<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
DAVOX CORPORATION
-----------------
(Name of Registrant as Specified In Its Charter)
---------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
<PAGE>
DAVOX CORPORATION
6 TECHNOLOGY PARK DRIVE
WESTFORD, MASSACHUSETTS 01886
________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 4, 1999
To The Stockholders of Davox Corporation:
Notice is Hereby Given that the Annual Meeting of Stockholders of Davox
Corporation, a Delaware corporation (the "Company"), will be held at 10:00 a.m.,
Boston time, on May 4, 1999, at the offices of the Company, 6 Technology Park
Drive, Westford, Massachusetts to consider and vote upon proposals:
1. To fix the number of directors constituting the Board of Directors
at four and to elect a Board of Directors for the ensuing year.
2. To approve an increase in the number of shares of Common Stock,
$.10 par value, available for issuance under the Davox 1996 Stock Plan (the
"1996 Stock Plan") to 2,700,000 shares.
3. To ratify the selection of the firm of Arthur Andersen LLP as
auditors for the fiscal year ending December 31, 1999.
4. 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 12, 1999 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 Proxy Statement 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,
Timothy C. Maguire
Secretary
Westford, Massachusetts
March 19, 1999
<PAGE>
DAVOX CORPORATION
6 TECHNOLOGY PARK DRIVE
WESTFORD, MASSACHUSETTS 01886
_______________________________
PROXY STATEMENT
_______________________________
MARCH 19, 1999
Proxies in the form enclosed with this proxy statement are solicited by the
Board of Directors of Davox Corporation (the "Company" or "Davox") for use at
the Annual Meeting of Stockholders to be held on May 4, 1999 at 10:00 a.m. local
time at the offices of the Company, 6 Technology Park Drive, Westford,
Massachusetts 01886.
Only stockholders of record as of March 12, 1999 (the "Record Date") will
be entitled to vote at the meeting and any adjournments thereof. As of that
date, 14,379,418 shares of Common Stock, $.10 par value, of the Company were
issued and outstanding. Each share of Common Stock outstanding as of the Record
Date will be entitled to one vote and stockholders may vote in person or by
proxy. Execution of a proxy will not in any way affect a stockholder's right to
attend the meeting and vote in person. Any stockholder giving a proxy has the
right to revoke it by written notice to the Secretary of the Company at any time
before it is exercised or by delivering a later executed proxy to the Secretary
of the Company at any time before the original proxy is exercised.
An Annual Report to Stockholders, containing financial statements for the
fiscal year ended December 31, 1998, is being mailed together with this proxy
statement to all stockholders entitled to vote. This proxy statement and the
form of proxy were first mailed to stockholders on or about March 19, 1999.
The persons named as attorneys in the proxy card are directors and/or
officers of the Company. All properly executed proxies returned in time to be
counted at the meeting will be voted as stated below under "Election of
Directors." Any stockholder giving a proxy has the right to withhold authority
to vote for any individual nominee to the Board of Directors by writing that
nominee's name in the space provided on the proxy. In addition to the election
of directors, the stockholders will consider and vote upon a proposal to amend
the Company's 1996 Stock Plan (the "1996 Plan") to increase the number of shares
of Common Stock authorized for issuance pursuant to the 1996 Plan and a proposal
to ratify the selection of auditors, as further described in this proxy
statement. Where a choice has been specified on the proxy with respect to the
foregoing matters, the shares represented by the proxy will be voted in
accordance with the specifications and will be voted FOR if no specification is
indicated.
The representation in person or by proxy of at least a majority of all
shares of Common Stock issued, outstanding and entitled to vote at the meeting
is necessary to constitute a quorum for the transaction of business. 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.
<PAGE>
The election of directors by the stockholders shall be determined by a
plurality of the votes cast by stockholders entitled to vote. On all other
matters being submitted to stockholders, an affirmative vote of a majority of
the shares present in person or by proxy and entitled to vote on each such
matter is required for approval; therefore, abstentions will have the practical
effect of voting against each such matter since they are included in the number
of shares present and voting on each such matter. However, broker "non-votes"
are not considered shares entitled to vote and therefore will have no impact on
the outcome of the vote.
The Board of Directors of the Company knows of no other matters to be
presented at the meeting. If any other matter should be presented at the meeting
upon which a vote properly may be taken, shares represented by all proxies
received by the Board of Directors will be voted with respect thereto in
accordance with the judgment of the persons named as attorneys in the proxies.
-2-
<PAGE>
MANAGEMENT AND PRINCIPAL STOCKHOLDERS OF DAVOX
The following table sets forth, as of March 12, 1999 (except as noted
below), certain information regarding the ownership of shares of the Company's
Common Stock by (i) each person who, to the knowledge of the Company, owned
beneficially more than 5% of the shares of Common Stock of the Company
outstanding at such date, (ii) each Director and nominee of the Company, (iii)
each Named Officer (as defined below) and (iv) all Directors, nominees and
Executive Officers as a group:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership (1) Percent of Class
- ------------------- ------------------------ ----------------
<S> <C> <C>
Entities and individuals associated with 1,100,000(2) 7.2%
FMR Corp.
82 Devonshire Street
Boston, MA 02109
Alphonse M. Lucchese 510,205(3) 3.3%
R. Scott Asen 536,841(4) 3.5%
Michael D. Kaufman 288,848(5) 1.9%
Walter J. Levison 45,000(6) *
John J. Connolly 63,898(7) *
James F. Mitchell 42,597(8) *
Douglas W. Smith 90,168(9) *
Mark Donovan 44,876(10) *
All Directors, Nominees and Executive 1,730,808(11) 11.3%
Officers as a group (12 Persons)
</TABLE>
______________________________
* Less than 1.0%.
(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 12, 1999.
(2) FMR Corp. ("FMR") has no power to direct the vote with respect to 1,100,000
of such shares. This information is as of December 31, 1998 and is based on
Schedule 13G dated February 12, 1999 filed by FMR.
(3) Includes 510,205 shares subject to options held by Mr. Lucchese exercisable
within 60 days of March 12, 1999.
(4) Includes 20,000 shares owned by Asen and Co. f/b/o SDFJ, Inc., 10,000
shares held by a company to which Mr. Asen, a Director of the Company,
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
487,341 shares
-3-
<PAGE>
individually owned by Mr. Asen and 15,000 shares subject to options held by
Mr. Asen that are exercisable within 60 days of March 12, 1999.
(5) Includes 150,000 shares held by MK Global Ventures and 5,000 shares held by
MK GVS Fund. Mr. Kaufman, a Director of the Company, 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 118,848 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 12, 1999.
(6) Includes 45,000 shares subject to options held by Mr. Levison which will be
exercisable within 60 days of March 12, 1999.
(7) Includes 63,898 shares subject to options held by Mr. Connolly exercisable
within 60 days of March 12, 1999.
(8) Includes 38,126 shares subject to options held by Mr. Mitchell exercisable
within 60 days of March 12, 1999 and does not include 214 shares which are
held by family members, as to which Mr. Mitchell disclaims beneficial
ownership of such shares.
(9) Includes 90,168 shares subject to options held by Mr. Smith exercisable
within 60 days of March 12, 1999.
(10) Includes 39,376 shares subject to options held by Mr. Donovan exercisable
within 60 days of March 12, 1999.
(11) Includes 903,331 shares subject to options held by officers and Directors
which are exercisable within 60 days of March 12, 1999. Also includes
shares held by entities associated with Messrs. Asen and Kaufman as
described in footnotes 4 and 5 respectively.
-4-
<PAGE>
PROPOSAL I
ELECTION OF DIRECTORS
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 Board of Directors 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 Board of
Directors 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 Board of Directors met eight times, and took actions by written consent
six times, during the fiscal year ended December 31, 1998. The Audit Committee
of the Board of Directors, 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, 1998. The Compensation Committee of the Board of Directors, 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 five times, and took action by written consent three
times, during the year ended December 31, 1998. 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 Board of
Directors 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.
Name Age Position
- ---- --- --------
Alphonse M. Lucchese 63 Chairman of the Board of Directors and
Chief Executive Officer
Michael D. Kaufman (1)(2) 57 Director
Walter J. Levison (1)(2) 80 Director
R. Scott Asen (1)(2) 54 Director
_______________
(1) Member of Compensation Committee
(2) Member of Audit Committee
The By-Laws of the Company provide that Board of Directors shall be elected
annually. Officers are elected by, and serve at the discretion of, the Board of
Directors.
Mr. Lucchese has served as Chief Executive Officer of the Company since
July 1, 1994 and has served as a Director and Chairman of the Board of Directors
since August 9, 1994. In addition, Mr.
-5-
<PAGE>
Lucchese served as President of the Company from July 1, 1994 until January 12,
1998. Prior to his employment with the Company, 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 the Company since 1982. Since 1987, Mr.
Kaufman has served as the managing general partner of MK Global Ventures and MK
GVS Fund, each of which is an investment company and a stockholder of the
Company, and MK Global Ventures II, also an investment company. Mr. Kaufman
currently serves as a director of DISC, Inc., Human Phermone Sciences, Inc.
(formerly Erox Corp.), Hypermedia Communications, Inc., Asante Technologies,
Inc. and Syntellect, Inc.
Mr. Levison has been a Director of the Company 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 the Company 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 Board of Directors 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 $8,000. Non-employee Directors are
also entitled to receive stock options pursuant to the 1988 Non-employee
Director Stock Option Plan.
Shares represented by all proxies received by the Board of Directors and
not marked so as to withhold authority to vote for any individual director (by
writing that individual director's name where indicated on the proxy) or for all
directors will be voted (unless one or more nominees are unable or unwilling to
serve) FOR the election of all the nominees named above the election of
directors will be determined by a plurality of the votes cast at the Annual
Meeting. The Board of Directors knows of no reason why any such nominee would
be unable or unwilling to serve, but if such should be the case, proxies may be
voted for the election of another person.
-6-
<PAGE>
COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS
The following table shows compensation information with respect to services
rendered to the Company in all capacities during the years ended December 31,
1998, 1997 and 1996 for (i) the individual who served as the Chief Executive
Officer as of December 31, 1998 and (ii) the other four most highly compensated
executive officers of the Company (collectively with the Chief Executive
Officer, the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation (1) Compensation (2)
------------------------ -----------------
Awards
-----------------
Securities
Underlying All Other
Name and Options(4)/ Compensation
Principal Position Year Salary ($) Bonus ($)(3) SARs (#) ($)
- ------------------------------------ ---- ---------- ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C>
Alphonse M. Lucchese (5)............. 1998 345,000 125,260 0 0
Chairman and Chief 1997 330,000 230,672 299,999/0 0
Executive Officer 1996 297,504 211,524 0 0
Douglas W. Smith..................... 1998 175,000 51,993 20,000/0 0
Vice President - International 1997 160,000 93,201 59,999/0 0
Operations and Strategic
Business Development 1996 146,259 85,913 0 0
John J. Connolly..................... 1998 171,250 25,552 10,000/0 0
Vice President - Finance and Chief 1997 156,250 45,508 59,999/0 0
Financial Officer 1996 141,250 41,845 0 0
James F. Mitchell.................... 1998 165,000 25,003 20,000/0 0
Senior Vice President and 1997 165,000 48,060 15,000/0 0
Chief Technical Officer 1996 159,000 47,105 0 0
Mark Donovan......................... 1998 166,250 21,795 60,000/0 0
Senior Vice President - 1997 132,000 30,756 29,999/0 0
Customer Service and Operations 1996 117,083 27,848 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 $50,000 or 10%
of the total salary and bonus reported.
(2) The Company did not grant any restricted stock awards or stock appreciation
rights ("SARs") or make any long term incentive plan payouts during the
fiscal years ended December 31, 1998, 1997 and 1996.
(3) Indicates bonus payments earned by the Named Officers in the year indicated,
for services rendered in such year, some of which were paid in the next
subsequent year.
(4) Reflects the stock split effected by the Company on May 28, 1997.
(5) Mr. Lucchese served as President of the Company until January 12, 1998.
-7-
<PAGE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Shown below is information with respect to options to purchase the Company's
Common Stock granted to the Named Officers during the fiscal year ended December
31, 1998 under the Company's stock option plans. No stock appreciation rights
were granted to these individuals during such year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
Number of Percent of Total Potential Realizable Value
Securities Options/SARs at Assumed Annual Rates Of
Underlying Granted To Exercise of Stock Price Appreciation
Option/SARs Employees In Base Price for Option Term
Granted (#) Fiscal Year ($/Sh) Expiration Date 5% ($) 10% ($)
-------------- ----------------- ------------ ----------------- -----------------------------
<S> <C> <C> <C> <C> <C>
Alphonse M. Lucchese 0 0 0 0 0 0
Douglas W. Smith 10,000/0 0.92/0% 17.38 July 23, 2008 97,563 258,270
10,000/0 0.92/0% 8.31 November 20, 2008 45,659 121,943
John J. Connolly 10,000/0 0.92/0% 17.38 July 23, 2008 97,563 258,270
James F. Mitchell 20,000/0 1.84/0% 17.38 July 23, 2008 195,126 516,540
Mark Donovan 10,000/0 0.92/0% 26.00 January 29, 2008 187,946 453,279
50,000/0 4.59/0% 19.88 May 7, 2008 609,693 1,559,465
</TABLE>
OPTION EXERCISES AND YEAR-END VALUES
Shown below is information with respect to (i) exercises of stock
options of the Named Officers during the fiscal year ended December 31, 1998 and
(ii) unexercised options outstanding at December 31, 1998 and the value of such
unexercised in-the-money options at December 31, 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Shares Options/SARs at In-the-money
Acquired December 31, 1998 Options/SARs at
on Value (#)(1) December 31, 1998 ($)(2)
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alphonse M. Lucchese 0 0 472,705 187,501 2,044,426.89 0
Douglas W. Smith 0 0 81,417 57,503 347,622.01 0
John J. Connolly 0 0 55,148 47,501 196,263.07 0
James F. Mitchell 0 0 33,750 29,375 133,202.82 0
Mark Donovan 0 0 28,125 71,249 38,671.88 0
</TABLE>
- -----------------------
(1) Options granted to the Named Officers become fully vested immediately
prior to the merger, consolidation, liquidation or sale of substantially
all of the assets of the Company and terminate immediately after the
effective date of such merger, consolidation, liquidation or sale.
(2) Value is based on the difference between the option exercise price and
the fair market value of the Company's Common Stock on December 31, 1998
($7.63 per share, the last reported sales price of the Company's Common
Stock on the Nasdaq National Market System on December 31, 1998)
multiplied by the number of shares underlying the option.
-8-
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company'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 the Company.
Under the supervision of the Compensation Committee, the Company
developed and implemented the 1998 Management Compensation Plan for the Chief
Executive Officer and certain of the executive officers of the Company (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) the Company'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 the Company.
Incentive compensation in the form of performance-based bonuses for the
Chief Executive Officer and the Company's other executive officers is based upon
management's success in meeting the Company'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 subsequently revised
twice during fiscal 1998) and bonuses were allocated to the Chief Executive
Officer and certain other executive officers contingent upon the achievement of
the target levels.
Mr. Alphonse Lucchese is the Chief Executive Officer and a Director of
the Company. His fiscal 1998 performance was evaluated on the basis of the
factors described above applicable to 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 component, as
well as his salary, reflect the Company's financial performance, the continued
introduction and commercialization of new products and progress toward achieving
business goals and the achievement by Mr. Lucchese of non-financial goals. In
assessing Mr. Lucchese's performance for fiscal 1998, 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 the Company
and to enable optionees to develop and maintain a significant, long-term stock
ownership position in the Company's Common Stock. The Compensation Committee
grants stock options to the Company's executive officers in consideration of the
strategic goals and direction of the Company. The Company'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
-9-
<PAGE>
continued employment. The value realizable from exercisable options is dependent
upon the extent to which the Company's performance is reflected in the market
price of the Company's Common Stock at any particular point in time.
The Company 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 the Company's Common Stock to
employees (as defined in the Stock Purchase Plan) of the Company pursuant to
non-transferable options at less than fair market value. Employees who own 5% or
more of the Common Stock of the Company and non-employee directors are not
eligible to participate in the Stock Purchase Plan. As of the date hereof
100,726 shares of Common Stock have been issued under the Stock Purchase Plan.
In general, under Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"), the Company cannot deduct, for federal income tax
purposes, compensation in excess of $1,000,000 paid to certain executive
officers. This deduction limitation does not apply, however, to compensation
that constitutes "qualified performance-based compensation" within the meaning
of Section 162(m) of the Code and the regulations promulgated thereunder. The
Company has considered the limitations on deductions imposed by Section 162(m)
of the Code, and it is the Company's present intention that, for so long as it
is consistent with its overall compensation objective, substantially all tax
deductions attributable to executive compensation will not be subject to the
deduction limitations of Section 162(m) of the Code.
The Compensation Committee is satisfied that the executive officers of
the Company are dedicated to achieving significant improvements in the long-term
financial performance of the Company 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
-10-
<PAGE>
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the
cumulative total stockholder return on the Company's Common Stock for the five
fiscal years ended December 31, 1998, 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, 1993 in the Company's Common Stock and in each of the foregoing
indices and assumes reinvestment of dividends, if any.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG DAVOX CORPORATION,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
12/31/93 12/30/94 12/29/95 12/31/96 12/31/97 12/31/98
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Davox Corporation 100.00 107.50 237.50 825.00 978.26 228.64
Nasdaq Market Index 100.00 104.99 136.18 169.23 207.00 291.96
Peer Group Index 100.00 95.67 154.27 163.74 195.67 426.23
- -------------------------------------------------------------------------------------------------------------------------
</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, the Company is not responsible for any errors or omissions in
such information.
-11-
<PAGE>
SEVERANCE ARRANGEMENTS
Pursuant to the terms of Mr. Lucchese's 1994 Executive Compensation
Plan, if Mr. Lucchese is terminated without cause he will receive 12 monthly
severance payments totaling the greater of (i) Mr. Lucchese's annual base salary
in the year of termination; or (ii) Mr. Lucchese's prior year base salary plus
any bonus earned in the prior year.
Pursuant to the terms of Mr. Mitchell's 1994 Executive Compensation
Plan, the Company shall continue Mr. Mitchell's base salary and medical benefits
for a period of 12 months if Mr. Mitchell is terminated due to an economic
layoff, a downsizing that eliminates his position or a reorganization that would
require Mr. Mitchell to relocate.
Pursuant to the terms of Mr. Smith's 1994 Executive Compensation Plan,
the Company shall continue Mr. Smith's base salary and medical benefits for a
period of 6 months if Mr. Smith is terminated due to an economic layoff, a
downsizing that eliminates his position or a reorganization that would require
Mr. Smith to relocate.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF THE COMPANY
The Company has adopted a policy that all transactions between the
Company and its officers, directors, principal stockholders and their affiliates
be on terms no less favorable to the Company than could be obtained from
unrelated third parties and that any loans by the Company 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 the Company's
legal staff and received $110,599 in compensation during the fiscal year ended
December 31, 1998. QCC, Inc., a corporation of which Mr. Alphonse M. Lucchese,
Jr., son of Mr. Alphonse M. Lucchese, was a fifty-percent stockholder, provided
technical consulting services to the Company. QCC, Inc. was subsequently sold to
Whittman-Hart, Inc. and Mr. Alphonse M. Lucchese, Jr. became an employee of that
organization. Whittman-Hart, Inc. provided similar consulting services to the
Company. During the fiscal year ended December 31, 1998, QCC, Inc. and Whittman-
Hart, Inc. received an aggregate of $336,273 in connection with rendering of
such consulting services to the Company.
PROPOSAL II
PROPOSAL TO AMEND THE 1996 PLAN
The 1996 Stock Plan was adopted by the Company's Board of Directors in
July 1996 and was approved by the Company's stockholders in April 1997. A
maximum of 900,000 shares (as adjusted in connection with the stock split
effected by the Company in May 1997) 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 the Company or the opportunity to make direct
stock purchases of shares of the Company. At the Company's 1998 Annual Meeting
of Stockholders held on May 6, 1998, the Company's stockholders approved a
proposal to increase the total number of shares authorized for issuance pursuant
to the 1996 Stock Plan to 1,950,000 shares. The Board of Directors 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 750,000
shares to 2,700,000 shares.
The Company's management relies on stock options as essential parts of
the compensation packages necessary for the Company to attract and retain
experienced officers and employees. The
-12-
<PAGE>
Board of Directors believes that the proposed increase in the number of shares
available under the 1996 Stock Plan is essential to permit the Company's
management to continue to provide long-term, equity-based incentives to present
and future key employees.
The following table sets forth as of March 12, 1999 all options granted
under the 1996 Stock Plan since its inception to (i) each of the Named Officers,
(ii) each person who has received five percent or more of the stock options
granted under the 1996 Stock Plan, (iii) all current executive officers of the
Company as a group and (iv) all employees, excluding executive officers, of the
Company as a group. Non-employee directors of the Company are not eligible to
receive stock options under the 1996 Stock Plan and no non-employee director has
been granted stock options under the 1996 Stock Plan since its inception. Future
awards are in the discretion of the Board of Directors and cannot be determined
at this time.
<TABLE>
<CAPTION>
Number of Shares
Represented by Options (1)
--------------------------
<S> <C>
Alphonse M. Lucchese* 299,999
Chairman and Chief Executive Officer
John J. Connolly 79,999
Vice President - Finance and Chief Financial Officer
James F. Mitchell 45,000
Senior Vice President and Chief Technical Officer
Mark Donovan* 99,999
Senior Vice President - Customer Service
and Operations
Douglas W. Smith 79,999
Vice President - International Operations
and Strategic Business Development
Joseph R. Coleman* 127,500
Vice President - North American Sales
Executive Group (9 persons) 847,495
Non-Executive Employee Group 1,045,010
</TABLE>
- --------------
* Persons who have received five percent or more of the stock options granted
under the 1996 Stock Plan.
(1) Options vest in eight equal semi-annual installments beginning six months
after date of grant. All stock options were granted with an exercise price equal
to the fair market value of the Common Stock on the date of grant. The ultimate
value of the options will depend on the future market value of the Company's
stock, which cannot be forecast with reasonable accuracy.
Description of the 1996 Stock Plan
The purpose of the 1996 Stock Plan is to provide incentives to
directors, officers and other employees of the Company by providing them with
opportunities to purchase stock of the Company and participate in the ownership
of the Company.
Under the 1996 Stock Plan, employees and officers of the Company may be
awarded incentive stock options ("ISO" or "ISOs"), as defined in Section 422(b)
of the Code, and directors (provided they are also employees), officers,
employees and consultants of the Company may be granted (i) options which do not
qualify as ISOs ("Non-Qualified Option" or "Non-Qualified Options"), (ii) awards
of stock in the Company ("Awards"), and (iii) opportunities to make direct
purchases of stock in the Company ("Purchases"). ISOs, Non-Qualified Options,
Awards and Purchases are sometimes collectively
-13-
<PAGE>
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 1,950,000 shares of Common Stock of the Company
pursuant to the grant of Stock Rights. Currently, 402 employees (including one
director who is also an employee and officer of the Company) of the Company are
eligible to participate in the 1996 Stock Plan.
The 1996 Stock Plan is administered by the Compensation Committee (the
"Committee") of the Board of Directors. 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 the Company 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 the Company, 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 the Company.
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 the Company 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, (iii) through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the Option or (iv) by any
combination of the above.
The 1996 Stock Plan limits to 750,000 shares (as adjusted in connection
with the stock split effected by the Company 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 the Company other than by
reason of death or disability, no further installments of his or her ISOs will
become exercisable, and vested ISOs shall
-14-
<PAGE>
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 the Company 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, 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 Board of Directors 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 Rights 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 the Company 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 and the
optionee does not satisfy the requisite 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 disposition 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, the Company
generally should be entitled to a corresponding federal income tax deduction.
-15-
<PAGE>
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 the Company's Common Stock to the Company 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.
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 or her
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 the Company 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. The Company 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 shares (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, the Company generally should 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 the Company's Common Stock to the Company in payment of the
exercise price. If an optionee exercises a Non-Qualified Option in such fashion,
special rules apply.
-16-
<PAGE>
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.
Awards and Purchases. The following general rules are applicable under
current federal income tax law to Awards and Purchases under the 1996 Stock
Plan:
Persons receiving shares pursuant to an Award or Purchase 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. The
Company generally should be entitled to a corresponding federal income tax
deduction. When such shares are sold, the seller 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 Board of Directors recommends a vote FOR the proposal to approve
the amendment to the Company's 1996 Stock Plan.
PROPOSAL III
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of Arthur Andersen LLP
independent certified public accountants, to serve as auditors for the fiscal
year ending December 31, 1999. Arthur Andersen LLP has served as the Company'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 Board of Directors recommends a vote FOR the ratification of this
selection.
OTHER MATTERS
The Board of Directors does not intend to bring any matters before the
Annual Meeting other than those specifically set forth in the Notice of Meeting
and it knows of no matters to be brought before the Annual Meeting by others. If
any other matters properly come before the Annual Meeting, it is the intention
of the persons named in the accompanying proxies to vote such proxies in
accordance with the judgment of the Board of Directors.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Company, and
in addition to soliciting stockholders by mail through its regular employees,
the Company may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of the Company 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 the Company may also be made of
some stockholders in person or by mail, telephone or telegraph following the
original solicitation. The Company has retained Innisfree M&A Incorporated to
assist in the solicitation of proxies. The Company will bear all reasonable
solicitation fees and expenses and the Company estimates that such fees and
expenses should be approximately $15,000 in the aggregate.
-17-
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and holders of more than 10% of the Company'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 the Company.
Such persons are required by regulations of the Commission to furnish the
Company with copies of all such filings. James F. Mitchell, an officer of the
Company, failed to file his Statement of Changes in Beneficial Ownership in a
timely manner when he sold 15,000 shares of the Company's Common Stock. Mr.
Mitchell subsequently filed such a report that disclosed the aforementioned
transaction. Based on its review of the copies of such filings received by it
with respect to the fiscal year ended December 31, 1998 and written
representations from certain Reporting Persons, the Company believes that all
other Reporting Persons complied with all Section 16(a) filing requirements in
1998.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the Company's proxy
materials to be furnished to all stockholders entitled to vote at the 2000
Annual Meeting of Stockholders pursuant to SEC Rule 14a-8 must be received at
the Company's principal executive offices not later than November 20, 1999.
Stockholders who wish to make a proposal at the 2000 Annual Meeting - other than
one that will be included in the Company's proxy materials - should notify the
Company no later than February 3, 2000. If a stockholder who wishes to present a
proposal fails to notify the Company by this date, the proxies that management
solicits for the meeting will have discretionary authority to vote on the
stockholder's proposal if it is properly brought before the meeting. If a
stockholder makes a timely notification, the proxies may still exercise
discretionary voting authority under circumstances consistent with the SEC's
proxy rules.
-18-
<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 Tuesday, May 4, 1999, 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 Proxy Statement dated
March 19, 1999, 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, 2, 3 AND 4.
(TO BE SIGNED ON REVERSE SIDE) ------------
SEE REVERSE
SIDE
------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR WITHHOLD Nominees: A.M. Lucchese
1. To fix the number / / / / M.D. Kaufman
of directors constituting W.J. Levison
the Board of Directors R.S. Asen
at four and to elect a Board of Directors
for the ensuing year.
INSTRUCTIONS: To withhold for a specific nominee, write
that nominee's name on the space provided.
________________________________________
FOR AGAINST ABSTAIN
2. To approve an increase in the number of shares / / / / / /
available for issuance under the Company's
1996 Stock Plan to 2,700,000.
3. To ratify the selection of the firm of Arthur / / / / / /
Andersen LLP as auditors for the Company
for the fiscal year ending December 31, 1999.
4. To consider and act upon any other matters that / / / / / /
may properly be brought before the Annual
Meeting of Stockholders of the Company.
SIGNATURE(S)_____________________ _________________________ Dated:_______, 1999
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 full title as such.
- --------------------------------------------------------------------------------
