promissory
note.
(9) The option was fully exercisable at grant.
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<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information concerning option exercises and
option holdings for the fiscal year ended December 31, 1997 with respect to
each of the AnswerSoft Named Officers. No stock appreciation rights were
exercised during such year or were outstanding at the end of that year.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS
AT FY-END (#) AT FY-END(1)
------------------------- -------------------------
VALUE REALIZED
SHARES (MARKET PRICE AT
ACQUIRED EXERCISE LESS
NAME ON EXERCISE (#) EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ---------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David W. Brandenburg.... 359,546 0 0 1,010,153 0 0
Richard E. Dural........ 0 -- 0 180,000 0 $17,812
Richard Connelly........ 0 -- 0 190,000 0 $27,778
Jeanne A. Bayless....... 0 -- 307,451 311,604 $18,518 0
Robert A. Young......... 0 -- 0 170,000 0 $24,000
</TABLE>
- --------
(1) Based on the fair market value of AnswerSoft's Common Stock at year-end
($0.26 per share, as determined by the Board of Directors) less the
exercise price payable for such shares.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
AnswerSoft's Board currently has no Compensation Committee. Option grants
are made by the AnswerSoft Board and all decisions regarding executive
compensation are made by the Board. The members of the AnswerSoft Board
currently are David W. Brandenburg, Jon W. Bayless, Joseph C. Aragona, Jeanne
A. Bayless, Habib Kairouz, and Randall Lunn. Other than Mr. Brandenburg and
Ms. Bayless, none of these individuals was at any time during the fiscal year
ended December 31, 1997, or at any other time, an officer or employee of
AnswerSoft. No member of the AnswerSoft Board serves as a member of the board
of directors or compensation committee of any entity that has one or more
executive officers serving as a member of AnswerSoft's Board.
1994 STOCK PLAN
AnswerSoft maintains the 1994 Stock Plan (the "1994 Plan"). The AnswerSoft
Named Officers and the members of the AnswerSoft Board are eligible for grants
under the 1994 Plan. AnswerSoft has reserved 4,200,000 shares of AnswerSoft
Common Stock for issuance under the 1994 Plan. As of February 28, 1998,
797,294 shares had been issued under the 1994 Plan, options for 2,841,471
shares were outstanding and 561,235 shares remained available for future
grant. Shares of AnswerSoft Common Stock subject to outstanding options which
expire or terminate prior to exercise will be available for future issuance
under the 1994 Plan.
The 1994 Plan includes an option grant program pursuant to which employees,
independent consultants and non-employee members of the AnswerSoft Board may,
at the discretion of the plan administrator, be granted options to purchase
shares of AnswerSoft Common Stock at an exercise price not less than 85% of
the fair market value of such shares on the grant date; and a stock issuance
program under which such eligible individuals may be issued shares of
AnswerSoft Common Stock.
The exercise price for options granted under the 1994 Plan may be paid in
cash or in outstanding shares of AnswerSoft Common Stock. Options may also be
exercised on a cashless basis through the same-day sale of the purchased
shares. The AnswerSoft Board may also permit the optionee to pay the exercise
price through a promissory note payable in installments over a period of
years. The amount financed may include any Federal or state income and
employment taxes incurred by reason of the option exercise. The AnswerSoft
Board has the authority to effect, from time to time, the cancellation of
outstanding options under the 1994 Plan in return for the grant of new options
for the same or different number of option shares with an exercise price per
share based upon the fair market value of the AnswerSoft Common Stock on the
new grant date.
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<PAGE>
In the event of a merger, consolidation or asset sale involving AnswerSoft,
or any transaction or series of transactions in which more than 50% of the
voting power of AnswerSoft is disposed of ("Corporate Transaction") each
option outstanding at the time under the 1994 Plan will immediately become
fully exercisable and options shall be assumed by the acquiring entity.
The AnswerSoft Board may amend or modify the 1994 Plan at any time. The 1994
Plan will terminate in 2004, unless sooner terminated by the AnswerSoft Board.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
Under the terms of an offer letter dated October 24, 1997, Mr. David W.
Brandenburg was appointed President and Chief Executive Officer of AnswerSoft,
with an annual base salary of $180,000 and bonus potential for 1998 and the
following fiscal years to be determined by the AnswerSoft Board. In addition,
Mr. Brandenburg was granted an option to purchase 890,305 shares of AnswerSoft
Common Stock, of which 222,576 shares were vested at grant and the balance
would vest 25% after one year and the balance over 36 months thereafter; an
additional option for 171,212 shares to vest on November 3, 2000; and an
additional option for 171,212 shares to vest on November 3, 2001. In addition,
Mr. Brandenburg was granted an option to purchase 136,970 shares of AnswerSoft
Series B Preferred Stock at an exercise price of $2.60 per share; no vesting
restrictions applied to the option on AnswerSoft Series B Preferred Stock.
On November 3, 1997, AnswerSoft extended a loan of $57,869.76 to Mr.
Brandenburg to assist him in exercising an option to purchase 222,576 shares
of AnswerSoft Common Stock. On December 4, 1997, AnswerSoft extended a loan of
$356,122 to Mr. Brandenburg to assist him in exercising an option to purchase
136,790 shares of AnswerSoft Series B Preferred Stock. The shares acquired
under each loan were pledged as security for the promissory notes evidencing
such loans. The promissory notes bear interest at 5.84%, compounded annually,
with principal and interest due on May 3, 1999 and June 4, 1999, respectively,
subject to acceleration upon borrower's cessation of employment and certain
other events. The largest aggregate amount of indebtedness outstanding during
1997 and the amount outstanding on December 31, 1997 was $413,991.76.
Under the terms of an offer letter dated November 14, 1997, Ms. Jeanne A.
Bayless was appointed Chairwoman of AnswerSoft with an annual base salary of
$180,000. The offer letter provided that Ms. Bayless' base salary would not be
reduced and would be increased as necessary to equal the base salary paid to
the Chief Executive Officer. Pursuant to the offer letter, Ms. Bayless
received fully vested stock options to purchase 115,740 shares in connection
with recruiting a chief financial officer and a vice president of marketing,
and fully vested stock options to purchase 191,711 shares in connection with
recruiting a chief executive officer. Pursuant to the offer letter, Ms.
Bayless was granted an additional option to purchase 311,604 shares of
AnswerSoft Common Stock. Pursuant to the offer letter, AnswerSoft has agreed
to pay Ms. Bayless a severance payment equal to six months of Ms. Bayless'
salary should her employment terminate for any reason. In addition, Ms.
Bayless would continue to participate in any benefit plans offered by
AnswerSoft for a period of twelve months after any termination of her
employment with AnswerSoft.
Under the terms of an offer letter dated March 19, 1997, Mr. Richard E.
Dural was appointed Vice President of International Sales of AnswerSoft, with
an annual base salary of $150,000 and eligibility for commissions, with a six-
month non-recoverable draw against commissions of $8,333 per month. In
addition, Mr. Dural's temporary housing expenses were to be reimbursed through
the end of 1997. Mr. Dural was granted options to purchase an aggregate of
111,322 shares of AnswerSoft's Common Stock.
Under the terms of an offer letter dated March 10, 1997, Mr. Richard
Connelly was appointed Chief Financial Officer of AnswerSoft, with an annual
base salary of $130,000 and the opportunity for a bonus under the management
bonus plan. Mr. Connelly was granted options to purchase 173,610 shares of
AnswerSoft's Common Stock.
Under the terms of an offer letter dated April 2, 1997, Mr. Robert Young was
appointed Vice President of Marketing of AnswerSoft, with an annual base
salary of $150,000 and the opportunity for a bonus under the
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management bonus plan. In addition, Mr. Young was to receive up to $40,000 of
reimbursement of moving expenses and closing costs and an additional $20,000
to assist in the sale of his primary residence and acquisition of a new home.
In addition, Mr. Young was to be granted options to purchase 150,000 shares of
AnswerSoft's Common Stock.
All of AnswerSoft's outstanding stock options will vest in full upon a
Corporate Transaction (as such term is defined in AnswerSoft's 1994 Stock
Plan) pursuant to the terms of the 1994 Stock Plan. The Merger will constitute
a Corporate Transaction and, accordingly, all of AnswerSoft's outstanding
stock options will vest in full on the Closing Date.
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PRINCIPAL STOCKHOLDERS OF ANSWERSOFT
The following table sets forth certain information regarding the beneficial
ownership of AnswerSoft's Common Stock as of February 28, 1998 as to (a) each
person who is known by AnswerSoft to own beneficially more than 5% of the
outstanding shares of AnswerSoft Common Stock, (b) each director of
AnswerSoft, (c) the President and Chief Executive Officer of AnswerSoft and
each of the AnswerSoft Named Officers (as defined above) and (d) all directors
and executive officers of AnswerSoft as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED (1)(2)
----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
------------------------------------ ----------- ----------
<S> <C> <C>
Rho Management Trust I................................... 1,964,502 16.40%
767 Fifth Avenue, 43rd Floor
New York, NY 10153
Funds Affiliated with Austin Ventures (3)................ 1,649,362 13.77%
114 W. 7th Street, Suite 1300
Austin, TX 78701
Funds Affiliated with Star Ventures (4).................. 1,309,668 10.93%
Possart Strasse 9
D-81679 Munich, Germany
Battery Ventures III, L.P................................ 1,259,374 10.51%
20 William Street
Wellesley, MA 02181
Funds Affiliated with TVM Management, LLC (5)............ 1,203,777 10.05%
101 Arch Street
Boston, MA 02110
W. Sue Bayless (6)....................................... 1,147,837 9.57%
5701 McCall Drive
Plano, TX 75093
Habib Kairouz (7)........................................ 1,964,502 16.40%
Joseph C. Aragona (3).................................... 1,649,362 13.77%
Randall R. Lunn (5)...................................... 1,203,777 10.05%
Jon W. Bayless (8)....................................... 1,147,837 9.57%
Roger W. Roberts......................................... * *
Jeanne A. Bayless (9).................................... 578,711 4.71%
David W. Brandenburg..................................... 359,546 3.00%
Richard Connelly (10).................................... 43,403 *
Robert A. Young.......................................... * *
Richard E. Dural (11).................................... 27,831 *
All directors & executive officers as a group (10 per-
sons) (12).............................................. 6,974,969 56.37%
</TABLE>
- --------
* Less than 1% of the outstanding shares of AnswerSoft Common Stock.
(1) Applicable percentage of ownership is based on shares of AnswerSoft Common
Stock outstanding as of February 28, 1998 together with applicable options
for such stockholder. Unless otherwise indicated, all information is
presented on an as converted basis assuming conversion of each share of
AnswerSoft Preferred Stock into one share of AnswerSoft Common Stock.
Beneficial ownership is determined in accordance with the rules of the
Commission, and includes voting and investment power with respect to
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shares. Shares of AnswerSoft Common Stock subject to options currently
exercisable or exercisable within 60 days after February 28, 1998 are
deemed outstanding for computing the percentage ownership of the person
holding such options, but are not deemed outstanding for computing the
percentage of any other person. All options shall become fully vested and
exercisable upon the consummation of the Merger.
(2) This table is based upon information supplied by officers, directors and
principal stockholders and filings with the Commission. Unless otherwise
indicated in the footnotes to this table and subject to community property
laws where applicable, AnswerSoft believes that each of the stockholders
named in this table has sole voting and investment power with respect to
the shares indicated as beneficially owned.
(3) Includes 532,398 shares held by Austin Ventures IV-A, L.P. and 1,116,964
shares held by Austin Ventures IV-B, L.P. Mr. Aragona, a director of
AnswerSoft, is a General Partner of AV Partners IV, L.P., which is the
general partner of Austin Ventures IV-A, L.P. and Austin Ventures IV-B,
L.P. Mr. Aragona disclaims beneficial ownership of the shares held by
Austin Ventures IV-A, L.P. and Austin Ventures IV-B, L.P. except to the
extent of his pecuniary interest therein arising from his general
partnership interest in AV Partners IV, L.P.
(4) Includes 331,252 shares held by SVE Star Venture Enterprises No. II,
888,945 shares held by SVE Star Venture Enterprises No. III, 73,755 shares
held by SVE Star Venture Enterprises No. IIIA, and 15,716 shares held by
Interstock Anstalt Fur Bermogens Und Trust Vewaltungen.
(5) Includes 357,548 shares held by TVM Techno Venture Enterprises No. II,
238,365 shares held by TVM Intertech Limited Partnership, 357,549 shares
held by TVM Zweile Beteiligung-US Limited Partnership, 11,950 shares held
by TVM Techno Venture Investors No. I, Limited Partnership, and 238,365
shares held by TVM Eurotech Limited Partnership. Mr. Lunn, a director of
AnswerSoft, is Managing Partner of TVM Management, LLC, the general
partner of TVM Techno Venture Management Limited Partnership, which is the
general partner of TVM Techno Venture Enterprises No. II, TVM Intertech
Limited Partnership, TVM Zweile Beteiligung-US Limited Partnership and TVM
Eurotech Limited Partnership. Mr. Lunn is also a general partner of TVM
Techno Venture Investors No. 1 Limited Partnership. Mr. Lunn disclaims
beneficial ownership of the shares held by TVM Techno Venture Enterprises
No. II, TVM Intertech Limited Partnership, TVM Zweile Beteiligung-US
Limited Partnership and TVM Eurotech Limited Partnership except to the
extent of his pecuniary interest therein arising from his general
partnership interest in TVM Management, LLC. Mr. Lunn also disclaims
beneficial ownership of the shares held by Techno Venture Investors No. 1
Limited Partnership except to the extent of his interest in 2,500 shares
of AnswerSoft Series A Preferred Stock held by such fund.
(6) Includes warrants exercisable for 12,500 shares of AnswerSoft Series A
Preferred Stock.
(7) Includes 1,964,502 shares held by Rho Management Trust I. Mr. Kairouz, a
director of AnswerSoft, is a Managing Director of Rho Management Company,
Inc., which is an investment advisor to Rho Management Trust I. Mr.
Kairouz disclaims beneficial ownership of the shares held by Rho
Management Trust I except to the extent of any pecuniary interest therein
arising from his position with Rho Management Company, Inc.
(8) Includes warrants exercisable for 12,500 shares of AnswerSoft Series A
Preferred Stock.
(9) Includes options exercisable within 60 days for 307,451 shares of
AnswerSoft Common Stock. Ms. Bayless, AnswerSoft's Chairman of the Board
of Directors, is the daughter of Jon W. Bayless, a director of AnswerSoft,
and W. Sue Bayless.
(10) Includes options exercisable within 60 days for 43,403 shares of
AnswerSoft Common Stock.
(11) Includes options exercisable within 60 days for 27,831 shares of
AnswerSoft Common Stock.
(12) Includes options exercisable within 60 days for 378,685 shares of
AnswerSoft Common Stock and warrants exercisable for 12,500 shares of
AnswerSoft Series A Preferred Stock.
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COMPARISON OF RIGHTS OF HOLDERS OF ANSWERSOFT
CAPITAL STOCK AND DAVOX COMMON STOCK
Upon consummation of the Merger, AnswerSoft stockholders (other than any
AnswerSoft stockholders who perfect their rights of appraisal) will become
stockholders of Davox and their rights will be governed by the Davox Charter
and the Davox By-Laws, which differ in certain respects from the AnswerSoft
Restated Certificate of Incorporation (the "AnswerSoft Charter") and the By-
Laws, as amended, of AnswerSoft (the "AnswerSoft By-Laws"). Because both
AnswerSoft and Davox are incorporated in the State of Delaware, the rights of
former AnswerSoft stockholders who become stockholders of Davox will continue
to be governed by the DGCL.
The following comparison of the Davox Charter and the Davox By-Laws, on the
one hand, and the AnswerSoft Charter and the AnswerSoft By-Laws, on the other,
is not intended to be complete and is qualified in its entirety by reference
to the respective documents. Copies of the Davox Charter and Davox By-Laws are
available without charge, upon request, from Davox. Copies of the AnswerSoft
Charter and AnswerSoft By-Laws are available without charge, upon request,
from AnswerSoft.
DIRECTORS
Number and Classification. The AnswerSoft By-Laws provide that the
AnswerSoft Board will consist of a minimum of five directors and a maximum of
seven directors, and that the number of directors may be changed by action of
the AnswerSoft Board. The AnswerSoft Board currently consists of six
directors. The Davox By-Laws provide that the number of directors constituting
the Davox Board will consist of a minimum of two directors and a maximum of
eight directors. The exact number of Davox directors is specified by
resolution of a majority of the directors or by the stockholders at an annual
meeting. The Davox Board currently consists of four directors.
Election and Vacancies. The AnswerSoft By-Laws provide for the election of
all directors annually, and directors are elected by vote of the holders of a
plurality of the shares then entitled to vote thereon. In addition, vacancies
in the AnswerSoft Board may be filled either by a majority of directors then
in office or by vote of the stockholders. The Davox By-Laws also provide for
the election of all directors annually by plurality vote, but provide that
vacancies in the Davox Board may be filled only by a majority of the directors
then in office.
STOCKHOLDERS
Stockholder Voting. The AnswerSoft Charter provides that so long as at least
500,000 shares of AnswerSoft Preferred Stock are outstanding, AnswerSoft will
not, without the affirmative vote or consent of the holders of the majority of
the then outstanding AnswerSoft Preferred Stock, voting together as a single
class, take any of the following actions: (i) effect any amendment of any
provision of the AnswerSoft Charter or AnswerSoft By-Laws that affects the
rights or privileges or restrictions of the AnswerSoft Preferred Stock; (ii)
increase or decrease the total number of authorized shares of AnswerSoft
Preferred Stock; (iii) create any new class or series of stock or any other
securities convertible into equity securities of AnswerSoft having a
preference over, or being on a parity with, the AnswerSoft Preferred Stock;
(iv) effect any reclassification, recapitalization or reorganization of the
capital stock of AnswerSoft, or liquidate or dissolve AnswerSoft; (v) sell or
otherwise dispose of or encumber all or substantially all of its property or
business or merge into or consolidate with any other corporation or effect any
transaction or series of related transactions in which more than 50% of the
voting power of the corporation is disposed of; or (vi) redeem, repurchase or
pay dividends or other distributions with respect to AnswerSoft Common Stock.
The Davox Charter has no such provisions. The Davox By-Laws provide that
each holder of Davox Common Stock is entitled to one vote per share. The
AnswerSoft Charter provides that each holder of AnswerSoft Common Stock is
entitled to one vote per share, and that each holder of AnswerSoft Preferred
Stock is entitled to one vote per share (with fractional shares being rounded
to the nearest whole number) for each share of AnswerSoft Common Stock that
such holder of AnswerSoft Preferred Stock would receive upon conversion of
such AnswerSoft Preferred Stock.
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Special Meetings of Stockholders. Under the DGCL, special meetings of the
stockholders of a Delaware corporation may be called by the board of directors
or by the person authorized in the corporation's certificate of incorporation
or bylaws. The AnswerSoft By-Laws provide that special meetings of the
stockholders may be called by the President or by the AnswerSoft Board. A
special meeting shall be called by the President or by the Secretary upon the
written request therefor by stockholders holding not less than twenty-five
percent (25%) of the outstanding shares of AnswerSoft entitled to vote at any
meeting of stockholders. The Davox By-Laws provide that special meetings of
the stockholders may be called by the President and shall be called by the
President or Secretary at the request in writing of a majority of the Davox
Board or at the request in writing of stockholders owning not less than ten
percent (10%) of the capital stock entitled to vote.
AMENDMENT OF CERTIFICATE OF INCORPORATION
The AnswerSoft Charter provides that AnswerSoft reserves the right to amend
or repeal any provision contained therein in the manner prescribed by the laws
of the State of Delaware. The AnswerSoft Charter also requires the affirmative
vote of a majority of the outstanding shares of Preferred Stock voting
together as a single class to: (i) effect any amendment of any provision of
the AnswerSoft Charter or By-Laws that affects the rights or privileges or
restrictions of the AnswerSoft Preferred Stock; or (ii) increase or decrease
the total number of authorized shares of AnswerSoft Preferred Stock. The Davox
Charter contains no such provisions. Under the DGCL, in the absence of such a
provision, amendments to a corporation's certificate of incorporation must
generally be approved by a vote of the holders of a majority of the stock
entitled to vote thereon.
PREFERENCE AND OTHER RIGHTS OF CERTAIN HOLDERS OF ANSWERSOFT STOCK
Rights on Liquidation or Merger. The AnswerSoft Charter provides that, in
the event of a liquidation or dissolution of AnswerSoft, holders of AnswerSoft
Preferred Stock are entitled to receive, before any distribution to holders of
AnswerSoft Common Stock, cash or property equaling the amount they paid for
their shares of AnswerSoft Preferred Stock plus the amount, if any, of
dividends declared but unpaid and accrued dividends. Thereafter, the holders
of AnswerSoft Preferred Stock and AnswerSoft Common Stock share ratably in any
remaining amounts. Unless sixty-seven percent (67%) of the holders of record
of the AnswerSoft Preferred Stock vote otherwise, upon any merger of
AnswerSoft, or the sale by AnswerSoft of all or substantially all of its
assets, the AnswerSoft Charter provides that the allocation of any cash,
securities or other property into which the shares of AnswerSoft Capital Stock
are to be converted must be made in accordance with the foregoing preferences.
The Davox Charter does not provide for a liquidation preference.
Conversion Rights. The AnswerSoft Charter provides that holders of
AnswerSoft Preferred Stock are entitled to convert each share of AnswerSoft
Preferred Stock into one share of AnswerSoft Common Stock, subject to
adjustment in such conversion ratio in the event there is any subdivision or
recombination of the outstanding shares of AnswerSoft Common Stock or dilutive
issuance of AnswerSoft Common Stock. The Davox Charter does not authorize any
capital stock other than common stock and therefore does not provide for
conversion rights.
DIVIDENDS AND OTHER DISTRIBUTIONS
The AnswerSoft Charter provides that each issued and outstanding share of
AnswerSoft Series A Preferred Stock and AnswerSoft Series B Preferred Stock
entitles the holder thereof to receive, when, as and if declared by the
AnswerSoft Board, out of funds legally available therefor, dividends in cash
at the annual rate per share of $.10 and $.26, respectively, payable as the
AnswerSoft Board may determine. Such dividends are non-cumulative until
September 21, 1999 after which time the right to dividends upon the issued and
outstanding shares of Preferred Stock shall be cumulative so that such rights
shall accrue on a quarterly basis from and after September 21, 1999. Holders
of AnswerSoft Common Stock are entitled to receive dividends when and as
declared by the AnswerSoft Board out of any assets legally available therefor,
subject to the prior rights of holders of Preferred Stock. The Davox By-Laws
provide that dividends may be declared by the Davox Board, subject to the
provisions of the Davox Charter, if any.
INDEMNIFICATION
Under the AnswerSoft Charter, AnswerSoft must indemnify any officer and
director to the fullest extent permitted by the DGCL. In accordance with the
DGCL, AnswerSoft must indemnify any person who was or is a
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party, or is threatened to be a party, to any suit (other than a "derivative"
action by or in the right of AnswerSoft) because such person is or was a
director or officer of AnswerSoft, against expenses and fines and amounts paid
in settlement in connection with such suit if such person acted in good faith
and in a manner such person reasonably believed to be in or not opposed to the
best interests of AnswerSoft, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the action was unlawful. Under
the DGCL, a similar standard of care is applicable in the case of derivative
actions, except that indemnification only extends to expenses (including
attorneys' fees) incurred in connection with the defense or settlement of such
an action and then, where the person is adjudged to be liable to AnswerSoft,
only if and to the extent that the court in which such action was brought
determines that such person is fairly and reasonably entitled to such
indemnity and then only for such expenses as the court deems proper. The Davox
Charter has similar provisions.
The Davox By-Laws provide that Davox may, but is not obligated to, pay for
the expenses incurred by an indemnified director or officer in defending such
suits in advance of their final disposition, provided that such person agrees
to reimburse Davox if it is ultimately determined that such person is not
entitled to indemnification.
DESCRIPTION OF DAVOX CAPITAL STOCK
The authorized capital stock of Davox consists of 30,000,000 shares of Davox
Common Stock, par value $.10 per share.
DAVOX COMMON STOCK
As of March 2, 1998, there were 11,909,052 shares of Davox Common Stock
outstanding and held of record by approximately 300 stockholders. Based upon
such number of shares outstanding as of that date and giving effect to the
issuance of the shares of Davox Common Stock to be issued in the Merger, there
will be approximately 14,293,504 shares of Davox Common Stock outstanding upon
the closing of the Merger (assuming the exercise of all AnswerSoft options and
warrants to purchase AnswerSoft Capital Stock).
Holders of Davox Common Stock are entitled to one vote for each share held
and do not have cumulative voting rights. Accordingly, holders of a majority
of the shares of Davox Common Stock entitled to vote in any election of
directors may elect all of the directors standing for election. Holders of
Davox Common Stock are entitled to receive pro rata such dividends, if any, as
may be declared by the Davox Board out of funds legally available therefor.
Upon the liquidation, dissolution or winding up of Davox, the holders of Davox
Common Stock are entitled to receive pro rata the net assets of Davox
available after the payment of all creditors. Holders of Davox Common Stock
have no preemptive, subscription, redemption or conversion rights. The
outstanding shares of Davox Common Stock are, and the shares offered hereby
when issued and sold will be, fully paid and nonassessable.
DELAWARE LAW AND CERTAIN DAVOX CHARTER AND BY-LAW PROVISIONS
Davox is subject to the provisions of Section 203 of the DGCL. Subject to
certain exceptions, Section 203 prohibits a publicly-held Delaware corporation
from engaging in a "business combination" with an "interested stockholder,"
for a period of three years after the date of the transaction in which the
person or entity became an interested stockholder, unless the interested
stockholder attained such status with the approval of the Davox Board or
unless the business combination is approved in a prescribed manner. A
"business combination," includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholders. Subject to
certain exceptions, an "interested stockholder" is a person or entity who,
together with affiliates and associates, owns, or within the three years
immediately preceding the "business combination" did own, 15% or more of the
corporation's outstanding voting stock.
The Davox Charter and the Davox By-Laws provide for the election of the
directors of Davox at the Annual Meeting of Stockholders. Any director may be
removed with or without cause, by the vote of at least a majority
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of the shares entitled to vote at an election of directors. In addition,
subject to certain limitations, the Davox Board may from time to time change
the number of directors and, unless there are no directors then in office,
only the directors are permitted to fill vacancies. These provisions could
make it more difficult for stockholders to change the composition of the Davox
Board.
The Davox Charter contains certain provisions permitted under the DGCL
relating to the liability of directors. These provisions eliminate a
director's liability for monetary damages for a breach of fiduciary duty,
except in circumstances involving certain wrongful acts, such as the breach of
a director's duty of loyalty or acts or omissions which involve intentional
misconduct or a knowing violation of law. The Davox Charter and By-Laws also
contain provisions indemnifying the directors and officers of Davox to the
fullest extent permitted by the DGCL. Davox believes that these provisions
will assist Davox in attracting and retaining qualified individuals to serve
as directors and officers.
The DGCL provides generally that the affirmative vote of a majority of the
shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or by-laws, unless a corporation's certificate of
incorporation or by-laws, as the case may be, requires a greater percentage.
The Davox By-Laws provide that such By-Laws may be amended by majority vote of
the stockholders of Davox. The Davox By-Laws may also be amended or repealed
by a majority vote of the Davox Board.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Davox Common Stock is American
Stock Transfer and Trust Company.
LEGAL MATTERS
The validity of the shares of Davox Common Stock to be issued pursuant to
the Merger Agreement will be passed upon for Davox by Testa, Hurwitz &
Thibeault, LLP, Boston, Massachusetts. Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP, Austin, Texas, is acting as counsel for AnswerSoft
in connection with certain legal matters relating to the Merger.
EXPERTS
The consolidated financial statements of AnswerSoft as of December 31, 1997
and 1996 and for each of the three years in the period ended December 31, 1997
included in the Proxy Statement of AnswerSoft, which is referred to and made a
part of this Prospectus and Registration Statement, have been audited by Ernst
& Young LLP, independent auditors, as set forth in their report appearing
elsewhere herein and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Davox included in this Joint Proxy
Statement/Prospectus and elsewhere in the Registration Statement, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated
in their report with respect thereto, and are included herein in reliance upon
the authority of such firm as experts in giving said reports.
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OTHER MATTERS TO BE CONSIDERED AT THE DAVOX MEETING
ELECTION OF DIRECTORS TO THE DAVOX BOARD
The directors of Davox are elected annually and hold office until the next
annual meeting of stockholders and until their successors shall have been
elected and shall have qualified. Shares represented by all proxies received
by the Davox Board and not so marked as to withhold authority to vote for any
individual director or for all directors will be voted (unless one or more
nominees are unable to serve) for fixing the number of directors for the
ensuing year at four and for the election of the nominees named below. The
Davox Board knows of no reason why any such nominee should be unable or
unwilling to serve, but if such should be the case, proxies will be voted for
the election of some other person or for fixing the number of directors at a
lesser number.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Davox Board met four times, and took actions by written consent twice,
during the fiscal year ended December 31, 1997. The Audit Committee of the
Davox Board, of which R. Scott Asen, Michael D. Kaufman and Walter J. Levison
are members, oversees the accounting and tax functions of Davox, including
matters relating to the appointment and activities of Davox's independent
auditors. The Audit Committee met once during the year ended December 31,
1997. The Compensation Committee of the Davox Board, of which R. Scott Asen,
Michael D. Kaufman and Walter J. Levison are members, reviews and makes
recommendations concerning executive compensation. The Compensation Committee
met four times and took action by written consent twice during the year ended
December 31, 1997. The Davox Board does not currently have a standing
nominating committee. Each of the directors attended at least 75% of the
aggregate of the total number of meetings of the Davox Board and of all
Committees on which he serves.
OCCUPATIONS OF DIRECTORS
The following table sets forth the nominees for Director, their ages as of
the Record Date and their present positions with Davox.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Alphonse M. Lucchese................ 62 Chairman of the Board of Directors and
Chief Executive Officer
Michael D. Kaufman(1)(2)............ 56 Director
Walter J. Levison(1)(2)............. 79 Director
R. Scott Asen(1)(2)................. 53 Director
</TABLE>
- --------
(1)Member of Compensation Committee
(2) Member of Audit Committee
The By-Laws of Davox provide that the Davox Board shall be elected annually.
Officers are elected by, and serve at the discretion of, the Davox Board.
Mr. Lucchese has served as Chief Executive Officer of Davox since July 1,
1994 and has served as a Director and Chairman of the Board of Directors since
August 9, 1994. In addition, Mr. Lucchese served as President of Davox from
July 1, 1994 until January 12, 1997. Prior to his employment with Davox, Mr.
Lucchese was President and Chief Executive Officer of Iris Graphics, Inc., a
manufacturer of high quality color printers, from 1987 until 1994.
Mr. Kaufman has been a Director of Davox since 1982. Since 1987, Mr. Kaufman
has served as the managing general partner of MK Global Ventures, MK GVS Fund
and MK GVD Fund, each of which is an
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investment company and a stockholder of Davox, and MK Global Ventures II, also
an investment company. Mr. Kaufman currently serves as a director of Document
Technologies, Inc., DISC, Inc., Erox Corp., Proxim, Inc., Hypermedia
Communications, Inc. and Asante Technologies, Inc.
Mr. Levison has been a Director of Davox since June 1994. Mr. Levison has
been a general partner of the Aegis Venture Funds, a group of limited
partnerships, since 1982. Mr. Levison formerly served as a director of Chipcom
Corporation and Scitex Corporation, and currently serves as a director of D.M.
Management Company.
Mr. Asen has been a Director of Davox since April 1992. Mr. Asen has been
President of Asen & Co., Inc., an investment management firm, since 1983. He
is also a general partner of Pioneer Associates, L.P. and Pioneer IV, L.P.,
each a venture capital fund, a general partner of AB Associates, LP and a
manager-member of Pioneer III-A, LLP and Pioneer III-B, LLP, each an
investment management entity. Mr. Asen currently serves as a director of
Barringer Laboratories, Inc. and SeaMED Corporation.
DIRECTOR COMPENSATION
All Non-employee Directors are compensated at a rate of $1,200 per meeting
of the Davox Board attended and $500 per meeting of the Audit or Compensation
Committees attended, plus normal travel expenses incurred in connection with
attendance at such meetings. All Non-employee Directors are also compensated
on an annual basis at the rate of $8,000. Non-employee Directors are also
entitled to receive stock options pursuant to the 1988 Non-employee Director
Stock Option Plan.
Shares represented by all proxies received by the Davox Board and not marked
so as to withhold authority to vote for any individual director (by writing
that individual director's name where indicated on the proxy) or for all
directors will be voted (unless one or more nominees are unable or unwilling
to serve) FOR the election of all the nominees named above. The election of
directors will be determined by a plurality of the votes cast at the Davox
Meeting. The Davox Board knows of no reason why any such nominee would be
unable or unwilling to serve, but if such should be the case, proxies may be
voted for the election of another person or for fixing the number of directors
at a lesser number.
APPROVAL OF INCREASE OF NUMBER OF SHARES UNDER THE DAVOX 1996 STOCK PLAN
The 1996 Stock Plan was adopted by the Davox Board in July 1996 and was
approved by Davox's stockholders in April 1997. A maximum of 900,000 shares of
Common Stock were originally reserved for issuance under the 1996 Stock Plan
upon the exercise of options or in connection with awards of stock of Davox or
the opportunity to make direct stock purchases of shares of Davox. The Davox
Board has approved and recommended to the stockholders that they approve an
increase in the number of shares authorized for issuance pursuant to the 1996
Stock Plan by 1,050,000 shares to 1,950,000 shares.
Davox's management relies on stock options as essential parts of the
compensation packages necessary for Davox to attract and retain experienced
officers and employees. The Davox Board believes that the proposed increase in
the number of shares available under the 1996 Stock Plan is essential to
permit Davox's management to continue to provide long-term, equity-based
incentives to present and future key employees.
Description of the 1996 Stock Plan
The purpose of the 1996 Stock Plan is to provide incentives to directors,
officers and other employees of Davox by providing them with opportunities to
purchase stock of Davox and participate in the ownership of Davox.
Under the 1996 Stock Plan, employees and officers of Davox may be awarded
incentive stock options ("ISO" or "ISOs"), as defined in Section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Code"), and directors,
officers, employees and consultants of Davox may be granted (i) options which
do not qualify as ISOs ("Non-Qualified Option" or "Non-Qualified Options"),
(ii) awards of stock in Davox
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<PAGE>
("Awards"), and (iii) opportunities to make direct purchases of stock in Davox
("Purchases"). ISOs, Non-Qualified Options, Awards and Purchases are sometimes
collectively referred to as "Stock Rights" and ISOs and Non-Qualified Options
are sometimes collectively referred to as "Options." The 1996 Stock Plan
provides for the issuance of a maximum of 900,000 shares of Common Stock of
Davox pursuant to the grant of Stock Rights. Currently, approximately 330
employees (including one director who is also an employee and officer of
Davox), and three non-employee directors of Davox are eligible to participate
in the 1996 Stock Plan.
The 1996 Stock Plan is administered by the Compensation Committee (the
"Committee") of the Davox Board. The Compensation Committee is currently
comprised of three outside directors, Michael D. Kaufman, R. Scott Asen and
Walter J. Levison. Subject to the terms of the 1996 Stock Plan, the Committee
has the authority to determine the persons to whom Stock Rights are granted,
the exercise price per share and other terms and provisions governing the
Stock Rights, including restrictions, if any, applicable to the shares of
Common Stock issuable upon exercise of Stock Rights.
Stock Rights may be granted under the 1996 Stock Plan at any time on or
prior to July 24, 2006. The exercise price per share of Non-Qualified Options
granted, and the purchase price per share of stock granted in any Award or
authorized as a Purchase, under the 1996 Stock Plan cannot be less than the
minimum legal consideration required therefor under the laws of any
jurisdiction in which Davox may be organized. The exercise price per share of
each ISO cannot be less than the fair market value of the Common Stock on the
date of grant (or, in the case of an ISO granted to an employee holding more
than ten percent of the voting stock of Davox, 110% of the fair market value
of the Common Stock on the date of grant). The 1996 Stock Plan provides that
each option shall expire on the date specified by the Committee, but not more
than ten years from its date of grant in the case of an ISO, and five years in
the case of an ISO granted to an employee or officer holding more than ten
percent of the voting stock of Davox.
Each Option granted under the 1996 Stock Plan may either be fully
exercisable at the time of grant or may become exercisable in such
installments as the Committee may specify. Each Option may be exercised from
time to time, in whole or in part, up to the total number of shares with
respect to which it is then exercisable. The Committee has the right to
accelerate the date that any installment of any Option becomes exercisable
(subject to the $100,000 per year limitation on the fair market value of stock
subject to ISOs granted to any employee which first become exercisable in any
calendar year).
Payment of the exercise price of an Option granted under the 1996 Stock Plan
may be made in cash or by check or, if authorized by the Committee in its
discretion in writing at the time of grant (i) by tendering shares of Common
Stock of Davox having fair market value equal as of the date of the exercise
to the cash exercise price of the Option, (ii) in full or in part by a
personal recourse, interest bearing note, or (iii) through the delivery of an
assignment to Davox of a sufficient amount of the proceeds from the sale of
the Common Stock acquired upon exercise of the Option.
The 1996 Stock Plan limits to 750,000 shares (as adjusted in connection with
the stock split effected by Davox in May 1997) the number of shares of Common
Stock that any employee may acquire under the 1996 Stock Plan in any one
calendar year.
Only the grantee may exercise a Stock Right; no assignments or transfers of
Stock Rights are permitted except by will or by the laws of descent and
distribution, or in the case of Non-Qualified Options only, pursuant to a
valid domestic relations order.
If an ISO optionee ceases to be employed by Davox other than by reason of
death or retirement, no further installments of his or her ISOs will become
exercisable, and vested ISOs shall terminate after the passage of three months
from the date of termination of employment (but no later than their specified
expiration dates), except to the extent that such ISOs shall have been
converted into Non-Qualified Options. If an optionee ceases to be employed by
Davox by reason of disability, or if an optionee dies, any ISO held by the
optionee may be exercised, to the extent exercisable on the date of disability
or death, by the optionee or the optionee's estate,
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<PAGE>
personal representative or beneficiary, at any time within 180 days from the
date of the optionee's disability or death (but not later than the specified
expiration date of the ISO).
Option holders are protected against dilution in the event of a stock
dividend, stock split, consolidation, merger, recapitalization, reorganization
or similar transaction. The Davox Board may from time to time adopt amendments
to the 1996 Stock Plan, certain of which are subject to stockholder approval,
and may terminate the 1996 Stock Plan, at any time (although such action shall
not affect options previously granted). Any shares subject to an option
granted under the 1996 Stock Plan, which for any reason expire or terminate
unexercised, may again be available for future option grants. Unless
terminated sooner, the 1996 Stock Plan will terminate on July 24, 2006.
Certain Federal Tax Information
The following discussion of United States federal income tax consequences of
the issuance and exercise of options and stock grants granted under the 1996
Stock Plan, and certain other rights granted under the 1996 Stock Plan is
based upon the provisions of the Code as in effect on the date of this Proxy
Statement, current regulations, and existing administrative rulings of the
Internal Revenue Service. It is not intended to be a complete discussion of
all of the federal income tax consequences of these plans or of the
requirements that must be met in order to qualify for the described tax
treatment. In addition, there may be foreign, state or local tax consequences
that are not discussed herein.
Incentive Stock Options. The following general rules are applicable under
current United States federal income tax law to ISOs granted under the 1996
Stock Plan:
1. In general, an optionee will not recognize any income upon the grant of
an ISO or upon the issuance of shares to him or her upon the exercise of an
ISO, and Davox will not be entitled to a federal income tax deduction upon
either the grant or the exercise of an ISO.
2. If shares acquired upon exercise of an ISO are not disposed of within (i)
two years from the date the option was granted or (ii) one year after the date
the shares are issued to the optionee pursuant to the ISO exercise (the
"Holding Periods"), the difference between the amount realized on any
subsequent disposition of the shares and the exercise price will generally be
treated as capital gain or loss to the optionee.
3. If shares acquired upon exercise of an ISO are disposed of before the
expiration of one or both of the Holding Periods (a "Disqualifying
Disposition"), then in most cases the lesser of (i) any excess of the fair
market value of the shares at the time of exercise of the ISO over the
exercise price or (ii) the actual gain on dispositions will be taxed to the
optionee as ordinary income in the year of such disposition.
4. In any year that an optionee recognizes ordinary income on a
Disqualifying Disposition of shares acquired upon exercising an ISO, Davox
generally will be entitled to a corresponding federal income tax deduction.
5. The difference between the amount realized by an optionee as the result
of a Disqualifying Disposition and the sum of (i) the exercise price and (ii)
the amount of ordinary income recognized under the above rules generally will
be treated as capital gain or loss.
6. Capital gain or loss recognized by an optionee on a disposition of shares
will be long-term capital gain or loss if the optionee's holding period for
the shares exceeds one year.
7. An optionee may be entitled to exercise an ISO by delivering shares of
Davox's Common Stock to Davox in payment of the exercise price, if the
optionee's ISO agreement so provides. If an optionee exercises an ISO in such
fashion, special rules will apply.
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<PAGE>
8. In addition to the tax consequences described above, the exercise of an
ISO may result in an "alternative minimum tax." The "alternative minimum tax"
(the maximum rate is 28%) will be applied against a taxable base which is
equal to "alternative minimum taxable income," reduced by a statutory
exemption. In general, the amount by which the value of the shares received
upon exercise of the ISO exceeds the exercise price is included in the
optionee's alternative minimum taxable income. A taxpayer is required to pay
the higher of his regular tax liability or the alternative minimum tax. A
taxpayer who pays alternative minimum tax attributable to the exercise of an
ISO may be entitled to a tax credit against his or her regular tax liability
in later years.
9. Special rules apply if the shares acquired upon the exercise of an ISO
are subject to vesting, or are subject to certain restrictions on resale under
federal securities laws applicable to directors, officers or 10% stockholders.
Non-Qualified Stock Options. The following general rules are applicable
under current federal income tax law to Non-Qualified Options granted under
the 1996 Stock Plan:
1. In general, the optionee will not recognize any income upon the grant of
a Non-Qualified Option, and Davox will not be allowed a federal income tax
deduction upon such grant.
2. The optionee generally will recognize ordinary income at the time of
exercise of the Non-Qualified Option in an amount equal to the excess, if any,
of the fair market value of the shares on the date of exercise over the
exercise price. Davox may be required to withhold income tax on this amount.
3. When the optionee sells the shares acquired through the exercise of a
Non-Qualified Option, he or she generally will recognize capital gain or loss
in an amount equal to the difference between the amount realized upon the sale
of the shares and his or her basis in the stock (generally, the exercise price
plus the amount taxed to the optionee as ordinary income). If the optionee's
holding period for the shares exceeds one year, such gain or loss will be a
long-term capital gain or loss.
4. When the optionee recognizes ordinary income attributable to a Non-
Qualified Option, Davox generally will be entitled to a corresponding federal
income tax deduction.
5. An optionee may be entitled to exercise a Non-Qualified Option by
delivering shares of Davox's Common Stock to Davox in payment of the exercise
price. If an optionee exercises a Non-Qualified Option in such fashion,
special rules apply.
6. Special rules apply if the shares acquired upon the exercise of a Non-
Qualified Option are subject to vesting, or are subject to certain
restrictions on resale under federal securities laws applicable to directors,
officers or 10% stockholders.
Stock Awards. The following general rules are applicable under current
federal income tax law to awards of Restricted Stock and Stock Grants under
the 1996 Stock Plan, if implemented:
Under current federal income tax law, persons receiving shares pursuant to
an award of stock or a grant of an opportunity to purchase stock under the
1996 Stock Plan will generally recognize ordinary income equal to the fair
market value of the shares received, reduced by any purchase price paid. Davox
generally will be entitled to a corresponding federal income tax deduction.
When such shares are sold, the grantee generally will recognize capital gain
or loss. Special rules apply if the shares acquired are subject to vesting, or
are subject to certain restrictions on resale under federal securities laws
applicable to directors, officers or 10% stockholders.
The Davox Board recommends a vote FOR the proposal to approve the amendment
to Davox's 1996 Stock Plan.
106
<PAGE>
RATIFICATION OF SELECTION OF AUDITORS
The Davox Board has selected the firm of Arthur Andersen LLP independent
certified public accountants, to serve as auditors for the fiscal year ending
December 31, 1998. Arthur Andersen LLP has served as Davox's auditors since
fiscal year ended December 31, 1983. It is expected that a member of the firm
will be present at the meeting with the opportunity to make a statement if so
desired and will be available to respond to appropriate questions. The Davox
Board recommends a vote FOR the ratification of this selection.
OTHER MATTERS
The Davox Board does not intend to bring any matters before the Davox
Meeting other than those specifically set forth in the Notice of Meeting and
it knows of no matters to be brought before the Davox Meeting by others. If
any other matters properly come before the Davox Meeting, it is the intention
of the persons named in the accompanying proxies to vote such proxies in
accordance with the judgment of the Davox Board.
OTHER MATTERS TO BE CONSIDERED AT THE ANSWERSOFT MEETING
APPROVAL OF OPTION VESTING PROPOSALS
Under Section 280G of the Code certain compensatory payments to employees or
other individuals who perform services for a corporation and who are officers,
highly compensated individuals or significant stockholders of the corporation
are treated as "excess parachute payments," if they are contingent on a change
in control of the corporation and exceed certain threshold amounts specified
in the Code. Payments made under an agreement entered into within one year
prior to a change in control are presumed to be contingent on the change in
control. On the other hand, payments are not considered parachute payments if
the taxpayer can show by clear and convincing evidence that they constitute
reasonable compensation for personal services to be performed after the change
in control or that they otherwise are not contingent on the change in control.
The value of accelerated vesting of shares of stock or options to purchase
such shares is considered a compensatory payment for this purpose.
If the corporation has issued no readily tradable shares and if the
compensatory payments have been approved by the holders of AnswerSoft Capital
Stock possessing more than seventy-five percent (75%) of the voting power of
its outstanding capital stock after the material terms of the payments were
disclosed to stockholders, then the payments are not considered excess
parachute payments. For this purpose, stock actually or constructively owned
by the recipient of the payments is disregarded.
Absent the approval of the stockholders, excess parachute payments will (i)
not be deductible by the corporation, and (ii) the recipient must pay a
nondeductible excise tax equal to 20% of the excess parachute payments in
addition to other income taxes.
All options granted under AnswerSoft's 1994 Stock Plan (the "1994 Plan")
will become fully vested and exercisable if AnswerSoft is acquired in a
corporate transaction. The Merger will constitute a corporate transaction that
will result in the full vesting and exercisability of all outstanding options
granted under the 1994 Plan.
Proposed Treasury regulations under Code Section 280G provide that, with
respect to the acceleration of vesting of an option, the amount treated as
contingent on a change in control of the corporation is the sum of (i) the
present value of the acceleration of vesting (the "Time Value Component") plus
(ii) an amount which reflects the lapse of the obligation to perform services
in order to continue vesting in the option (the "Lapse of Services
Component"). With respect to each unvested option as of the date of the
Merger, the Time Value Component equals the excess of (A) the fair market
value of such option as of such date over (B) the present value of the fair
market value of such option, had the option vested in accordance with its
terms and assuming the fair market value of the AnswerSoft Common Stock on the
date the option otherwise would have vested is
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<PAGE>
the same as the fair market value of the AnswerSoft Common Stock on the date
of the Merger. Present value generally is calculated based on 120% of the
applicable federal rate in effect as of the date of the Merger. Proposed
Treasury regulations provide that the value of the Lapse of Services Component
is based on all facts and circumstances, but in no event will it be less than
1% of the value of the payment for each full calendar month for which the
individual no longer has to perform services to receive the option.
The value of the vesting acceleration of options granted to the individuals
listed below could be considered an excess parachute payment under Code
Section 280G, absent the required stockholder approval. Accordingly,
AnswerSoft seeks stockholder approval of such vesting acceleration. If the
stockholders do not approve the Option Vesting Proposals, then the vesting of
the options held by the individuals listed below will not accelerate.
The affirmative vote of more than seventy-five percent (75%) of the
outstanding shares of AnswerSoft Capital Stock (excluding shares held directly
or indirectly by or for the individuals whose Option Vesting Proposals are
being voted on, such as shares owned by the individuals' spouses, children or
parents), is required for approval of the Option Vesting Proposals with
respect to each of the individuals named below.
(a) Option Vesting Proposal for David W. Brandenburg. On November 3,
1997, the AnswerSoft Board granted to David W. Brandenburg,
AnswerSoft's President and Chief Executive Officer, three options each
with an exercise price per share of $0.26: (i) an option to purchase
890,305 shares of AnswerSoft Common Stock, of which 222,576 shares were
vested at grant and the balance vesting 25% after one year of service
and the remaining balance in equal installments over 36 months of
service thereafter, and (ii) two options each for 171,212 shares that
vest on November 3, 2000 and November 3, 2001, respectively. 1,010,153
shares of AnswerSoft Common Stock subject to Mr. Brandenburg's options
are unvested as of May 20, 1998. The value of the vesting acceleration
of Mr. Brandenburg's options may result in adverse tax consequences to
Davox, AnswerSoft and Mr. Brandenburg unless this Option Vesting
Proposal is approved.
(b) Option Vesting Proposal for Jeanne A. Bayless. On November 3,
1997, the AnswerSoft Board granted to Jeanne A. Bayless, AnswerSoft's
Chairwoman of the Board, an option to purchase 311,604 shares of
AnswerSoft Common Stock. The option has an exercise price per share of
$0.26. The vesting schedule of such options is as follows: 25% of the
option shares become vested upon completion of one year of service from
the vesting date and the balance in a series of equal monthly
installments over the next 36 months of service thereafter. 311,604
shares of AnswerSoft Common Stock subject to Ms. Bayless' option are
unvested as of May 20, 1998. The value of the vesting acceleration of
Ms. Bayless' option may result in adverse tax consequences to Davox,
AnswerSoft and Ms. Bayless unless this Option Vesting Proposal is
approved.
(c) Option Vesting Proposal for Richard E. Dural. On April 25, 1997,
the AnswerSoft Board granted to Richard E. Dural, AnswerSoft's Vice
President of Worldwide Sales, an option to purchase 111,322 shares of
AnswerSoft Common Stock at an exercise price per share of $0.10, and on
December 12, 1997, the AnswerSoft Board granted to Mr. Dural an option
to purchase 68,678 shares of AnswerSoft Common Stock at an exercise
price per share of $0.26. The vesting schedule of such options is as
follows: 25% of the option shares become vested upon completion of one
year of service from the vesting date and the balance in a series of
equal monthly installments over the next 36 months of service
thereafter. 149,850 shares of AnswerSoft Common Stock subject to such
options are unvested as of May 20, 1998. The value of the vesting
acceleration of Mr. Dural's options may result in adverse tax
consequences to Davox, AnswerSoft and Mr. Dural unless this Option
Vesting Proposal is approved.
(d) Option Vesting Proposal for Richard Connelly. On April 25, 1997,
the AnswerSoft Board granted to Richard Connelly, AnswerSoft's Chief
Financial Officer and Secretary, an option to purchase 173,610 shares
of AnswerSoft Common Stock at an exercise price per share of $0.10, and
on December 12, 1997, the AnswerSoft Board granted to Mr. Connelly an
option to purchase 16,390 shares of AnswerSoft Common Stock at an
exercise price per share of $0.26. The vesting schedule of such options
is as follows: 25% of the option shares become vested upon completion
of
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<PAGE>
one year of service from the vesting date and the balance in a series
of equal monthly installments over the next 36 months of service
thereafter. 142,980 shares of AnswerSoft Common Stock subject to such
options are unvested as of May 20, 1998. The value of the vesting
acceleration of Mr. Connelly's options may result in adverse tax
consequences to Davox, AnswerSoft and Mr. Connelly unless this Option
Vesting Proposal is approved.
(e) Option Vesting Proposal for Robert A. Young. On April 25, 1997,
the AnswerSoft Board granted to Robert A. Young, AnswerSoft's Vice
President of Marketing, an option to purchase 150,000 shares of
AnswerSoft Common Stock at an exercise price per share of $0.10, and on
December 12, 1997, the AnswerSoft Board granted to Mr. Young an option
to purchase 20,000 shares of AnswerSoft Common Stock at an exercise
price per share of $0.26. The vesting schedule of such options is as
follows: 25% of the option shares become vested upon completion of one
year of service from the vesting date and the balance in a series of
equal monthly installments over the next 36 months of service
thereafter. 132,500 shares of AnswerSoft Common Stock subject to such
options are unvested as of May 20, 1998. The value of the vesting
acceleration of Mr. Young's options may result in adverse tax
consequences to Davox, AnswerSoft and Mr. Young unless this Option
Vesting Proposal is approved.
The AnswerSoft Board has determined that the Option Vesting Proposal with
respect to each of the above named individuals is in the best interests of
AnswerSoft and recommends a vote FOR each Option Vesting Proposal. Shares
represented by all proxies received by the AnswerSoft Board and not marked as
to withhold authority to vote for any individual Option Vesting Proposal or
for all of the Option Vesting Proposals will be voted FOR approval of all of
the Option Vesting Proposals above.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by Davox, and in addition
to soliciting stockholders by mail through its regular employees, Davox may
request banks, brokers and other custodians, nominees and fiduciaries to
solicit their customers who have stock of Davox registered in the names of a
nominee and, if so, will reimburse such banks, brokers and other custodians,
nominees and fiduciaries for their reasonable out-of-pocket costs.
Solicitation by officers and employees of Davox may also be made of some
stockholders in person or by mail, telephone or telegraph following the
original solicitation.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Davox's directors, executive
officers and holders of more than 10% of Davox's Common Stock (collectively,
"Reporting Persons") to file with the Commission initial reports of ownership
and reports of changes in ownership of Common Stock of Davox. Such persons are
required by regulations of the Commission to furnish Davox with copies of all
such filings. Based on its review of the copies of such filings received by it
with respect to the fiscal year ended December 31, 1997 and written
representations from certain Reporting Persons, Davox believes that all
Reporting Persons complied with all Section 16(a) filing requirements in 1997.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the proxy statement to
be furnished to all stockholders entitled to vote at the next annual meeting
of stockholders of Davox must be received at Davox's principal executive
offices not later than November 20, 1998. In order to curtail controversy as
to the date on which a proposal was received by Davox, it is suggested that
proponents submit their proposals by Certified Mail, Return Receipt Requested.
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<PAGE>
INDEX TO DAVOX CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants.................................. F-2
Consolidated Balance Sheets as of December 31, 1997 and 1996.............. F-3
Consolidated Statements of Income for the Years Ended December 31, 1997,
1996 and 1995............................................................ F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1997, 1996 and 1995......................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1997, 1996 and 1995...................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
INDEX TO ANSWERSOFT CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors........................................... F-17
Consolidated Balance Sheets as of December 31, 1997 and 1996............. F-18
Consolidated Statements of Operations for the Years Ended December 31,
1997, 1996 and 1995..................................................... F-19
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1997, 1996 and 1995........................................ F-20
Consolidated Statements of Cash Flows for the Years Ended December 31,
1997, 1996 and 1995..................................................... F-21
Notes to Consolidated Financial Statements............................... F-22
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Davox Corporation:
We have audited the accompanying consolidated balance sheets of Davox
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1997
and 1996, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Davox Corporation and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 26, 1998
F-2
<PAGE>
DAVOX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and Cash equivalents.......................... $25,366 $ 21,333
Marketable securities.............................. 23,802 9,780
Accounts receivable, net of reserves of
approximately $1,048 and $699 in 1997 and 1996,
respectively...................................... 10,359 3,185
Deferred tax asset................................. 9,319 --
Prepaid expenses and other current assets.......... 969 1,306
------- --------
Total current assets............................. 69,815 35,604
Property and equipment, net.......................... 4,585 4,051
Long-term deferred tax asset......................... 669 --
Other assets, net.................................... 99 74
------- --------
$75,168 $ 39,729
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................... $ 4,987 $ 4,811
Accrued expenses................................... 10,223 6,175
Customer deposits.................................. 2,018 3,414
Deferred revenue................................... 3,783 2,494
------- --------
Total current liabilities........................ 21,011 16,894
------- --------
Commitments and Contingencies (Note 6)
Stockholders' equity:
Common stock, $.10 par value--
Authorized--30,000,000 shares
Issued--11,864,216 and 11,080,749
shares in 1997 and 1996, respectively............ 1,186 1,108
Capital in excess of par value..................... 57,758 44,894
Accumulated deficit................................ (4,763) (23,143)
------- --------
54,181 22,859
Less--Treasury Stock, 3,294 shares at cost........... (24) (24)
------- --------
Total stockholders' equity........................... 54,157 22,835
------- --------
$75,168 $ 39,729
======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
DAVOX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Product revenue........................... $ 52,993 $ 37,177 $ 23,382
Service revenue........................... 23,822 16,465 14,174
----------- ----------- -----------
Total revenue......................... 76,815 53,642 37,556
----------- ----------- -----------
Cost of product revenue................... 11,874 10,883 7,156
Cost of service revenue................... 14,676 10,694 9,295
----------- ----------- -----------
Total cost of revenue................. 26,550 21,577 16,451
----------- ----------- -----------
Gross profit.............................. 50,265 32,065 21,105
----------- ----------- -----------
Research, development and engineering
expenses................................. 8,479 5,861 4,020
Selling, general and administrative
expenses................................. 22,852 17,213 12,166
----------- ----------- -----------
Total operating expenses.................. 31,331 23,074 16,186
----------- ----------- -----------
Income from operations.................. 18,934 8,991 4,919
Interest income......................... 1,952 1,137 421
----------- ----------- -----------
Income before provision for income taxes.. 20,886 10,128 5,340
Provision for income taxes................ 2,506 1,013 534
----------- ----------- -----------
Net income................................ $ 18,380 $ 9,115 $ 4,806
=========== =========== ===========
Earnings per share:
Basic................................... $ 1.60 $ 0.85 $ 0.48
=========== =========== ===========
Diluted................................. $ 1.45 $ 0.74 $ 0.42
=========== =========== ===========
Weighted average shares outstanding:
Basic................................... 11,522,057 10,730,760 10,077,380
=========== =========== ===========
Diluted................................. 12,663,245 12,285,244 11,565,830
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
DAVOX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK CAPITAL IN TREASURY STOCK
-------------------- EXCESS OF ACCUMULATED ----------------- STOCKHOLDERS'
SHARES PAR VALUE PAR VALUE DEFICIT SHARES AMOUNT EQUITY
---------- --------- ---------- ----------- -------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1994................... 9,869,494 $ 987 $ 41,593 $(37,064) (3,294) $ (24) $ 5,492
Proceeds from exercise
of stock options,
including related tax
benefit............... 385,137 39 539 -- -- -- 578
Proceeds from employee
stock purchase plan... 13,104 1 35 -- -- -- 36
Net income............. -- -- -- 4,806 -- -- 4,806
---------- ------ -------- -------- -------- ------ -------
BALANCE, December 31,
1995................... 10,267,735 1,027 42,167 (32,258) (3,294) (24) 10,912
Proceeds from exercise
of stock options,
including related tax
benefit............... 798,035 79 2,638 -- -- -- 2,717
Proceeds from employee
stock purchase plan... 14,979 2 89 -- -- -- 91
Net income............. -- -- -- 9,115 -- -- 9,115
---------- ------ -------- -------- -------- ------ -------
BALANCE, December 31,
1996................... 11,080,749 1,108 44,894 (23,143) (3,294) (24) 22,835
Proceeds from exercise
of stock options,
including related tax
benefit............... 771,314 77 12,620 -- -- -- 12,697
Proceeds from employee
stock purchase plan... 12,153 1 244 -- -- -- 245
Net income............. -- -- -- 18,380 -- -- 18,380
---------- ------ -------- -------- -------- ------ -------
BALANCE , December 31,
1997................... 11,864,216 $1,186 $ 57,758 $ (4,763) (3,294) $ (24) $54,157
========== ====== ======== ======== ======== ====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
DAVOX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996 1995
------- -------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income....................................... $18,380 $ 9,115 $ 4,806
Adjustments to reconcile net income to net cash
provided by operating activities--
Depreciation and amortization.................. 3,387 2,373 2,644
Changes in current assets and liabilities--
Accounts receivable............................ (7,174) 1,275 240
Prepaid expenses and other current assets...... 337 (245) (84)
Accounts payable............................... 176 1,844 397
Accrued expenses............................... 4,947 3,039 71
Customer deposits.............................. (1,396) 2,121 462
Deferred revenue............................... 1,289 865 (229)
------- -------- -------
Net cash provided by operating activities...... 19,946 20,387 8,307
------- -------- -------
Cash flows from investing activities
Purchases of property and equipment.............. (3,921) (4,134) (1,230)
(Increase) decrease in other assets.............. (25) 3 41
Purchases of marketable securities............... (39,025) (10,865) --
Sales/maturities of marketable securities........ 25,003 1,085 --
------- -------- -------
Net cash used in investing activities........ (17,968) (13,911) (1,189)
------- -------- -------
Cash flows from financing activities:
Proceeds from exercise of stock options.......... 1,810 1,830 504
Proceeds from exercise of employee stock purchase
plan............................................ 245 91 36
------- -------- -------
Net cash provided by financing activities........ 2,055 1,921 540
------- -------- -------
Net increase in cash and cash equivalents.......... 4,033 8,397 7,658
Cash and cash equivalents, beginning of year....... 21,333 12,936 5,278
------- -------- -------
Cash and cash equivalents, end of year............. $25,366 $ 21,333 $12,936
======= ======== =======
Supplemental disclosures of cash flow information:
Cash paid for--
Income taxes................................... $ 265 $ 429 $ 185
======= ======== =======
Supplemental disclosure of non-cash investing and
financing activities:
Recognition of tax benefit relating to
disqualifying dispositions and exercise of non-
qualified stock options........................... $10,887 $ 888 $ 73
======= ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Davox Corporation (the Company) is a software and systems integration
company that develops, markets, implements, supports and services management
systems for call center operations located throughout the world. These systems
are marketed directly, through joint marketing relationships and distribution
agreements. The Company markets its systems to banks, consumer finance
organizations, retailers, entertainment companies, telemarketing organizations
and utilities.
These consolidated financial statements reflect the application of certain
significant accounting policies as described below and elsewhere in the
accompanying consolidated financial statements.
(a) Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
(b) Revenue Recognition
The Company recognizes revenue in accordance with the provisions of
Statement of Position No. 91-1 (SOP 91-1), Software Revenue Recognition. The
Company generates software revenue from licensing the rights to use its
software products. The Company also generates service revenues from the sale
of product maintenance contracts and consulting services.
Revenue from software license fees are recognized upon delivery, net of
estimated returns, provided there are no significant postdelivery obligations,
and payment is due within one year and is probable of collection. If
acceptance is required, software license revenue is recognized upon customer
acceptance. Fees for consulting services are recognized upon customer
acceptances or over the period in which services are provided if customer
acceptance is not required, and the revenue is fixed and determinable.
Maintenance revenue is deferred at the time of software license revenue
recognition and is recognized ratably over the term of the support period,
which is typically one year.
In October 1997, the American Institute of Certified Public Accountants
issued SOP 97-2, Software Revenue Recognition. The Company believes that its
revenue recognition practices are consistent with those required by SOP 97-2.
(c) Warranty Costs
The Company warrants its products for 90 days and provides for estimated
warranty costs upon shipment of such products. Warranty costs have not been
and are not anticipated to be significant.
(d) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
(e) Postretirement Benefits
The Company has no obligations for postretirement or general postemployment
benefits.
F-7
<PAGE>
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
(f) Cash, Cash Equivalents and Marketable Securities
The Company considers all highly liquid investments with original maturities
of three months or less at the time of acquisition to be cash equivalents.
Cash equivalents consist mainly of commercial paper.
The Company accounts for investments in accordance with Statement of
Financial Accounting Standard (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Under SFAS No. 115, securities that
the Company has the positive intent and ability to hold to maturity are
reported at amortized cost and are classified as held-to-maturity. Held-to-
maturity securities consisted mainly of investments in Euro dollar bonds and
high grade commercial paper instruments at December 31, 1997 and high grade
commercial paper instruments at December 31, 1996. All of these investments
are classified as current as they mature within one year.
At December 31, 1997 and 1996, marketable securities consisted of the
following (in thousands):
<TABLE>
<CAPTION>
1997 1996
----------------- ----------------
TOTAL TOTAL TOTAL TOTAL
MARKET AMORTIZED MARKET AMORTIZED
VALUE COST VALUE COST
------- --------- ------ ---------
<S> <C> <C> <C> <C>
Euro dollar bonds......................... $11,326 $11,334 $ -- $ --
(maturity 4-6 months)
Commercial paper obligations.............. 7,082 7,040 9,780 9,780
(maturity 3-6 months)
Corporate bonds........................... 3,447 3,448 -- --
(maturity 4-5 months)
Federal agency issues..................... 2,010 1,980 -- --
(maturity 6 months)
------- ------- ------ ------
$23,865 $23,802 $9,780 $9,780
======= ======= ====== ======
</TABLE>
(g) Property and Equipment
The Company provides for depreciation and amortization of property and
equipment using the straight-line and declining-balance methods by charges to
operations in amounts to allocate the cost of the property and equipment over
their estimated useful lives. The cost of property and equipment and their
useful lives are summarized as follows (in thousands):
<TABLE>
<CAPTION>
ESTIMATED
ASSET CLASSIFICATION USEFUL LIFE 1997 1996
-------------------- ------------- ------- ------
<S> <C> <C> <C>
Office equipment and software................. 2-5 Years $ 9,996 $6,705
Rental and demonstration equipment............ 2-3 Years 367 427
Service equipment............................. 1-5 Years 2,166 2,180
Leasehold improvements........................ Life of Lease 199 184
------- ------
12,728 9,496
Less-Accumulated depreciation and amortiza-
tion......................................... 8,143 5,445
------- ------
$ 4,585 $4,051
======= ======
</TABLE>
F-8
<PAGE>
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
(h) Research and Development and Software Development Costs
Research and development costs have been charged to operations as incurred.
SFAS No. 86, Accounting for the Costs of Computer Software To Be Leased, Sold,
or Otherwise Marketed, requires the capitalization of certain computer
software development costs incurred after technological feasibility is
established. The Company believes that once technological feasibility of a
software product has been established, the additional development costs
incurred to bring the product to a commercially acceptable level are not
significant.
(i) Earnings Per Share
In March 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 128, Earnings per Share. This statement established standards for
computing and presenting earnings per share and applies to entities with
publicly traded common stock or potential common stock. This statement is
effective for fiscal years ending after December 15, 1997. The prior years'
earnings per share have been retroactively restated in accordance with this
statement. Basic earnings per share was determined by dividing net income by
the weighted average shares of common stock outstanding during the year.
Diluted earnings per share reflects the dilution of the potentially dilutive
securities, primarily stock options based on the treasury stock method.
The calculations of basic and diluted earnings per share are as follows (in
thousands, except per share data):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net Income.......................................... $18,380 $ 9,115 $ 4,806
======= ======= =======
Basic weighted average shares outstanding........... 11,522 10,731 10,077
Weighted average common equivalent shares........... 1,141 1,554 1,489
------- ------- -------
Diluted weighted average shares outstanding......... 12,663 12,285 11,566
======= ======= =======
Basic earnings per share............................ $ 1.60 $ 0.85 $ 0.48
Diluted earnings per share.......................... $ 1.45 $ 0.74 $ 0.42
</TABLE>
In 1997, 55,042 weighted average common equivalent shares were not included
in the diluted weighted average shares outstanding as they were antidilutive.
There were no antidilutive shares in 1996 and 1995.
(j) Concentration of Credit Risk
SFAS No. 105, Disclosure of Information About Financial Instruments with
Off-Balance Sheet Risk and Financial Instruments with Concentrations of Credit
Risk, requires disclosure of any significant off-balance sheet and credit risk
concentrations. Financial instruments that potentially expose the Company to
concentrations of credit risk consist primarily of cash and cash equivalents,
short-term investments and trade accounts receivable. The Company places its
temporary cash investments in financial institutions. The Company has not
experienced significant losses related to receivables from individual
customers or groups of customers in any specific industry or by geographic
area. Due to these factors, no additional credit risk beyond amounts provided
for collection losses is believed by management to be inherent in the
Company's accounts receivable. The Company had one customer and no customers
with amounts due to the Company of greater than 10% of accounts receivable as
of December 31, 1997 and 1996, respectively.
(k) Derivative Financial Instruments and Fair Value of Financial Instruments
The Company does not have any derivative or other financial instruments as
defined by SFAS No. 119, Disclosures About Derivative Financial Instruments
and Fair Value of Financial Instruments.
F-9
<PAGE>
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
SFAS No. 107, Disclosures About Fair Value of Financial Instruments,
requires disclosure of an estimate of the fair value of certain financial
instruments. The Company's financial instruments consist of cash equivalents,
short term investments, accounts receivable and accounts payable. The
estimated fair value of these financial instruments approximates their
carrying value at December 31, 1997 and 1996 due to the short-term nature of
these instruments.
(l) Recently Issued Accounting Standards
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income.
SFAS No. 130 requires disclosure of all components of comprehensive income on
an annual and interim basis. Comprehensive income is defined as the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from nonowner sources. SFAS No. 130 is effective for
fiscal years beginning after December 15, 1997. Management does not expect the
adoption of this standard to have a material impact on the Company and its
operations.
In July 1997, the FASB issued SFAS No. 131, Disclosures About Segments of
Enterprise and Related Information. SFAS No. 131 requires certain financial
and supplementary information to be disclosed on an annual and interim basis
for each reportable segment of an enterprise. SFAS No. 131 is effective for
fiscal years beginning after December 15, 1997. Unless impracticable,
companies would be required to restate prior period information upon adoption.
Management does not expect the adoption of this standard to have a material
impact on the Company and its operations.
(2) LINE OF CREDIT
The Company has a working capital line of credit (line of credit) with a
bank that expires in June 1998, if not renewed, pursuant to which the Company
may borrow up to the lesser of $2.0 million or a percentage of accounts
receivable, as defined. Borrowings under the line of credit will bear interest
at the bank's prime rate (8.5% at December 31, 1997). There were no borrowings
under the line of credit during 1997 and 1996.
(3) ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1996
------- ------
<S> <C> <C>
Income Taxes................................................. $ 2,230 $ --
Payroll and payroll related.................................. 3,217 2,064
Other........................................................ 4,776 4,111
------- ------
$10,223 $6,175
======= ======
</TABLE>
(4) 401(K) PLAN
The Company maintains The Davox Corporation 401(k) Retirement Plan (the
Plan), which is a deferred contribution plan that covers all full-time
employees over 21 years of age who have completed at least six months of
service with the Company. The participants may make pretax deferred
contributions to the plan of up to 15% of the annual compensation, as defined.
Contributions by the Company are discretionary and are determined by the Board
of Directors. The Company made discretionary contributions of approximately
$214,000 and $161,000 in 1997 and 1996, respectively. There were no Company
contributions to the Plan in 1995.
F-10
<PAGE>
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
(5) INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes (FAS 109). Under the liability method specified by
FAS 109, a deferred tax asset or liability is determined based on the
difference between the financial statement and tax bases of assets and
liabilities, as measured by the enacted tax rates assumed to be in effect when
these differences are expected to reverse.
The components of the provision for income taxes consist of the following
(in thousands):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
Current:
Federal................................ $ 5,700 $ 203 $ 107
State.................................. 1,606 810 427
----------- ----------- ---------
Total current........................ 7,306 1,013 534
----------- ----------- ---------
Deferred:
Federal................................ (4,300) -- --
State.................................. (500) -- --
----------- ----------- ---------
Total deferred....................... (4,800) -- --
----------- ----------- ---------
Provision for Income Taxes............. $ 2,506 $ 1,013 $ 534
=========== =========== =========
</TABLE>
The provision for income taxes that is currently payable for the years ended
December 31, 1997 and 1996 does not reflect $10,887,000 and $888,000,
respectively, of tax benefits included in additional paid in capital related
to disqualifying dispositions and the exercise of non-qualified stock options.
The approximate income tax effect of each type of temporary difference
comprising the deferred tax asset is approximately as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Net operating loss carryforwards........................... $ 5,190 $ 8,153
Depreciation............................................... 762 571
Inventory reserves......................................... 1,442 561
Tax credit carryforwards................................... 800 577
Other temporary differences................................ 2,594 1,940
------- -------
10,788 11,802
Valuation allowance........................................ (800) (11,802)
------- -------
$ 9,988 $ --
======= =======
</TABLE>
At December 31, 1997, the Company has available net operating loss
carryforwards and tax credit carryforwards of approximately $13,097,000 and
$800,000, respectively, expiring through 2009. These carryforwards may be used
to offset future income taxes payable, if any, and are subject to review by
the Internal Revenue Service. All of the net operating loss carryforwards as
of December 31, 1997 relate to the excess tax benefit of disqualifying
dispositions and the exercise of non-qualified stock options, which is
included in additional paid in capital as discussed below.
In accordance with FAS 109, the Company records a valuation allowance
against its deferred tax asset to the extent management believes it is more
likely than not that the asset will be realized. As of December 31,
F-11
<PAGE>
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
1997, the Company believes that its deferred tax asset will be realizable
except to the extent of certain tax credit carryforwards which may expire.
Accordingly, the reduction in the valuation allowance during 1997 was recorded
as a $4.8 million reduction of the provision for income taxes for the net
operating losses, not attributed to stock options, and a $10.9 million credit
to additional paid in capital relating to the tax benefit of certain stock
option exercises.
A reconciliation of the federal statutory rate to the Company's effective
tax rate is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Federal Statutory tax rate................... 34.0% 34.0% 34.0%
State income taxes, net of federal income tax
benefit..................................... 5.0 6.3 6.3
Reduction in valuation allowance/utilization
of net operating loss carryforwards......... (28.0) (29.0) (27.7)
Foreign sales corporation benefit............ (1.0) -- --
Other........................................ 2.0 (1.3) (2.6)
-------- -------- --------
Effective tax rate........................... 12.0% 10.0% 10.0%
======== ======== ========
</TABLE>
(6) COMMITMENTS AND CONTINGENCIES
(a) Operating Lease Commitments
The Company leases its facilities and sales offices under operating leases
that expire at various dates through October 2001. The Company's lease for its
corporate headquarters expires in September 2000. Pursuant to the lease
agreements, the Company is responsible for maintenance costs and real estate
taxes. Total rental expense for all operating leases for the years ended
December 31, 1997, 1996 and 1995 amounted to approximately $803,000, $507,000
and $551,000, respectively.
Future minimum lease payments are approximately as follows at December 31,
1997 (in thousands):
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
Years Ending December 31,
1998............................................................... $ 977
1999............................................................... 816
2000............................................................... 579
2001............................................................... 85
------
$2,457
======
</TABLE>
(b) Employment and Severance Agreements
The Company has entered into employment and severance agreements with
certain officers and key employees whereby the Company may be required to pay
the officers and employees a total of approximately $1,537,000 upon
termination of employment by the Company under certain circumstances, as
defined.
(c) Litigation
The Company is presently engaged in various legal actions and its ultimate
liability, if any, cannot be determined at the present time. However,
management has consulted with legal counsel, and management believes that any
such liability will not have a material adverse effect on the Company's
financial position or its results of operations.
F-12
<PAGE>
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
(7) STOCKHOLDERS' EQUITY
(a) Stock Split
On April 24, 1997, the Company effected a three-for-two stock split through
the issuance of a 50% stock dividend payable on May 28, 1997 to shareholders
of record on May 13, 1997. All share and per share amounts have been
retroactively adjusted for all periods presented.
(b) 1986 Stock Plan
The Company's 1986 Stock Plan (the "1986 Plan"), administered by the Board
of Directors authorizes the issuance of a maximum of 3,696,429 shares of
common stock for the exercise of options in connection with awards or direct
purchases of stock. Options granted under the 1986 Plan may be either
nonstatutory stock options or options intended to constitute "incentive stock
options" under the Internal Revenue Code. Stock options may be granted to
employees, officers, employee-directors or consultants of the Company and are
exercisable in such installments as the Board of Directors may specify. The
options granted currently vest over a four-year period and expire ten years
from the date of grant. The 1986 Plan terminated pursuant to its terms in
September 1996.
(c) 1996 Stock Plan
The Company's 1996 Stock Plan (the "1996 Plan") administered by the Board of
Directors authorizes the issuance of a maximum of 1,350,000 shares of common
stock for the exercise of options in connection with awards or direct
purchases of stock. Options granted under the 1996 Plan may be either
nonstatutory stock options or options intended to constitute "incentive stock
options" under the Internal Revenue Code. Stock options may be granted to
employees, officers, employee-directors or consultants of the Company and are
exercisable in such installments as the Board of Directors may specify. The
shares currently vest to the individual over a four-year period. There were
300,461 shares available for future grants under the 1996 Plan at December 31,
1997.
(d) Stock Options to Directors
The Company's 1988 Non-employee Director Stock Option Plan (the "1988
Plan"), as amended, is administered by the Board of Directors and authorizes
the issuance of a maximum of 600,000 shares of common stock for the exercise
of options. The 1988 Plan provides for the automatic grant of options for
60,000 shares to each newly elected non-employee director and additional
grants of 15,000 options per biennial anniversary of election to the Board of
Directors. Options granted under the 1988 Plan vest 25% per year beginning one
year from the date of grant and expire five years from the date of grant.
There are 326,250 shares available for future grants under the 1988 Plan at
December 31, 1997.
F-13
<PAGE>
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
(e) Stock Plan Summary
The following is a summary of the stock option activity for all plans for
the years ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF EXERCISE AVERAGE
OPTIONS PRICE RANGE EXERCISE PRICE
--------- ------------- --------------
<S> <C> <C> <C>
Outstanding, December 31, 1994..... 2,555,740 $ 1.17-$ 3.67 $ 2.07
Granted.......................... 169,312 4.50- 8.17 6.12
Exercised........................ (306,917) 1.17- 4.75 1.64
Canceled......................... (66,788) 1.17- 8.17 3.23
--------- ------------- ------
Outstanding, December 31, 1995..... 2,351,347 1.17- 8.17 2.38
Granted.......................... 431,325 8.09- 26.33 19.26
Exercised........................ (797,950) 1.17- 16.17 2.29
Canceled......................... (76,201) 1.17- 8.17 3.11
--------- ------------- ------
Outstanding, December 31, 1996..... 1,908,521 1.33- 26.33 6.21
Granted.......................... 978,643 24.33- 34.13 26.33
Exercised........................ (771,313) 1.33- 26.33 3.50
Canceled......................... (42,357) 1.33- 31.00 20.86
--------- ------------- ------
Outstanding, December 31, 1997..... 2,073,494 $ 1.33-$34.13 $16.41
--------- ------------- ------
Exercisable, December 31, 1997..... 545,419 $ 1.33-$26.33 $ 8.21
========= ============= ======
</TABLE>
The range of exercise prices for options outstanding and options exercisable
at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------- ------------------------
WEIGHTED AVERAGE
RANGE OF REMAINING CONTRACTUAL WEIGHTED AVERAGE WEIGHTED AVERAGE
EXERCISE PRICES LIFE (IN YEARS) NUMBER EXERCISE PRICE NUMBER EXERCISE PRICE
--------------- --------------------- --------- ---------------- ------- ----------------
<S> <C> <C> <C> <C> <C>
$ 1.33-$ 1.67........... 5.90 375,179 $ 1.62 179,130 $ 1.62
1.92- 3.25........... 6.38 242,382 2.54 160,822 2.48
3.50- 16.17........... 6.80 209,602 7.58 55,357 6.32
16.75- 24.33........... 9.02 822,433 22.88 117,419 21.96
26.25- 34.13........... 9.32 423,898 29.26 32,691 26.30
--------- -------
2,073,494 545,419
========= =======
</TABLE>
(f) Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan (the "Purchase Plan") under
which a maximum of 150,000 shares of Common Stock may be purchased by eligible
employees. Substantially all full-time employees of the Company are eligible
to participate in the Purchase Plan.
The Purchase Plan provides for two "purchase periods" within each of the
Company's fiscal years, the first commencing on January 1 of each calendar
year and continuing through June 30 of such calendar year, and the second
commencing on July 1 of each year and continuing through December 31 of such
calendar year. Eligible employees may elect to become participants in the
Purchase Plan for a purchase period by completing a stock purchase agreement
prior to the first day of the purchase period for which the election is made.
Shares are purchased through accumulation of payroll deductions (of not less
than 0.5% nor more than 10% of
F-14
<PAGE>
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
compensation, as defined) for the number of whole shares, determined by
dividing the balance in the employee's account on the last day of the purchase
period by the purchase price per share for the stock determined under the
Purchase Plan. The purchase price for the shares will be the lower of 85% of
the fair market value of the Common Stock at the beginning of the purchase
period or 85% of such value at the end of the purchase period (rounded to the
nearest quarter). During 1997, 1996 and 1995, 12,153, 14,979 and 13,104
shares, respectively, were purchased under the Purchase Plan.
(g) Accounting for Stock-Based Compensation
The Company accounts for its stock-based compensation under Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. In
October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
Accounting for Stock-Based Compensation, which established a fair-value-based
method of accounting for stock-based compensation plans. The Company has
adopted the disclosure-only alternative under SFAS No. 123, which requires the
disclosure of the pro forma effects on earnings and earnings per share as if
SFAS No. 123 had been adopted, as well as certain other information.
The Company has computed the pro forma disclosures required under SFAS No.
123 for all stock options granted (including the employee stock purchase plan)
as of December 31, 1997 and 1996 using the Black-Scholes option pricing model
prescribed by SFAS No. 123.
The assumptions used and the weighted average information for the years
ended December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1997 1996
------------ ------------
<S> <C> <C>
Risk-free interest rates......................... 5.71%--6.83% 5.36%--6.64%
Expected dividend yield.......................... -- --
Expected lives................................... 4.78 years 5.50 years
Expected volatility.............................. 66% 71%
Weighted average grant-date fair value of options
granted during the period....................... $16.00 $12.80
Weighted-average exercise price.................. $16.41 $6.21
Weighted-average remaining contractual life of
options outstanding............................. 7.98 years 7.45 years
</TABLE>
The effect of applying SFAS No. 123 would be as follows (in thousands except
per share data):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------
1997 1996
------- ------
<S> <C> <C>
Net income as reported....................................... $18,380 $9,115
======= ======
Pro forma net income......................................... $14,584 $8,290
======= ======
Net income per share as reported
Basic...................................................... $ 1.60 $ 0.85
======= ======
Diluted.................................................... $ 1.45 $ 0.74
======= ======
Pro forma net income per share
Basic...................................................... $ 1.24 $ 0.75
======= ======
Diluted.................................................... $ 1.13 $ 0.66
======= ======
</TABLE>
F-15
<PAGE>
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
(8) SIGNIFICANT CUSTOMERS
Revenue from the Company's largest single customer was 11%, 4% and 12% of
total revenue in 1997, 1996 and 1995, respectively. Revenue from the Company's
three largest customers amounted to 20%, 12% and 20% of total revenue in 1997,
1996 and 1995, respectively.
(9) EXPORT SALES
Export product sales, primarily to Canada, Europe, Mexico, Australia and
Japan, accounted for 18%, 14% and 12% of total revenue in 1997, 1996 and 1995,
respectively. All of the Company's sales for the years ended December 31,
1997, 1996 and 1995 were originated from its headquarters located in the
United States.
(10) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following table presents a condensed summary of quarterly results of
operations for the years ended December 31, 1997 and 1996 (in thousands,
except per share data):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total revenue................................ $17,269 $18,170 $19,805 $21,571
Gross profit................................. 10,960 11,498 13,162 14,645
Net income................................... 3,886 4,075 4,953 5,466
Net income per share
Basic...................................... $ 0.35 $ 0.36 $ 0.43 $ 0.46
Diluted.................................... $ 0.31 $ 0.32 $ 0.39 $ 0.43
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total revenue................................ $11,410 $12,665 $14,079 $15,488
Gross profit................................. 6,732 7,527 8,451 9,356
Net income................................... 1,758 2,048 2,477 2,831
Net income per share
Basic...................................... $ 0.17 $ 0.19 $ 0.23 $ 0.26
Diluted.................................... $ 0.15 $ 0.17 $ 0.20 $ 0.23
</TABLE>
F-16
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
AnswerSoft, Inc.
We have audited the accompanying consolidated balance sheets of AnswerSoft,
Inc. as of December 31, 1997 and 1996, and the related consolidated statements
of operations, stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of AnswerSoft, Inc. at December 31, 1997 and 1996, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Dallas, Texas
February 28, 1998
F-17
<PAGE>
ANSWERSOFT, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 3,273,323 $ 2,942,179
Accounts receivable, net of reserves of
approximately $85,910 at
December 31, 1997 and $12,357 at December 31,
1996, respectively................................ 2,240,092 1,179,149
Prepaid expenses and other current assets.......... 153,737 197,431
----------- -----------
Total current assets............................. 5,667,152 4,318,759
Property and equipment, net.......................... 663,092 266,754
Other assets......................................... 62,095 163,217
----------- -----------
Total assets......................................... $ 6,392,339 $ 4,748,730
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.................. $ 178,205 $ 5,295
Accounts payable................................... 260,003 316,514
Accrued expenses and other liabilities............. 614,128 400,405
Deferred revenue................................... 571,830 1,177,129
----------- -----------
Total current liabilities........................ 1,624,166 1,899,343
Long-term debt....................................... 297,008 --
Deferred revenue..................................... 252,945 314,953
Commitments..........................................
Preferred stock, $.01 par value......................
Authorized shares--25,000,000
Issued and outstanding shares--10,615,047 at
December 31, 1997 and 8,480,000 at December 31,
1996.............................................. 13,911,122 8,480,000
Stockholders' equity:
Common stock $.01 par value:
Authorized shares--20,000,000
Issued and outstanding shares--1,354,442 at
December 31, 1997 and 630,141 at December 31,
1996.............................................. 13,544 6,301
Paid-in capital..................................... 117,169 5,420
Other............................................... 6,629 --
Amounts due from officer............................ (413,992) --
Accumulated deficit................................. (9,416,252) (5,957,287)
----------- -----------
Total stockholders' equity........................... (9,692,902) (5,945,566)
----------- -----------
Total liabilities and stockholders' equity........... $ 6,392,339 $ 4,748,730
=========== ===========
</TABLE>
See accompanying notes.
F-18
<PAGE>
ANSWERSOFT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1997 1996 1995
----------- ---------- -----------
<S> <C> <C> <C>
Revenue
Product............................... $ 5,307,222 $2,565,957 $ 240,803
Product support and services.......... 1,430,891 890,913 799,925
----------- ---------- -----------
6,738,113 3,456,870 1,040,728
----------- ---------- -----------
Cost of revenue
Product............................... 170,650 89,936 33,412
Product support and services.......... 1,308,008 564,602 678,519
----------- ---------- -----------
1,478,658 654,538 711,931
----------- ---------- -----------
Gross profit............................ 5,259,455 2,802,332 328,797
----------- ---------- -----------
Costs and expenses
Sales and marketing................... 5,036,145 1,939,435 1,316,533
Software development.................. 1,939,366 872,460 880,726
General and administrative............ 1,821,602 552,527 484,923
----------- ---------- -----------
8,797,113 3,364,422 2,682,182
----------- ---------- -----------
Loss from operations.................... (3,537,658) (562,090) (2,353,385)
Interest income......................... 99,817 82,208 211,583
Interest expense........................ (21,124) (2,046) (3,872)
----------- ---------- -----------
Loss before income taxes................ (3,458,965) (481,928) (2,145,674)
Income taxes............................ -- -- 24,875
----------- ---------- -----------
Net loss................................ $(3,458,965) $ (481,928) $(2,170,549)
=========== ========== ===========
Basic and diluted loss per common
share.................................. $ (3.37) $ (0.79) $ (4.33)
Weighted average shares outstanding..... 1,026,561 607,141 501,058
</TABLE>
See accompanying notes.
F-19
<PAGE>
ANSWERSOFT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
----------------- PAID-IN ACCUMULATED NOTE DUE
SHARES AMOUNT CAPITAL DEFICIT FROM OFFICER OTHER TOTAL
--------- ------- -------- ----------- ------------ ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE at December 31,
1994................... 434,020 $ 4,340 $ -- $(3,304,810) $ -- $ -- $ (3,300,470)
Issuance of common
stock pursuant to
stock option
exercises............. 144,420 1,444 1,764 -- -- -- 3,208
Net loss............... -- -- -- (2,170,549) -- -- (2,170,549)
--------- ------- -------- ----------- --------- ------ -------------
BALANCE at December 31,
1995................... 578,440 5,784 1,764 (5,475,359) -- -- (5,467,811)
Issuance of common
stock pursuant to
stock option
exercises............. 51,701 517 3,656 -- 4,173
Net loss............... -- -- -- (481,928) -- -- (481,928)
--------- ------- -------- ----------- --------- ------ -------------
BALANCE at December 31,
1996................... 630,141 6,301 5,420 (5,957,287) -- -- (5,945,566)
Issuance of Series B
preferred stock
pursuant to stock
option exercises...... -- -- -- -- (356,122) -- (356,122)
Issuance of common
stock pursuant to
stock option
exercises............. 589,301 5,893 77,999 -- (57,870) -- 26,022
Net loss............... -- -- -- (3,458,965) -- -- (3,458,965)
Other.................. 135,000 1,350 33,750 -- -- 6,629 41,729
--------- ------- -------- ----------- --------- ------ -------------
BALANCE at December 31,
1997................... 1,354,442 $13,544 $117,169 $(9,416,252) $(413,992) $6,629 $ (9,692,902)
========= ======= ======== =========== ========= ====== =============
</TABLE>
See accompanying notes.
F-20
<PAGE>
ANSWERSOFT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1997 1996 1995
----------- ---------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss............................... $(3,458,965) $ (481,928) $(2,170,549)
Adjustments to reconcile net loss to
net cash used in
operating activities:
Depreciation and amortization......... 290,585 99,783 75,927
Provision for loss on accounts
receivable........................... 90,894 12,357 --
Changes in operating assets and
liabilities:
Accounts receivable.................. (1,151,837) (889,976) (294,080)
Prepaid expenses other assets........ 138,990 (320,993) (24,516)
Accounts payable, accrued expenses
and other liabilities............... 157,212 468,126 (33,949)
Deferred revenue..................... (667,307) 1,477,082 15,000
Other................................ 116,729 -- --
----------- ---------- -----------
Net Cash (used in) provided by
operating activities................ (4,483,699) 364,451 (2,432,167)
----------- ---------- -----------
INVESTING ACTIVITIES
Purchases of property and equipment.... (681,097) (193,212) (191,662)
Disposals of property and equipment.... -- 128,751 --
----------- ---------- -----------
Net cash used in investing activities.. (681,097) (64,461) (191,662)
----------- ---------- -----------
FINANCING ACTIVITIES
Proceeds from issuance of Series B
Preferred Stock....................... 5,000,000 -- --
Proceeds from issuance of common stock
pursuant to stock options............. 26,022 4,173 3,208
Proceeds from issuance of long-term
debt.................................. 475,213 -- --
Payments on obligations under capital
leases................................ (5,295) (9,749) (21,407)
----------- ---------- -----------
Net cash provided by (used in)
financing activities.................. 5,495,940 (5,576) (18,199)
----------- ---------- -----------
Increase (decrease) in cash.............. 331,144 294,414 (2,642,028)
Cash at beginning of period.............. 2,942,179 2,647,765 5,289,793
----------- ---------- -----------
Cash at end of period.................... $ 3,273,323 $2,942,179 $ 2,647,765
=========== ========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid............................ $ 21,124 $ 2,046 $ 3,872
=========== ========== ===========
</TABLE>
See accompanying notes.
F-21
<PAGE>
ANSWERSOFT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
AnswerSoft, Inc. (the "Company"), a Delaware corporation, is a private
company and was founded in 1993 for the purpose of developing and marketing
inter-application automation software in the computer telephony integration
market ("CTI") throughout the world with a primary focus on business call
centers. The Company's products are designed to enhance the customer to
business interactions by way of the call center.
Consistent with the Company's operating structure, major markets are served
by the Company's sales organization and indirect distribution channels
consisting of the world's major telephone switch suppliers, independent
resellers and distributors. One customer accounted for 36%, 35%, and 24% of
the total revenues for 1997, 1996 and 1995, respectively. One other customer
accounted 29% of the total revenue in 1997. Additionally, four other customers
separately accounted for 17%, 15%, 14%, and 11% of the total revenue in 1995.
Basis of Presentation
The consolidated financial statements include the accounts of Company and
its wholly owned subsidiaries after elimination of intercompany balances and
transactions. The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the results of operations for the years ended December 31,
1997, 1996 and 1995. While management has based their assumptions and
estimates on the facts and circumstances currently known, final amounts may
differ from such estimates. Certain reclassifications have been made to the
prior periods financial statements to conform to the current period financial
statement presentation.
Revenue
The Company offers its customers software products, post contract customer
support services and professional implementation services on a fee basis. For
a license fee, customers enter into software license arrangements which grant
a right to use, but not to own, the Company's software products. The customer,
at its option, may enter into a post contract product support agreement which
allows the customer access to telephone support, product code patches, and
unspecified product upgrades, enhancements and releases on a when and if
available basis. Revenue from license fees for software products is recognized
after the software is delivered, provided that no significant future vendor
obligations exist and that collection of the license fee is probable. Post
contract product support revenue including product support included in initial
license fees, is recognized ratably over the term of the contract beginning in
the month following the date of the post contract customer support agreement.
Service revenue is recognized as the services are performed.
Software Development Costs
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed," (SFAS No.86), software development costs are expensed as incurred
until technological feasibility of the related products has been established,
at which time such costs are capitalized until the product is released as
generally available to customers. Because the products' features and
functionality are highly sophisticated, they require exhaustive testing and
technological feasibility is not reached until shortly before a product is
released for general availability. Accordingly, software development costs
qualifying for capitalization have been insignificant and therefore, such
costs have been charged to expense as incurred.
F-22
<PAGE>
ANSWERSOFT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Depreciation and Amortization
Property and equipment are recorded at cost and depreciated using the
straight-line method over average useful lives of three (3) to five (5) years.
Other intangible assets are amortized on a straight-line basis over a period
of three (3) years.
Advertising Costs
Advertising costs, which include expenses relating to promotions, trade
shows, direct mailings, and other advertising, are expensed as incurred.
During 1997, 1996 and 1995, advertising costs were approximately $368,000,
$194,000 and $100,000, respectively.
Stock Options
The Company has elected to follow Accounting Principles Board Opinion No. 25
("APB 25"), "Accounting for Stock Issued to Employees," in accounting for its
employee stock options and stock based awards. Under APB 25, if the exercise
price of an employee's stock option equals or exceeds the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
The Company has granted all stock options at estimated fair market value;
accordingly, no compensation expense has been recorded. Note 9 below provides
additional disclosures required under Statement of Financial Accounting
Standard No. 123 ("FAS 123"), "Accounting for Stock-Based Compensation."
Loss per Common Share
In 1997, the Financial Accounting Standards Board ("FASB") issued Statement
No. 128, Earnings per Share. Statement 128 replaced the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share excludes
any dilutive effects of options, warrants and convertible securities. Loss per
common share amounts for all periods have been presented to conform to the
Statement 128 requirements. The Company's loss per common share calculations
are based on the average number of shares of common stock outstanding during
each year presented. There is no difference in basic and diluted loss per
share for 1997, 1996 and 1995, since the effects for those periods from the
potential exercise of options and warrants and the potential conversion to
common stock of preferred stock was antidilutive.
Foreign Currency Translation
The assets and liabilities of the Company's non-U.S. operations are
translated into U.S. dollars at exchange rates in effect as of the respective
balance sheet dates, and revenue and expense accounts of these operations are
translated at average exchange rates during the months the transactions occur.
Unrealized translation gains and losses are included as an adjustment to
stockholders' equity.
Cash and Cash Equivalents
Cash equivalents consist primarily of a highly liquid money market fund
investments. The carrying amount of cash and cash equivalents approximates
fair value.
F-23
<PAGE>
ANSWERSOFT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Developments
In October 1997 the FASB approved the American Institute of Certified Public
Accountants Statement of Position ("SOP 97-2"), "Software Revenue
Recognition," which will be effective for transactions occurring after
December 31, 1997. The Company's adoption of SOP 97-2 is not expected to have
a material impact on the financial position or results of operations of the
Company; however, to date, implementation guidance is minimal and the Company
has not completed its evaluation of the effect of the new standard on future
revenue recognition.
In June 1997 the FASB issued Statement No. 130 ("FAS 130"), "Reporting
Comprehensive Income." FAS 130 establishes standards for reporting and display
of comprehensive income and its components in a full set of general-purpose
financial statements. FAS 130 is effective for fiscal years beginning after
December 15, 1997. The adoption of FAS 130 will require additional disclosure
in the Company's financial statements but will not have any impact on the
financial position or results of operations of the Company.
2. ACCOUNTS RECEIVABLE
Accounts and notes receivable consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Billed accounts receivable........................... $1,399,651 $1,191,506
Unbilled accounts receivable......................... 926,351 --
Less: Allowance for doubtful accounts................ (85,910) (12,357)
---------- ----------
$2,240,092 $1,179,149
========== ==========
</TABLE>
At December 31, 1997 and 1996, 55% and 39% , respectively, of total accounts
receivable were from one customer that is under a software product
distribution contract for certain of the Company's products. Loss of this
customer as a distributor of the Company's products could have a material
adverse effect on the Company's results of operations and financial condition.
The distribution contract provides for the right to replicate and sell certain
of the Company's products and is subject to automatic renewal for an
additional one year term in the Company's second quarter unless either party
notifies the other of non-renewal sixty days prior to renewal. Management
expects that this contract will be renewed for another one year term. Unbilled
receivables consist of fees due from the distributor for product sold by the
distributor in the Company's fourth quarter. A separate customer accounted for
27% of the total accounts receivable at December 31, 1996.
The remainder of the Company's receivables are due principally from
corporations in diverse industries, distributors and resellers located in
North America, and to a lesser extent, Europe and Asia Pacific. The Company
does not perform routine credit evaluations of its large customers' financial
conditions as they are generally large well-known companies, and collateral is
generally not required. Foreign customers generally provide a partial payment
prior to shipment or are required to supply a standby letter of credit drawn
on a US bank. The carrying amounts of accounts receivable approximate fair
value.
F-24
<PAGE>
ANSWERSOFT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Equipment............................................. $ 558,357 $ 188,067
Furniture and fixtures................................ 224,979 6,659
Computer software..................................... 362,468 269,981
---------- ---------
1,145,804 464,707
Accumulated depreciation.............................. (482,712) (197,953)
---------- ---------
$ 663,092 $ 266,754
========== =========
</TABLE>
4. LINES OF CREDIT
On November 18, 1997, the Company entered into an agreement with a bank
which allows the Company to borrow up to $1,000,000 on a revolving line of
credit, based on a defined borrowing base, which is secured by the Company's
accounts receivable. The borrowings bear interest at the prevailing prime rate
plus .25% and are due at the end of November 1998. No borrowings have been
made under the revolving line of credit. On April 1, 1997, the Company entered
into an equipment line of credit agreement for $2,000,000 with the bank.
Borrowings bear interest at the prevailing prime rate plus .25% per annum. The
term of the agreement is 36 months and the Company may make six (6) draws
during first 12 months of the agreement. During the first twelve (12) months
of the agreement interest payments are due quarterly. Payments are interest
only during the first 12 months of the agreement. Payment of principal and
interest are payable monthly beginning April 1, 1998. During 1997, the Company
borrowed $475,213 under the equipment line of credit. Borrowings under both
lines are secured by substantially all the assets of the Company. The
agreements also subject the Company to maintain compliance with financial
ratios such as a quick ratio and a tangible net worth requirements, maximum
quarterly loss provisions, restrictions on dividend payments and limitations
on investments. At December 31, 1997 the Company was in compliance with the
debt covenants. The aggregate amount of principal maturities are $178,205 in
1998, $237,606 in 1999 and $59,402 in 2000.
5. 401(K) PLAN
The Company maintains a defined contribution plan under section 401(k) of
the Internal Revenue Code of 1996, as amended, (the "401(k) Plan"). The 401(k)
Plan covers all full-time employees over 21 years of age who have completed at
least one year of service with the Company. The participants may make pre-tax
contributions to the 401(k) Plan up to 15% of annual compensation as defined.
No contributions have been made by the Company to the 401(k) Plan in 1997,
1996 or 1995.
6. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Compensation and payroll taxes............................. $239,417 $180,000
Employee benefits.......................................... 150,026 76,364
Other...................................................... 224,685 144,041
-------- --------
$614,128 $400,405
======== ========
</TABLE>
F-25
<PAGE>
ANSWERSOFT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
7. INCOME TAXES
Deferred tax assets and liabilities are determined based on differences
between financial reporting and tax basis of assets and liabilities, and are
measured using enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
The significant components of the Company's deferred tax liabilities and
assets are as follows at December 31:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Prepaid expenses............................... $ (48,220) $ (3,763)
Other.......................................... (7,964) (7,623)
----------- -----------
Total deferred tax liabilities............... $ (56,184) $ (11,386)
----------- -----------
Deferred tax assets:
Net operating loss carryforwards............... $ 2,655,632 $ 1,449,486
Depreciation and amortization.................. 44,947 11,102
Accrued liabilities and deferred revenue....... 118,237 197,757
Allowance for doubtful accounts................ 31,761 4,330
Research and development credit carryforwards.. 87,926 65,903
----------- -----------
Total deferred tax assets.................... $ 2,938,503 $ 1,728,578
----------- -----------
Deferred tax assets, net of deferred tax
liabilities..................................... $ 2,882,319 $ 1,717,192
Valuation allowance.............................. (2,882,319) (1,717,192)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
The provision for income taxes is reconciled with the federal statutory rate
as follows at December 31:
<TABLE>
<CAPTION>
1997 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
Provision computed at federal statutory
rate................................... $(1,176,048) $(163,856) $(729,529)
State income taxes, net of federal tax
effect................................. -- 631 16,418
Valuation allowance..................... 1,164,707 144,936 741,271
Other................................... 11,341 18,289 (3,285)
----------- --------- ---------
$ -- $ -- $ 24,875
=========== ========= =========
</TABLE>
For federal income tax purposes, the Company has a net operating loss
carryforward of $7,811,000 and unused research and development credits of
approximately $87,900 which begin to expire in the years 2008 and 2009,
respectively. Utilization of approximately $2,300,000 of the net operating
loss and approximately $36,000 of the research and development credit
carryforwards is restricted because of changes in ownership, as defined by the
Tax Reform Act of 1986, which occurred in March 1994 and in February 1995.
Subsequent changes in ownership of the Company may further restrict
utilization of the entire net operating loss and research and development
credit carryforwards.
8. PREFERRED STOCK
The Company has two issues of preferred stock outstanding, Series A
Preferred Stock ("Series A") and Series B Preferred Stock ("Series B") or
collectively referred to as the "Preferred Stock". The Series A was
F-26
<PAGE>
ANSWERSOFT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
8. PREFERRED STOCK (CONTINUED)
issued in 1994 at $1.00 per share. On July 16, 1997 the Company issued
1,923,077 shares of Series B at $2.60 per share raising gross proceeds of
approximately $5,000,000.
The shares of Preferred Stock are convertible at the option of the holder
but are subject to automatic conversion upon the closing of a firm
underwritten public offering pursuant to a registration statement filed under
the Securities Act of 1933, as amended, in which the aggregate sales price of
such securities equals at least $10,000,000 and the per share sales price is
not less than $10.00, or upon the affirmative vote of the holders of at least
51% of the outstanding shares of the Preferred Stock. The conversion rate is
initially one share of Common Stock for each share of Preferred Stock, but is
subject to adjustment as set forth in the Certificate of Incorporation.
Holders of Preferred Stock have voting rights equal to the number of common
shares they would have upon conversion of the Preferred Stock.
Prior to May 1, 2001, Holders of the Preferred Stock may require the Company
to redeem such shares if redemption is elected by holders of at least 67% of
the outstanding Preferred Stock. The redemption price per share is the greater
of $1.00 and $2.60 per share or the fair market value of the Series A and
Series B, respectively, as of a date within 45 days after receipt by the
corporation of the redemption certificate, plus all unpaid dividends declared
and accrued with respect to the Preferred Stock. The redemption elected by
holders of the Preferred Stock is to be effected in two installments with 50%
of each holder's shares of Preferred Stock to be redeemed in the first
installment on October 1, 2001 and the remainder Preferred Stock in the second
installation on October 1, 2002.
Holders of Series A and Series Preferred B Stock are entitled to receive
dividends at a per share rate of $0.10 and $0.26, respectively, per annum.
Prior to September 21, 1999, dividends are payable only to the extent declared
by the Company's Board of Directors. Subsequent to September 21, 1999,
dividends on the Preferred Stock accrue quarterly and are cumulative.
Dividends on Common Stock may be declared or paid only if dividends have been
declared and set apart for payment or paid on all outstanding shares of
Preferred Stock. As of December 31, 1997, the Company had declared no
dividends on either its Common Stock or Preferred Stock.
Holders of Preferred Stock are entitled to liquidation preferences of $1.00
and $2.60 per share for Series A and Series B, respectively, plus accrued and
unpaid dividends in the event of liquidation, dissolution or winding up of the
Company including the merger of the Company or the sale of the Company
including the sale of substantially all of its assets.
Warrants to purchase 25,000 shares of Series A at a price of $1.00 per share
(exercisable on or before February 11, 1999) were outstanding at December 31,
1997. In connection with an equipment lease (Note 10), the lessor received
warrants to acquire 35,000 shares of Series A shares at an exercise price of
$1.00 per share, exercisable on or before January 1, 2003.
On November 3, 1997 an option for 136,970 shares of Series B shares with an
exercise price of $2.60 was granted to an officer of the Company as part of
his employment with the Company. The options were exercised on December 4,
1997 in exchange for a non-recourse promissory note from the officer.
At December 31, 1997, 8,555,000 shares of Series A and 2,060,047 of Series B
Stock were outstanding.
9. STOCK OPTIONS
In 1994, the Company's Board of Directors approved the adoption of an
employee stock option plan, as amended, (the "Plan") which authorized the
grant of options up to 4,200,000 of the Company's Common Stock.
F-27
<PAGE>
ANSWERSOFT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
9. STOCK OPTIONS (CONTINUED)
The Plan provides for the granting of options to eligible employees to
purchase the Company's Common stock at an exercise price of not less than 100%
of the fair market value per share on the date of grant as determined by the
Board of Directors. All employees are eligible to participate in the Plan. The
Plan is administered by the Board of Directors who determine the number of
shares for which options will be granted, the effective dates of the grants,
the option price and the vesting schedules. All options under the Plan have a
ten (10) year term and typically vest over four (4) years from the effective
date of grant. Unless otherwise established, options granted pursuant to the
Plan vest 25% upon the completion of twelve (12) months of service and at a
rate of 1/48 of the shares granted each month thereafter. Certain option
grants became exercisable upon grant or within thirty (30) days after grant
pursuant to agreements with the employees.
<TABLE>
<CAPTION>
1997 1996 1995
------------------------- ------------------------ ------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
--------- -------------- -------- -------------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January
1...................... 881,569 $ 0.08 575,759 $ 0.07 524,499 $ 0.04
Granted................. 3,018,524 $ 0.22 554,644 $ 0.10 399,092 $ 0.10
Exercised............... (589,301) $ 0.15 (51,701) $ 0.08 (144,420) $ 0.05
Canceled or expired..... (356,857) $ 0.12 (197,133) $ 0.10 (203,412) $ 0.06
--------- -------- --------
Outstanding at December
31..................... 2,953,935 $ 0.21 881,569 $ 0.08 575,759 $ 0.07
========= ======== ========
Exercisable at end of
year................... 362,555 $ 0.18 326,494 $ 0.07 129,691 $ 0.04
========= ======== ========
Weighted average fair
value of options
granted during the
year................... $ 0.05 $ 0.02 $ 0.02
</TABLE>
The range of exercise prices for the options outstanding at December 31,
1997 range from $0.10 to $0.26 per share with 651,409 shares outstanding at
$0.10 per share. For all options, all $0.l0 per share options, and all $0.26
per share options outstanding at December 31, 1997, the weighted average
remaining contractual lives were nine years, eight years and ten years,
respectively. Of the 362,555 options currently available for exercise, 170,802
shares have a contractual exercise price of $0.10 per share. Options available
for grant at December 31, 1997 represented 470,383 shares.
FAS 123 requires disclosure of pro forma net earnings and net earnings per
common share information computed as if the Company had accounted for its
employee stock options granted subsequent to January 1, 1995 under the fair
value method set forth in FAS 123. The fair value of the Company's outstanding
stock options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted average assumptions.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Expected option life in years............... 4.0 4.0 4.0
Risk-free interest rate..................... 5.74% 6.14% 7.63%
</TABLE>
The Company does not have a history of paying dividends and none have been
assumed in estimating the fair value of the options.
F-28
<PAGE>
ANSWERSOFT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
9. STOCK OPTIONS (CONTINUED)
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions. Because, among other things, changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options. For
purposes of pro forma disclosures, the estimated fair value of the options is
amortized to expense over the options' vesting periods. In addition, because
FAS 123 is applicable only to options granted subsequent to January 1, 1995,
the pro forma information does not reflect the pro forma effect of all
previous stock option grants of the Company. Therefore, the pro forma
information is not necessarily indicative of future amounts until FAS 123 is
applied to all outstanding stock options. The pro forma effects of FAS 123 on
net losses reported in 1996 and 1995 were less than $5,000 in each year. In
1997, pro forma net loss is $3,504,329 and pro forma loss per share is $3.41.
10. COMMITMENTS
The Company leases facilities and certain equipment under operating leases.
In 1996 the Company entered into a Master Lease Agreement ("MLA") with a third
party. A sale-leaseback arrangement was executed whereby the Company sold
equipment for its net book value of $129,000 and leased back the equipment for
an initial term of 42 months at a monthly payment of $3,681. In 1997, the
Company executed another sale-leaseback arrangement of equipment under the MLA
whereby equipment was sold at its net book value of $355,486 and leased back
for monthly payments of $10,977 over a term of 42 months. Both leases have
been accounted for as operating leases.
Total rent expense for the years ended December 31, 1997, 1996 and 1995 was
$502,724, $89,683 and $106,213, respectively. At December 31, 1997, minimum
future rental payments due under all operating leases, net of estimated future
sublease income, are as follows:
<TABLE>
<S> <C>
1998................................ $725,320
1999................................ 686,325
2000................................ 647,099
2001................................ 456,652
2002................................ 42,673
Thereafter.......................... 2,003
</TABLE>
In addition, the Company has a standby letter of credit in the amount of
$100,000 payable to the landlord of its office space should the Company not be
able to meet its obligation under its lease. As of December 31, 1997 no
amounts have been drawn on this standby letter of credit.
F-29
<PAGE>
Annex A
-------
AMENDED AND RESTATED
AGREEMENT AND
PLAN OF MERGER
BY AND AMONG
DAVOX CORPORATION
DUKE ACQUISITION CORPORATION
AND
ANSWERSOFT, INC.
Dated as of April 6, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I THE MERGER................................................... 1
1.1 The Merger...................................................... 1
1.2 Effective Time.................................................. 2
1.3 Certain Effects of the Merger................................... 2
1.4 Certificate of Incorporation.................................... 2
1.5 By-Laws......................................................... 2
1.6 Directors....................................................... 2
1.7 Certain Other Agreements........................................ 2
1.8 Escrow Shares................................................... 3
1.9 Stockholder Representatives..................................... 3
ARTICLE II CONVERSION AND EXCHANGE OF SECURITIES....................... 4
2.1 Shares of the Surviving Corporation............................. 4
2.2 Conversion of Company Common.................................... 4
2.3 Conversion of AnswerSoft Securities............................. 4
2.4 Intentionally Omitted........................................... 5
2.5 Exchange Agent.................................................. 5
2.6 No Fractional Davox Common...................................... 5
2.7 Distribution of Davox Common.................................... 5
2.8 AnswerSoft Stock Options........................................ 6
2.9 Closing of Stock Transfer Books................................. 7
2.10 Dissenting Shares............................................... 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ANSWERSOFT............... 7
3.1 Corporate Existence and Power................................... 7
3.2 Corporate Authorization......................................... 8
3.3 Governmental Authorization...................................... 8
3.4 Non-Contravention............................................... 8
3.5 Capitalization.................................................. 8
3.6 Subsidiaries.................................................... 9
3.7 Financial Statements............................................ 9
3.8 Absence of Undisclosed Liabilities.............................. 10
3.9 Title to Properties............................................. 10
3.10 Intentionally Omitted........................................... 11
3.11 Condition of Tangible Assets.................................... 11
3.12 Intellectual Property........................................... 11
3.13 Absence of Certain Changes...................................... 13
3.14 Litigation...................................................... 14
3.15 Material Contracts.............................................. 14
3.16 Taxes........................................................... 16
3.17 Insurance Coverage.............................................. 17
3.18 Compliance with Laws; No Defaults............................... 18
3.19 Finders' Fees................................................... 18
3.20 Employees....................................................... 18
3.21 Environmental Matters........................................... 18
3.22 Intercompany Arrangements; Conflicts............................ 19
3.23 Other Information............................................... 19
3.23 Year 2000 Compliant............................................. 19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF DAVOX AND THE COMPANY..... 19
4.1 Corporate Existence and Power................................... 19
4.2 Corporate Authorization......................................... 20
4.3 Governmental Authorization...................................... 20
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.4 Non-Contravention............................................... 20
4.5 Finders' Fees................................................... 20
4.6 Litigation...................................................... 21
4.7 Capitalization.................................................. 21
4.8 SEC Documents................................................... 21
4.9 Davox Common.................................................... 21
4.10 Compliance with Laws; No Defaults............................... 22
4.11 Absence of Certain Changes...................................... 22
ARTICLE V COVENANTS.................................................... 22
5.1 Mutual Covenants and Agreements................................. 22
5.2 Certain Covenants of AnswerSoft................................. 23
5.3 Covenants of Davox and the Company.............................. 26
ARTICLE VI EMPLOYEE BENEFITS........................................... 28
6.1 Employee Benefits Definitions................................... 28
6.2 ERISA Representations........................................... 28
6.3 No Third Party Beneficiaries.................................... 29
ARTICLE VII CLOSING MATTERS............................................ 30
7.1 The Closing..................................................... 30
7.2 Documents and Certificates...................................... 30
ARTICLE VIII CONDITIONS OF CLOSING..................................... 30
8.1 Conditions to Obligations of Davox, the Company and AnswerSoft.. 30
8.2 Conditions Applicable to Davox and the Company.................. 31
8.3 Conditions Applicable to AnswerSoft............................. 33
ARTICLE IX TERMINATION................................................. 33
9.1 Grounds for Termination......................................... 33
9.2 Procedure Upon Termination...................................... 34
9.3 Certain Remedies Upon Termination............................... 34
ARTICLE X SURVIVAL; INDEMNIFICATION.................................... 35
10.1 Survival........................................................ 35
10.2 Indemnification................................................. 35
10.3 Third Person Claims............................................. 35
10.5 Method of Payment............................................... 36
10.6 No Contribution................................................. 36
10.7 Maximum Liability and Remedies.................................. 36
ARTICLE XI MISCELLANEOUS............................................... 37
11.1 Specific Performance............................................ 37
11.2 Expenses........................................................ 37
11.3 Further Assurances.............................................. 37
11.4 Parties in Interest............................................. 37
11.5 Entire Agreement................................................ 37
11.6 Amendment or Modification....................................... 37
11.7 Waiver.......................................................... 38
11.8 Assignability................................................... 38
11.9 Certain Definitions............................................. 38
11.10 Headings and Interpretation..................................... 38
11.10 Notices......................................................... 38
11.11 Law Governing................................................... 39
11.12 Invalidity of Provisions........................................ 39
11.13 Counterparts.................................................... 39
11.14 Consent to Jurisdiction......................................... 40
</TABLE>
-iii-
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
This Amended and Restated Agreement and Plan of Merger is dated as
of April 6, 1998 and amends and restates in its entirety that certain Agreement
and Plan of Merger dated as of March 9, 1998 (the "Agreement") by and among
Davox Corporation, a Delaware Corporation ("Davox"), Duke Acquisition
Corporation, a Delaware corporation and a wholly owned subsidiary of Davox (the
"Company"), and AnswerSoft, Inc., a Delaware corporation ("AnswerSoft";
AnswerSoft and the Company being hereinafter sometimes called the "Constituent
Corporations"):
WITNESSETH:
WHEREAS, the authorized capital stock of Davox consists of 30,000,000
shares of Common Stock, par value $.10 per share (the "Davox Common"), of which
11,912,346 shares were issued and outstanding as of March 2, 1998;
WHEREAS, the authorized capital stock of the Company consists of 100
shares of Common Stock, par value $.01 per share, all of which shares are owned
beneficially and of record by Davox;
WHEREAS, the authorized capital stock of AnswerSoft consists of
45,000,000 shares of capital stock, (i) 20,000,000 shares of which have been
designated as Common Stock, par value $.01 per share (the "AnswerSoft Common"),
of which 1,356,845 shares are issued and outstanding and (ii) 25,000,000 shares
of which have been designated Preferred Stock, par value $.01 per share (the
"Preferred Stock"), of which 10,000,000 shares have been designated Series A
Convertible Preferred Stock (of which 8,555,000 shares are issued and
outstanding), 10,000,000 shares have been designated Series A-1 Convertible
Preferred Stock (none of which shares are issued and outstanding), 2,060,047
shares have been designated Series B Convertible Preferred Stock (all of which
shares are issued and outstanding) and 2,060,047 shares have been designated
Series B-1 Convertible Preferred Stock (none of which shares are issued and
outstanding);
WHEREAS, the respective Boards of Directors of Davox, the Company and
AnswerSoft have by resolutions approved this Agreement and deem it advisable for
the mutual benefit of the Constituent Corporations, and of the respective
stockholders of each, that the Company merge with and into AnswerSoft under and
pursuant to the General Corporation Law of the State of Delaware (the "Delaware
Corporation Law") and upon the terms and subject to the conditions hereinafter
set forth;
WHEREAS, to induce Davox and the Company to enter into this Agreement,
simultaneously with the execution and delivery of this Agreement, AnswerSoft and
certain of its stockholders have entered into certain agreements with Davox and
the Company pursuant to which such AnswerSoft stockholders have undertaken to
take certain actions in connection with the transactions contemplated by this
Agreement; and
WHEREAS, the parties intend by executing and delivering this
Agreement, to adopt a plan of reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, the parties intend that the Merger (as hereinafter defined)
be treated as a "pooling of interests" transaction for accounting purposes under
generally accepted accounting principles;
NOW, THEREFORE, in consideration of these premises and the mutual
agreements, provisions and covenants contained in this Agreement, the parties
hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. In accordance with Section 251 of the Delaware Corporation
----------
Law, the Company shall be merged with and into AnswerSoft (the "Merger"), and
AnswerSoft shall be the surviving corporation (such
<PAGE>
corporation in its capacity as such surviving corporation being hereinafter
called the "Surviving Corporation"). The terms and conditions of the Merger, the
mode of carrying the same into effect, and the manner and basis of converting
shares of each of the Constituent Corporations into the consideration which the
holders of those shares are to receive upon conversion of such shares, shall be
as set forth in this Agreement.
1.2 Effective Time. The Merger shall become effective as of the time
--------------
of the filing of the executed certificate of merger with the Secretary of State
of Delaware pursuant to Section 251(c) of the Delaware Corporation Law (the
"Effective Time").
1.3 Certain Effects of the Merger. As of the Effective Time, the
-----------------------------
effect of the Merger shall be as provided by the applicable provisions of the
Delaware Corporation Law. Without limiting the generality of the foregoing and
subject thereto, at the Effective Time: the separate existence of the Company
shall cease and the Company shall be merged into AnswerSoft; the Surviving
Corporation shall possess, without further act or deed, all the rights,
privileges and powers, and be subject to all the restrictions, disabilities and
duties of each of the Constituent Corporations; and all the rights, privileges,
powers and franchises of each of the Constituent Corporations, and all property,
real and personal, and all debts due to any of the Constituent Corporations on
whatever account, shall be vested in the Surviving Corporation; and all
property, rights, privileges and powers, and all and every other interest shall
be thereafter as effectively the property of the Surviving Corporation as they
were of the several and respective Constituent Corporations, and the title to
any real estate vested by deed or otherwise, under the laws of Delaware, in any
of the Constituent Corporations, shall not revert or be in any way impaired by
reason of the Merger; but all rights of creditors and all liens upon any
property of any of the Constituent Corporations shall be preserved unimpaired,
and all debts, liabilities and duties of the respective Constituent Corporations
shall thenceforth attach to the Surviving Corporation, and may be enforced
against it to the same extent as if such debts, liabilities and duties had been
incurred or contracted by it. Any action or proceeding, whether civil, criminal
or administrative, pending by or against any of the Constituent Corporations
shall be prosecuted as if the Merger had not taken place, and the Surviving
Corporation may be substituted in such action or proceeding.
1.4 Certificate of Incorporation. The certificate of incorporation
----------------------------
of the Surviving Corporation shall, from and after the Effective Time, be
amended to read in its entirety as set forth in the certificate of incorporation
of the Company as in effect immediately prior to the Effective Time until
changed as permitted by law or by such certificate of incorporation, except that
Paragraph FIRST of such certificate of incorporation shall be amended to change
the name of the Surviving Corporation to "AnswerSoft, Inc." so that as so
amended said Paragraph FIRST shall read in its entirety as follows: "The name
of the Corporation is "AnswerSoft, Inc."
1.5 By-Laws. The By-Laws of the Surviving Corporation shall, from
-------
and after the Effective Time, be amended to read in their entirety as set forth
in the by-laws of the Company as in effect immediately prior to the Effective
Time until changed as permitted by law, by the certificate of incorporation of
the Surviving Corporation or by such by-laws.
1.6 Directors. The directors and officers of the Surviving
---------
Corporation from and after the Effective Time shall be the directors and
officers of the Company immediately prior to the Effective Time, each to hold
office in accordance with applicable law and the certificate of incorporation
and by-laws of the Surviving Corporation.
1.7 Certain Other Agreements. Concurrently with the execution and
------------------------
delivery of this Agreement:
(a) AnswerSoft shall deliver to Davox and the Company a copy of the
Participation Agreement in the form of Exhibit A (the "Participation Agreement")
---------
duly executed and delivered by AnswerSoft and the parties listed on Schedule
--------
2.1(g) thereto (the "Major Stockholders").
- ------
(b) Davox and the Company shall deliver to the respective other
parties thereto a copy of the Participation Agreement duly executed by Davox and
the Company.
-2-
<PAGE>
1.8 Escrow Shares. At the Effective Time, Davox shall deliver to
-------------
American Stock Transfer and Trust Company, or any successor escrow agent
appointed pursuant to the Escrow Agreement (the "Escrow Agent"), ten percent
(10%) of the Total Davox Common Shares (as hereinafter defined) (rounded down to
the nearest whole share), such shares (the "Escrow Shares") to be held and
applied in accordance with the terms of the Escrow Agreement substantially in
the form attached hereto as Exhibit B (the "Escrow Agreement").
---------
1.9 Stockholder Representatives.
---------------------------
(a) The stockholders of AnswerSoft, by virtue of their approval of
the Agreement, will be deemed to have irrevocably constituted and appointed,
effective as of the Effective Time, Jon W. Bayless and Joseph C. Aragona
(together with their respective permitted successors, the "Stockholder
Representatives"), as their true and lawful agent and attorney-in-fact to enter
into any agreement in connection with the transactions contemplated by this
Agreement and any transactions contemplated by the Escrow Agreement, to exercise
all or any of the powers, authority and discretion conferred on them under any
such agreement, to waive any terms and conditions of any such agreement (other
than the Merger consideration), to give and receive notices on their behalf and
to be their exclusive representative with respect to any matter, suit, claim,
action or proceeding arising with respect to any transaction contemplated by any
such agreement, including, without limitation, the defense, settlement or
compromise of any claim, action or proceeding for which Davox or the Company may
be entitled to indemnification and the Stockholder Representatives agree to act
as, and to undertake the duties and responsibilities of, such agent and
attorney-in-fact. This power of attorney is coupled with an interest and is
irrevocable.
(b) The Stockholder Representatives shall not be liable to anyone for
any action taken or not taken by them in good faith or for any mistake of fact
or law for anything that they may do or refrain from doing in connection with
his obligations under this Agreement (i) with the consent of stockholders who,
as of the date of this Agreement, owned a majority in number of the outstanding
shares of AnswerSoft Common (treating the Preferred Stock on an as-converted
basis) or (ii) in the absence of their own gross negligence or willful
misconduct. Any action taken or not taken pursuant to the advice of counsel
shall be conclusive evidence of such good faith. The Stockholders and Davox
shall, jointly and severally, indemnify and hold the Stockholder
Representatives, and each successor thereof, harmless from any and all liability
and expenses (including, without limitation, counsel fees) which may arise out
of any action taken or omitted by them as Stockholder Representatives in
accordance with this Agreement, as the same may be amended, modified or
supplemented, except such liability and expense as may result from the gross
negligence or willful misconduct of the Stockholder Representatives.
(c) The Stockholder Representatives may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper party or parties. The
Stockholder Representatives shall not be liable for other parties' forgeries,
fraud or false presentations.
(d) The Stockholder Representatives shall have reasonable access to
information about AnswerSoft and the reasonable assistance of AnswerSoft's
officers and employees for purposes of performing their duties and exercising
their rights hereunder, provided that the Stockholder Representatives shall
treat confidentially and not disclose any non-public information from or about
AnswerSoft to anyone (except on a need to know basis to individuals who agree to
treat such information confidentially).
(e) If the Stockholder Representatives shall be unable or unwilling
to serve in such capacity, their successor shall be named by those persons
holding a majority of the shares of AnswerSoft Common outstanding (treating the
Preferred Stock on an as-converted basis) at the Effective Time, and such
successors shall serve and exercise the powers of the Stockholder
Representatives hereunder.
-3-
<PAGE>
ARTICLE II
CONVERSION AND EXCHANGE OF SECURITIES
2.1 Shares of the Surviving Corporation. The authorized number and
-----------------------------------
par value of shares of all classes of stock of the Company immediately prior to
the Effective Time shall be the authorized number and par value of shares of the
classes of stock of the Surviving Corporation from and after the Effective Time.
2.2 Conversion of Company Common. At the Effective Time, each
----------------------------
share of Common Stock, par value $.01 per share, of the Company issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, automatically
be converted into and represent one validly issued, fully paid and nonassessable
share of Common Stock, par value $.01 per share, of the Surviving Corporation.
2.3 Conversion of AnswerSoft Securities.
-----------------------------------
(a) At the Effective Time, each share of AnswerSoft Common and
Preferred Stock issued and outstanding immediately prior to the Effective Time
(other than shares of AnswerSoft Common and Preferred Stock (i) held in the
treasury of AnswerSoft, which shall not be considered as outstanding for
purposes of this Agreement, (ii) held by Davox or any subsidiary of Davox or
AnswerSoft, or (iii) which are Dissenting Shares (as hereinafter defined))
shall, by virtue of the Merger and without any action on the part of the holder
thereof, automatically be cancelled and extinguished and converted into the
right to receive the number of shares of Davox Common determined in accordance
with Section 2.3(c).
(b) At the Effective Time, each share of Preferred Stock and
AnswerSoft Common held (i) in the treasury of AnswerSoft, or (ii) by Davox or
any subsidiary of Davox or AnswerSoft, immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, automatically be cancelled and retired and all rights in respect
thereof shall cease to exist.
(c) The number of shares of Davox Common to be received for each
share of Preferred Stock or AnswerSoft Common as provided in Section 2.3(a) (the
"Exchange Ratios") shall be the applicable Adjustable Amount (as hereinafter
defined).
"Adjustable Amount" means: (i) for shares of Series A Convertible
-----------------
Preferred Stock or shares of Series B Convertible Preferred Stock, the
applicable Preference Amount plus the Participating Amount and (ii) for shares
of AnswerSoft Common, the Participating Amount.
"Preference Amount" means: (i) for shares of Series A Convertible
-----------------
Preferred Stock, the applicable Preference Amount shall be the quotient
(determined to the seventh decimal place without rounding) obtained by dividing
$1.00 by the Average Price; and (ii) for shares of Series B Convertible
Preferred Stock, the applicable Preference Amount shall be the quotient
(determined to the seventh decimal place without rounding) obtained by dividing
$2.60 by the Average Price.
"Participating Amount" means the quotient (determined to the seventh
--------------------
decimal place without rounding) obtained by dividing (i) the excess of the Total
Davox Common Shares over the Preference Shares (as hereinafter defined) by (ii)
the Total AnswerSoft Securities.
"Preference Shares" means the aggregate number of shares of Davox
-----------------
Common equal to the sum of (i) the product determined by multiplying the
Preference Amount applicable to shares of Series A Convertible Preferred Stock
by 8,615,000; plus (ii) the product determined by multiplying the Preference
Amount applicable to shares of Series B Convertible Preferred Stock by
2,060,047.
-4-
<PAGE>
"Total Davox Common Shares" means the number of shares of Davox Common
-------------------------
as is determined by dividing $74,000,000 by the greater of (i) $30.75 and (ii)
the average of the last reported sale price of the common stock of Davox on the
Nasdaq National Market for the 20 trading days ending the fifth trading day
immediately preceding March 9, 1998 (subject to appropriate adjustment in the
event of a stock split or reverse stock split) (such price as determined in
accordance with (i) and (ii) hereof being referred to as the "Average Price").
"Total AnswerSoft Securities" means the sum of (i) all issued and
---------------------------
outstanding shares of AnswerSoft Common, (ii) all issued and outstanding shares
of Preferred Stock and (iii) all Outstanding AnswerSoft Options (as defined in
Section 2.8).
2.4 [INTENTIONALLY OMITTED].
2.5 Exchange Agent. American Stock Transfer and Trust Company, or
--------------
such other national or state bank as is selected by Davox, shall act as the
agent for the AnswerSoft stockholders for purposes of mailing and receiving
transmittal letters and distributing consideration to the AnswerSoft
stockholders (the "Exchange Agent").
--------------
2.6 No Fractional Davox Common. Notwithstanding any other
--------------------------
provision of this Agreement, neither certificates nor scrip for fractional
shares of Davox Common shall be issued to any holder of AnswerSoft Common or
Preferred Stock in the Merger and the holder thereof shall not be entitled to
any voting or other rights of a holder of shares or a fractional share interest.
Each holder of shares of Preferred Stock or AnswerSoft Common who otherwise
would have been entitled to receive a fraction of a share of Davox Common shall
receive in lieu thereof cash, without interest, in an amount determined by
multiplying such holder's fractional interest by the Average Price. All amounts
of cash in respect of fractional interests which have not been claimed at the
end of three years from the Effective Time by surrender of certificates for
shares of Preferred Stock or AnswerSoft Common shall be repaid to the Surviving
Corporation, subject to the provisions of applicable escheat or similar laws,
for the account of the holders entitled thereto.
2.7 Distribution of Davox Common.
----------------------------
(a) As soon as practicable after the Effective Time, the Exchange
Agent shall distribute the Davox Common as provided in this Section 2.7. Davox
shall deliver to the Exchange Agent one or more certificates representing in the
aggregate the number of shares of Davox Common issuable in the Merger in
sufficient time for the Exchange Agent to make such distribution. The Exchange
Agent shall not be entitled to vote or exercise any rights of ownership with
respect to any shares of Davox Common held by it from time to time hereunder,
except that it shall receive and hold all dividends or other distributions paid
or distributed with respect to such shares for the account of the persons
entitled thereto.
(b) Within five business days after the Effective Time, Davox shall
cause to be mailed to each holder of record of a certificate or certificates
(the "Certificates") which immediately prior to the Effective Time represented
outstanding shares of Preferred Stock or AnswerSoft Common, whose shares were
converted into the right to receive shares of Davox Common and cash (if any),
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
receipt of the Certificates by the Exchange Agent, and shall be in such form and
have such other provisions as Davox may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Davox Common and cash (if any). Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Davox, with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
shares of Davox Common and payment in lieu of fractional shares which such
holder has the right to receive (if any), and the Certificate so surrendered
shall forthwith be canceled. Until so surrendered, each outstanding Certificate
that, prior to the Effective Time, represented shares of Preferred Stock and
AnswerSoft Common will be deemed from and after the Effective Time, for all
corporate purposes, to evidence only the ownership of the number of full shares
of Davox Common into which such shares of Preferred Stock and AnswerSoft Common
shall have been so converted and the right to
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receive an amount in cash in lieu of the issuance of any fractional shares (if
any). All other rights as an AnswerSoft stockholder shall cease as of the
Effective Time. Davox shall use its best efforts to effectuate this transfer of
Preferred Stock and AnswerSoft Common into Davox Common on or prior to June 30,
1998; provided, however, that AnswerSoft acknowledges that Davox has no control
over when the Certificates are presented to the Exchange Agent. Unless and until
any such outstanding certificates for shares of Preferred Stock or AnswerSoft
Common shall be so surrendered, no dividend (cash or stock) payable to holders
of record of shares of Davox Common as of any date subsequent to the Effective
Time shall be paid to the holder of any such outstanding certificate and his
other rights as a stockholder of Davox shall be suspended, but upon such
surrender of such outstanding certificate there shall be paid to the record
holder of the certificate of shares of Davox Common issued in exchange therefor
the amount of dividends, if any, without interest and less any taxes which may
have been imposed thereon, that have theretofore become payable with respect to
the number of those shares of Davox Common represented by such certificate
issued upon such surrender and exchange, and his other rights as a stockholder
of Davox shall thereafter be restored.
2.8 AnswerSoft Stock Options. At or prior to the Effective Time,
------------------------
Davox and AnswerSoft shall take all action necessary to cause the assumption by
Davox as of the Effective Time of the options to purchase AnswerSoft Common (the
"AnswerSoft Stock Plan Options") and the warrants to purchase Preferred Stock
outstanding as of the Effective Time (the "AnswerSoft Warrants"), whether or not
exercisable and whether or not vested (the AnswerSoft Stock Plan Options and the
AnswerSoft Warrants are referred to collectively as the "Outstanding AnswerSoft
Options"). Each of the Outstanding AnswerSoft Options shall be converted
without any action on the part of the holder thereof into an option to purchase
shares of Davox Common as of the Effective Time in such a manner that Davox (a)
is, with respect to the AnswerSoft Stock Plan Options, "assuming a stock option
in a transaction to which Section 424(a) applies" within the meaning of Section
424 of the Code or (b) to the extent that Section 424 of the Code does not apply
to any such Outstanding AnswerSoft Options, would be a transaction within
Section 424 of the Code. The number of shares of Davox Common that the holder
of an assumed Outstanding AnswerSoft Option shall be entitled to receive upon
the exercise of such option or warrant shall be a number of whole shares
(rounded down to the nearest whole share) determined by multiplying the number
of shares of AnswerSoft Common or Preferred Stock subject to such warrant or
option, determined immediately before the Effective Time, by the applicable
Exchange Ratio. The exercise price of each share of Davox Common subject to an
assumed Outstanding AnswerSoft Option shall be the amount (rounded up to the
nearest whole cent) obtained by dividing the exercise price per share of
AnswerSoft Common or Preferred Stock at which such warrant or option is
exercisable immediately before the Effective Time by the Exchange Ratio
applicable to shares of AnswerSoft Common or Preferred Stock, as the case may
be, but shall be not less than $.10. The assumption and substitution of the
Outstanding AnswerSoft Options as provided herein shall not give the holders of
such warrants or options additional benefits which they did not have immediately
prior to the Effective Time or relieve the holders of any obligations or
restrictions applicable to their warrants or options or the shares obtainable
upon exercise of the warrants or options. Each AnswerSoft Stock Plan Option
assumed by Davox shall be exercisable upon the same terms and conditions as
under AnswerSoft's 1994 Stock Plan and the applicable option agreement issued
thereunder, except that (A) each such Outstanding AnswerSoft Option shall be
exercisable for that whole number of shares of Davox Common as set forth above
and (B) the exercise price per share of Davox Common shall be adjusted as set
forth above. Davox shall (i) on or prior to the Effective Time, reserve out of
its unissued shares of Common Stock sufficient shares to provide for the
exercise of the Outstanding AnswerSoft Options, (ii) use all reasonable efforts
to register under the Securities Act, within thirty (30) days after the
Effective Time, those shares of Davox Common to be issued upon the exercise of
the AnswerSoft Stock Plan Options for a period ending on the first date by which
all AnswerSoft Stock Plan Options have been exercised, which registration shall
initially be effective under a registration statement on Form S-8 or such other
form as may be permitted under the Securities Act, (iii) as promptly as
practicable after the Effective Time, but in any event not later than 15
business days after the Effective Time, issue to each holder of an Outstanding
AnswerSoft Option a document evidencing the foregoing assumption by Davox, and
(iv) from and after the Effective Time, upon exercise of the assumed Outstanding
AnswerSoft Options in accordance with the terms thereof, make available for
issuance all shares of Davox Common covered thereby. It is the intention of the
parties that the AnswerSoft Stock Plan Options assumed by Davox qualify
following the Effective Time as incentive stock options as defined in Section
422 of the Code to the extent permitted under Section 422 of the Code and to the
extent the AnswerSoft Stock Plan Options qualified as incentive stock options
prior to the Effective Time.
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<PAGE>
2.9 Closing of Stock Transfer Books. Except pursuant to the exercise of
-------------------------------
options and warrants outstanding on the date of this Agreement, the stock
transfer books of AnswerSoft shall be closed at the close of business on the
tenth (10th) business day immediately preceding the Effective Time. In the event
of a transfer of ownership of Preferred Stock or AnswerSoft Common which is not
registered in the transfer records of AnswerSoft, the shares of Davox Common and
cash (if any) to be issued in the Merger as provided herein may be delivered to
a transferee, if the certificate representing such Preferred Stock or AnswerSoft
Common is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and by payment of any applicable stock
transfer taxes.
2.10 Dissenting Shares. Shares of Preferred Stock or AnswerSoft
-----------------
Common that have not been voted for adoption of this Agreement and with respect
to which appraisal rights shall have been properly perfected in accordance with
Section 262 of the Delaware Corporation Law (the "Dissenting Shares") shall not
-----------------
be converted into the right to receive shares of Davox Common and cash (if any)
in accordance with this Agreement, at or after the Effective Time, unless and
until the holder of such Dissenting Shares withdraws his demand for such
appraisal in accordance with Section 262(k) of the Delaware Corporation Law or
becomes ineligible for such appraisal. If a holder of Dissenting Shares shall
withdraw in accordance with Section 262(k) of the Delaware Corporation Law his
demand for such appraisal or shall become ineligible for such appraisal, then,
as of the later of the Effective Time or the occurrence of such event, such
holder's Dissenting Shares shall cease to be Dissenting Shares and shall be
converted into the right to receive the shares of Davox Common and cash (if any)
into which his Preferred Stock or AnswerSoft Common was converted as of the
Effective Time pursuant to this Agreement. Any amounts to be paid to holders of
Dissenting Shares with respect to such Dissenting Shares shall be paid by the
Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ANSWERSOFT
AnswerSoft represents and warrants to Davox and the Company that the
statements contained in this Article III are true and correct, except as set
forth in the disclosure schedules delivered by AnswerSoft to Davox prior to the
execution and delivery of this Agreement (the "AnswerSoft Disclosure
Schedules"). Any reference in this Article III to an agreement being
"enforceable" shall be deemed to be qualified to the extent such enforceability
is subject to (i) laws of general application relating to bankruptcy,
insolvency, moratorium and the relief of debtors, and (ii) the availability of
specific performance, injunctive relief and other equitable remedies.
3.1 Corporate Existence and Power. AnswerSoft is a corporation
-----------------------------
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all corporate power and authority necessary to enable
it to own, lease or otherwise hold its properties and assets and to carry on its
business as now conducted and currently proposed to be conducted by AnswerSoft.
AnswerSoft is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification necessary,
except for those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect upon the
financial condition, results of operations, business, properties, assets or
operations of AnswerSoft and its subsidiaries taken as a whole (a "Material
Adverse Effect on AnswerSoft"). All jurisdictions in which AnswerSoft is so
qualified to do business are listed in Schedule 3.1. AnswerSoft has previously
------------
delivered to Davox and the Company true and complete copies of the certificate
of incorporation and by-laws of AnswerSoft, as amended to date and as currently
in effect, and all minutes of meetings (including actions in lieu thereof) of
the board of directors (and each committee thereof) and stockholders of
AnswerSoft.
3.2 Corporate Authorization. The execution, delivery and
-----------------------
performance by AnswerSoft of this Agreement and the Participation Agreement and
the consummation by AnswerSoft of the Merger and other transactions contemplated
by this Agreement and the Participation Agreement are within AnswerSoft's
corporate power and authority, and, subject to the adoption of this Agreement by
the stockholders of AnswerSoft as required by law, have been duly authorized by
all necessary corporate action. The Board of Directors of AnswerSoft has
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<PAGE>
(i) unanimously determined that this Agreement and the transactions contemplated
hereby, including the Merger, are fair to and in the best interest of
AnswerSoft's stockholders, (ii) unanimously approved this Agreement and the
transactions contemplated hereby, including the Merger, and (iii) unanimously
resolved to recommend approval and adoption of this Agreement and the Merger by
its stockholders. This Agreement has been duly authorized, executed and
delivered by AnswerSoft and constitutes a valid and binding obligation of
AnswerSoft, enforceable against AnswerSoft in accordance with its terms.
3.3 Governmental Authorization. The execution, delivery and
--------------------------
performance by AnswerSoft of this Agreement, and the consummation of the Merger
and other transactions contemplated by this Agreement by AnswerSoft, do not and
will not require any consent, approval or action by or in respect of, or any
declaration, filing or registration with, any governmental or regulatory body,
court, agency, official or authority (each, a "Governmental Authority"), other
than (i) routine filings with the Secretary of State of the State of Delaware
necessary to consummate the Merger and (ii) such other consents, approvals,
actions, declarations, filings or registrations the absence of which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on AnswerSoft.
3.4 Non-Contravention. The execution, delivery and performance by
-----------------
AnswerSoft of this Agreement and the Participation Agreement, and the
consummation of the Merger and other transactions contemplated by this Agreement
by AnswerSoft, do not and will not, with or without the giving of notice, the
lapse of time or both: (i) contravene or conflict with the certificate of
incorporation or by-laws of AnswerSoft or any of its subsidiaries, (ii) assuming
compliance with the matters referred to in Section 3.3, contravene or conflict
with or constitute a violation of any provision of any law, rule, regulation,
judgment, injunction, order or decree currently in effect and binding upon or
applicable to AnswerSoft or any of its subsidiaries, other than any
contravention conflict or violation that, in the aggregate, could not reasonably
be expected to have a Material Adverse Effect on AnswerSoft, (iii) require any
consent, approval or other action by any person, contravene or conflict with or
constitute a violation of or a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of
AnswerSoft or any of its subsidiaries or to a loss of any benefit to which
AnswerSoft or any of its subsidiaries is entitled, under any material provision
of (A) except as set forth on Schedule 3.4(iii), any material agreement,
-----------------
contract, indenture, lease or other instrument binding upon AnswerSoft or any of
its subsidiaries or (B) assuming compliance with the matters referred to in
Section 3.3, any license, franchise, permit or other similar authorization held
by AnswerSoft or any of its subsidiaries other than any contravention, conflict
or violation that, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on AnswerSoft or (iv) except for the rights of any
holders of Dissenting Shares, result in the creation or imposition of any
mortgage, pledge, security interest, lien, claim, charge, restriction,
encumbrance or assessment of any kind (each, a "Lien") on any asset of
----
AnswerSoft or any of its subsidiaries other than Liens that, in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on
AnswerSoft.
3.5 Capitalization. The authorized capital stock of AnswerSoft
--------------
consists of 45,000,000 shares of capital stock, (i) 20,000,000 shares of which
have been designated as Common Stock, par value $.01 per share (the "AnswerSoft
Common"), of which 1,356,845 shares are issued and outstanding and no shares are
held in the treasury of AnswerSoft as of the date hereof, and (ii) 25,000,000
shares of which have been designated Convertible Preferred Stock, par value $.01
per share (the "Preferred Stock"), of which 10,000,000 shares have been
designated Series A Convertible Preferred Stock (of which 8,555,000 shares are
issued and outstanding as of the date hereof), 10,000,000 shares have been
designated Series A-1 Convertible Preferred Stock (none of which shares are
issued and outstanding), 2,060,047 shares have been designated Series B
Convertible Preferred Stock (all of which are issued and outstanding as of the
date hereof) and 2,060,047 shares have been designated Series B-1 Convertible
Preferred Stock (none of which shares are issued and outstanding). There are no
shares of Preferred Stock held in the treasury of AnswerSoft. All issued and
outstanding shares of Preferred Stock and AnswerSoft Common are validly issued,
fully paid and nonassessable, and have not been issued in violation of any
preemptive, first refusal or other subscription rights of any stockholder of
AnswerSoft or any other person. Except as set forth on Schedule 3.5, there are
------------
no outstanding (i) shares of capital stock or other voting securities of
AnswerSoft, (ii) securities of AnswerSoft convertible into or exchangeable for
shares of capital stock or voting securities of AnswerSoft or (iii) options,
warrants, exchange rights, subscription rights or other agreements, commitments
or rights to purchase or otherwise acquire from AnswerSoft, or agreements,
commitments or obligations of AnswerSoft to issue or sell,
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<PAGE>
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of AnswerSoft (the items in
clauses (i), (ii) and (iii) being referred to collectively as the "AnswerSoft
----------
Securities"). Except as set forth on Schedule 3.5, there are no outstanding
- ------------ ------------
obligations of AnswerSoft or any of its subsidiaries to sell, issue or deliver,
or to repurchase, redeem or otherwise acquire, any AnswerSoft Securities.
Schedule 3.5 sets forth a true and complete list of the record, and, to the
- ------------
knowledge of AnswerSoft, the beneficial, owners of all AnswerSoft Securities.
3.6 Subsidiaries.
------------
(a) Except as set forth on Schedule 3.6, AnswerSoft does not hold or
------------
own, directly or indirectly, any capital stock or other equity securities of any
other corporation, or have any direct or indirect equity or ownership interest
in any association, partnership, joint venture or other entity. Each of the
entities listed on Schedule 3.6 that is a corporation is a corporation duly
------------
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each such entity that is a limited partnership
is a limited partnership duly formed, validly existing and in good standing
under the laws of the jurisdiction of its formation. Each such entity has all
corporate, partnership or other power and authority necessary to enable it to
own, lease or otherwise hold its properties and assets and to carry on its
business as now conducted and currently proposed to be conducted by AnswerSoft,
and is duly qualified to do business as a foreign corporation, partnership or
other entity and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where failure to be so
qualified would not, individually or in the aggregate, have a Material Adverse
Effect on AnswerSoft. All jurisdictions in which each such entity is qualified
to do business are listed in Schedule 3.6. AnswerSoft has previously delivered
------------
to Davox and the Company true and complete copies of the organizational
documents of each entity listed on Schedule 3.6, each as amended to date and as
------------
currently in effect, and all minutes of meetings (or actions in lieu thereof) of
the boards of directors (and each committee thereof), stockholders or partners
of each such entity that is a subsidiary of AnswerSoft.
(b) Except as set forth on Schedule 3.6, all of the outstanding
------------
capital stock of, or other equity or ownership interests in, each of the
entities listed on Schedule 3.6 is owned by AnswerSoft, directly or indirectly,
------------
free and clear of any Lien and free of any other limitation or restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other equity or ownership interests). There are no
outstanding (i) securities of AnswerSoft or any such entity convertible into or
exchangeable for shares of capital stock, voting securities or other equity or
ownership interests in any such entity or (ii) options, warrants, exchange
rights, subscription rights or other agreements, commitments or rights to
purchase or otherwise acquire from AnswerSoft or any such entity, or agreements,
commitments or obligations of AnswerSoft or any such entity to issue or sell,
any capital stock, voting securities or other equity or ownership interests in,
or any securities convertible into or exchangeable for any capital stock or
voting securities of, or other equity or ownership interests in, any such entity
(the items in clauses (i) and (ii) being referred to collectively as the
"Subsidiary Securities"). Except as listed in Schedule 3.6, there are no
------------
outstanding obligations of AnswerSoft or any entity listed in Schedule 3.6 to
------------
sell, issue or deliver, or to repurchase, redeem or otherwise acquire, any
outstanding Subsidiary Securities.
3.7 Financial Statements. AnswerSoft has previously delivered to
--------------------
Davox and the Company the following financial statements (collectively, the
"Financial Statements"): the audited consolidated balance sheets of AnswerSoft
and its subsidiaries as of December 31, 1994, 1995, 1996 and 1997 and the
related statements of operations, stockholders' equity and cash flows for each
of the years ended December 31, 1994, 1995, 1996 and 1997, together with the
notes thereto, in each case audited in accordance with generally accepted
accounting principles applied on a consistent basis and accompanied by the
report thereon of Ernst & Young. The audited consolidated balance sheet of
AnswerSoft as of December 31, 1997 is hereinafter referred to as the "Audited
Balance Sheet."
Each of the Financial Statements has been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated therein or in the notes thereto); and fairly presents the financial
position of AnswerSoft and its subsidiaries as of its date or the results of
operations or changes in financial position, as is appropriate, of AnswerSoft
and its subsidiaries for the periods then ended. Except as may be set forth
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in the Financial Statements, all of the revenues and expenses of AnswerSoft and
its subsidiaries reflected in the Financial Statements were derived or incurred
in the ordinary course of business of AnswerSoft and its subsidiaries. The
account records underlying the Financial Statements accurately and fairly
reflect, in reasonable detail, the transactions of AnswerSoft and its
subsidiaries, and AnswerSoft's books of account have been maintained in
accordance with generally accepted accounting practices applied on a consistent
basis. All accounts, notes and other receivables of AnswerSoft and its
subsidiaries are valid and enforceable, are not subject to any valid defense,
set off, counterclaim or claim for returns or refunds, and are collectible in
full in accordance with their terms in the ordinary and regular course of
business of AnswerSoft and its subsidiaries, except to the extent of any
reserves therefor reflected on the Audited Balance Sheet or taken in the
ordinary course of business consistent with past practice which in the aggregate
are not material to AnswerSoft and its subsidiaries. All amounts previously
collected by AnswerSoft and its subsidiaries in respect of accounts, notes and
other receivables of AnswerSoft and its subsidiaries are not subject to any
valid defense, set off, counterclaim or claim for returns or refunds.
3.8 Absence of Undisclosed Liabilities. AnswerSoft and its
----------------------------------
subsidiaries have no liabilities or obligations, except those liabilities or
obligations which are (a) fully reflected or adequately reserved against in the
Audited Balance Sheet, (b) disclosed in this Agreement or in the Schedules
hereto, or (c) incurred in the ordinary course of business consistent with past
practice since December 31, 1997, which in the aggregate are not material to
AnswerSoft and its subsidiaries. There is no known basis for any assertion
against AnswerSoft or its subsidiaries of any material liability or obligation
not (a) fully reflected or adequately reserved against in the Audited Balance
Sheet, (b) disclosed in this Agreement or in the Schedules hereto, or (c)
incurred in the ordinary course of business consistent with past practice since
December 31, 1997, which in the aggregate are not material to AnswerSoft and its
subsidiaries taken as a whole. For the purposes of this Agreement the phrase
"liabilities or obligations" shall include any direct or indirect indebtedness,
claim, loss, damage, deficiency (including deferred income tax and other net tax
deficiencies), cost, expense, obligation, guarantee, or responsibility, whether
accrued, absolute or contingent, known or unknown, fixed or unfixed, liquidated
or unliquidated, secured or unsecured.
3.9 Title to Properties. AnswerSoft owns no real property, nor has
-------------------
it ever owned any real property. Attached as Schedule 3.9(a) are copies of all
---------------
real property leases to which AnswerSoft is a party and each amendment thereto.
All such leases are in full force and effect and there is not, under any such
leases, any existing default or event of default (or event with which notice or
lapse of time, or both, would constitute a default). Except as set forth on
Schedule 3.4, none of such leases require any consent to the transactions
- ------------
contemplated by this Agreement. Except as set forth in Schedule 3.9(b), all of
---------------
the assets and properties of AnswerSoft are reflected on the Audited Balance
Sheet (except to the extent not required to be so reflected by generally
accepted accounting principles), and AnswerSoft has good, valid and marketable
title to, or, in the case of leased assets and properties, valid leasehold
interests in, all of its tangible assets and properties, whether real or
personal, that are material to the business of AnswerSoft, free and clear of all
Liens, except (a) Liens for current taxes not delinquent or being contested in
good faith by appropriate proceedings, (b) Liens in connection with workmen's
compensation, unemployment insurance or other social security obligations, (c)
deposits or pledges to secure bids, tenders, contracts (other than contracts for
the payment of money), leases, statutory obligations, surety and appeal bonds
and other obligations of like nature arising in the ordinary course of business,
(d) mechanic's, workman's, materialmen's or other like Liens arising in the
ordinary course of business with respect to obligations which are not due or
which are being contested in good faith, and (e) such imperfections of title,
Liens, easements and encumbrances, if any, as are not substantial and do not
materially detract from the value, or materially interfere with the present use,
of any of the properties subject thereto or effected thereby, or otherwise have
a Material Adverse Affect on AnswerSoft. The only intangible assets and
properties owned by AnswerSoft or used in the conduct of its business are
AnswerSoft Intellectual Property Rights (as defined in Section 3.12) and
AnswerSoft Third Party Intellectual Property Rights.
3.10 [INTENTIONALLY OMITTED]
3.11 Condition of Tangible Assets. Except as set forth on Schedule 3.11,
---------------------------- --------------
all material tangible property, including the real property and structures
thereon, of AnswerSoft and its subsidiaries is in good operating condition and
the operation and use of such property in the businesses of AnswerSoft and its
subsidiaries conform in all material respects to all applicable laws,
ordinances, regulations, permits, licenses and certificates.
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<PAGE>
3.12 Intellectual Property.
---------------------
(a) AnswerSoft and its subsidiaries own, or are licensed or otherwise
possess legally enforceable rights to use, all patents, trademarks, trade names,
service marks, copyrights, trade secrets and any applications therefor,
maskworks, formulae, net lists, designs, schematics, technology, know-how,
computer software programs or applications (in both source code and object code
form), and tangible or intangible proprietary information or material that are
used or proposed by AnswerSoft to be used in the business of AnswerSoft as
currently conducted or as proposed by AnswerSoft to be conducted by AnswerSoft
(excluding any of the foregoing validly licensed or purchased from third parties
as set forth on Schedule 3.12(b)) (the "AnswerSoft Intellectual Property
----------------
Rights"). For purposes of the foregoing sentence, "proposed by AnswerSoft"
shall refer solely to the projects and products described on Schedule
--------
3.12(a)(ii). Schedule 3.12(a) sets forth a list of all trademarks, service
- ----------- ----------------
marks, trade names, registered copyrights (and any applications for the
registration thereof), patents, and patent applications owned or licensed (and
specifically identified in the license agreement) and used or held for use by
AnswerSoft that relate to or are part of AnswerSoft's products or products
proposed by AnswerSoft or are used in the business of AnswerSoft, specifying as
to each, as applicable: (i) the nature of such right; (ii) the owner of such
right; and (iii) with respect to all trademarks, service marks, trade names,
registered copyrights (and any applications for the registration thereof),
patents, and patent applications owned by AnswerSoft, the jurisdictions by or in
which such right 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. AnswerSoft has received executed
assignments for each of AnswerSoft's patents and patent applications listed in
Schedule 3.12(a), and has recorded the assignments for each of AnswerSoft's
- ----------------
United States patents and patent applications in the United States Patent and
Trademark Office. Where required, AnswerSoft has received executed assignments
for all other AnswerSoft Intellectual Property Rights and has recorded such
assignments with the appropriate domestic or foreign filing offices.
(b) Schedule 3.12(b) (i) and Schedule 3.12(b)(ii) sets forth a
-------------------- --------------------
complete list of (i) all licenses, sublicenses and other agreements as to which
AnswerSoft is a party and pursuant to which any person is authorized to use any
AnswerSoft Intellectual Property Right (excluding object code use licenses and
related maintenance and support agreements entered in the ordinary course of
business) or any trade secret that is material to AnswerSoft, including the
identity of all parties thereto; and (ii) all licenses, sublicenses and other
agreements as to which AnswerSoft is a party and pursuant to which AnswerSoft is
authorized to use (1) any third party patents, trademarks, trade secrets or
copyrights (including software) (the "AnswerSoft Third Party Intellectual
Property Rights") which are incorporated in, are, or form a part of, any
AnswerSoft product, or (2) any trade secret of a third party in or as to any
AnswerSoft product including the identity of all parties thereto. To the
knowledge of AnswerSoft, the AnswerSoft Third Party Intellectual Property Rights
have been assigned to or licensed by the licensor of such right.
(c) Other than as set forth on Schedule 3.12, AnswerSoft is not, nor
-------------
will it be as a result of the execution and delivery of this Agreement or the
performance of its obligations hereunder, in breach or violation of any license,
sublicense or agreement described on Schedule 3.12(b). No claims with respect
----------------
to AnswerSoft Intellectual Property Rights, any trade secret that is material to
AnswerSoft, or AnswerSoft Third Party Intellectual Property Rights (to the
extent arising out of any use, reproduction or distribution of such AnswerSoft
Third Party Intellectual Rights by or through AnswerSoft), have been asserted or
are threatened by any person. AnswerSoft does not know of any valid grounds for
any bona fide claims against AnswerSoft (i) to the effect that the manufacture,
sale, licensing or use of any product as now used, sold or licensed or proposed
for use, sale or license by AnswerSoft infringes on any copyright, patent,
trademark, service mark or trade secret; (ii) against the use by AnswerSoft of
any trademarks, trade names, trade secrets, copyrights, patents, technology,
know-how or computer software programs and applications used in AnswerSoft's
business as currently conducted or as proposed to be conducted by AnswerSoft;
(iii) challenging the ownership, validity, enforceability or effectiveness of
any of the AnswerSoft Intellectual Property Rights or other trade secret that is
material to AnswerSoft; or (iv) challenging AnswerSoft's license or legally
enforceable right to use, or the validity, enforceability or effectiveness of,
AnswerSoft Third Party Intellectual Property Rights.
-11-
<PAGE>
(d) Other than as set forth on Schedule 3.12, all registered
-------------
trademarks, service marks, and copyrights held by AnswerSoft are valid and
subsisting. All patents held by AnswerSoft are valid, enforceable, and
subsisting, and all patent applications held by AnswerSoft are pending in their
respective patent office, and AnswerSoft is unaware of any facts that would form
the basis for a refusal of, or of any defects in the prosecution of any such
application that would irrevocably foreclose, the grant of patent rights under
such application; provided, however, that AnswerSoft makes no representation,
that any or all claims in such applications will be allowed. To the best
knowledge of AnswerSoft, there has been and is no unauthorized use, disclosure,
infringement or misappropriation of any of the AnswerSoft Intellectual Property
Rights or any trade secret material to AnswerSoft, or any AnswerSoft Third Party
Intellectual Property Right to the extent licensed by or through AnswerSoft, by
any third party, including any employee or former employee of AnswerSoft.
AnswerSoft (i) has not been sued or charged in writing as a defendant in any
claim, suit, action or proceeding which involves a claim of infringement of any
patents, trademarks, service marks, copyrights or violation of any trade secret
or other proprietary right of any third party; (ii) has not been threatened or
charged in writing, orally or otherwise with infringement or violation of any
patents, trademarks, service marks, copyrights or trade secrets or other
proprietary right of any third party; and (iii) has no knowledge of valid
grounds for any such threat or claim.
(e) No AnswerSoft Intellectual Property Right or trade secret that is
material to AnswerSoft is subject to any outstanding order, judgment, decree,
legal or governmental proceeding (other than pending applications for patent,
trademark registration or copyright registration) or stipulation restricting in
any manner the licensing thereof by AnswerSoft. To the knowledge of AnswerSoft,
no AnswerSoft Third Party Intellectual Property Right is subject to any
outstanding order, judgment, decree, legal or governmental proceeding (other
than pending applications for patent, trademark registration or copyright
registration) or stipulation restricting in any manner the licensing thereof by
AnswerSoft. Except for contracts licensing AnswerSoft's products executed in
the ordinary course of business and in accordance with AnswerSoft's past
practices, AnswerSoft has not entered into any agreement to indemnify any other
person against any charge of infringement of any AnswerSoft Third Party
Intellectual Property Right.
(f) AnswerSoft has taken reasonable measures consistent with industry
practice to protect and preserve (i) the validity and enforceability of
trademarks included in the AnswerSoft Intellectual Property Rights, (ii) the
validity and enforceability of copyrights and pending patent applications
included in the AnswerSoft Intellectual Property Rights and the confidentiality
of pending U.S. patent applications included in the AnswerSoft Intellectual
Property Rights, (iii) the validity and enforceability of patents included in
the AnswerSoft Intellectual Property Rights, and (iv) the confidentiality and
validity and enforceability of its trade secrets and other confidential
information it wishes to remain as confidential. Except as set forth on
Schedule 3.12(f), all employees, contractors, agents and consultants of
- ----------------
AnswerSoft have executed a nondisclosure and assignment of inventions agreement
to protect the confidentiality and to vest in AnswerSoft exclusive ownership of
such intellectual property rights. To the best knowledge of AnswerSoft, no
material trade secret or confidential information of AnswerSoft has been used,
divulged, appropriated or misappropriated for the benefit of any person other
than AnswerSoft or otherwise to the detriment of AnswerSoft. To the best
knowledge of AnswerSoft, no employee, contractor, agent or consultant of
AnswerSoft has used any trade secrets or other confidential information of any
other person in the course of their work for AnswerSoft. AnswerSoft has no
written or oral agreements with employees, contractors, agents or consultants
with respect to the ownership of inventions, trade secrets or other works
created by them as a result of which any such employee, contractor, agent or
consultant may have nonexclusive rights to the portions of AnswerSoft's
Intellectual Property Rights so created by such individual.
(g) To the knowledge of AnswerSoft, no officer, employee, contractor,
agent or consultant of AnswerSoft is, or is now expected to be, in violation of
any term of any employment contract, patent disclosure agreement, proprietary
information agreement, noncompetition agreement, nonsolicitation agreement,
confidentiality agreement, or any other similar contract or agreement or any
restrictive covenant relating to the right of any such officer, employee,
contractor, agent or consultant to be employed or engaged by AnswerSoft because
of the nature of the business conducted or to be conducted by AnswerSoft or
relating to the use of trade secrets or proprietary information of others, and
to AnswerSoft's best knowledge and belief, the continued employment or retention
of its officers, employees, contractors, agents or consultants does not subject
AnswerSoft to any liability with respect to any of the foregoing matters.
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<PAGE>
3.13 Absence of Certain Changes. Except as disclosed in Schedule 3.13,
-------------------------- -------------
since December 31, 1997 the business of AnswerSoft and its subsidiaries has
been conducted in the ordinary course consistent with past practices and
there has not been:
(i) any event, occurrence, development or state of circumstances
or facts which has had or could reasonably be expected to result in or have a
Material Adverse Effect on AnswerSoft;
(ii) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of AnswerSoft, or
any repurchase, redemption or other acquisition by AnswerSoft or any of its
subsidiaries of any outstanding shares of capital stock or other securities of,
or other equity or ownership interests in, AnswerSoft or any of its
subsidiaries;
(iii) any amendment of any material term of any outstanding security
of AnswerSoft or any of its subsidiaries;
(iv) any incurrence, assumption or guarantee by AnswerSoft or any of
its subsidiaries of any indebtedness for borrowed money other than in the
ordinary course of business and in amounts and on terms consistent with past
practices, but in any event not exceeding an aggregate of $10,000;
(v) any creation or assumption by AnswerSoft or any of its
subsidiaries of any Lien on any asset, other than Liens that do not in the
aggregate materially detract from the value of such assets or materially impair
the use thereof in the operation of the business of AnswerSoft and its
subsidiaries;
(vi) any making of any loan, advance or capital contributions to or
investment in any person;
(vii) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of AnswerSoft or any of
its subsidiaries which, individually or in the aggregate, has had or would
reasonably be expected to result in or have a Material Adverse Effect on
AnswerSoft;
(viii) any acquisition of any capital asset or any other investment
for aggregate consideration in excess of $10,000;
(ix) any sale, lease, pledge, transfer or other disposition of any
capital asset for aggregate consideration in excess of $10,000;
(x) any transaction or commitment made, or any contract or
agreement entered into, by AnswerSoft or any of its subsidiaries relating to its
assets or business (including the acquisition or disposition of any assets)
other than those transactions covered by any other subparagraphs of this Section
3.13 or any relinquishment by AnswerSoft or any of its subsidiaries of any
contract or other right, in either case, material to AnswerSoft and its
subsidiaries taken as a whole, other than transactions, commitments and
relinquishments in the ordinary course of business consistent with past
practices and those contemplated by this Agreement;
(xi) any change in any method of accounting or accounting practice
by AnswerSoft or any of its subsidiaries, except as required by competent
accounting authority;
(xii) any (A) grant of any severance or termination pay to any
director, officer or employee of AnswerSoft or any of its subsidiaries, (B)
entering into of any employment, severance, management, consulting, deferred
compensation or other similar agreement (or any amendment to any such existing
agreement) with any director, officer or employee of AnswerSoft or any of its
subsidiaries, (C) change in benefits payable under existing severance or
termination pay policies or employment, severance, management, consulting or
other similar agreements or (D) change in compensation, bonus or other benefits
payable to directors, officers or employees of AnswerSoft or any of its
subsidiaries;
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<PAGE>
(xiii) any labor dispute, other than routine individual grievances,
or any activity or proceeding by a labor union or representative thereof to
organize any employees of AnswerSoft or any of its subsidiaries, or any
lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to any employees of AnswerSoft or any of its subsidiaries; or
(xiv) any agreement, undertaking or commitment to do any of the
foregoing.
3.14 Litigation. Except as disclosed in Schedule 3.14, there is no
---------- -------------
action, suit, investigation or proceeding pending by or against or, to the best
knowledge of AnswerSoft, threatened against or affecting, AnswerSoft or any of
its subsidiaries or any of their respective properties or assets before any
court or arbitrator or any Governmental Authority. Except as set forth in
Schedule 3.14, neither AnswerSoft nor any of its subsidiaries is subject to any
- -------------
judgment, order or decree entered in any lawsuit or proceeding or issued by any
Governmental Authority. The foregoing sentences include, without limiting their
generality, actions pending or, to AnswerSoft's knowledge, threatened (or any
basis therefor known to AnswerSoft) involving the prior employment or engagement
of any of AnswerSoft's officers or key employees or their use in connection with
AnswerSoft's business of any information or techniques allegedly proprietary to
any of their former employers or to any other Person.
3.15 Material Contracts.
------------------
(a) Except for agreements, contracts, plans, leases, arrangements or
commitments disclosed in Schedule 3.15 or any other Schedule to this Agreement,
-------------
neither AnswerSoft nor any of its subsidiaries has any outstanding obligations
or liabilities under:
(i) any collective bargaining agreement;
(ii) any agreements that contain any unpaid severance
liabilities or obligations;
(iii) any bonus, deferred compensation, incentive compensation,
pension, profit-sharing or retirement plans, or any other employee benefit plans
or arrangements;
(iv) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or
consulting or sales agreement, contract or commitment with a firm or other
organization not terminable by AnswerSoft on 30 days' notice without liability
except to the extent applicable local law and/or general principles of wrongful
termination law may limit AnswerSoft's ability to terminate such employees;
(v) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(vi) any fidelity or surety bond or completion bond;
(vii) any lease of personal property having a remaining value
individually in excess of $10,000;
(viii) any agreement of indemnification or guaranty;
(ix) any agreement, contract or commitment containing any
covenant limiting the freedom of AnswerSoft to engage in any line of business or
compete with any person;
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<PAGE>
(x) any agreement, contract or commitment relating to capital
expenditures involving future obligations in excess of $10,000;
(xi) any agreement, contract or commitment relating to the
disposition or acquisition of assets not in the ordinary course of business or
any ownership interest in any corporation, partnership, joint venture or other
business enterprise;
(xii) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit, including guaranties referred to in clause
(viii) hereof;
(xiii) any purchase order or contract for the purchase of raw
materials or acquisition of assets involving $10,000 or more;
(xiv) any construction contracts ;
(xv) any distribution, joint marketing, teaming or development
agreement;
(xvi) any distributor, dealer, franchise, original equipment
manufacturer, value-added reseller, manufacturer's representative or sales
agency contract or commitment;
(xvii) any agreements pertaining to AnswerSoft's maintenance or
support of its products, services or supplies; or
(xviii) any other agreement, contract or commitment which
involves $10,000 or more and is not cancelable without penalty within thirty
(30) days.
AnswerSoft has not breached, or received any claim or threat that it
has breached, any of the terms or conditions of any agreement, contract or
commitment set forth in any of AnswerSoft's Schedules or any other material
agreement, contract or commitment in such a manner as would permit any other
party to cancel or terminate the same or would permit any other party to seek
damages from AnswerSoft that would have a Material Adverse Effect on AnswerSoft.
Each agreement, plan, contract or commitment set forth in any of AnswerSoft's
Schedules is a valid and binding agreement of AnswerSoft and, to AnswerSoft's
knowledge, each other party thereto and is in full force and effect and is not
subject to any default thereunder of which AnswerSoft is aware by any party
obligated to AnswerSoft pursuant thereto. AnswerSoft has obtained, or will
obtain prior to the Effective Time, all necessary consents, waivers and
approvals as are required in connection with the Merger under any of
AnswerSoft's material agreements, contracts, licenses or leases.
(b) There is no contract, agreement, commitment or obligation to
which AnswerSoft or any of its subsidiaries is a party or is bound that at the
time it was entered into or made was, or is currently, known or expected by
AnswerSoft or any of its subsidiaries to result in any material loss to
AnswerSoft or any of its subsidiaries upon completion or performance thereof, or
any bid, offer or proposal which if accepted would result as such a contract,
agreement, commitment or obligation.
(c) Except as disclosed in Schedule 3.15, AnswerSoft is not a party
-------------
to any agreement with any of its securityholders or optionholders, or any
affiliate thereof, nor, to the best of AnswerSoft's knowledge, is any
securityholder or optionholder of AnswerSoft a party to any agreement with any
other such securityholder or optionholder relating to AnswerSoft or any of its
securities.
3.16 Taxes.
-----
(a) The term "Taxes" as used herein means all federal, state, local,
foreign and other net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall
-15-
<PAGE>
profits, customs duties, unemployment insurance, environmental, worker's
compensation, Pension Benefit Guaranty Corporation premiums and all other taxes,
fees, assessments or other charges of any kind similar to Taxes, together with
any interest and any penalties, additions to tax or additional amounts with
respect thereto, and the term "Tax" means any one of the foregoing taxes. The
term "Returns" as used herein means all returns, declarations, reports,
information returns, statements, claims for refund and other documents relating
to Taxes, including any schedule or attachment thereto, and including any
amendment thereof, and "Return" means any one of the foregoing returns. All
citations to the Code, or the Treasury Regulations promulgated thereunder, shall
include any amendments or any substitute or successor provisions thereto. For
purposes of this Section 3.16, references to "AnswerSoft" shall be deemed to
refer to each of AnswerSoft and its subsidiaries.
(b) Except as set forth on Schedule 3.16(b), AnswerSoft has timely
----------------
filed all Returns required to be filed by or on its behalf. All Returns filed by
or on behalf of AnswerSoft were true, complete and correct in all material
respects. None of such Returns contains or will contain a disclosure statement
under former Section 6661 or Section 6662 of the Code or any similar provision
of any state, local or foreign law.
(c) Except as set forth on Schedule 3.16(c), all Taxes shown to be
----------------
payable by AnswerSoft on any Return or on subsequent assessments with respect
thereto have been paid in full on a timely basis, and all other Taxes payable by
AnswerSoft have been paid or accrued as liabilities on the Audited Balance Sheet
in accordance with generally accepted accounting principles. AnswerSoft has
withheld and paid over all Taxes required to have been withheld and paid over by
it, and complied in all respects with all information reporting and backup
withholding requirements, including maintenance of required records with respect
thereto, in connection with amounts paid or owing to any employee, creditor,
independent contractor or other third party. There are no Liens on any of the
assets of AnswerSoft with respect to Taxes, other than Liens for Taxes not yet
due and payable, and, to the best of AnswerSoft's knowledge, no such Liens will
arise as a result of the consummation of the transactions contemplated by this
Agreement.
(d) The amount of AnswerSoft's liability for unpaid Taxes for all
periods ending on or before the date of the Audited Balance Sheet does not, in
the aggregate, exceed the amount of the net liability accruals for Taxes set
forth on the Audited Balance Sheet (as opposed to any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) and
AnswerSoft will incur no additional Taxes subsequent to the date of the Audited
Balance Sheet until the Closing Date except (i) in the ordinary course of
business (ii) as a result of the transactions contemplated by this Agreement or
(iii) on account of actions taken or caused to be taken by Davox or any of its
Affiliates (including the Surviving Corporation) on or after the Closing Date.
Schedule 3.16(d) sets forth all Taxes that AnswerSoft will incur subsequent to
- ----------------
the Audited Balance Sheet Date until the Closing Date as a result of the
transactions contemplated by this Agreement.
(e) No issues have been raised (and are currently pending) or, to the
best knowledge of AnswerSoft, threatened by any taxing authority in connection
with any Returns filed by, or Taxes payable by, AnswerSoft. AnswerSoft is not
currently the beneficiary of an extension of time within which to file any
Return, and no waivers of statutes of limitation with respect to any of the
Returns have been given by or requested from AnswerSoft that remain in effect.
All deficiencies asserted or assessments made as a result of any examinations
have been settled and fully paid, or are either fully reflected as a liability
in the Financial Statements or reported in footnotes to the Financial Statements
as a contingent liability. All elections with respect to Taxes affecting
AnswerSoft, as of the date hereof, are set forth in the Returns, other than any
such elections which are not required to be included in the Returns, copies of
which have been made available to Davox. Except as set forth on Schedule
--------
3.16(e), AnswerSoft is not a party to any agreement, contract, arrangement or
- -------
plan that has resulted or would result, separately or in the aggregate, in the
payment of (i) any "excess parachute payments" within the meaning of Section
280G of the Code (without regard to the exceptions in Sections 280G(b)(4) or
280G(b)(5) of the Code) or (ii) any other amount for which a deduction would be
disallowed under Section 162(a) by reason of being unreasonable in amount or
Sections 162(b), (c), (d), (e) or (f) or Section 404 of the Code. AnswerSoft
has not agreed to make any adjustment under Section 481(a) of the Code by reason
of a change in accounting method or otherwise, and AnswerSoft will not be
required to make any such adjustment as a result of the transactions
contemplated by this Agreement. AnswerSoft is not (and has not ever been) a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code. Except as set forth on Schedule 3.16(e), to the
----------------
knowledge of
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<PAGE>
AnswerSoft, none of the stockholders of AnswerSoft nor any other holder of the
capital stock of AnswerSoft is a "foreign person" as that term is defined in
Section 1445 of the Code. AnswerSoft is not (and has not ever been) a party to a
Tax sharing agreement and has not assumed the liability of any other person for
Taxes. Except as set forth on Schedule 3.16(e), AnswerSoft has not ever been a
----------------
member of a group of corporations filing a consolidated, unitary or combined
Return other than a group for which AnswerSoft is the common parent. AnswerSoft
has not participated in or cooperated with any international boycott within the
meaning of Section 999 of the Code. No claim has ever been received from a tax
authority in a jurisdiction where AnswerSoft does not file Returns that it is or
may be subject to Tax in that jurisdiction. Schedule 3.16(e) contains a list of
----------------
all jurisdictions (federal, foreign, state, local or other) to which any Tax is
properly payable or where Returns are required to be filed. The transactions set
forth in this Agreement are not subject to the Tax withholding provisions of
Section 3406 of the Code, or of Subchapter A of Chapter 3 of the Code or of any
other provision of law. Except as set forth on Schedule 3.16(e), AnswerSoft has
----------------
not had a permanent establishment in any foreign country, as defined in any
applicable Tax treaty or convention between the United States and such foreign
country. AnswerSoft has never filed a consent pursuant to Section 341(f) of the
Code (or any corresponding provision of state, local or foreign law), relating
to collapsible corporations, or agreed to have Section 341(f)(2) of the Code (or
any corresponding provision of state, local or foreign law) apply to the
disposition of any asset owned by it. AnswerSoft shall have fully complied with
all federal, state, local and foreign Tax withholding obligations arising in
connection with the cancellation or exercise of AnswerSoft options, rights and
warrants. Any adjustment of Taxes made by the Internal Revenue Service in any
examination which is required to be reported to state, local, foreign or other
taxing authorities has been so reported, and any additional Taxes due with
respect thereto have been paid. No power of attorney has been granted by
AnswerSoft, and is currently in force, with respect to any matter relating to
Taxes. Schedule 3.16(e) sets forth the amount of AnswerSoft's net operating
----------------
losses, tax credits and other tax attributes subject to limitation under
Sections 382, 383, 384 of the Code or the consolidated return regulations
promulgated under Section 1502 of the Code (in each case, determined without
regard to the transactions contemplated by this Agreement). AnswerSoft has not
issued any shares of "Restricted Stock" (within the meaning of Section 11 of the
AnswerSoft 1994 Stock Plan).
3.17 Insurance Coverage. Schedule 3.17 sets forth an accurate and
------------------ -------------
complete list of all insurance policies and fidelity bonds covering the assets,
business, equipment, properties, operations, employees, officers and directors
of AnswerSoft and its subsidiaries. There is no claim by AnswerSoft or any of
its subsidiaries pending under any of such policies or bonds as to which, to
AnswerSoft's knowledge, coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums payable under all such
policies and bonds have been paid, and AnswerSoft and its subsidiaries have
otherwise complied in all material respects with the terms and conditions of all
such policies and bonds. Such policies of insurance and bonds (or other
policies and bonds providing substantially similar insurance coverage) remain in
full force and effect. AnswerSoft believes that such insurance is adequate to
cover all reasonably foreseeable risks associated with the business of
AnswerSoft and its subsidiaries and is in such amounts, with such deductibles
and with such other terms as is prudent for a business such as that of
AnswerSoft and its subsidiaries. Neither AnswerSoft nor any of its subsidiaries
knows of any threatened termination of, or has received written notice of, any
premium increase with respect to, any of such policies or bonds.
3.18 Compliance with Laws; No Defaults.
---------------------------------
(a) Except as disclosed in Schedule 3.18, neither AnswerSoft nor any
-------------
of its subsidiaries is in violation of, and since their respective inceptions
has not violated, any applicable provisions of any law, statute, ordinance,
regulation, judgment, order, injunction, permit, license, certificate or other
authorization, or its governing instruments, except for violations that have not
had and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on AnswerSoft.
(b) Neither AnswerSoft nor any of its subsidiaries is in default
under, and no condition exists that with notice or lapse of time or both would
constitute a default under, any applicable law, statute, ordinance, regulation,
judgment, order, injunction, permit, license, certificate or other
authorization, or its governing instruments, except for violations that have not
had and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on AnswerSoft.
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<PAGE>
(c) Except as set forth on Schedule 3.18, AnswerSoft and its
-------------
subsidiaries are in compliance with all currently applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and are not engaged in any unfair labor practice, failure to
comply with which or engagement in which, as the case may be, has had, or could
reasonably be expected to have, a Material Adverse Effect on AnswerSoft. There
is no unfair labor practice complaint pending or, to the knowledge of
AnswerSoft, threatened against AnswerSoft or any of its subsidiaries before the
National Labor Relations Board.
3.19 Finders' Fees'. There is no investment banker, broker, finder
--------------
or other intermediary that has been retained by or is authorized to act on
behalf of AnswerSoft or any of its subsidiaries who might be entitled to any fee
or commission from Davox, the Company, AnswerSoft or any other person upon
consummation of the transactions contemplated by this Agreement.
3.20 Employees. Schedule 3.20 sets forth a true and complete list
--------- -------------
of (a) the names, titles, annual salaries and other compensation of all
employees of AnswerSoft (the "Employees") as of the date of this Agreement and
the location at which such Employees regularly perform services for AnswerSoft
and (b) the wage rates for non-salaried Employees of AnswerSoft (by
classification). Any agreements, commitments or understandings between
AnswerSoft and any Employee concerning such Employee's future salary,
compensation or terms of employment are summarized in Schedule 3.20. Except as
-------------
set forth on Schedule 3.20, as of the date of this Agreement none of such
-------------
Employees has indicated to AnswerSoft that he or she intends to resign or retire
as a result of the transactions contemplated by this Agreement or otherwise.
3.21 Environmental Matters.
---------------------
(a) AnswerSoft and each of its subsidiaries has materially complied
with all applicable foreign, national, federal, state and/or local laws
(including without limitation case law, rules, regulations, orders, judgments,
decrees, permits, licenses and governmental approvals) that are intended to
protect the environment and/or human health or safety (collectively,
"Environmental Laws").
(b) Neither AnswerSoft nor any of its subsidiaries has handled,
generated, used, stored, transported or disposed of any material, substance or
waste that is regulated by Environmental Laws, except for reasonable amounts of
ordinary office supplies and/or office-cleaning supplies that have been handled
in compliance with Environmental Laws.
(c) To AnswerSoft's or any of AnswerSoft's subsidiaries' knowledge,
there are no "Environmental Liabilities," which, for purposes of this Agreement,
means any liabilities whatsoever which (y) arise out of or in any way relate to
AnswerSoft or any of its subsidiaries or any real estate at any time owned,
operated or leased by AnswerSoft or any of its subsidiaries, whether vested or
unvested, contingent or fixed, actual or potential, and (z) arise from or relate
to actions occurring (including any failure to act) or conditions existing on or
before the Closing Date.
3.22 Intercompany Arrangements; Conflicts.
------------------------------------
(a) Except as set forth on Schedule 3.22, neither AnswerSoft nor any
-------------
of its subsidiaries owns any note, bond, debenture or other indebtedness, or is
otherwise a creditor, of any stockholder of AnswerSoft or any of its
subsidiaries or any of their affiliates. Except as disclosed in Schedule 3.22,
-------------
since December 31, 1997 there has not been any payment by AnswerSoft or any of
its subsidiaries to any stockholder of AnswerSoft or any of its subsidiaries
(except for compensation to employees of AnswerSoft or any of its subsidiaries
in their capacities as such) or any of their affiliates, charge by any
stockholder of AnswerSoft or any of its subsidiaries or any of their affiliates
to AnswerSoft or any of its subsidiaries, or any other transaction between
AnswerSoft or any of its subsidiaries and any stockholder of AnswerSoft or any
of its subsidiaries or any of their affiliates.
(b) Except as set forth on Schedule 3.22, none of the officers or
-------------
directors of AnswerSoft or any of its subsidiaries (i) has any direct or
indirect interest in any entity which does business with AnswerSoft or
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<PAGE>
any of its subsidiaries; (ii) has any direct or indirect interest in any
property, asset or right which is used by AnswerSoft or any of its subsidiaries
in the conduct of their business; or (iii) has any contractual relationship with
AnswerSoft or any of its subsidiaries other than such relationships that arise
from being an officer, director or stockholder of AnswerSoft or any of its
subsidiaries.
3.23 Other Information. This Agreement and the Schedules hereto,
-----------------
taken as a whole, do not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements contained
therein, in light of the circumstance in which they were made, not misleading.
The financial projections relating to AnswerSoft and its subsidiaries previously
delivered to Davox constitute AnswerSoft's good faith estimate as of the date of
this Agreement of the information purported to be shown therein, and AnswerSoft
is not aware of any fact or information that would lead it to believe that such
projections are incorrect or misleading in any material respect. Davox
recognizes that such projections are based on the assumptions described therein
and that such assumptions may not prove to be correct. As of the date of this
Agreement, however, AnswerSoft has no reason to believe that any of such
assumptions are incorrect or unreasonable as of the date of this Agreement.
3.24 Year 2000 Compliant. AnswerSoft warrants to Davox that the
-------------------
occurrence of the date January 1, 2000 will not, by itself, cause the current
version of the software owned by AnswerSoft and licensed by AnswerSoft to its
customers in the regular course of business ("AnswerSoft Software") to
materially fail to operate in accordance with the published specifications for
such AnswerSoft Software, provided that all other software, scripts, hardware
and products used in combination with the AnswerSoft Software properly exchange
date data with the AnswerSoft Software. The foregoing warranty applies only to
failures in operation of the AnswerSoft Software that are reproducible in
standalone form and does not apply to (i) AnswerSoft Software that is modified,
customized or altered by Davox or any third party; (ii) AnswerSoft Software that
is otherwise operated in violation of any license agreement accompanying the
AnswerSoft Software or other than in accordance with the end user documentation;
or (iii) failures which are caused by other software, hardware or products not
owned by AnswerSoft.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DAVOX AND THE COMPANY
Davox and the Company hereby represent and warrant to AnswerSoft as
follows:
4.1 Corporate Existence and Power. Each of Davox and the Company
-----------------------------
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware and has all corporate power and authority
necessary to enable it to own, lease or otherwise hold its properties and assets
and to carry on its business as now conducted and proposed to be conducted.
Davox is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification necessary,
except for those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect upon the
financial condition, results of operations, business, properties, assets or
operations of Davox and its subsidiaries taken as a whole (a "Material Adverse
Effect on Davox"). Davox has previously delivered to AnswerSoft true and
complete copies of the certificates of incorporation and by-laws of Davox and
the Company, as currently in effect.
4.2 Corporate Authorization. The execution, delivery and
-----------------------
performance by Davox and the Company of this Agreement, and the consummation by
Davox and the Company of the Merger and other transactions contemplated by this
Agreement, are within the corporate power and authority of Davox and the
Company, respectively, and, subject to the approval by the stockholders of Davox
of the issuance of the shares of Davox Common contemplated by this Agreement,
have been duly authorized by all necessary corporate action. This Agreement has
been duly and validly authorized, executed and delivered by Davox and the
Company and constitutes a valid and binding obligation of Davox and the Company,
enforceable against Davox and the Company in accordance with its terms.
4.3 Governmental Authorization. The execution, delivery and
--------------------------
performance by Davox and the Company of this Agreement, and the consummation of
the Merger and other transactions contemplated by this
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<PAGE>
Agreement by Davox and the Company, do not and will not require any consent,
approval or action by or in respect of, or any declaration, filing or
registration with, any Governmental Authority, other than routine filings with
the Secretary of State of the State of Delaware necessary to consummate the
Merger, and compliance with the applicable requirements of the Securities Act of
1933 (the "Securities Act"), the Securities Exchange Act of 1934 (the "Exchange
Act") and any applicable state securities and blue sky laws in connection with
the offering, sale and delivery of the shares of Davox Common to be issued in
the Merger and the solicitation of proxies for approval of the transactions
contemplated by this Agreement, and such other consents, approvals, actions,
declarations, filings or registrations, the absence of which, in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on Davox.
4.4 Non-Contravention. The execution, delivery and performance by
-----------------
Davox and the Company of this Agreement, and the consummation of the Merger and
other transactions contemplated by this Agreement by Davox and the Company, do
not and will not, with or without the giving of notice, the lapse of time or
both: (i) contravene or conflict with the certificates of incorporation or by-
laws of Davox or the Company, (ii) assuming compliance with the matters referred
to in Section 4.3, contravene or conflict with or constitute a violation of any
provision of any law, rule, regulation, judgment, injunction, order or decree
binding upon or applicable to Davox or the Company, other than any
contravention, conflict or violation that, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on Davox, (iii) require
any consent, approval or other action by any person, contravene or conflict with
or constitute a violation of or a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of Davox or
the Company or to a loss of any benefit to which Davox or the Company is
entitled, under any material provision of (A) any material agreement, contract,
indenture, lease or other instrument binding upon Davox or the Company or (B)
any license, franchise, permit or other similar authorization held by Davox or
the Company, other than any contravention, conflict or violation that, in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
Davox or (iv) result in the creation or imposition of any Lien on any asset of
Davox or the Company, other than Liens that, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on Davox.
4.5 Finders' Fees. Except for Piper Jaffray Inc., whose fees will
-------------
be paid by Davox, there is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of
Davox or the Company who might be entitled to any fee or commission from
AnswerSoft or any of its stockholders (or any of their affiliates) upon
consummation of the transactions contemplated by this Agreement.
4.6 Litigation. There is no action, suit, investigation or
----------
proceeding pending against, or to the best knowledge of Davox threatened
against, Davox or the Company before any court or arbitrator or any Governmental
Authority that, if decided adversely to Davox, would result in a Material
Adverse Effect on Davox.
4.7 Capitalization.
--------------
(a) As of March 2, 1998, the authorized capital stock of Davox
consists of 30,000,000 shares of Davox Common, of which 11,909,052 shares were
issued and outstanding and 3,294 shares are held in the treasury of Davox. As
of March 2, 1998, there were reserved for issuance under Davox's 1986 Stock
Plan, 1996 Stock Plan and 1991 Employee Stock Purchase Plan, 878,527 shares,
1,750,000 shares and 150,000 shares of Davox Common, respectively. As of March
2, 1998, there were outstanding options to purchase 878,527 shares and 1,264,521
shares, respectively, of Davox Common under Davox's 1986 Stock Plan and 1996
Stock Plan. Except as set forth above, as of March 2, 1998, there were no
outstanding (i) shares of capital stock or other voting securities of Davox,
(ii) securities of Davox convertible into or exchangeable for shares of capital
stock or voting securities of Davox or (iii) options, warrants, exchange rights,
subscription rights or other agreements, commitments or rights to purchase or
otherwise acquire from Davox, or agreements, commitments or obligations of Davox
to issue or sell, any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of Davox (the items
in clauses (i), (ii) and (iii) being referred to collectively as the "Davox
Securities"). As of March 2, 1998, there were no outstanding obligations of
Davox or any of its subsidiaries to sell, issue or deliver, or to repurchase,
redeem or otherwise acquire, any Davox Securities.
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<PAGE>
(b) The authorized capital stock of the Company consists of 100
shares of Common Stock, par value $.01 per share, all of which are issued and
outstanding and owned of record by Davox. All issued and outstanding shares of
Davox Common and Common Stock, par value $.01 per share, of the Company are
validly issued, fully paid and nonassessable, and have not been issued in
violation of any preemptive, first refusal or other subscription rights of any
stockholder of Davox, the Company or any other person.
4.8 SEC Documents. Davox has filed with the Commission and has
-------------
made available to AnswerSoft a true and complete copy of the following Davox
documents: (i) its annual report on Form 10-K for the fiscal year ended
December 31, 1997; (ii) its quarterly reports on Form 10-Q for the fiscal
quarters ended March 31, 1997, June 30, 1997 and September 30, 1997; (iii) its
current report on Form 8-K dated May 26, 1997; and (iv) the proxy statement
dated March 21, 1997 (collectively, the "Davox SEC Documents"), which are all of
the documents (other than preliminary material) that Davox was required to file
with the Commission from December 31, 1996 through the date hereof. As of their
respective dates, the Davox SEC Documents complied in all material respects with
the requirements of the Securities Act, or the Exchange Act, as the case may be,
and the rules and regulation of the Commission thereunder applicable to such
Davox SEC Documents, and none of the Davox SEC Documents, as of their respective
dates, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of Davox's subsidiaries is required to file any forms, reports
or other documents with the Commission. The consolidated financial statements
of Davox and its subsidiaries included in the Davox SEC Documents complied as to
form in all material respects with the published rules and regulations of the
Commission with respect thereto, were prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of the Audited statements, as permitted by Rule 10-01 of Regulation S-X)
and fairly presented in accordance with applicable requirements of GAAP
(subject, in the case of the Audited statements, to normal recurring
adjustments, none of which will be material) the consolidated financial position
of Davox and its subsidiaries as of their respective dates and the consolidated
results of operations and the consolidated cash flows of Davox and its
subsidiaries for the periods presented therein.
4.9 Davox Common. The shares of Davox Common to be issued and
------------
exchanged for shares of Preferred Stock and AnswerSoft Common in the Merger
will, at the Effective Time, be duly authorized, validly issued, fully paid and
nonassessable and subject to no preemptive rights and such shares will have been
issued pursuant to an effective registration statement under the Securities Act.
4.10 Compliance with Laws; No Defaults.
---------------------------------
(a) Neither Davox nor any of its subsidiaries is in violation of any
applicable provisions of any laws, statutes, ordinances or regulations, except
for violations that have not had and could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Davox.
(b) Neither Davox nor any of its subsidiaries is in default under,
and no condition exists that, with notice or lapse of time or both, would
constitute a default under, (i) any mortgage, loan agreement, indenture or
evidence of indebtedness for borrowed money to which Davox or any of its
subsidiaries is a party or by which any of their assets is bound, which defaults
or potential defaults, individually or in the aggregate, have had, or could
reasonably be expected to have, a Material Adverse Effect on Davox or (ii) any
judgment, order or injunction of any court, arbitrator or Governmental
Authority.
4.11 Absence of Certain Changes. Since December 31, 1997, Davox
--------------------------
has conducted its business in the ordinary course and there has not occurred (i)
any amendments or changes in the Certificate of Incorporation or By-Laws of
Davox, (ii) any damage to, destruction or loss of any assets of Davox that could
have a Material Adverse Effect on Davox or (iii) any event, occurrence,
development or state of circumstances or facts which have had or could
reasonably be expected to result in or have a Material Adverse Effect on Davox.
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<PAGE>
ARTICLE V
COVENANTS
5.1 Mutual Covenants and Agreements. Each of the parties hereby
-------------------------------
covenants and agrees with the other parties as follows:
(a) Cooperation. It shall cooperate fully with the other parties
-----------
hereto in furnishing any information or performing any action reasonably
requested by any such party, which information or action is necessary to the
speedy and successful consummation of the transactions contemplated by this
Agreement or is necessary, appropriate or desirable for the corporate purposes
of Davox. Subject to its further rights under this Agreement, it shall use all
reasonable efforts to cause the Closing to occur at the earliest practicable
time.
(b) Other Required Information. It shall furnish to the other
--------------------------
parties hereto any application or statement, and all information concerning
itself and its subsidiaries as is required to be set forth in any application or
statement, to be filed with any Governmental Authority in connection with the
transactions contemplated by this Agreement, or otherwise.
(c) Confidentiality. The parties acknowledge that Davox and
---------------
AnswerSoft have previously executed a non-disclosure agreement dated January 21,
1998, as amended (the "Confidentiality Agreement"), which Confidentiality
Agreement shall continue in full force and effect in accordance with its terms.
(d) Publicity. Except as otherwise required by applicable law or
---------
stock exchange regulations, it shall not issue any press release or make any
other public statement with respect to any matters discussed herein, without
obtaining the prior approval of (i) Davox in the case of a proposed statement or
release by AnswerSoft, or (ii) AnswerSoft in the case of a proposed release or
statement by Davox or the Company, of the contents and the manner of
presentation and publication thereof.
(e) Preparation of Registration Statement. It shall cooperate with
-------------------------------------
the other parties hereto in the preparation of a joint proxy statement to be
mailed to Davox's and AnswerSoft's stockholders in connection with the
transactions contemplated hereby (the "Proxy Materials") which will be included
within a registration statement on the appropriate form (the "Registration
Statement") to be filed by Davox with the Commission. When the Registration
Statement or any post-effective amendment thereto shall become effective, and at
all times subsequent to such effectiveness, up to and including the dates of the
meetings of the stockholders of Davox and AnswerSoft with respect to the
transactions contemplated by this Agreement, such Registration Statement and
Proxy Materials and all amendments or supplements thereto, with respect to all
information set forth therein furnished or to be furnished by any party with
respect to itself or its affiliates, (i) will comply in all material respects
with the applicable provisions of the Securities Act and the Exchange Act and
the rules and regulations promulgated by the Commission thereunder and (ii) will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements contained
therein not misleading. In no event, however, shall any party hereto be liable
for any untrue statement of a material fact or omission to state a material fact
in the Registration Statement and Proxy Materials made in reliance upon, and in
conformity with, written information concerning any other party hereto furnished
by such other party specifically for use in the Registration Statement and Proxy
Materials. It shall advise the other parties hereto promptly of the happening
of any event which makes untrue any statement of a material fact contained in
the Registration Statement or Proxy Materials or any amendment or supplement
thereto. Notwithstanding the foregoing, AnswerSoft makes no representation,
warranty or covenant with respect to (A) any information supplied by Davox or
the Company that is contained in any of the foregoing documents or (B) any of
the statements made in subparagraph (i) of this Section 5.1(e). Subject to the
provisions of Section 5.2(i), the Proxy Materials shall include the
recommendation of the Board of Directors of AnswerSoft in favor of the Merger;
provided that such recommendation may not be included or may be withdrawn if
previously included if AnswerSoft's Board of Directors believes in good faith
that a Superior Proposal (as defined in Section 5.2(i)) has been made and shall
determine that to include such recommendation or not withdraw such
recommendation if previously included would constitute a breach of the Board of
Directors' fiduciary duty under applicable law.
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<PAGE>
(f) Miscellaneous Agreements and Consents. Each party shall use its
-------------------------------------
reasonable efforts to ensure that its representations and warranties remain true
and correct in all material respects. Subject to the terms and conditions
provided in this Agreement, it shall use all reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, appropriate or desirable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement. It will, and will
cause each of its subsidiaries to, use their respective reasonable efforts to
obtain consents of all third parties and Governmental Authorities necessary,
appropriate or desirable for the consummation of the transactions contemplated
by this Agreement.
(g) Certain Tax Matters. It shall not, either before or after the
-------------------
consummation of the Merger, take any action which would prevent the Merger from
qualifying as a tax-free reorganization under Section 368(a) of the Code.
(h) Pooling. It shall use all reasonable efforts, shall cooperate
-------
fully and shall take all actions as are reasonably necessary to allow the Merger
and other transactions contemplated by this Agreement to be accounted for as a
"pooling of interests" in accordance with United States generally accepted
accounting principles which shall be acceptable to the Commission.
(i) Tax Opinions. AnswerSoft and Davox shall each have received an
------------
opinion of its counsel in form and substance reasonably satisfactory to it to
the effect that when the Merger is consummated in accordance with the terms of
this Agreement, the Merger will be treated for Federal income tax purposes as a
tax-free reorganization with the meaning of Section 368(a) of the Code. For
purpose of rendering such opinion, such counsel shall be entitled to rely on
reasonable assumptions and representations as to factual matters pertinent to
such opinions, including the existence of a valid business purpose.
5.2 Certain Covenants of AnswerSoft. AnswerSoft hereby covenants and
-------------------------------
agrees with Davox and the Company as follows:
(a) Preservation of Business Organization. AnswerSoft shall use all
-------------------------------------
reasonable efforts to preserve without material impairment the business
organization of AnswerSoft and its subsidiaries and their goodwill as to payors,
providers, suppliers, distributors, clients and others having business relations
with AnswerSoft and its subsidiaries.
(b) Carry on in Regular Course. AnswerSoft shall, and shall cause
--------------------------
each of its subsidiaries to, carry on its business in the ordinary and usual
course in a manner consistent with its past practices.
(c) Consents. AnswerSoft shall use all reasonable efforts to obtain
--------
consents in writing to the transactions contemplated by this Agreement and/or
such amendments, assignments or modifications of such documents or instruments
as may be required in order that the transactions contemplated by this Agreement
shall not result in any default with respect to any law, rule, regulation,
order, decree, license, agreement, contract, commitment or instrument to which
AnswerSoft or any of its subsidiaries is a party or by which AnswerSoft, any of
its subsidiaries or any of their assets is bound. AnswerSoft shall keep Davox
informed as to its progress in obtaining such consents.
(d) Capital Stock. Except pursuant to the exercise of options and
-------------
warrants outstanding on the date of this Agreement and except pursuant to
AnswerSoft's repurchase of AnswerSoft securities from AnswerSoft employees upon
their departure from AnswerSoft (which repurchases shall be consistent with past
practices and only with Davox's consent), AnswerSoft shall not issue or sell, or
redeem, purchase or otherwise acquire, any AnswerSoft Securities, or agree to do
any of the foregoing. AnswerSoft shall not, and shall cause its subsidiaries
not to, issue or sell, or redeem, purchase or otherwise acquire, any Subsidiary
Securities, or agree to do any of the foregoing. Except for any agreement by
which AnswerSoft was bound immediately prior to the date hereof and specifically
disclosed on the AnswerSoft Disclosure Schedules, AnswerSoft shall not
accelerate, amend or change the period of exercisability of options or
restricted stock granted under employee stock plans or authorize cash payments
in exchange for any options granted under any of such plans.
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<PAGE>
(e) Other Actions. Except as set forth on Schedule 5.2(e), without
------------- ---------------
the prior written consent or approval of Davox, AnswerSoft shall not, and shall
cause its subsidiaries not to: (i) amend their respective certificates of
incorporation or by-laws; (ii) increase the rate of compensation of, or pay any
bonus to, any of their respective directors, officers or employees of AnswerSoft
and its subsidiaries; (iii) enter into or amend any employment, management,
consulting, deferred compensation, severance or other similar contract or
agreement; (iv) enter into or modify (except as may be required by applicable
law) any Employee Plan, or any trust agreement or insurance contract related
thereto, in respect of any of their respective present or former directors,
officers or employees; (v) enter into any contract or commitment except in the
ordinary course of business or as contemplated by this Agreement; (vi) incur any
debt for borrowed money in any amount, or any liability or obligation other than
in the ordinary course of business and in any event not in excess of $10,000 in
the aggregate; (vii) discharge or satisfy any consensual Lien or any non-
consensual Lien securing any liability in excess of $10,000 or pay any debt,
liability or obligation other than in the ordinary course of business and in any
event not in excess of $10,000 in the aggregate; (viii) mortgage, pledge or
subject to any Lien any of their respective assets, tangible or intangible; (ix)
dispose or discontinue any portion of their respective businesses or properties
having a fair market value in excess of $10,000, or merge or consolidate with or
acquire all or any substantial portion of, the business or properties of any
other entity; (x) acquire or enter into any contract or agreement or make any
commitment or obligation with respect to the lease or acquisition of any capital
asset other than in the ordinary course of business and in any event not in
excess of $10,000 in the aggregate; (xi) make any dividends, distributions or
cash transfers to any of their respective stockholders or affiliates; (xii)
enter into any transaction with any of their respective stockholders or any
affiliates of any of their respective stockholders, other than in the ordinary
course of, and pursuant to the reasonable requirements of, their respective
businesses and upon terms that are no less favorable to AnswerSoft or the
subsidiary than AnswerSoft or the subsidiary could obtain in a comparable
transaction with a person who was not such a stockholder or an affiliate of such
a stockholder or other than as contemplated by this Agreement; or (xiii) agree
to do any of the foregoing.
(f) Access. AnswerSoft shall, and shall cause each of its
------
subsidiaries to, permit officers, employees, agents, attorneys and accountants
and other persons designated by Davox full access after reasonable notice during
normal business hours to the properties, books, contracts, commitments, tax
returns, examination reports of the Internal Revenue Service and other records
of AnswerSoft and its subsidiaries and subject to the Confidentiality Agreement
as discussed in Section 5.1(c). Unless prohibited by law or contract, such
designees of Davox shall be furnished with true, accurate and complete copies of
such contracts, commitments and other records and all other information with
respect to the assets and business of AnswerSoft and its subsidiaries as such
designees may reasonably request.
(g) Documents and Information to be Furnished. AnswerSoft shall
-----------------------------------------
deliver to Davox promptly after such documents are available AnswerSoft's
unaudited monthly financial reports with respect to periods ending after the
date hereof and all other documents, financial statements, budgets, proxy or
information statements, reports, correspondence, notices and other items
AnswerSoft delivers, or is required to deliver, to each of its classes of
stockholders.
(h) Changes in Accounting Method. Without the prior written consent
----------------------------
or approval of Davox, AnswerSoft shall not make any change in any method of
financial or tax accounting or any financial or tax accounting practice or in
its method of maintaining books and records, including, without limitation,
accounting practices and books and records relating to depreciation, accruals
for liabilities, bad debt reserves, amortization policies or rates, acceleration
of collection of receivables or postponement of expenses.
(i) Other Negotiations. AnswerSoft shall not, and shall not permit
------------------
its representatives to, directly or indirectly, initiate, solicit, encourage
discussions with, provide information to, or approve a transaction with, any
corporation, partnership, person or other entity or group concerning any merger,
purchase or sale of all or substantially all of the assets or the sale of all or
substantially all of the AnswerSoft Securities or Subsidiary Securities or
similar transaction involving AnswerSoft or any of its subsidiaries (all such
transactions being referred to herein as "Acquisition Transactions") provided,
--------
however, that nothing contained in this Agreement shall prevent AnswerSoft or
- -------
its Board of Directors from furnishing information to, or entering into
discussions, negotiations or
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<PAGE>
agreements with, any person or entity in connection with an unsolicited bona
fide written proposal for an Acquisition Transaction by such person or entity or
recommending an unsolicited bona fide written proposal for an Acquisition
Transaction to the stockholders of AnswerSoft, if and only to the extent that
(i) the Board of Directors of AnswerSoft believes in good faith that such
proposal for an Acquisition Transaction would, if consummated, result in a
transaction more favorable to AnswerSoft's stockholders than the transaction
contemplated by this Agreement (any such more favorable proposal for an
Acquisition Transaction being referred to in this Agreement as a "Superior
Proposal") and (ii) the Board of Directors of AnswerSoft determines in good
faith that such action is necessary to comply with its fiduciary duties to
stockholders under applicable law. AnswerSoft shall promptly communicate to
Davox the terms of any written proposal which it may receive with respect to an
Acquisition Transaction and any written request by or indication of interest on
the part of any third party with respect to initiation of any Acquisition
Transaction or discussions with respect thereto.
(j) Compliance with the Securities Act. AnswerSoft shall attach to
----------------------------------
the Participation Agreement a schedule identifying all persons whom it believes
to be, at the time this Agreement is submitted to a vote of the stockholders of
AnswerSoft, "affiliates" of AnswerSoft as such term is used in and for the
purposes of Accounting Series Releases 130 and 135, as amended, of the
Securities and Exchange Commission, and defined in Rule 144(a)(1) of the
Securities Act of 1933, as amended (each such person being referred to as an
"AnswerSoft Affiliate"). AnswerSoft shall cause each AnswerSoft Affiliate who
has not executed the Participation Agreement to deliver to Davox prior to the
Closing a written agreement providing that such person will not sell, pledge,
transfer or otherwise dispose of the shares of Davox Common to be received by
such person in the Merger except in compliance with the applicable provisions of
the Securities Act and the rules and regulations thereunder. If the Merger
qualifies for pooling-of-interests accounting treatment, shares of Davox Common
issued to AnswerSoft Affiliates in exchange for Preferred Stock or AnswerSoft
Common shall not be transferable until such time as financial results covering
at least 30 days of combined operations of Davox and AnswerSoft have been
published.
(k) Distribution of Proxy Materials; Stockholders' Approval.
-------------------------------------------------------
AnswerSoft shall take all action necessary in accordance with applicable law to
convene a meeting of its stockholders to be held as soon as practical after the
effective date of the Registration Statement for the purpose of approving and
adopting this Agreement (including the transactions contemplated hereby).
AnswerSoft shall submit the Proxy Materials to its stockholders, and its Board
of Directors shall recommend to its stockholders the adoption of this Agreement;
provided that such recommendation may be withdrawn, modified or amended to the
- --------
extent the Board of Directors of AnswerSoft deems it necessary to do so in the
exercise of its fiduciary obligations to the AnswerSoft stockholders. It shall,
at such meeting of its stockholders, present this Agreement for adoption by its
stockholders. Subject to its fiduciary obligations, it shall use all reasonable
efforts to obtain all votes and approvals of its stockholders necessary for the
approval and adoption of this Agreement under the Delaware Corporation Law, and
its certificate of incorporation and by-laws.
(l) Notices of Certain Events. AnswerSoft shall promptly notify Davox
-------------------------
of:
(i) any notice or other communication from any person alleging
that the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(ii) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this Agreement;
and
(iii) any actions, suits, claims, investigations or proceedings
commenced relating to or involving or otherwise affecting AnswerSoft or any of
its subsidiaries that, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Article III or that relate to the
consummation of the transactions contemplated by this Agreement.
(m) Termination of Agreements. AnswerSoft shall use all reasonable
-------------------------
efforts to terminate, effective immediately prior to the Effective Time, all
agreements among AnswerSoft and any of its securityholders or optionholders, or
among any AnswerSoft securityholders or optionholders, providing for
registration rights,
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<PAGE>
rights of first refusal, rights of co-sale, relating to the voting of AnswerSoft
securities or requiring AnswerSoft to obtain the consent or approval of any such
securityholders prior to taking or failing to take any action.
(n) Parachute Payments. AnswerSoft shall use all reasonable efforts
------------------
to obtain the shareholder approval described in Section 280G(b)(5)(B) of the
Code for all payments which, in the absence of such approval, would be treated
as "parachute payments" within the meaning of Section 280G(b)(2) of the Code.
5.3 Covenants of Davox and the Company. Davox and the Company hereby
----------------------------------
covenant and agree with AnswerSoft as follows:
(a) Preservation of Business Organization. Davox shall use all
-------------------------------------
reasonable efforts to cause to preserve without material impairment the business
organization of Davox and its subsidiaries and their goodwill as to payors,
providers, suppliers, distributors, clients and others having business relations
with Davox and its subsidiaries.
(b) Carry on in Regular Course. Davox shall carry on its business in
--------------------------
the ordinary and usual course, in a manner consistent with its past practices.
Without the prior written consent or approval of AnswerSoft, Davox shall not
amend its certificate of incorporation or by-laws.
(c) Consents. Davox shall use all reasonable efforts to obtain
--------
consents in writing to the transactions contemplated by this Agreement and/or
such amendments, assignments or modifications of such documents or instruments
as may be required in order that the transactions contemplated by this Agreement
shall not result in any default with respect to any law, rule, regulation,
order, decree, license, agreement, contract, commitment or instrument to which
Davox is a party or by which Davox or any of its assets is bound.
(d) Access. Davox shall permit officers, agents, attorneys and
------
accountants and other persons designated by AnswerSoft full access after
reasonable notice during normal business hours to the properties, books,
contracts, commitments, tax returns, examination reports of the Internal Revenue
Service and other records of Davox and its subsidiaries. Unless prohibited by
law or contract, such designees of AnswerSoft shall be furnished with true,
accurate and complete copies of such contracts, commitments and other records
and all other information with respect to the assets and business of Davox and
its subsidiaries as such designees may reasonably request.
(e) Effectiveness of Registration Statement. Davox shall: (i) advise
---------------------------------------
AnswerSoft, promptly after Davox receives notice thereof, of the time when the
Registration Statement has become effective or any supplement or amendment has
been filed, (ii) advise AnswerSoft of the issuance of any stop order or the
suspension of the qualification of the Davox Common to be issued in connection
with the Merger for the offering or sale in any jurisdiction, of the initiation
or threat of any proceeding for any such purpose and Davox shall use reasonable
efforts to resolve such issues, (iii) advise AnswerSoft of any request by the
Commission for the amendment or supplementation of the Registration Statement or
for additional information, and (iv) respond to Commission comments and use
reasonable efforts to have the Registration Statement declared effective, as
promptly as practical.
(f) Documents and Information to be Furnished. Davox shall furnish
-----------------------------------------
to AnswerSoft promptly after such documents are available to Davox's
stockholders its unaudited quarterly financial reports in the form filed with
the Commission on Form 10-Q prescribed under the Exchange Act and such other
reports, statements, documents and other items Davox delivers, or is required to
deliver, to any of its stockholders.
(g) Distribution of Proxy Materials; Stockholders' Approval. Davox
-------------------------------------------------------
shall take all action necessary in accordance with applicable law to convene a
meeting of its stockholders to be held at the earliest possible time after the
effective date of the Registration Statement for the purpose of approving and
adopting this Agreement (including the transactions contemplated hereby). It
shall submit the Proxy Materials to its stockholders, and its Board of Directors
shall recommend to its stockholders the adoption of this Agreement; provided
--------
that such recommendation may be withdrawn, modified or amended to the extent the
Board of Directors of Davox deems it necessary to do so in the exercise of its
fiduciary obligations to the Davox stockholders. It shall, at such meeting of
its stockholders, present this Agreement for adoption by its stockholders.
Subject to its fiduciary obligations, it shall
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use all reasonable efforts to obtain all votes and approvals of its stockholders
necessary for the approval and adoption of this Agreement under the Delaware
Corporation Law, and its certificate of incorporation and by-laws.
(h) Notices of Certain Events. Davox shall promptly notify AnswerSoft
-------------------------
of:
(i) any notice or other communication from any person alleging
that the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(ii) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this Agreement;
and
(iii) any actions, suits, claims, investigations or proceedings
commenced relating to or involving or otherwise affecting Davox or any of its
subsidiaries that, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Article IV or that relate to the
consummation of the transactions contemplated by this Agreement.
(i) Pooling. If the Merger qualifies for pooling-of-interests
-------
accounting treatment, Davox shall use all reasonable efforts to cause its
affiliates to agree not to transfer shares of Davox Common owned by such
affiliates until such time as financial results covering at least 30 days of
combined operations of Davox and AnswerSoft have been published.
(j) Listing of Additional Shares. Prior to the Effective Time, Davox
----------------------------
shall file with Nasdaq a Notification Form for Listing of Additional Shares with
respect to the Davox Common.
(k) Blue Sky Laws. Davox shall take such steps as may be necessary
-------------
to comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Davox Common in connection with the Merger.
AnswerSoft shall use its best efforts to assist Davox as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable in connection with the issuance of Davox Common in connection with
the Merger.
(l) Indemnification.
---------------
(a) At all times, from and after the Effective Time, Davox and
the Surviving Corporation jointly and severally shall indemnify, defend and hold
harmless each person who is now, or has been at any time prior to the date of
this Agreement or who becomes prior to the Effective Time, an officer, director
or employee of AnswerSoft or any of its subsidiaries (the "Indemnified Parties")
in respect of acts or omissions, whether arising out of or pertaining to the
transactions contemplated by this Agreement or otherwise, occurring on or prior
to the Effective Time to the fullest extent permitted under AnswerSoft's
Certificate of Incorporation, Bylaws and indemnification agreements in effect on
the date hereof; provided that such indemnification shall be subject to any
limitation imposed from time to time under applicable law.
(b) If Davox or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
person or entity and shall not be the continuing or surviving person of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person or entity, then and in each such case,
proper provision shall be made so that such successors or assigns of Davox or
the Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 5.3(l).
(c) This section shall survive the consummation of the Merger at
the Effective Time, is intended to benefit AnswerSoft, the Surviving Corporation
and the Indemnified Parties, and shall be enforceable by the Indemnified
Parties.
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ARTICLE VI
EMPLOYEE BENEFITS
6.1 Employee Benefits Definitions. The following terms, as used herein,
have the following meanings:
"Benefit Arrangement" means each employment, severance or other
-------------------
similar contract, arrangement or policy (written or oral) and each plan or
arrangement (written or oral) providing for severance benefits, insurance
coverage (including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (i) is not an Employee
Plan, (ii) is entered into, maintained or contributed to, as the case may be, by
AnswerSoft or any of its ERISA Affiliates and (iii) covers any employee or
former employee of AnswerSoft.
"Employee Plans" means each "employee benefit plan", as such term is
--------------
defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA
and (ii) is maintained or contributed to by AnswerSoft or any of its ERISA
Affiliates, as the case may be.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
-----
amended.
"ERISA Affiliate" of any entity means any other entity that, together
---------------
with such entity, would be treated as a single employer under Section 414 of the
Code.
"Multiemployer Plan" means each Employee Plan that is a multiemployer plan,
------------------
as defined in Section 3(37) of ERISA.
6.2 ERISA Representations. AnswerSoft hereby represents and warrants to
---------------------
Davox and the Company that:
(a) Schedule 6.2 lists each Employee Plan that covers any employee of
------------
AnswerSoft, copies or descriptions of all of which have previously been made
available or furnished to Davox. With respect to each Employee Plan, AnswerSoft
has provided the plan document and any related trust or insurance agreements,
the three most recently filed Form 5500 and an accurate summary description of
such plan.
(b) Schedule 6.2 also includes a list of each Benefit Arrangement of
------------
AnswerSoft, copies or descriptions of which have been made available or
furnished previously to Davox.
(c) None of the Employee Plans or other arrangements listed on
Schedule 6.2 covers any non-United States employee or former employee of
- ------------
AnswerSoft.
(d) No "prohibited transaction", as defined in Section 406 of ERISA
or Section 4975 of the Code, has occurred with respect to any Employee Plan.
(e) No Employee Plan is a Multiemployer Plan and no Employee Plan is
subject to Title IV of ERISA. AnswerSoft and its ERISA Affiliates have not
incurred any liability under Title IV of ERISA arising in connection with the
termination of any plan covered or previously covered by Title IV of ERISA.
(f) Each Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from tax pursuant to Section 501(a) of the Code. AnswerSoft has furnished
to Davox copies of the most recent Internal Revenue Service determination
letters with respect to each such plan.
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<PAGE>
(g) Each Benefit Arrangement has been maintained in material
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations which are applicable to such Benefit
Arrangement.
(h) With respect to the employees and former employees of AnswerSoft,
there are no employee post-retirement medical or health plans in effect, except
as required by Section 4980B of the Code or applicable state benefits
continuation laws.
(i) All contributions and payments accrued under each Employee Plan
and Benefit Arrangement, determined in accordance with prior funding and accrual
practices, will be discharged and paid on or prior to the Closing Date. Except
as disclosed in writing to Davox prior to the date hereof, there has been no
amendment to, written interpretation of or announcement (whether or not written)
by Seller or any of its ERISA Affiliates relating to, or change in employee
participation or coverage under, any Employee Plan or Benefit Arrangement that
would increase materially the expense of maintaining such Employee Plan or
Benefit Arrangement above the level of the expense incurred in respect thereof
for the fiscal year ended prior to the date hereof.
(j) Except as set forth on Schedule 6.2, there is no contract,
------------
agreement, plan or arrangement covering any employee or former employee of
AnswerSoft that, individually or collectively, could give rise to the payment of
any amount that would not be deductible pursuant to the terms of Section 280G of
the Code.
(k) No tax under Section 4980B or Section 4980D of the Code has been
incurred in respect of any Employee Plan that is a group health plan, as defined
in Section 5000(b)(1) of the Code.
(l) No employee of AnswerSoft will become entitled to any bonus,
retirement, severance or similar benefit or enhanced benefit solely as a result
of the transactions contemplated hereby.
6.3. No Third Party Beneficiaries. No provision of this Agreement
----------------------------
or this Article VI shall create any third party beneficiary or other rights in
any employee or former employee (including any beneficiary or dependent thereof)
of AnswerSoft in respect of continued employment (or resumed employment) with
AnswerSoft and no provision of this Article VI shall create any such rights in
any such Persons in respect of any benefits that may be provided, directly or
indirectly, under any Employee Plan or Benefit Arrangement or any plan or
arrangement that may be established by Davox or any of its Affiliates. No
provision of this Agreement shall constitute a limitation on rights to amend,
modify or terminate after the Closing Date any Employee Plan or Benefit
Arrangement. Davox and AnswerSoft agree that Davox will provide benefits to
AnswerSoft employees and officers following the Effective Time that are
substantially identical to the benefits currently provided to similarly situated
employees and officers of Davox. From and after the Effective Time, Davox shall
grant all employees credit for all service (to the same extent as service with
Davox is taken into account with respect to similarly situated employees of
Davox) with AnswerSoft prior to the Effective Time for (i) eligibility and
vesting purposes and (ii) for purposes of vacation accrual after the Effective
Time as if such service with AnswerSoft was service with Davox. Davox and
AnswerSoft agree that where applicable with respect to any medical or dental
benefit plan of Davox, to the extent permitted under such plan, Davox shall
waive any preexisting condition exclusion and actively-at-work requirements
(provided, however, that no such waiver shall apply to a preexisting condition
of any employee of AnswerSoft who was, as of the Effective Time, excluded from
participation in a plan by virtue of such preexisting condition) and provided
that any covered expenses incurred on or before the Effective Time by an
employee or an employee's covered dependents shall be taken into account for
purposes of satisfying applicable deductible, coinsurance and maximum out-of-
pocket provisions after the Effective Time to the same extent as such expenses
are taken into account for the benefit of similarly situated employees of Davox.
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ARTICLE VII
CLOSING MATTERS
7.1 The Closing. The closing (the "Closing") shall be held at the
-----------
offices of Testa, Hurwitz & Thibeault, LLP, 125 High Street, Boston,
Massachusetts 02110, on May 21, 1998 or as soon thereafter as practicable (the
"Closing Date"). If any condition in Article VIII is not satisfied in any
material respect (or is not duly waived) at the Closing, any party whose
obligations are subject to such condition may extend the period in which the
Closing must be consummated (during which period each other party shall use its
respective reasonable efforts to cause all such conditions to be satisfied in
all material respects). If all conditions are determined to be satisfied in all
material respects (or are duly waived) at the Closing (whether or not delayed),
the Closing shall be consummated by the making of all necessary filings with the
Secretary of State of Delaware under the Delaware Corporation Law.
7.2 Documents and Certificates. Each of Davox, the Company and
--------------------------
AnswerSoft shall use all reasonable efforts, on or prior to the Closing, to
execute and deliver all such instruments, documents or certificates as may be
necessary or advisable, on the advice of counsel, for the consummation at the
Closing of the transactions contemplated by this Agreement or to cause the
Effective Time, subject to consummation at the Closing, to occur as soon as
practicable.
ARTICLE VIII
CONDITIONS OF CLOSING
8.1 Conditions to Obligations of Davox, the Company and AnswerSoft.
--------------------------------------------------------------
The obligations of Davox, the Company and AnswerSoft under this Agreement to
consummate the Merger are subject to the satisfaction of the following
conditions:
(a) Stockholder Approvals. The adoption of this Agreement and the
---------------------
transactions contemplated hereby shall have been approved by the stockholders of
AnswerSoft and Davox as required by the Delaware Corporation Law, the
certificates of incorporation and by-laws of AnswerSoft and Davox and the rules
of the Nasdaq National Market.
(b) Governmental Approvals. Davox, the Company and AnswerSoft shall
----------------------
have received all necessary approvals of Governmental Authorities of the
transactions contemplated by this Agreement, and each of such approvals shall
remain in full force and effect at the Closing Date.
(c) Registration Effective. The Registration Statement shall have
----------------------
become effective for all of the Davox Common to be issued as of the Closing Date
for all of the issued and outstanding shares of capital stock of AnswerSoft as
of the Closing Date and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the Commission.
(d) Litigation. No action, suit, litigation, proceeding or
----------
investigation shall (i) have been formally instituted and be pending with regard
to the Merger or (ii) be threatened by any Governmental Authority with regard to
the Merger which, if resolved substantially in accordance with plaintiff's
demand, would be reasonably likely to have a Material Adverse Effect on Davox.
On the Closing Date, there shall not be in force any order or decree restraining
or enjoining consummation of the Merger or placing any limitation upon such
consummation or to invalidate, suspend or require modification of any provision
of this Agreement.
(e) Nasdaq National Market Listing. The shares of Davox Common to be
------------------------------
issued in the Merger shall have been accepted for listing on the Nasdaq National
Market.
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<PAGE>
(f) Pooling. Based on the written opinions of Arthur Andersen LLP
-------
and Ernst & Young and such other advice as they may deem relevant, Davox and
AnswerSoft shall have no basis for believing that the transactions contemplated
by this Agreement will not be accounted for as a "pooling of interests" in
accordance with United States generally accepted accounting principles and that
such accounting treatment will not be accepted by the Commission.
8.2 Conditions Applicable to Davox and the Company. The obligations
----------------------------------------------
of Davox and the Company under this Agreement to cause the Merger to be
consummated are, at their option, subject to the satisfaction of the following
conditions, in addition to the conditions contained in Section 8.1:
(a) Performance of this Agreement. All the terms, covenants and
-----------------------------
conditions of this Agreement to be complied with and performed by AnswerSoft on
or before the Closing Date shall have been fully complied with and performed in
all material respects.
(b) Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of AnswerSoft set forth in Article III shall be true and correct
in all material respects both on the date of this Agreement and as of the
Closing Date with the same force and effect as if such representations and
warranties were made anew at and as of the Closing Date, except: (i) to the
extent such representations and warranties are by their express provisions made
as of the date of this Agreement or another specified date; and (ii) for the
effect of any activities or transactions which may have taken place after the
date of this Agreement which are contemplated by this Agreement.
(c) No Material Adverse Change. Since the date of this Agreement,
--------------------------
there shall have been no material adverse change in the financial condition,
results of operations, business, properties, assets or operations of AnswerSoft
and its subsidiaries, taken as a whole.
(d) Officers' Certificate Concerning this Agreement. AnswerSoft
-----------------------------------------------
shall have furnished to Davox and the Company a certificate dated the Closing
Date, signed by its chief executive officer and its chief financial officer, to
the effect that the conditions set forth in Sections 8.2(a) through 8.2(c) have
been satisfied.
(e) Opinion of Counsel. Davox and the Company shall have received
------------------
from counsel to AnswerSoft an opinion or opinions dated the Closing Date
substantially in the form set forth in Exhibit C.
---------
(f) Auditor's Letters. Davox and its directors and officers who sign
-----------------
the Registration Statement shall have received from Ernst & Young letters, dated
(i) the date of the mailing of the Proxy Materials to the stockholders of Davox
and AnswerSoft and (ii) the Closing Date with respect to AnswerSoft's financial
condition and certain of the financial information in the Registration
Statement, which letters shall be in a form customary for accountants' letters
in respect of transactions such as those contemplated hereby and shall be based
upon customary specified procedures undertaken by such firm.
(g) Required Consents. The holders of any note, guarantee or other
-----------------
evidence of indebtedness of AnswerSoft or any of its subsidiaries, the lessors
of any material real or personal property or assets leased by AnswerSoft or any
of its subsidiaries, the parties (other than AnswerSoft or any of its
subsidiaries) to any other material contract, commitment or agreement to which
AnswerSoft or any of its subsidiaries is a party, and any other person (other
than Governmental Authorities) which owns or has authority to grant any
franchise, license, permit, easement, rights or other authorization necessary
for the business or operations of AnswerSoft or any of its subsidiaries, to the
extent that their consent or approval of the Merger or any other transactions
contemplated by this Agreement is required under the pertinent lease, contract,
commitment or agreement or other document or instrument or under applicable
laws, rules or regulations for the consummation of the transactions contemplated
hereby in the manner herein provided, shall have granted such consent or
approval.
(h) Appraisal Rights. Holders of not more than 5% of the outstanding
----------------
shares of Preferred Stock and AnswerSoft Common shall have exercised appraisal
rights pursuant to Section 262 of the Delaware Corporation Law.
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<PAGE>
(i) Performance of Participation Agreement. All the terms, covenants
--------------------------------------
and conditions of the Participation Agreement to be complied with and performed
by AnswerSoft and the Major Stockholders on or before the Closing Date shall
have been fully complied with and performed in all material respects.
(j) Termination of Agreements. All agreements among AnswerSoft and
-------------------------
any of its securityholders or optionholders, or among any of the AnswerSoft
securityholders or optionholders, providing for registration rights, rights of
first refusal, rights of co-sale, relating to the voting of AnswerSoft
securities or requiring AnswerSoft to obtain the consent or approval of any such
securityholders prior to taking or failing to take any action, shall have been
terminated in their entirety.
(k) Proceedings; Other Agreements. All proceedings to be taken in
-----------------------------
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Davox, and Davox shall have received copies of all such documents
(including but not limited to any documents or certificates required or
reasonably requested by Arthur Andersen LLP) and other evidence as it may
reasonably request to establish the consummation of such transactions and the
taking of all proceedings in connection therewith.
(l) Non-U.S. Real Property Holding Company Certification. On or
----------------------------------------------------
before the Closing Date, Davox shall have received from AnswerSoft a properly
executed statement satisfying the requirements of Treasury Regulation Sections
1.897-2(h) and 1.1445-2(c)(3) in a form acceptable to Davox.
(m) Closing Average Price. The average of the last reported sale
---------------------
price of the common stock of Davox on the Nasdaq National Market for the 30
trading days ending the fifth trading day immediately preceding the Closing Date
(the "Closing Average Price") shall not be more than 1.25 times the Average
Price (as defined in Section 2.4).
(n) Stockholder and Optionholder List. AnswerSoft shall have
---------------------------------
delivered to Davox, as of the Closing Date, a true and complete list of all
holders of shares of capital stock of AnswerSoft and holders of options and
warrants to purchase capital stock, certified as of the Closing Date by the
Secretary of AnswerSoft.
(o) Employment Agreements. Davox shall have received from some or
---------------------
all of the individuals listed on Exhibit 8.2(o)(i) hereto, such individuals to
-----------------
be identified by Davox in its sole discretion, an executed copy of an Employment
Agreement with Davox, a form of which is attached hereto as Exhibit 8.2(o)(ii),
------------------
with such modifications as Davox shall reasonably request; provided, however,
that such employees shall not be required to relocate from the Dallas, Texas
area. AnswerSoft shall also use its best efforts to cause some or all of the
individuals listed on Exhibit 8.2(o)(iii) hereto, such individuals to be
-------------------
identified by Davox in its sole discretion, to sign an Employment Agreement with
Davox, a form of which is attached hereto as Exhibit 8.2(o)(ii), with such
------------------
modifications as Davox shall reasonably request.
(p) Escrow Agreement. Davox shall have received from the Stockholder
----------------
Representatives and the Escrow Agent an executed copy of the Escrow Agreement.
8.3 Conditions Applicable to AnswerSoft. The obligations of
-----------------------------------
AnswerSoft under this Agreement to cause the Merger to be consummated are, at
its option, subject to the satisfaction of the following conditions, in addition
to the conditions contained in Section 8.1:
(a) Performance of this Agreement. All the terms, covenants and
-----------------------------
conditions of this Agreement to be complied with and performed by Davox and the
Company on or before the Closing Date shall have been fully complied with and
performed in all material respects.
(b) Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of Davox and the Company set forth in Article IV shall have been
true and correct in all material respects on the date of this Agreement and as
of the Closing Date with the same force and effect as if such representations
and
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<PAGE>
warranties were made anew at and as of the Closing Date, except: (i) to the
extent such representations and warranties are by their express provisions made
as of the date of this Agreement or another specified date; and (ii) for the
effect of any activities or transactions which may have taken place after the
date of this Agreement which are contemplated by this Agreement.
(c) No Material Adverse Change. Since the date of this Agreement,
--------------------------
there shall have been no material adverse change (other than as a result of the
transactions contemplated by this Agreement) in the financial condition, results
of operations, business, properties, assets or operations of Davox and its
subsidiaries, taken as a whole.
(d) Officers' Certificate Concerning this Agreement. Davox shall
-----------------------------------------------
have furnished to AnswerSoft a certificate dated the Closing Date, signed by the
chief executive officer and the chief financial officer of Davox, to the effect
that, the conditions set forth in Sections 8.3(a) through 8.3(c) hereof have
been satisfied.
(e) Opinion of Counsel. AnswerSoft shall have received from counsel
------------------
to Davox an opinion or opinions dated the Closing Date substantially in the form
set forth on Exhibit D.
---------
(f) Required Consents. Davox shall have received all consents or
-----------------
approvals of the Merger or any other transactions contemplated by this Agreement
required under any material lease, contract, commitment, note, guaranty or other
evidence of indebtedness of Davox or any of its subsidiaries, or any lease of
any material real property of Davox and its subsidiaries, or under applicable
law for the consummation of the transactions contemplated hereby.
(g) Closing Average Price. The Closing Average Price shall not be
---------------------
less than 0.75 times the Average Price.
ARTICLE IX
TERMINATION
9.1 Grounds for Termination. This Agreement may be terminated at any time
-----------------------
prior to the Effective Time:
(a) by mutual written agreement duly authorized by the Board of
Directors of Davox and AnswerSoft;
(b) by either Davox or AnswerSoft if the Effective Time shall not
have occurred on or before July 31, 1998; provided, however, that the right to
-------- -------
terminate this Agreement under this clause (b) shall not be available to any
party if such party's breach of any representation, warranty or agreement
contained in this Agreement has been the cause of or resulted in the failure of
the Closing to occur on or before such date;
(c) by either Davox or AnswerSoft, if such party is not in material
breach of its obligations under this Agreement, in the event of (i) a material
breach by the other party of any representation, warranty or agreement contained
in this Agreement which is not cured within sixty (60) days after written notice
of such breach is given to the party committing such breach or (ii) the failure
of the stockholders of the other party to approve the Merger or any matter
required to be approved by such stockholders in order to consummate the Merger;
(d) by Davox in the event (i) of a material breach of the
Participation Agreement by AnswerSoft or any of the Major Stockholders
(provided, however, that it shall not be deemed to be a material breach of the
Participation Agreement by any of the Major Stockholders if the Merger is
approved by the AnswerSoft stockholders, notwithstanding such Major
Stockholders' failure to vote in favor of the Merger) or (ii) Davox is advised
by Arthur Andersen, LLP that it believes (or Davox is advised by the Commission)
that the
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<PAGE>
transactions contemplated by this Agreement will not be accounted for as a
"pooling of interests" in accordance with United States generally accepted
accounting principles; and
(e) by either Davox or AnswerSoft if AnswerSoft shall have received a
proposal for an Acquisition Transaction and the Board of Directors of AnswerSoft
in connection therewith withdraws or adversely modifies its approval and
recommendation of this Agreement and the transactions contemplated hereby after,
in the case of termination by AnswerSoft, determining that to cause AnswerSoft
to proceed with the transactions contemplated hereby would not be consistent
with the Board of Directors' fiduciary duty to the stockholders of AnswerSoft.
The party desiring to terminate this Agreement shall give notice of such
termination to the other parties.
9.2 Procedure Upon Termination. In the event of the termination of
--------------------------
this Agreement, the Board or Boards of Directors so terminating may direct its
or their officers not to file the certificate of merger in the office of the
Secretary of State of the State of Delaware, notwithstanding favorable action by
the stockholders of Davox, the Company and AnswerSoft. In the event this
Agreement is terminated, the agreements of AnswerSoft and Davox contained in
Sections 5.1(c), 5.1(d), 5.3(l) and 9.3 shall survive such termination;
provided, however, that Section 10.2 shall terminate in the event this Agreement
is terminated under Section 9.1(a) or by AnswerSoft under Section 9.1(b) or
9.1(c).
9.3 Certain Remedies Upon Termination.
----------------------------------
(a) If this Agreement is terminated pursuant to Sections 9.1(c),
9.1(d)(i) or 9.1(e), then AnswerSoft (in the case of a termination by Davox (or
termination by AnswerSoft pursuant to Section 9.1(e)) or Davox (in the case of a
termination by AnswerSoft pursuant to Section 9.1(c)) shall pay the other all
fees and expenses (including without limitation all accounting, legal and
investment banking fees and expenses) incurred by the other in connection with
this Agreement within 30 days after written demand therefor in consideration of
the other's efforts in seeking to consummate the Merger and the other
transactions contemplated by this Agreement. The preceding sentence shall not
limit the right of either party to pursue any other remedy permitted by
applicable law.
(b) If this Agreement is terminated pursuant to Section 9.1(c) (with
respect to a termination by Davox), 9.1(d)(i) or 9.1(e) and if AnswerSoft has
consummated a change in control (as hereinafter defined) within six (6) months
after such termination, other than one in which control of AnswerSoft is
acquired by Davox, then AnswerSoft shall pay Davox (net of any fee paid or
payable to Davox pursuant to Section 9.3(a)) $3,000,000 (the "Termination Fee")
promptly after written demand therefor. A "change in control" shall mean the
-----------------
(i) acquisition of 50% or more of the voting power of AnswerSoft by any person,
entity or group (including via an initial public offering of AnswerSoft's
capital stock in which 50% or more of the capital stock outstanding is issued in
such offering), (ii) a merger or consolidation involving AnswerSoft as a result
of which the stockholders of AnswerSoft as of the date of this Agreement hold
less than 50% of the voting power of the surviving or resulting corporation,
(iii) a sale or other disposition by AnswerSoft of all or substantially all the
assets of AnswerSoft, or (iv) an agreement with respect to any of the foregoing.
Any payment made pursuant to this Section 9.3(b) shall be made in lieu of any
other claim for damages or remedy that might be available to Davox, actual
damages being impossible to calculate due, among other things, to the inability
to calculate the benefits accruing to the stockholders of Davox as a result of
the combination of AnswerSoft and Davox.
ARTICLE X
SURVIVAL; INDEMNIFICATION
10.1 Survival. The covenants, agreements, representations and
--------
warranties of AnswerSoft contained in this Agreement shall survive the Closing
until the earlier of (i) the delivery by Davox's independent auditor of its
report on Davox's financial statements for the fiscal year ended December 31,
1998 or (ii) the one (1) year
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anniversary of the Closing Date. Notwithstanding the preceding sentence, any
claim or liability regarding any covenant, agreement, representation or warranty
in respect of which indemnity may be sought under Section 10.2 shall survive the
time at which it would otherwise terminate pursuant to the preceding sentence,
if notice of the inaccuracy or breach thereof giving rise to such right to
indemnity shall have been given to the party against whom such indemnity may be
sought prior to such time. The covenants, agreements, representations and
warranties of AnswerSoft and the rights and remedies that may be exercised by
any Indemnitee (as defined below) shall not be limited, diminished or otherwise
affected by or as a result of any information that may have been provided, any
investigation or examination that may have or be made by, or any knowledge of,
any Indemnitee or any other party on behalf of any Indemnitee.
10.2 Indemnification. By their approval of this Agreement, the
---------------
stockholders of AnswerSoft agree that the Escrow Shares shall be available to
the extent provided in this Article X and in the Escrow Agreement to compensate
each of Davox and, effective at and as of the Effective Time, without
duplication, AnswerSoft and each of their respective subsidiaries and affiliates
(each in its capacity as an indemnified party, an "Indemnitee") at all times
from and after the date of this Agreement for any and all losses, liabilities,
damages, judgments, rulings, assessments and any and all amounts paid in
settlement of or related to any claim or litigation or amounts mutually agreed
to by Davox and the Stockholder Representatives (collectively, "Actual
Damages"), and any and all costs and expenses, interest, penalties, reasonable
attorneys' fees and any and all other expenses incurred in investigating,
preparing, and defending against any litigation, commenced or threatened, and
any claim whatsoever (collectively "Litigation Damages," together with "Actual
Damages," "Damages") (Damages in each case shall be net of the amount of any
insurance proceeds, indemnity or contribution actually recovered by such
Indemnitee), incurred by such Indemnitee as a result of, arising out of or
incident to any of the following with respect to which a claim for
indemnification is brought by an Indemnitee within the applicable survival
period described in Section 10.1: (i) any breach of any representation or
warranty of AnswerSoft set forth herein, or in any certificate or other document
delivered in connection herewith or therewith (except the Participation
Agreement), or (ii) any breach or nonfulfillment by AnswerSoft, or any
noncompliance by AnswerSoft with, any covenant, agreement, or obligation
contained herein, or in any certificate or other document delivered in
connection herewith (except the Participation Agreement) except to the extent
waived by Davox.
10.3 Third Person Claims. Promptly after an Indemnitee has received
-------------------
notice of or has knowledge of any claim by a person not a party to this
Agreement ("Third Person") or the commencement of any action or proceeding by a
------------
Third Person, the Indemnitee shall, as a condition precedent to a claim with
respect thereto being made against the Escrow Shares, give the Stockholder
Representatives written notice of such claim or the commencement of such action
or proceeding; provided, however that the failure to give such notice will not
-------- -------
affect the Indemnitees' right to indemnification hereunder with respect to such
claim, action or proceeding, except to the extent that the Stockholder
Representatives has, or the AnswerSoft stockholders have, been actually
prejudiced as a result of such failure. If the Stockholder Representatives
notifies the Indemnitee within 30 days from the receipt of the foregoing notice
that he wishes to defend against the claim by the Third Person and if the
estimated amount of the claim, together with all other claims made against the
Escrow Shares that have not been settled, is less than the remaining balance of
the Escrow Shares, then the Stockholder Representatives shall have the right to
assume and control the defense of the claim by appropriate proceedings with
counsel reasonably acceptable to Indemnitee, and the Stockholder Representatives
shall be entitled to reimbursement out of the Escrow Shares for such defense.
The Indemnitee may participate in the defense, at its sole expense, of any such
claim for which the Stockholder Representatives shall have assumed the defense
pursuant to the preceding sentence, provided that counsel for the Stockholder
Representatives shall act as lead counsel in all matters pertaining to the
defense or settlement of such claims, suit or proceedings; provided, however,
-------- -------
that Indemnitee shall control the defense of any claim or proceeding that in
Indemnitee's reasonable judgment could have a material and adverse effect on
Indemnitee's business apart from the payment of money damages. The Indemnitee
shall be entitled to indemnification under Section 10.2 (subject to the
limitations set forth in Section 10.4) for the reasonable fees and expenses of
its counsel for any period during which the Stockholder Representatives has not
assumed the defense of any claim. Whether or not the Stockholder
Representatives shall have assumed the defense of any claim, neither the
Indemnitee nor the Stockholder Representatives shall make any settlement with
respect to any such claim, suit or proceeding without the prior consent of the
other, which consent shall not be unreasonably withheld or delayed. It is
understood and agreed that in situations where failure to settle a claim
expeditiously could have an adverse effect on the party
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<PAGE>
wishing to settle, the failure of the party controlling the defense to act upon
a request for consent to such settlement within five (5) business days of
receipt of notice thereof shall be deemed to constitute consent to such
settlement for purposes of this Article X.
10.4 Method of Payment. Upon consummation of the Merger, Davox or
-----------------
the Surviving Corporation shall only be entitled to satisfy claims for
indemnification pursuant to this Article X from the Escrow Shares. To the
extent that Davox or the Surviving Corporation is entitled to indemnification
hereunder, the Escrow Shares shall be valued in accordance with the provisions
of Section 2.3 hereof. Davox may not receive any Escrow Shares from the Escrow
Fund unless and until a Notice of Claim (as defined in the Escrow Agreement)
identifying Actual Damages the aggregate amount of which equals or exceeds
$100,000 has been delivered to the Escrow Agent as provided in the Escrow
Agreement, and such amount is determined pursuant to this Article X and the
Escrow Agreement to be payable, in which case Davox shall be entitled to receive
Escrow Shares equal in value to the full amount of the Damages (including the
first $100,000 of such Damages).
10.6 No Contribution. The stockholders of AnswerSoft acknowledge
---------------
and agree that they shall not have and shall not exercise or assert any right of
contribution, indemnification, subrogation or other remedy or right against the
Surviving Corporation in connection with any indemnification obligation or other
liability to which they may become subject under or in connection with this
Agreement, the Participation Agreement or any certificate or other document
delivered in connection herewith or therewith.
10.7 Maximum Liability and Remedies. The rights of Davox to make
------------------------------
claims upon the Escrow Shares in accordance with this Article X shall be the
sole and exclusive remedy of Davox and the Surviving Corporation after the
Closing Date with respect to any representation, warranty, covenant or agreement
made by AnswerSoft under this Agreement and no former stockholder, optionholder,
warrantholder, director, officer, employee or agent of AnswerSoft shall have any
personal liability to Davox or the Surviving Corporation after the Closing Date
in connection with the Merger. Nothing in this Agreement shall limit the
liability of AnswerSoft that may arise pursuant to Article IX.
ARTICLE XI
MISCELLANEOUS
11.1 Specific Performance. Each of the parties to this Agreement
--------------------
hereby acknowledges that the other party will have no adequate remedy at law if
it fails to perform any of its obligations under this Agreement. In such event,
each of the parties agrees that the other party shall have the right, in
addition to any other rights it may have (whether at law or in equity), to
specific performance of this Agreement.
11.2 Expenses. Except as set forth in Section 9.3, all fees and
--------
expenses (including all accounting, legal and investment banking fees and
expenses and all other expenses) incurred by Davox and the Company in connection
with this Agreement and the transactions contemplated hereby will be borne by
Davox. Except as set forth in Section 9.3, all fees and expenses (including
without limitation all accounting, legal and investment banking fees and
expenses) incurred by AnswerSoft in connection with this Agreement and the
transactions contemplated hereby will be borne by AnswerSoft.
11.3 Further Assurances. If at any time after the Effective Time,
------------------
Davox or the Company shall consider it advisable that any further conveyance,
agreements, documents, instruments and assurances of law or any other things are
necessary or desirable to vest, perfect, confirm or record in the Company the
title to any property, rights, privileges, powers and franchises of AnswerSoft,
the officers of AnswerSoft last in office and such other persons, if any, as the
Board of Directors of AnswerSoft last in office may authorize shall execute and
deliver, upon Davox or the Company's request, any and all proper conveyances,
agreements, documents, instruments and assurances of law, and do all things
reasonably necessary or proper to vest, perfect, confirm or record title to such
property, rights, privileges, powers and franchises in the Company, and
otherwise to carry out the provisions of this Agreement.
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<PAGE>
11.4 Parties in Interest. All the terms and provisions of this
-------------------
Agreement shall be binding upon, shall inure to the benefit of and shall be
enforceable by the respective successors and permitted assigns of the parties
hereto. Nothing expressed or implied in this Agreement is intended or shall be
construed to confer upon or give any person, firm or corporation other than the
parties hereto, their permitted successors or assigns, and their respective
stockholders any rights or remedies under or by reason of this Agreement or any
transaction contemplated hereby, other than Section 5.3(l) which is intended to
be for the benefit of the Indemnified Parties and may be enforced by the
Indemnified Parties.
11.5 Entire Agreement. This Agreement, the Participation Agreement, the
----------------
Confidentiality Agreement and the Escrow Agreement, together with the Schedules
and Exhibits hereto and thereto, which are incorporated into this Agreement by
this reference, supersede any other agreement, whether written or oral, that may
have been made or entered into by Davox and AnswerSoft (or by any officer or
officers of such parties) relating to the matters contemplated hereby. This
Agreement, the Participation Agreement, the Confidentiality Agreement and the
Escrow Agreement, together with the Schedules and Exhibits hereto and thereto,
constitute the entire agreement by the parties, and there are no agreements or
commitments except as set forth herein and therein.
11.6 Amendment or Modification. At any time before or after the
-------------------------
adoption of the Agreement by the stockholders of AnswerSoft or the approval of
the matters submitted to the stockholders of Davox in the Proxy Materials, this
Agreement may be amended or supplemented by additional agreements, articles or
certificates, as may be determined by the parties hereto to be necessary,
desirable or expedient to further the purposes of this Agreement, or to clarify
the intention of the parties hereto, or to add to or to modify the covenants,
terms or conditions hereof or to effect or facilitate any governmental approval
or acceptance of the Merger or of this Agreement or to effect or facilitate the
filing or recording of this Agreement or the consummation of any of the
transactions contemplated hereby; provided, however, that all such agreements,
articles or certificates must be in writing and signed by all parties hereto in
order to be effective.
11.7 Waiver. Any party to this Agreement may, by written notice to
------
the other parties to this Agreement, (a) extend the time for the performance of
any of the obligations or other actions of the other parties under this
Agreement; (b) waive any inaccuracies in the representations or warranties of
the other parties contained in this Agreement or in any document delivered
pursuant to this Agreement; (c) waive compliance with any of the conditions or
covenants of the other parties contained in this Agreement; or (d) waive or
modify performance of any of the obligations of the other parties under this
Agreement. Except as provided in the preceding sentence, no action taken
pursuant to this Agreement, including without limitation any investigation by or
on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties,
covenants, conditions or agreements contained in this Agreement. The failure of
any party hereto to enforce at any time any of the provisions of this Agreement
shall in no way be construed to be a waiver of any such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
such party thereafter to enforce each and every such provision. No waiver of
any breach of or non-compliance with this Agreement shall be held to be a waiver
of any other or subsequent breach or non-compliance.
11.8 Assignability. This Agreement shall not be assignable by
-------------
AnswerSoft, on the one hand, or Davox or the Company, on the other hand, without
the prior written consent of Davox, on the one hand, or AnswerSoft, on the other
hand, as the case may be.
11.9 Certain Definitions. For purposes of this Agreement, the
-------------------
following terms shall have the meanings set forth below:
(a) "affiliate" shall mean, when used with respect to a specified
---------
person, another person that directly, or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with the
person specified;
(b) "control" (including, with its correlative meanings, "controlled
------- ----------
by" and "under common control with") shall mean possession, directly or
- -- -------------------------
indirectly, of power to direct or cause the direction of management
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<PAGE>
or policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise);
(c) "person" shall mean any individual, corporation, partnership,
------
limited liability company, trust, joint venture, unincorporated association,
Governmental Authority or other entity; and
(d) "subsidiary" of any person shall mean a corporation, company or
----------
other entity (i) more than 50% of whose outstanding shares or securities
(representing the right to vote for the election of directors or other managing
authority) are, or (ii) which does not have outstanding shares or securities (as
may be the case in a partnership, limited liability company, joint venture or
unincorporated association), but more than 50% of whose ownership interest
representing the right to make decisions for such other entity is, now or
hereafter owned or controlled, directly or indirectly, by such person.
11.10 Headings and Interpretation. The headings contained in this
---------------------------
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement. Terms such as "herein," "hereof" and
"hereinafter" refer to this Agreement as a whole and not to the particular
sentence or paragraph where they appear, unless the context otherwise requires.
Unless the context otherwise requires, (i) terms used in the plural include the
singular, and vice versa, and (ii) words in the masculine gender include the
feminine, and vice versa.
11.10 Notices. All notices and other communications under this
-------
Agreement shall be in writing and shall be delivered by hand or overnight
courier service, mailed or sent by telex, graphic scanning or other telegraphic
communications equipment of the sending party, as follows:
If to Davox or the Company:
Davox Corporation
6 Technology Park Drive
Westford, Massachusetts 01886
Telecopy: (978) 952-0795
Attn: President
with a copy to:
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, Massachusetts 02110
Telecopy: (617) 248-7100
Attn: Timothy C. Maguire, Esq.
If to AnswerSoft:
AnswerSoft, Inc.
2201 N. Central
Expressway, Suite 200
Richardson, Texas 75080
Telecopy: (972) 997-8310
Attn: President
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<PAGE>
with a copy to:
If to AnswerSoft:
Gunderson, Dettmer, Stough, Villeneuve, Franklin & Hachigian, LLP
8911 Capital of Texas Highway
Suite 4140
Austin, Texas 78759
Telecopy: (512) 342-8181
Attn: Brian K. Beard, Esq.
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt. All notices and other communications given to
any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt if delivered by hand or
overnight courier service or sent by telex, graphic scanning or other
telegraphic communications equipment of the sender, or on the date five business
days after dispatch by certified or registered mail if mailed, in each case
delivered, sent or mailed (properly addressed) to such party as provided in this
Section 11.10 or in accordance with the latest unrevised direction from such
party given in accordance with this Section 11.10.
11.11 Law Governing. This Agreement shall be governed by and
-------------
construed and enforced in accordance with the laws of the State of Delaware,
without giving effect to the principles of conflicts of law thereof.
11.12 Invalidity of Provisions. Each of the provisions contained
------------------------
in this Agreement is distinct and severable and a declaration of invalidity or
unenforceability of any such provision or part thereof by a court of competent
jurisdiction shall not affect the validity or enforceability of any other
provision hereof.
11.13 Counterparts. This Agreement may be executed simultaneously
------------
in one or more counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same instrument.
11.14 Consent to Jurisdiction. Each of AnswerSoft, Davox and the
-----------------------
Company hereby irrevocably submits to the exclusive jurisdiction of any state or
federal court in the State of Delaware over any suit, action or proceeding
brought against it by any of the other parties hereto and arising out of or
relating to this Agreement and the transactions contemplated hereby.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
- Agreement and Plan of Merger -
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties on the date first above written.
DAVOX CORPORATION
By: /s/ Alphonse M. Lucchese
--------------------------
DUKE ACQUISITION CORPORATION
By: /s/ Alphonse M. Lucchese
--------------------------
ANSWERSOFT, INC.
By: /s/ David W. Brandenburg
--------------------------
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<PAGE>
Annex B
PARTICIPATION AGREEMENT
This Participation Agreement dated as of March 9, 1998 (the
"Agreement") by and among Davox Corporation, a Delaware corporation ("Davox"),
Duke Acquisition Corporation, a Delaware corporation and a wholly owned
subsidiary of Davox (the "Company"), AnswerSoft, Inc., a Delaware corporation
("AnswerSoft"), the parties listed on Schedule 2.1(g) attached hereto
(collectively, the "Major Stockholders"), each of which is a stockholder of
AnswerSoft. Capitalized terms not defined herein have the meanings assigned to
them in the Agreement and Plan of Merger (the "Merger Agreement") dated the date
hereof by and among Davox, the Company and AnswerSoft.
WITNESSETH:
WHEREAS, pursuant to the Merger Agreement, Davox, the Company and
AnswerSoft have agreed to merge the Company with and into AnswerSoft on the
terms and conditions set forth therein (the "Merger"); and
WHEREAS, to induce Davox to enter into the Merger Agreement, the Major
Stockholders, as the major stockholders of AnswerSoft, have agreed to enter into
this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, provisions and covenants contained in this Agreement, the parties
hereby agree as follows:
ARTICLE I
COVENANTS
1.1 Covenants and Agreements. Each of the Major Stockholders hereby
covenants and agrees with AnswerSoft, Davox and the Company as follows:
1.1(a) Cooperation. It shall cooperate fully with AnswerSoft,
Davox and the Company in furnishing any information or performing any action
reasonably requested by any such party, which information or action is necessary
for the speedy and successful consummation of the transactions contemplated by
the Merger Agreement. It shall use all reasonable efforts to cause the Closing
to occur at the earliest practical time.
1.1(b) Other Required Information. It shall furnish to
AnswerSoft, Davox and the Company all information concerning itself and its
subsidiaries and affiliates as is required to be set forth in any application or
statement to be filed with any Governmental Authority in connection with the
transactions contemplated by the Merger Agreement or otherwise.
1.1(c) Confidentiality. (i) All information furnished by one
party (the "disclosing party") to any other party (the "receiving party") in
connection with this Agreement and the Merger Agreement and the transactions
contemplated hereby and thereby shall be kept confidential by the receiving
party (and shall be used by it only in connection with this Agreement and the
Merger Agreement and the transactions contemplated hereby and thereby; provided,
--------
however, that in the event the transactions contemplated by this Agreement and
- -------
the Merger Agreement shall fail to be consummated, Davox shall keep all such
information confidential), except to the extent that such information (A) is or
becomes generally available to the public other than as a result of disclosure
by the receiving party (or any of its directors, officers, employees, agents or
advisors (the "Agents")), (B) was within the possession of the receiving party
prior to its being furnished to the receiving party by or on behalf of the
disclosing party provided that the source of such information is not known by
--------
the receiving party to be bound by a confidentiality agreement with or other
contractual, legal or fiduciary obligation of confidentiality to the disclosing
party or any other party with respect to such information, (C) becomes available
to the receiving party on a non-confidential basis from a source other than the
disclosing party or any of its Agents, provided that such source is not
--------
<PAGE>
known by the receiving party to be bound by a confidentiality agreement with or
other contractual, legal or fiduciary obligation of confidentiality to the
disclosing party with respect to such information, (D) is independently
developed by the receiving party or any of its Agents who did not have access to
or the ability to use such information or (E) is required to be disclosed in any
document filed with the Commission or any other Governmental Agency.
(ii) If the receiving party or any of its Agents is
requested or required (by oral questions, interrogatories, requests for
information or documents in legal proceedings, subpoena, civil investigative
demand or other similar process) to disclose any of the confidential
information, the receiving party shall use all reasonable efforts to provide the
disclosing party with prompt written notice of any such request or requirement
so that the disclosing party may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Agreement. If, in the
absence of a protective order or other remedy or the receipt of a waiver by the
disclosing party, the receiving party or any of its Agents are nonetheless,
based on the advice of counsel, required to disclose confidential information to
any tribunal or else stand liable for contempt or suffer other censure or
penalty, the receiving party or its Agents may, without liability hereunder,
disclose to such tribunal only that portion of the confidential information
which such counsel advises the receiving party is legally required to be
disclosed, provided that the receiving party exercise its best efforts to
preserve the confidentiality of the confidential information, including, without
limitation, by cooperating with the disclosing party to obtain an appropriate
protective order or other reliable assurance that confidential treatment will be
accorded the confidential information by such tribunal.
(iii) If the transactions contemplated by this
Agreement and the Merger Agreement shall fail to be consummated, the receiving
party shall promptly cause all copies of documents or extracts thereof
containing information and data as to the disclosing party to be returned to the
disclosing party or destroyed.
1.1(d) Publicity. With respect to any matters discussed
---------
herein, and except as otherwise required by applicable law or stock exchange
regulations, it shall not issue any press release or make any other public
statement without obtaining the prior approval of Davox to the contents and the
manner of presentation and publication thereof.
1.1(e) Certain Tax and Accounting Matters. It shall use its
-----------------------------------
best efforts to not, either before or after the consummation of the Merger, take
any action that would prevent the Merger from qualifying as a tax-free
reorganization under Section 368 of the Code.
1.1(f) Pooling. It shall use all reasonable efforts, shall
-------
cooperate fully and shall take all actions as are reasonably necessary to allow
the Merger and other transactions contemplated by this Agreement to be accounted
for as a "pooling of interests" in accordance with United States generally
accepted accounting principles which shall be acceptable to the Commission.
1.1(g) Initial Restriction on Disposition. It shall not sell,
----------------------------------
transfer, or otherwise dispose of its interests in, or reduce its risk relative
to, any of the shares of Davox Common into which its shares of AnswerSoft Common
or Preferred Stock are converted upon consummation of the Merger until such time
as Davox notifies it that the requirements of SEC Accounting Series Release Nos.
130 and 135 ("ASR 130 and 135") have been met. It understands that ASR 130 and
135 relate to publication of financial results covering at least 30 days of
post-Merger combined operations of Davox and AnswerSoft. Davox, at its
discretion, may cause stop transfer orders to be placed with its transfer agent
with respect to the certificates representing the Major Stockholders' shares of
Davox Common in order to enforce the provisions of this Section 1.1(g).
1.1(h) Other Negotiations. It shall not, and shall use its
------------------
reasonable efforts to not permit AnswerSoft or their respective representatives
to, directly or indirectly, initiate, solicit, encourage discussions with or
provide information to any corporation, partnership, person or other entity or
group concerning any merger, purchase or sale of all or substantially all of the
assets or the sale of all or substantially all of the capital stock (or
securities convertible or exchangeable or otherwise evidencing, or any agreement
or instrument evidencing, the right to acquire capital stock) or similar
transaction involving AnswerSoft or any of its subsidiaries (all such
-2-
<PAGE>
transactions being referred to herein as "Acquisition Transactions") provided,
however, that nothing contained in this Agreement shall prevent AnswerSoft or
its Board of Directors from furnishing information to, or entering into
discussions, negotiations or agreements with, any person or entity in connection
with an unsolicited bona fide written proposal for an Acquisition Transaction by
such person or entity or recommending an unsolicited bona fide written proposal
for an Acquisition Transaction to the stockholders of AnswerSoft, if and only to
the extent that (i) the Board of Directors of AnswerSoft believes in good faith
that such proposal for an Acquisition Transaction would, if consummated, result
in a transaction more favorable to AnswerSoft's stockholders than the
transaction contemplated by the Merger Agreement (any such more favorable
proposal for an Acquisition Transaction being referred to in this Agreement as a
"Superior Proposal") and (ii) the Board of Directors of AnswerSoft determines in
good faith that such action is necessary to comply with its fiduciary duties to
stockholders under applicable law. It shall promptly communicate to Davox the
terms of any proposal which it may receive in respect of an Acquisition
Transaction and any request by or indication of interest on the part of any
third party with respect to the initiation of any Acquisition Transaction or
discussions with respect thereto.
1.1(i) [INTENTIONALLY OMITTED]
1.1(j) No Purchases or Sales of Davox Shares. Neither it nor
-------------------------------------
any of its affiliates will, directly or indirectly, purchase, sell, borrow, lend
or otherwise acquire or dispose of any shares of Davox Common or other
securities of Davox, or other securities convertible into or exercisable for
shares of Davox Common or such other Davox securities whenever acquired, or make
any offer, solicitation, recommendation or agreement relating thereto at any
time prior to the Expiration Date. "Expiration Date" shall mean the earlier of
(i) such time as the Merger shall become effective in accordance with the terms
and provisions of the Merger Agreement and (ii) such time as the Merger
Agreement shall have been terminated pursuant to Article IX thereof.
1.1(k) Agreement to Vote Shares. At every meeting of the
------------------------
stockholders of AnswerSoft called on or prior to the Expiration Date, and at
every adjournment thereof, and on every action or approval by written consent of
the stockholders of AnswerSoft, it shall vote all shares of AnswerSoft capital
stock owned by it in favor of approval and adoption of the Merger Agreement and
the Merger and any matter that could reasonably be expected to facilitate the
Merger (including, but not limited to, approval of payments described on the
attached Disclosure Schedule).
1.1(1) Agreement to Grant Proxy. It shall execute and deliver
------------------------
to Davox within five days of Davox's written request therefor a valid and
binding irrevocable proxy in any form reasonably proposed by Davox that grants
Davox (or its designees) the authority to vote its shares of capital stock of
AnswerSoft as Davox shall in its sole discretion determine to approve the
transactions contemplated by the Merger Agreement.
1.1(m) No Proxy Solicitations. Except as required by law,
----------------------
including actions which it determines upon the written advice of legal counsel
are required pursuant to its fiduciary duties under applicable law, it shall
not, and will not permit any person under its control to: (i) solicit proxies or
become a "participant" in a "solicitation" (as such terms are defined in
Regulation 14A under the Exchange Act) with respect to any proposal made in
opposition to or competition with consummation of the Merger (an "Opposing
Proposal"); or (ii) initiate a stockholders' vote or action by consent of
AnswerSoft stockholders with respect to an Opposing Proposal.
1.1(n) Receipt of Davox Common. The Davox Common received by
-----------------------
it as a result of the Merger will be taken for its own account and not for
others, directly or indirectly, in whole or in part.
1.1(o) Restrictions on Resale. It has been informed by Davox
-----------------------
that any distribution by it of Davox Common has not been registered under the
Securities Act and that shares of Davox Common received pursuant to the Merger
can only be sold by the undersigned (1) following registration under the
Securities Act, or (2) in conformity with the volume and other requirements of
Rule 145(d) promulgated by the Commission as the same now exist or may hereafter
be amended, or (3) to the extent some other exemption from registration under
the Securities Act might be available. It understands that Davox is under no
-------------------------------------
obligation to file a registration statement with the Commission covering the
- -----------------------------------------------------------------------------
disposition of its shares of Davox Common or to take any other action necessary
- --------------------------------------------------------------------------------
to make compliance with an exemption from such registration available.
- ----------------------------------------------------------------------
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<PAGE>
1.1(p) No Transfer. During the 30 days immediately preceding
-----------
the Effective Time of the Merger, it has not sold, transferred, or otherwise
disposed of its interests in, or reduced its risk relative to, any of the shares
of AnswerSoft Common or Preferred Stock beneficially owned by it as of the
record date for determination of shareholders entitled to vote at the
Shareholders' Meeting of AnswerSoft held to approve the Merger.
1.1(q) Tax Status of Transaction. It is aware that Davox
-------------------------
intends to treat the Merger as a tax-free reorganization under Section 368 of
the Internal Revenue Code ("Code") for federal income tax purposes. It agrees to
treat the transaction in the same manner as Davox for federal income tax
purposes.
1.1(r) Restrictions on Transfer. Stop transfer instructions
------------------------
with respect to the shares of Davox Common received by it pursuant to the Merger
will be given to Davox's transfer agent and there will be placed on the
certificates for such shares, or shares issued in substitution thereof, a legend
stating in substance:
"The shares represented by this certificate were issued
pursuant to a business combination which is accounted for as a "pooling
of interests" and may not be sold, nor may the owner thereof reduce his
risks relative thereto in any way, until such time as Davox ("Davox")
has published the financial results covering at least 30 days of
combined operations after the effective date of the merger through
which the business combination was effected. In addition, the shares
represented by this certificate may not be sold, transferred or
otherwise disposed of except or unless (1) covered by an effective
registration statement under the Securities Act of 1933, as amended,
(2) in accordance with (i) Rule 145(d) (in the case of shares issued to
an individual who is not an affiliate of Davox) or (ii) Rule 144 (in
the case of shares issued to an individual who is an affiliate of
Davox) of the Rules and Regulations of such Act, or (3) in accordance
with a legal opinion satisfactory to counsel for Davox that such sale
or transfer is otherwise exempt from the registration requirements of
such Act."
Such legend will also be placed on any certificate representing Davox securities
issued subsequent to the original issuance of the Davox Common pursuant to the
Merger as a result of any transfer of such shares or any stock dividend, stock
split, or other recapitalization as long as the Davox Common issued to it
pursuant to the Merger has not been transferred in such manner to justify the
removal of the legend therefrom. Upon the request of the undersigned, Davox
shall cause the certificates representing the shares of Davox Common issued to
the undersigned in connection with the Merger to be reissued free of any legend
relating to restrictions on transfer by virtue of ASR 130 and 135 as soon as
practicable after the requirements of ASR 130 and 135 have been met. In
addition, if the provisions of Rule 144 and 145 are amended to eliminate
restrictions applicable to the Davox Common received by the undersigned pursuant
to the Merger, or at the expiration of the restrictive period set forth in Rule
145(d), Davox, upon the request of the undersigned, will cause the certificates
representing the shares of Davox Common issued to the undersigned in connection
with the Merger to be reissued free of any legend relating to the restrictions
set forth in Rules 144 and 145(d) upon receipt by Davox of an opinion of its
counsel to the effect that such legend may be removed.
1.1(s) Consent and Waiver. Effective as of the Effective Time,
-------------------
to the extent that it, together with the other Major Stockholders, has the power
to do so, it hereby terminates all rights of all of the purchasers of AnswerSoft
Common and Preferred Stock named in the Series A Preferred Stock Sale and
Exchange Agreement, dated as of March 10, 1994, among AnswerSoft, Computer
Telephony Limited and the parties listed on the Schedule of Purchasers attached
thereto as Exhibit A; the Preferred Stock Purchase Agreement, dated as of
---------
September 21, 1994, among AnswerSoft, the parties identified on Schedule 1
----------
thereto and, solely for the purposes of certain sections, the Key Employees (as
defined therein), as amended by Amendment No. 1 thereto, dated as of December 2,
1994; the Stock Purchase Agreement, dated as of February 9, 1996, between
AnswerSoft and Taylor Winfield, Inc. for 75,0000 shares of Series A Preferred
Stock; the Series B Preferred Stock Purchase Agreement, dated as of July 16,
1997, among AnswerSoft, the Purchasers, the Prior Investors and the Key
Employees; the Amended and Restated Co-Sale Agreement, dated as of July 16,
1997, among AnswerSoft, the Key Employees and the parties listed on Schedules 1
-----------
and 2 thereto and, to the extent any such rights are not so terminated, it
- -----
hereby irrevocably waives any rights it may have under such agreements. In
addition, it hereby gives any consents or
-4-
<PAGE>
waivers that are reasonably required for the consummation of the Merger under
the terms of any agreement to which it is a party or pursuant to any other
rights it may have.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Major Stockholders. Each of the
----------------------------------------------------
Major Stockholders hereby represents and warrants severally and not jointly to
Davox and the Company as follows:
2.1(a) Existence and Power. If such Major Stockholder is a
-------------------
corporation, partnership or trust, it is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization.
2.1(b) Authorization; Binding Agreement. The execution,
--------------------------------
delivery and performance by such Major Stockholder, if it is a corporation,
partnership or trust, of this Agreement are within its corporate, partnership or
trust power and authority and have been duly authorized by all necessary
corporate, partnership or trust action on the part of such Major Stockholder.
This Agreement has been duly executed and delivered by such Major Stockholder
and constitutes a valid and binding agreement of such Major Stockholder
enforceable against such Major Stockholder in accordance with its terms, subject
to (i) laws of general application relating to bankruptcy, insolvency,
moratorium and the relief of debtors, and (ii) the availability of specific
performance, injunctive relief and other equitable remedies.
2.1(c) Governmental Authorization. The execution, delivery and
---------------------------
performance by it of this Agreement does not require any action by or in respect
of, or declaration, filing or registration with, any Governmental Authority.
2.1(d) Non-Contravention. The execution, delivery and
------------------
performance by it of this Agreement does not and will not (i) if it is a
corporation, partnership or trust, contravene or conflict with its
organizational documents, or (ii) contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to it.
2.1(e) Litigation. There is no action, suit, investigation or
----------
proceeding (or any basis therefor) pending against or, to the knowledge of such
Major Stockholder, threatened against or affecting, such Major Stockholder or
any of its respective properties before any court or arbitrator or any
governmental body, agency, official or authority that in any manner challenges
or seeks to prevent, enjoin, alter or materially delay the transactions
contemplated by this Agreement or the Merger Agreement.
2.1(f) Finders' Fees. There is no investment banker, broker,
-------------
finder or other intermediary that has been retained by or is authorized to act
on behalf of such Major Stockholder who might be entitled to any fee or
commission from Davox, AnswerSoft or any of their affiliates upon consummation
of the transactions contemplated by this Agreement or the Merger Agreement.
2.1(g) Ownership of Stock. Such Major Stockholder is the
------------------
record and beneficial owner of the shares of Preferred Stock and/or AnswerSoft
Common set forth after such Major Stockholder's name on Schedule 2.1(g), and
---------------
owns all shares free and clear of any and all Liens or any rights of first
refusal, voting trusts, proxies or other arrangements or understandings, whether
written or oral, and such Major Stockholder has the sole and exclusive right and
power to exercise all voting rights and other rights with respect to such
shares.
-5-
<PAGE>
ARTICLE III
MISCELLANEOUS
3.1 Understanding of Restrictions on Dispositions. The undersigned has
---------------------------------------------
carefully read this Participation Agreement and discussed its requirements and
impact upon its ability to sell, transfer, or otherwise dispose of the shares of
Davox Common received by the undersigned, to the extent it believes necessary,
with its counsel or counsel for AnswerSoft.
3.2 Transfer Under Rule 145(d). If the undersigned desires to sell or
--------------------------
otherwise transfer the shares of Davox Common received by him in connection with
the Merger at any time during the restrictive period set forth in Rule 145(d),
the undersigned will provide the necessary representation letter to the transfer
agent for Davox Common together with such additional information as the transfer
agent may reasonably request. If Davox's counsel concludes that such proposed
sale or transfer complies with the requirements of Rule 145(d), Davox shall
cause such counsel to provide such opinions as may be necessary to Davox's
transfer agent so that the undersigned may complete the proposed sale or
transfer.
3.3 Acknowledgments. The undersigned recognizes and agrees that the
---------------
provisions included herein also apply to all shares of the capital stock of
AnswerSoft and Davox that are deemed to be beneficially owned by the undersigned
pursuant to applicable federal securities laws, which the undersigned agrees may
include, without limitation, shares owned or held in the name of (i) the
undersigned's spouse, (ii) any relative of the undersigned or of the
undersigned's spouse who has the same home as the undersigned, (iii) any trust
or estate in which the undersigned, the undersigned's spouse, and any such
relative collectively own at least 10% beneficial interest or of which any of
the foregoing serves as trustee, executor, or in any similar capacity, (iv) any
corporation or other organization in which the undersigned, the undersigned's
spouse and any such relative collectively own at least 10% of any class of
equity securities or of the equity interest. The undersigned further recognizes
that, in the event that the undersigned is a director or officer of Davox or
becomes a director or officer of Davox upon consummation of the Merger, among
other things, any sale of Davox Common by the undersigned within a period of
less than six months following the effective time of the Merger may subject the
undersigned to liability pursuant to Section 16(b) of the Securities Exchange
Act of 1934, as amended.
3.4 Survival; Termination. (a) All representations and warranties in
---------------------
this Agreement shall survive the Closing. Any investigation or other examination
that may have been made or may be made at any time by or on behalf of the party
to whom representations and warranties are made shall not limit, diminish or in
any way affect the representations and warranties in this Agreement, and the
parties may rely on the representations and warranties in this Agreement
irrespective of any information obtained by them by any investigation,
examination or otherwise.
(b) The covenants contained in Sections 1.1(a), 1.1(b), 1.1(d),
1.1(h), 1.1(i), 1.1(j), 1.1(k), 1.1(1), 1.1(m) and 1.1(p) (but not any liability
for any breach thereof prior to the Effective Time) shall terminate at the
Effective Time. All other covenants contained in this Agreement shall survive
the Merger for a period of one (1) year after which time they shall be of no
further force or effect. The foregoing to the contrary notwithstanding, the
provisions of Section 1.1(c) hereof shall survive the Merger and the termination
of the other covenants.
3.5 Specific Performance. Each of the parties to this Agreement hereby
--------------------
acknowledges that the other party will have no adequate remedy at law if it
fails to perform any of its obligations under this Agreement. In such event,
each of the parties agrees that the other party shall have the right, in
addition to any other rights it may have (whether at law or in equity), to
specific performance of this Agreement.
3.6 Expenses. All fees and expenses incurred by Davox and the Company
---------
in connection with this Agreement and the transactions contemplated hereby
(including without limitation the fees and expenses of their financial, legal
and accounting advisers) will be borne by Davox. All fees and expenses incurred
by AnswerSoft in connection with this Agreement and the transactions
contemplated hereby (including without limitation the fees and expenses of its
financial, legal and accounting advisers) will be borne by AnswerSoft.
-6-
<PAGE>
3.7 Further Assurances. If at any time after the Effective Time, Davox
------------------
or the Company shall consider it advisable that any further conveyance,
agreements, documents, instruments and assurances of law or any other things are
necessary or desirable to best, perfect, confirm or record in the Company the
title to any property, rights, privileges, powers and franchises of AnswerSoft,
the officers of AnswerSoft last in office and such other persons, if any, as the
Board of Directors of AnswerSoft last in office may authorize shall execute and
deliver, upon Davox or the Company's request, any and all proper conveyances,
agreements, documents, instruments and assurances of law, and do all things
necessary or proper to vest, perfect, confirm or record title to such property,
rights, privileges, powers and franchises of AnswerSoft in the Company, and
otherwise to carry out the provisions of this Agreement to be performed by
AnswerSoft.
3.8 Parties in Interest. All the terms and provisions of this Agreement
-------------------
shall be binding upon, shall inure to the benefit of and shall be enforceable by
the respective successors and permitted assigns of the parties hereto. Nothing
expressed or implied in this Agreement is intended or shall be construed to
confer upon or give any person, firm or corporation other than the parties
hereto, their permitted successors or assigns, and their respective stockholders
any rights or remedies under or by reason of this Agreement or any transaction
contemplated hereby.
3.9 Entire Agreement. This Agreement supersedes any other agreement,
-----------------
whether written or oral, that may have been made or entered into by Davox, the
Company, AnswerSoft and the Major Stockholders (or by any officers, directors or
stockholders of any of such parties) relating to the matters contemplated
hereby. This Agreement constitutes the entire agreement by the parties, and
there are no agreements or commitments except as set forth herein.
3.10 Amendment or Modification. At any time before or after the
-------------------------
adoption of the Agreement by the stockholders of AnswerSoft or the approval of
the proposals contained in the Proxy Statement by the stockholders of Davox and
AnswerSoft, this Agreement may be amended or supplemented by additional
agreements, articles or certificates, as may be determined by the parties hereto
to be necessary, desirable or expedient to further the purposes of this
Agreement, or to clarify the intention of the parties hereto, or to add to or to
modify the covenants, terms or conditions hereof or to effect or facilitate any
governmental approval or acceptance of the Merger or of this Agreement or to
effect or facilitate the filing or recording of the Agreement or the
consummation of any of the transactions contemplated hereby or thereby.
3.11 No Waiver. The failure of any party hereto to enforce at any time
---------
any of the provisions of this Agreement shall in no way be construed to be a
waiver of any such provision, nor in any way to affect the validity of this
Agreement or any part hereof or the right of such party thereafter to enforce
each and every such provision. No waiver of any breach of or non-compliance with
this Agreement shall be held to be a waiver of any other or subsequent breach or
non-compliance.
3.12 Assignability. This Agreement shall not be assignable by
-------------
AnswerSoft and the Major Stockholders, on the one hand, or Davox and the
Company, on the other hand, without the prior written consent of Davox and the
Company, on the one hand, or AnswerSoft and the Major Stockholders, on the other
hand.
3.13 Headings and Interpretation. The headings contained in this
---------------------------
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement. Terms such as "herein", "hereof",
"hereinafter" refer to this Agreement as a whole and not to the particular
sentence or paragraph where they appear, unless the context otherwise requires.
Unless the context otherwise requires, (i) terms used in the plural include the
singular, and vice versa, and (ii) words in the masculine gender include the
feminine, and vice versa.
3.14 Notices. All notices, requests, claims, demands and other
--------
communications under this Agreement shall be in writing and shall be deemed to
have been duly given when received at the addresses set forth in the Merger
Agreement, in the case of Davox, the Company and AnswerSoft, and the books and
records of AnswerSoft, in the case of the Major Stockholders, or to such other
address as any party may have furnished to the others in writing in accordance
herewith, except that notices of change of address shall only be effective upon
receipt.
-7-
<PAGE>
3.15 Law Governing. This Agreement shall be governed by and construed
-------------
and enforced in accordance with the laws of the State of Delaware, without
giving effect to the principles of conflicts of law thereof.
3.16 Invalidity of Provisions. Each of the provisions contained in this
------------------------
Agreement is distinct and severable and a declaration of invalidity or
unenforceability of any such provision or part thereof by a court of competent
jurisdiction shall not affect the validity or enforceability of any other
provision hereof.
3.17 Counterparts. This Agreement may be executed simultaneously in one
------------
or more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-8-
<PAGE>
- Participation Agreement -
IN WITNESS WHEREOF this Agreement has been duly executed and delivered by
the parties on the date first above written.
DAVOX:
DAVOX CORPORATION
By: /s/ Alphonse M. Lucchese
---------------------------
COMPANY:
DUKE ACQUISITION CORPORATION
By: /s/ Alphonse M. Lucchese
---------------------------
ANSWERSOFT:
ANSWERSOFT, INC.
By: /s/ David W. Brandenburg
---------------------------
MAJOR SHAREHOLDERS:
See attached counterpart signature pages
<PAGE>
Schedule 2.1(g)
---------------
Major Stockholders
------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
SERIES A SERIES B
MAJOR STOCKHOLDER PREFERRED STOCK PREFERRED STOCK COMMON STOCK
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
<S> <C> <C> <C>
JEANNE BAYLESS 271,270
4317 Larkel
Plano, TX 75093
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
DAVID BRANDENBURG 136,970 222,576
4545 Biltmoore Drive
Frisco, TX 75034
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
JON W. BAYLESS 925,000 210,337
c/o Sevin Rosen
Two Galleria Tower
13455 Noel Road, Suite 1670, LB-5
Dallas, TX 75240
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
SVE STAR VENTURES ENTERPRISES NO. II, A GERMAN 252,928 78,324
CIVIL LAW PARTNERSHIP
c/o Dr. Meir Barel
SVE Star Ventures Capital Management Ltd.
Possart Str. 9
D-81679 Munich
GERMANY
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
SVE STAR VENTURES ENTERPRISES NO. III, A GERMAN 678,756 210,189
CIVIL LAW PARTNERSHIP
c/o Dr. Meir Barel
SVE Star Ventures Capital Management Ltd.
Possart Str. 9
D-81679 Munich
GERMANY
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
SVE STAR VENTURES ENTERPRISES NO. IIIA, A GERMAN 56,316 17,439
CIVIL LAW PARTNERSHIP
c/o Dr. Meir Barel
SVE Star Ventures Capital Management Ltd.
Possart Str. 9
D-81679 Munich
GERMANY
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
INTERSTOCK ANSTALT FUR BERMOGENS UND TRUST 12,000 3,716
VEWALTUNGEN
c/o Peter Gross
Herrengasse 21
FL-9490
Fuerstentum LIECHTENSTEIN
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
SERIES A SERIES B
MAJOR STOCKHOLDER PREFERRED STOCK PREFERRED STOCK COMMON STOCK
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
<S> <C> <C> <C>
BATTERY VENTURES III, L.P. 1,259,374
c/o Thomas Crotty
20 William Street
Wellseley, MA 02181
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
RANDALL R. LUNN
TVM
101 Arch Street, Suite 1950
Boston, MA 02110
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
TVM TECHNO VENTURE ENTERPRISES NO. II LIMITED 292,125 65,423
PARTNERSHIP
c/o John DiBello
TVM
101 Arch Street, Suite 1950
Boston, MA 02110
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
TVM INTERTECH LIMITED PARTNERSHIP 194,750 43,615
c/o John DiBello
TVM
101 Arch Street, Suite 1950
Boston, MA 02110
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
TVM ZWEITE BETELIGUNG-US LIMITED PARTNERSHIP 292,126 65,423
c/o John Dibello
TVM
101 Arch Street, Suite 1950
Boston, MA 02110
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
TVM TECHNO VENTURE INVESTORS NO. 1 LIMITED 7,500 4,450
PARTNERSHIP
c/o John DiBello
TVM
101 Arch Street, Suite 1950
Boston, MA 02110
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
TVM EUROTECH LIMITED PARTNERSHIP 194,750 43,615
c/o John DiBello
TVM
101 Arch Street, Suite 1950
Boston, MA 02110
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
SERIES A SERIES B
MAJOR STOCKHOLDER PREFERRED STOCK PREFERRED STOCK COMMON STOCK
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
<S> <C> <C> <C>
JOSEPH C. ARAGONA
c/o Austin Ventures
1300 Norwood Toiwer
114 West 7th Street
Austin, TX 78701
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
AUSTIN VENTURES IV-A, L.P. 406,514 125,884
c/o Joseph C. Aragona
1300 Norwood Toiwer
114 West 7th Street
Austin, TX 78701
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
AUSTIN VENTURES IV-B, L.P. 852,861 264,103
c/o Joseph C. Aragona
1300 Norwood Toiwer
114 West 7th Street
Austin, TX 78701
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
RHO MANAGEMENT TRUST I 1,500,000 464,502
(f/k/a/ Gibraltar Trust)
c/o Joshua Ruch
Rho Management Company
767 Fifth Avenue, 43rd Floor
New York, NY 10153
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
HABIB KAIROUZ
Rho Management Company
767 Fifth Avenue, 43rd Floor
New York, NY 10153
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
RICHARD CONNELLY
AnswerSoft, Inc.
2201 N. Central Expressway
Suite 200
Richardson, TX 75080
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
W. SUE BAYLESS 925,000 210,337
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
ROGER ROBERTS
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
RICHARD DURAL
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
ROBERT YOUNG
- ---------------------------------------------------- ---------------------- ------------------------ ------------------
</TABLE>
-3-
<PAGE>
Annex C
-------
March 9, 1998
The Board of Directors
Davox Corporation
Six Technology Park Drive
Westford, MA 01886
Attention: Mr. Alphonse Lucchese, Chairman
Members of the Board:
In connection with the proposed transaction (the "Transaction") in which
Davox Acquisition Corporation, ("DAC"), a direct wholly-owned subsidiary of
Davox Corporation ("Davox"), shall be merged with and into AnswerSoft, Inc.
("AnswerSoft"), pursuant to an Agreement and Plan of Merger (the "Agreement") to
be entered into among Davox, DAC and AnswerSoft, and AnswerSoft shall thereupon
be a wholly-owned subsidiary of Davox, you have requested our opinion as to the
fairness, from a financial point of view, to Davox of the proposed consideration
to be paid in the Transaction. Under the terms of the Agreement at the
effective time of the Transaction, the outstanding shares of AnswerSoft Common
and Preferred Stock, each as defined in the Agreement, will be exchanged for
Davox Common, as defined in the Agreement. The Transaction is intended to
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code") and will be treated as a pooling-
of-interests for accounting purposes.
Piper Jaffray Inc., as a customary part of its investment banking business,
is engaged in the valuation of businesses and their securities in connection
with mergers and acquisitions, underwriting and secondary distributions of
securities, private placements and valuations for estate, corporate and other
purposes. We will receive a fee for providing this opinion. This opinion fee is
not contingent upon the consummation of the Transaction. Davox has also agreed
to indemnify us against certain liabilities in connection with our services.
Piper Jaffray makes a market in Davox Common and provides research coverage for
Davox. In the ordinary course of our business, we and our affiliates may
actively trade securities of Davox for our own account or the account of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
In arriving at our opinion, we have undertaken such review, analyses and
inquiries as we deemed necessary and appropriate under the circumstances. Among
other things, we have reviewed (i) a draft copy of the Agreement and Plan of
Merger dated March 8, 1998, (ii) certain financial, operating and business
information related to AnswerSoft, (iii) certain internal financial information
of AnswerSoft on a stand-alone basis prepared for financial planning purposes
and furnished by the management of AnswerSoft and revised by Davox, (v) to the
extent publicly available, financial terms of certain acquisition transactions
involving companies operating in industries deemed similar to that in which
AnswerSoft operates and selected public companies deemed comparable to
AnswerSoft, (vi) certain publicly available information relative to Davox, (vii)
certain internal financial information of Davox on a stand alone basis and as a
combined company with AnswerSoft, prepared by Davox management for financial
planning purposes and furnished by the management of Davox, and (viii) certain
publicly available financial and securities data of Davox. We had discussions
with members of the management of (a) Davox concerning the financial condition,
current operating results and business outlook for both Davox and AnswerSoft on
a stand-alone basis and the combined company resulting from the Transaction and
Davox's plans relating to such combined company as well as the amount and timing
of the revenue enhancements and cost savings expected to result from the
Transaction, and (b) AnswerSoft concerning the financial condition, current
operating results and business outlook for AnswerSoft and the combined company.
We have relied upon and assumed the accuracy, completeness and fairness of
the financial statements and other information provided to us by Davox,
AnswerSoft or otherwise made available to us, and have not assumed
responsibility for the independent verification of such information. Neither
Davox nor AnswerSoft publicly disclose internal financial information of the
type provided to Piper Jaffray in connection with Piper Jaffray's review of the
Transaction. Such information was prepared for financial planning purposes and
was not prepared with the expectation of public disclosure. We have relied upon
the assurances of the managements of Davox and
<PAGE>
AnswerSoft that the information provided to us as set forth above by Davox and
AnswerSoft has been prepared on a reasonable basis, and, with respect to
financial planning data and other business outlook information, reflects the
best currently available estimates, and that they are not aware of any
information or facts that would make the information provided to us incomplete
or misleading.
We have assumed that the final form of the Agreement will be substantially
similar to the last draft reviewed by us, without modification or waiver of
material terms or conditions by Davox or AnswerSoft. We have also assumed that
the transactions contemplated by the Agreement will constitute a
"reorganization" within the meaning of Section 368(a) of the Code and that the
transaction will be treated as a pooling-of-interests for accounting purposes.
In addition, in arriving at our opinion, we have assumed that, in the course of
obtaining the necessary regulatory approvals for the Transaction, no
restrictions, including any divestiture requirements, will be imposed that will
have a material adverse effect on the contemplated benefits of the Transaction.
In arriving at our opinion, we have not performed any appraisals or
valuations of any specific assets or liabilities of Davox or AnswerSoft, and
have not been furnished with any such appraisals or valuations. We express no
opinion regarding the liquidation value of any entity. We have assumed that any
Escrow Shares, as defined in the Agreement, will be issued to AnswerSoft
shareholders. We have, with your consent, made no analysis of, or distinction
between, any separate class of capital stock of AnswerSoft, and, accordingly,
our opinion relates solely to the aggregate consideration to be paid by Davox in
the Transaction in accordance with the Agreement for the AnswerSoft Common and
Preferred Stock.
This opinion is necessarily based upon the information available to us and
facts and circumstances as they exist and are subject to evaluation on the date
hereof; events occurring after the date hereof could materially affect the
assumptions used in preparing this opinion. We are not expressing any opinion
herein as to the price at which shares of Davox Common have traded or may trade
at any future time. We have not undertaken to reaffirm or revise this opinion
or otherwise comment upon any events occurring after the date hereof and do not
have any obligation to update, revise or reaffirm this opinion.
This opinion is directed to the Board of Directors of Davox and is not
intended to be and does not constitute a recommendation to any stockholder as to
how such stockholder should vote with respect to the Transaction. We were not
requested to opine as to, and this opinion does not address, the basic business
decision to proceed with or effect the Transaction. This opinion shall not be
published or otherwise used, nor shall any public references to us be made,
without our prior written approval. We hereby consent to the inclusion in its
entirety of this opinion in a prospectus/proxy statement to be filed with the
Securities and Exchange Commission and sent to all stockholders of Davox and
AnswerSoft. Our consent shall not in any way constitute an admission that we
are within the class of persons required to file a consent under Sections 7 or
11 of the Securities Act of 1933.
Based upon and subject to the foregoing and based upon such other factors
as we consider relevant, it is our opinion that the proposed consideration to be
paid in the Transaction for the AnswerSoft Common and Preferred Stock taken as a
whole is fair, from a financial point of view, to Davox as of the date hereof.
Sincerely,
PIPER JAFFRAY INC.
By: /s/ Piper Jaffray Inc.
------------------------------------
<PAGE>
Annex D
-------
262 APPRAISAL RIGHTS. -- (a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to (S) 228 of this title shall be entitled to an appraisal by the Court
of Chancery of the fair value of the stockholder's shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (S)(S) 251 (other than a merger effected pursuant to (S)
251(g) of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of (S) 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to (S)(S) 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock or depository receipts at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash
in lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S) 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
<PAGE>
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
his shares shall deliver to the corporation, before the taking of the vote on
the merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein provided.
Within 10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not voted
in favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to (S) 228 or
(S) 253 of this title, each constituent corporation, either before the effective
date of the merger or consolidation or within ten days thereafter, shall notify
each of the holders of any class or series of stock of such constituent
corporation who are entitled to appraisal rights of the approval of the merger
or consolidation and that appraisal rights are available for any or all shares
of such class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section; provided that, if the notice is
given on or after the effective date of the merger or consolidation, such notice
shall be given by the surviving or resulting corporation to all such holders of
any class or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective date
of the merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation the appraisal of
such holder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such notice
did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a second
notice before the effective date of the merger or consolidation notifying each
of the holders of any class or series of stock of such constituent corporation
that are entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send such a
second notice to all such holders on or within 10 days after such effective
date; provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only to be
sent to each stockholder who is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with this subsection.
An affidavit of the secretary or assistant secretary or of the transfer agent of
the corporation that is required to give either notice that such notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. For purposes of determining the stockholders entitled to
receive either notice, each constituent corporation may fix, in advance, a
record date that shall be not more than 10 days prior to the date the notice is
given, provided, that if the notice is given on or after the effective date of
the merger or consolidation, the record date shall be such effective date. If
no record date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day on
which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled
-2-
<PAGE>
to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair
rate of interest, the Court may consider all relevant factors, including the
rate of interest which the surviving or resulting corporation would have had to
pay to borrow money during the pendency of the proceeding. Upon application by
the surviving or resulting corporation or by any stockholder entitled to
participate in the appraisal proceeding, the Court may, in its discretion,
permit discovery or other pretrial proceedings and may proceed to trial upon the
appraisal prior to the final determination of the stockholder entitled to an
appraisal. Any stockholder whose name appears on the list filed by the
surviving or resulting corporation pursuant to subsection (f) of this section
and who has submitted his certificates of stock to the Register in Chancery, if
such is required, may participate fully in all proceedings until it is finally
determined that he is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
-3-
<PAGE>
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
-4-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law and the Registrant's Charter and By-
laws provide for indemnification of the Registrant' s directors and officers
for liabilities and expenses that they may incur in such capacities. In
general, directors and officers are indemnified with respect to actions taken
in good faith in a manner reasonably believed to be in, or not opposed to, the
best interests of the Registrant, and with respect to any criminal action or
proceeding, actions that the indemnified party had no reasonable cause to
believe were unlawful. Reference is made to the Registrant's Charter and By-
laws filed as Exhibits 3.1 and 3.2 hereto, respectively.
The Agreement provides that commencing with the effectiveness of the Merger,
the Registrant will indemnify the current officers, directors and employees of
AnswerSoft in respect of acts or omissions occurring on or prior to the
effective time of the Merger.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith or incorporated by reference
herein:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- -----------------------------------------------------------------
<C> <S>
2.1 Amended and Restated Agreement and Plan of Merger by and among
the Registrant, Duke Acquisition Corp. and AnswerSoft, Inc.,
dated as of April 6, 1998 (attached as Annex A to the Joint Proxy
Statement/Prospectus contained in this Registration Statement).
3.1(4) Restated Certificate of Incorporation of the Registrant, as
amended.
3.2(4) By-laws of the Registrant, as amended.
4.1 Description of Capital Stock contained in the Registrant's
Restated Certificate of Incorporation, as amended, filed as
Exhibit 3.1.
5.1 Opinion of Testa, Hurwitz & Thibeault, LLP regarding the legality
of the securities being issued.
8.1 Form of opinion of Testa, Hurwitz & Thibeault, LLP regarding
certain tax matters.
8.2 Form of opinion of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP regarding certain tax matters.
9.1 Participation Agreement by and among the Registrant and certain
stockholders of AnswerSoft, Inc. dated as of March 9, 1998
(attached as Annex B to the Joint Proxy Statement/Prospectus
contained in this Registration Statement).
10.1(1) 1986 Stock Plan of the Registrant, as amended.
10.2(4) Amended and Restated 1988 Non-Employee Director Stock Option Plan
of the Registrant.
10.3(4) Form of Option Agreement under the Registrant's 1988 Non-Employee
Director Stock Option Plan.
10.4(5) Special support services agreement between Registrant and
Datapoint (UK) Ltd., dated August 1, 1997.
10.5(4) 1991 Employee Stock Purchase Plan, as amended.
10.6(1) Common Stock Purchase Agreement dated September 23, 1994 between
the Registrant and the purchasers named therein.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- -----------------------------------------------------------------
<C> <S>
10.7(1) Letter agreement dated December 30, 1994 between the Registrant
and Fleet Bank of Massachusetts, N.A.
10.8(2)(5) Third party service provider agreement between the Registrant and
Grumman Systems Support Corporation.
10.9(4) 1996 Stock Plan of the Registrant, as amended.
10.10(3) Form of Incentive Stock Option Agreement under the Registrant's
1996 Stock Plan.
10.11(3) Form of Non-Qualified Stock Option Agreement under the
Registrant's 1996 Stock Plan.
10.12(3) Executive Compensation Plan.
10.13(4) Lease agreement between Registrant and Michelson Farm Westford
Technology Park VI Limited Partnership for Westford Technology
Park Building Six.
10.14(4)(5) Distribution agreement between Lucent Technologies Inc. (by and
through its Business Communications Systems Division) and the
Registrant, dated May 2, 1997.
21(4) Subsidiaries of the Registrant.
23.1 Consent of Testa, Hurwitz & Thibeault, LLP (included in Exhibit
5.1 and Exhibit 8.1).
23.2 Consent of Arthur Andersen LLP with respect to Registrant's
financial statements.
23.3 Consent of Ernst & Young, LLP with respect to AnswerSoft's
financial statements.
23.4 Consent of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP (included in Exhibit 8.2).
24.1 Power of Attorney (see page II-4).
99.1 Form of proxy to be used in soliciting the Registrant's
stockholders for its annual meeting.
99.2 Form of proxy to be used in soliciting AnswerSoft's stockholders
for its special meeting.
99.3 Consent of Piper Jaffray Inc.
</TABLE>
- --------
(1) Previously filed as an exhibit to Form 10-K for the fiscal year ended
December 31, 1994.
(2) Previously filed as an exhibit to Form 10-K for the fiscal year ended
December 31, 1995.
(3) Previously filed as an exhibit to Form 10-K for the fiscal year ended
December 31, 1996.
(4) Previously filed as an exhibit to Form 10-K for the fiscal year ended
December 31, 1997.
(5) Confidential treatment has been previously granted for certain portions of
these exhibits.
(b) FINANCIAL STATEMENT SCHEDULES
Davox Schedule II Valuation and Qualifying Accounts
ITEM 22. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(2) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any
II-2
<PAGE>
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the undersigned Registrant undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form
with respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of the applicable
form.
(3) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(4) Insofar as the indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(5) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to the request.
(6) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Town of Westford, Commonwealth of
Massachusetts, on the 6th day of April 1998.
DAVOX CORPORATION
/s/ Alphonse M. Lucchese
By: _________________________________
Alphonse M. Lucchese
Chief Executive Officer and
Chairman
POWER OF ATTORNEY
We, the undersigned officers and directors of Davox Corporation, hereby
severally constitute and appoint Alphonse M. Lucchese and Timothy C. Maguire,
and each of them singly, our true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution in each of them, to sign for us
and in our names in the capacities indicated below, any and all pre-effective
and post-effective amendments to said Registration Statement, or a
registration statement filed pursuant to Rule 462(b) of the Securities Act of
1933, as amended, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission, and generally to do all such things in our names and on our behalf
in our capacities as officers and directors to enable Davox Corporation to
comply with the provisions of the Securities Act of 1933, as amended, and all
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys, or any
of them.
Pursuant to the requirements of the Securities Act of 1933, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/ Alphonse M. Lucchese Chief Executive Officer April 6, 1998
- ----------------------------- and Chairman (principal
Alphonse M. Lucchese executive officer)
/s/ John J. Connolly Chief Financial Officer April 6, 1998
- ----------------------------- (principal financial
John J. Connolly officer)
/s/ R. Scott Asen Director April 6, 1998
- -----------------------------
R. Scott Asen
/s/ Michael D. Kaufman Director April 6, 1998
- -----------------------------
Michael D. Kaufman
/s/ Walter J. Levison Director April 6, 1998
- -----------------------------
Walter J. Levison
II-4
<PAGE>
DAVOX
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ACCOUNTS RECEIVABLE RESERVES
---------------------------------------------------------
BEG. OF YEAR COST/EXPENSE RESERVES DEDUCTIONS END OF YEAR
------------ ------------ ------------------- -----------
<S> <C> <C> <C> <C>
DEC. 31, 1995
Davox.............. 638 242 215 665
DEC. 31, 1996
Davox.............. 665 98 64 699
DEC. 31, 1997
Davox.............. 699 463 114 1,048
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- -----------------------------------------------------------------
<C> <S>
2.1 Amended and Restated Agreement and Plan of Merger by and among
the Registrant, Duke Acquisition Corp. and AnswerSoft, Inc.,
dated as of April 6, 1998 (attached as Annex A to the Joint Proxy
Statement/Prospectus contained in this Registration Statement).
3.1(4) Restated Certificate of Incorporation of the Registrant, as
amended.
3.2(4) By-laws of the Registrant, as amended.
4.1 Description of Capital Stock contained in the Registrant's
Restated Certificate of Incorporation, as amended, filed as
Exhibit 3.1.
5.1 Opinion of Testa, Hurwitz & Thibeault, LLP regarding the legality
of the securities being issued.
8.1 Form of opinion of Testa, Hurwitz & Thibeault, LLP regarding
certain tax matters.
8.2 Form of opinion of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP regarding certain tax matters.
9.1 Participation Agreement by and among the Registrant and certain
stockholders of AnswerSoft, Inc. dated as of March 9, 1998
(attached as Annex B to the Joint Proxy Statement/Prospectus
contained in this Registration Statement).
10.1(1) 1986 Stock Plan of the Registrant, as amended.
10.2(4) Amended and Restated 1988 Non-Employee Director Stock Option Plan
of the Registrant.
10.3(4) Form of Option Agreement under the Registrant's 1988 Non-Employee
Director Stock Option Plan.
10.4(5) Special support services agreement between Registrant and
Datapoint (UK) Ltd., dated August 1, 1997.
10.5(4) 1991 Employee Stock Purchase Plan, as amended.
10.6(1) Common Stock Purchase Agreement dated September 23, 1994 between
the Registrant and the purchasers named therein.
10.7(1) Letter agreement dated December 30, 1994 between the Registrant
and Fleet Bank of Massachusetts, N.A.
10.8(2)(5) Third party service provider agreement between the Registrant and
Grumman Systems Support Corporation.
10.9(4) 1996 Stock Plan of the Registrant, as amended.
10.10(3) Form of Incentive Stock Option Agreement under the Registrant's
1996 Stock Plan.
10.11(3) Form of Non-Qualified Stock Option Agreement under the
Registrant's 1996 Stock Plan.
10.12(3) Executive Compensation Plan.
10.13(4) Lease agreement between Registrant and Michelson Farm Westford
Technology Park VI Limited Partnership for Westford Technology
Park Building Six.
10.14(4)(5) Distribution agreement between Lucent Technologies Inc. (by and
through its Business Communications Systems Division) and the
Registrant, dated May 2, 1997.
21(4) Subsidiaries of the Registrant.
23.1 Consent of Testa, Hurwitz & Thibeault, LLP (included in Exhibit
5.1 and Exhibit 8.1).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ---------------------------------------------------------------------
<C> <S>
23.2 Consent of Arthur Andersen LLP with respect to Registrant's financial
statements.
23.3 Consent of Ernst & Young, LLP with respect to AnswerSoft's financial
statements.
23.4 Consent of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
LLP (included in Exhibit 8.2).
24.1 Power of Attorney (see page II-4).
99.1 Form of proxy to be used in soliciting the Registrant's stockholders
for its annual meeting.
99.2 Form of proxy to be used in soliciting AnswerSoft's stockholders for
its special meeting.
99.3 Consent of Piper Jaffray Inc.
</TABLE>
- --------
(1) Previously filed as an exhibit to Form 10-K for the fiscal year ended
December 31, 1994.
(2) Previously filed as an exhibit to Form 10-K for the fiscal year ended
December 31, 1995.
(3) Previously filed as an exhibit to Form 10-K for the fiscal year ended
December 31, 1996.
(4) Previously filed as an exhibit to Form 10-K for the fiscal year ended
December 31, 1997.
(5) Confidential treatment has been previously granted for certain portions of
these exhibits.
<PAGE>
Exhibit 5.1
April 1, 1998
Davox Corporation
6 Technology Park Drive
Westford, MA 01886
Re: Davox Corporation
Registration Statement on Form S-4
Ladies and Gentlemen:
We have represented Davox Corporation, a Delaware corporation (the
"Company"), in connection with the preparation and filing of the Company's
Registration Statement on Form S-4 (the "Registration Statement"), relating to
the issuance to stockholders of AnswerSoft, Inc. ("AnswerSoft") of up to
2,448,897 shares of Common Stock, par value $.10 per share (the "Shares") of the
Company pursuant to the Agreement and Plan of Merger (the "Merger Agreement")
dated as of March 9, 1998 by and among the Company, Duke Acquisition
Corporation, a Delaware corporation and a wholly owned subsidiary of the Company
("DAC") and AnswerSoft.
We have reviewed the corporate proceedings taken by the Board of
Directors of the Company with respect to the authorization and issuance of the
Shares. We have also examined and relied upon originals or copies, certified or
otherwise authenticated to our satisfaction, of all corporate records,
documents, agreements or other instruments of the Company and have made all
investigations of law and have discussed with the Company's officers all
questions of fact that we have deemed necessary or appropriate.
Based upon and subject to the foregoing, we are of the opinion that,
upon approval of the issuance of the Shares by the Company's shareholders, the
Shares will be duly authorized and, upon the filing of a certificate of merger
intended to effect the merger of DAC with and into AnswerSoft in accordance with
the Merger Agreement and the laws of the State of Delaware, will be validly
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm in the Prospectus
contained in the Registration Statement under the caption "Legal Matters."
Very truly yours,
TESTA, HURWITZ & THIBEAULT, LLP
<PAGE>
Exhibit 8.1
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April 6, 1998
Davox Corporation
6 Technology Park Drive
Westford, MA 01886
Ladies and Gentlemen:
This opinion is being delivered to you in connection with the
Securities and Exchange Commission Registration Statement on Form S-4 filed on
April 6, 1998, and related Exhibits thereto, as thereafter amended at any time
to and including the date hereof (the "Registration Statement") relating to the
Agreement and Plan of Merger (the "Merger Agreement") among Davox Corporation, a
Delaware corporation ("Davox"), its wholly-owned subsidiary, Duke Acquisition
Corporation, a Delaware corporation ("DAC"), and AnswerSoft, Inc., a Delaware
corporation ("AnswerSoft") dated March 9, 1998. Pursuant to the Merger
Agreement, DAC will merge with and into AnswerSoft (the "Merger"), and
AnswerSoft will become a wholly-owned subsidiary of Davox.
Except as otherwise provided, capitalized terms referred to herein
have the meanings set forth in the Merger Agreement. All section references,
unless otherwise indicated, are to the Internal Revenue Code of 1986, as amended
(the "Code").
We have acted as legal counsel to Davox in connection with the
Merger. As such, and for the purpose of rendering this opinion, we have
examined and are relying (or will rely) upon (without any independent
investigation or review thereof) the truth and accuracy, at all relevant times,
of the statements, covenants, representations and warranties contained in the
following documents (including all schedules and exhibits thereto):
1. The Merger Agreement (including Exhibits);
2. Representations made to us by AnswerSoft in a letter of even date;
3. Representations made to us by Davox and DAC in a letter of even
date;
4. Representations made by certain shareholders of AnswerSoft in the
Participation Agreement;
5. The Registration Statement; and
<PAGE>
6. Such other instruments and documents related to the formation,
organization and operation of Davox, AnswerSoft and DAC or to the consummation
of the Merger and the transactions contemplated thereby as we have deemed
necessary or appropriate.
In connection with rendering this opinion, we have assumed that:
1. Original documents (including signatures) are authentic, documents
submitted to us as copies conform to the original documents, and there has been
(or will be by the Effective Time of the Merger) due execution and delivery of
all documents where due execution and delivery are prerequisites to
effectiveness thereof;
2. Any representation or statement made "to the knowledge of" or
otherwise similarly qualified is correct without such qualification and all
statements and representations, whether or not qualified, will remain true
through the Effective Time. As to all matters in which a person or entity
making a representation has represented that such person or entity either is not
a party to, does not have, or is not aware of any plan, intention, understanding
or agreement to take an action, there is in fact no plan, intention,
understanding or agreement and such action will not be taken;
3. The Merger will be consummated pursuant to the Merger Agreement
and will be effective under the laws of the state of Delaware;
4. No AnswerSoft shareholder has guaranteed or will guarantee any
AnswerSoft indebtedness outstanding during the period immediately prior to the
Merger, and at all relevant times, including as of the Effective Time of the
Merger, (i) no outstanding indebtedness of AnswerSoft, Davox or DAC has or will
represent equity for tax purposes; (ii) no outstanding equity of AnswerSoft,
Davox or DAC has or will represent indebtedness for tax purposes; and (iii) no
outstanding security, instrument, agreement or arrangement that provides for,
contains, or represents either a right to acquire AnswerSoft stock or to share
in the appreciation thereof constitutes or will constitute "stock" for purposes
of Section 368(c) of the Code; and
5. Counsel for Davox and AnswerSoft will, pursuant to Section 5.1(i)
of the Agreement, each deliver an opinion to the effect that, for federal income
tax purposes, the Merger will be a "reorganization" within the meaning of
Section 368(a) of the Code.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that, if the Merger is consummated in accordance with the
provisions of the Merger Agreement (and without any waiver, breach or amendment
of any provisions thereof), for federal income tax purposes, the Merger will be
a "reorganization" within the meaning of Section 368(a) of the Code.
<PAGE>
In addition to the assumptions set forth above, this opinion is
subject to the exceptions, limitations and qualifications set forth below.
1. This opinion represents and is based upon our best judgment
regarding the application of federal income tax laws arising under the Code,
existing judicial decisions, administrative regulations and published rulings
and procedures. Our opinion is not binding upon the Internal Revenue Service or
the courts, and there is no assurance that the Internal Revenue Service will not
successfully assert a contrary position. Furthermore, no assurance can be given
that future legislative, judicial or administrative changes, on either a
prospective or retroactive basis, would not adversely affect the accuracy of the
conclusions stated herein. Nevertheless, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
federal income tax laws.
2. This opinion addresses only the classification of the Merger as a
reorganization under Section 368(a) of the Code, and does not address any other
federal, state, local or foreign tax consequences that may result from the
Merger or any other transaction (including any transaction undertaken in
connection with the Merger). In particular, but without limitation, we express
no opinion regarding (i) whether and the extent to which any AnswerSoft
shareholder who has provided or will provide services to AnswerSoft, Davox or
DAC will have compensation income under any provision of the Code; (ii) the
effects of such compensation income, including but not limited to the effect
upon the basis and holding period of the Davox stock received by any such
shareholder in the Merger; (iii) the potential application of the "golden
parachute" provisions (Sections 280G, 3121(v)(2) and 4999) of the Code, the
alternative minimum tax provisions (Sections 55, 56 and 57) of the Code or
Sections 305, 306, 357, 424, and 708, or the regulations promulgated thereunder;
(iv) except as expressly stated in the preceeding sentence, the corporate level
tax consequences of the Merger to Davox, DAC or AnswerSoft, including without
limitation the recognition of any gain and the survival and/or availability,
after the Merger, of any of the federal income tax attributes or elections of
AnswerSoft, after application of any provision of the Code, as well as the
regulations promulgated thereunder and judicial interpretations thereof; (v) the
application of the collapsible corporation provisions of Section 341 of the Code
to AnswerSoft, (vi) the basis of any equity interest in AnswerSoft acquired by
Davox in the Merger; (vii) the tax consequences of any transaction in which
AnswerSoft stock or a right to acquire AnswerSoft stock was received; (viii) the
tax consequences to any AnswerSoft shareholder or to AnswerSoft, Davox or DAC of
a forfeiture to Davox of all or any part of the shares held in the Escrow Fund;
and (ix) the tax consequences of the Merger (including the opinion set forth
above) as applied to stockholders of AnswerSoft and/or holders of options or
warrants for AnswerSoft stock or that may be relevant
<PAGE>
to particular classes of AnswerSoft stockholders and/or holders of options or
warrants for AnswerSoft stock such as dealers in securities, corporate
shareholders subject to the alternative minimum tax, foreign persons, and
holders of shares acquired upon exercise of stock options or in other
compensatory transactions.
3. No opinion is expressed as to any transaction other than the
Merger as described in the Merger Agreement or to any transaction whatsoever,
including the Merger, if all the transactions described in the Merger Agreement
are not consummated in accordance with the terms of such Merger Agreement and
without waiver or breach of any material provision thereof or if all of the
representations, warranties, statements and assumptions upon which we relied are
not true and accurate through the Effective Time and at all relevant times
thereafter. In the event any one of the statements, representations, warranties
or assumptions upon which we have relied to issue this opinion is incorrect, our
opinion might be adversely affected and may not be relied upon.
4. This opinion has been delivered to you solely for the purpose of
being included as an exhibit to the Registration Statement; it may not be relied
upon for any other purpose (including, without limitation, satisfying any
conditions in the Agreement) or by any other person or entity, and may not be
made available to any other person or entity without our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the captions
"Legal Matters" and "Certain Federal Income Tax Considerations." This consent
is not to be construed as an admission that we are a person whose consent is
required to be filed with the Registration Statement under the provisions of the
Securities Act of 1933.
Very truly yours,
TESTA, HURWITZ & THIBEAULT, LLP
<PAGE>
Exhibit 8.2
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April 6, 1998
AnswerSoft, Inc.
2201 North Central Expressway, Suite 200
Richardson, TX 75080
Ladies and Gentlemen:
This opinion is being delivered to you in connection with the
Securities and Exchange Commission Registration Statement on Form S-4 filed on
April 6, 1998, and related Exhibits thereto, as thereafter amended at any time
to and including the date hereof (the "Registration Statement") relating to the
Agreement and Plan of Merger (the "Merger Agreement") among Davox Corporation, a
Delaware corporation ("Davox"), its wholly-owned subsidiary, Duke Acquisition
Corporation, a Delaware corporation ("DAC"), and AnswerSoft, Inc., a Delaware
corporation ("AnswerSoft") dated March 9, 1998. Pursuant to the Merger
Agreement, DAC will merge with and into AnswerSoft (the "Merger"), and
AnswerSoft will become a wholly-owned subsidiary of Davox.
Except as otherwise provided, capitalized terms referred to herein
have the meanings set forth in the Merger Agreement. All section references,
unless otherwise indicated, are to the Internal Revenue Code of 1986, as amended
(the "Code").
We have acted as legal counsel to AnswerSoft in connection with the
Merger. As such, and for the purpose of rendering this opinion, we have
examined and are relying (or will rely) upon (without any independent
investigation or review thereof) the truth and accuracy, at all relevant times,
of the statements, covenants, representations and warranties contained in the
following documents (including all schedules and exhibits thereto):
1. The Merger Agreement (including Exhibits);
2. Representations made to us by AnswerSoft in a letter of even date;
3. Representations made to us by Davox and DAC in a letter of even
date;
4. Representations made by certain shareholders of AnswerSoft in the
Participation Agreement;
5. The Registration Statement; and
<PAGE>
6. Such other instruments and documents related to the formation,
organization and operation of Davox, AnswerSoft and DAC or to the consummation
of the Merger and the transactions contemplated thereby as we have deemed
necessary or appropriate.
In connection with rendering this opinion, we have assumed that:
1. Original documents (including signatures) are authentic, documents
submitted to us as copies conform to the original documents, and there has been
(or will be by the Effective Time of the Merger) due execution and delivery of
all documents where due execution and delivery are prerequisites to
effectiveness thereof;
2. Any representation or statement made "to the knowledge of" or
otherwise similarly qualified is correct without such qualification and all
statements and representations, whether or not qualified, will remain true
through the Effective Time. As to all matters in which a person or entity
making a representation has represented that such person or entity either is not
a party to, does not have, or is not aware of any plan, intention, understanding
or agreement to take an action, there is in fact no plan, intention,
understanding or agreement and such action will not be taken;
3. The Merger will be consummated pursuant to the Merger Agreement
and will be effective under the laws of the state of Delaware;
4. No AnswerSoft shareholder has guaranteed or will guarantee any
AnswerSoft indebtedness outstanding during the period immediately prior to the
Merger, and at all relevant times, including as of the Effective Time of the
Merger, (i) no outstanding indebtedness of AnswerSoft, Davox or DAC has or will
represent equity for tax purposes; (ii) no outstanding equity of AnswerSoft,
Davox or DAC has or will represent indebtedness for tax purposes; and (iii) no
outstanding security, instrument, agreement or arrangement that provides for,
contains, or represents either a right to acquire AnswerSoft stock or to share
in the appreciation thereof constitutes or will constitute "stock" for purposes
of Section 368(c) of the Code; and
5. Counsel for Davox and AnswerSoft will, pursuant to Section 5.1(i)
of the Agreement, each deliver an opinion to the effect that, for federal income
tax purposes, the Merger will be a "reorganization" within the meaning of
Section 368(a) of the Code.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that, if the Merger is consummated in accordance with the
provisions of the Merger Agreement (and without any waiver, breach or amendment
of any provisions thereof), for federal income tax purposes, the Merger will be
a "reorganization" within the meaning of Section 368(a) of the Code.
<PAGE>
In addition to the assumptions set forth above, this opinion is
subject to the exceptions, limitations and qualifications set forth below.
1. This opinion represents and is based upon our best judgment
regarding the application of federal income tax laws arising under the Code,
existing judicial decisions, administrative regulations and published rulings
and procedures. Our opinion is not binding upon the Internal Revenue Service or
the courts, and there is no assurance that the Internal Revenue Service will not
successfully assert a contrary position. Furthermore, no assurance can be given
that future legislative, judicial or administrative changes, on either a
prospective or retroactive basis, would not adversely affect the accuracy of the
conclusions stated herein. Nevertheless, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
federal income tax laws.
2. This opinion addresses only the classification of the Merger as a
reorganization under Section 368(a) of the Code, and does not address any other
federal, state, local or foreign tax consequences that may result from the
Merger or any other transaction (including any transaction undertaken in
connection with the Merger). In particular, but without limitation, we express
no opinion regarding (i) whether and the extent to which any AnswerSoft
shareholder who has provided or will provide services to AnswerSoft, Davox or
DAC will have compensation income under any provision of the Code; (ii) the
effects of such compensation income, including but not limited to the effect
upon the basis and holding period of the Davox stock received by any such
shareholder in the Merger; (iii) the potential application of the "golden
parachute" provisions (Sections 280G, 3121(v)(2) and 4999) of the Code, the
alternative minimum tax provisions (Sections 55, 56 and 57) of the Code or
Sections 305, 306, 357, 424, and 708, or the regulations promulgated thereunder;
(iv) except as expressly stated in the preceeding sentence, the corporate level
tax consequences of the Merger to Davox, DAC or AnswerSoft, including without
limitation the recognition of any gain and the survival and/or availability,
after the Merger, of any of the federal income tax attributes or elections of
AnswerSoft, after application of any provision of the Code, as well as the
regulations promulgated thereunder and judicial interpretations thereof; (v) the
application of the collapsible corporation provisions of Section 341 of the Code
to AnswerSoft, (vi) the basis of any equity interest in AnswerSoft acquired by
Davox in the Merger; (vii) the tax consequences of any transaction in which
AnswerSoft stock or a right to acquire AnswerSoft stock was received; (viii) the
tax consequences to any AnswerSoft shareholder or to AnswerSoft, Davox or DAC of
a forfeiture to Davox of all or any part of the shares held in the Escrow Fund;
and (ix) the tax consequences of the Merger (including the opinion set forth
above) as applied to stockholders of AnswerSoft and/or holders of options or
warrants for AnswerSoft stock or that may be relevant
<PAGE>
to particular classes of AnswerSoft stockholders and/or holders of options or
warrants for AnswerSoft stock such as dealers in securities, corporate
shareholders subject to the alternative minimum tax, foreign persons, and
holders of shares acquired upon exercise of stock options or in other
compensatory transactions.
3. No opinion is expressed as to any transaction other than the
Merger as described in the Merger Agreement or to any transaction whatsoever,
including the Merger, if all the transactions described in the Merger Agreement
are not consummated in accordance with the terms of such Merger Agreement and
without waiver or breach of any material provision thereof or if all of the
representations, warranties, statements and assumptions upon which we relied are
not true and accurate through the Effective Time and at all relevant times
thereafter. In the event any one of the statements, representations, warranties
or assumptions upon which we have relied to issue this opinion is incorrect, our
opinion might be adversely affected and may not be relied upon.
4. This opinion has been delivered to you solely for the purpose of
being included as an exhibit to the Registration Statement; it may not be relied
upon for any other purpose (including, without limitation, satisfying any
conditions in the Agreement) or by any other person or entity, and may not be
made available to any other person or entity without our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the captions
"Legal Matters" and "Certain Federal Income Tax Considerations." This consent
is not to be construed as an admission that we are a person whose consent is
required to be filed with the Registration Statement under the provisions of the
Securities Act of 1933.
Very truly yours,
GUNDERSON DETTMER STOUGH VILLENEUVE FRANKLIN &
HACHIGIAN, LLP
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of our report dated
January 26, 1998 included in Davox Corporation's Annual Report on Form 10-K for
the year ended December 31, 1997. We also consent to the reference to us under
the heading "Experts" in such Prospectus.
Arthur Andersen LLP
Boston, Massachusetts
April 6, 1998
<PAGE>
Exhibit 23.3
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Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts"
and to the use of our report dated February 28, 1998 with respect to the
consolidated financial statements of AnswerSoft, Inc. included in the
Registration Statement (Form S-4) and related Joint Proxy Statement and
Prospectus of Davox Corporation for the registration of 2,384,452 shares of its
common stock.
/s/ Ernst & Young LLP
Ernst & Young LLP
Dallas, Texas
April 1, 1998
<PAGE>
DAVOX CORPORATION
PROXY SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Alphonse M. Lucchese and James F. Mitchell
and each or either of them, proxies with full power of substitution to vote all
shares of stock of Davox Corporation (the "Company") which the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Company to be
held on Wednesday, May 6, 1998, at 10:00 a.m. at the offices of the Company,
6 Technology Park Drive, Westford, Massachusetts, and at any adjournment
thereof, upon matters set forth in the Notice of Annual Meeting and Joint Proxy
Statement/Prospectus relating thereto dated April 6, 1998, a copy of which has
been received by the undersigned. THIS PROXY WHEN PROPERLY EXECUTED WILL BE
VOTED IN ACCORDANCE WITH YOUR INDICATED DIRECTIONS. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR PROPOSALS 1, 3,
4 AND 5.
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(TO BE SIGNED ON REVERSE SIDE.) SEE REVERSE
SIDE
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<PAGE>
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR AGAINST ABSTAIN
1. To approve the issuance of 2,384,452 shares of [_] [_] [_]
the Company's common stock, $.10 par value,
pursuant to the Amended and Restated Agreement
and Plan of Merger dated as of April 6, 1998
among the Company, Duke Acquisition Corporation
and AnswerSoft, Inc.
2. To fix the number of directors constituting the FOR WITHHOLD
Board of Directors at four and to elect a Board [_] [_]
of Directors for the ensuing year.
Nominees: A. M. Lucchese
M. D. Kaufman
W. J. Levison
R. S. Asen
FOR AGAINST ABSTAIN
3. To approve an increase in the number of shares [_] [_] [_]
available for issuance under the Company's 1986
Stock Plan to 1,950,000 shares.
4. To ratify the selection of the firm of [_] [_] [_]
Arthur Andersen LLP as auditors for
the Company for the fiscal year ending
December 31, 1998.
5. To consider and act upon any other matters [_] [_] [_]
that may properly be brought before the Annual
Meeting of Stockholders of the Company.
INSTRUCTIONS: To withhold for a specific nominee, write that nominee's name on
the space provided.
- --------------------------------------------------------------------------------
SIGNATURE(S) Dated: , 1998
---------------------------- ------------------------ ---
Signature if Held Jointly
NOTE: Please sign exactly as your name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give your full title as such.
<PAGE>
ANSWERSOFT, INC.
PROXY SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David W. Brandenburg and Richard Connelly
and each or either of them, proxies with full power of substitution to vote all
shares of stock of AnswerSoft, Inc. (the "Company") which the undersigned is
entitled to vote at the Special Meeting of Stockholders of the Company to be
held on Wednesday, May 6, 1998, at 9:00 a.m. at the offices of the Company,
2201 North Central Expressway, Suite 200, Richardson, Texas, and at any
adjournment thereof, upon matters set forth in the Notice of Special Meeting and
Joint Proxy Statement/Prospectus relating thereto dated April 6, 1998, a copy of
which has been received by the undersigned. THIS PROXY WHEN PROPERLY EXECUTED
WILL BE VOTED IN ACCORDANCE WITH YOUR INDICATED DIRECTIONS. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
------------
(TO BE SIGNED ON REVERSE SIDE.) SEE REVERSE
SIDE
------------
<PAGE>
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR AGAINST ABSTAIN
1. To approve the Amended and Restated [_] [_] [_]
Agreement and Plan of Merger dated
April 6, 1998 among the Company,
Duke Acquisition Corporation
and Davox Corporation.
FOR WITHHOLD
2. To approve the Option Vesting Proposals. [_] [_]
3. To consider and act upon any other FOR AGAINST ABSTAIN
matters that may properly be brought [_] [_] [_]
before the Special Meeting of
Stockholders of the Company.
INSTRUCTIONS: To withhold for a specific individual's Option Vesting Proposal,
write that individual's name on the space provided:
- ---------------------------------------------------
SIGNATURE(S) DATE , 1998
------------------------- ------------------------- ---
Signature if Held Jointly
NOTE: Please sign exactly as your name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give your full title as such.
<PAGE>
Exhibit 99.3
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Consent of Piper Jaffray Inc.
We hereby consent to the use of our name in the Joint Proxy
Statement/Prospectus of Davox Corporation and AnswerSoft, Inc. forming part of
the Registration Statement on Form S-4 of Davox Corporation and to the inclusion
of our opinion as Annex C of such Joint Proxy Statement/Prospectus.
In giving the foregoing consent, we do not admit that we are within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules or regulations of the Securities and
Exchange Commission thereunder.
/s/ Piper Jaffray Inc.
Piper Jaffray Inc.
Minneapolis, Minnesota
April 1, 1998
