<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/x/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Brite Voice Systems, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Brite Voice Systems, Inc.
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/x/ 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:
common stock, no par value
-----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
3,331,000 shares
-----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
$18.3125 per share
-----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
$60,998,937
------------------------------------------------------------------------
5) Total fee paid:
$12,200.00
-----------------------------------------------------------------------
Set forth the amount on which the filing fee is calculated and state how it
was determined:
The fee is computed pursuant to the provisions of Rule 0-11 and is based
on the average of the high and low prices for the common stock on
May 21, 1995, as reported on the Nasdaq Stock Market.
/ / 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.:
Schedule 14A
------------------------------------------------------------------------
3) Filing Party:
BRITE VOICE SYSTEMS, INC.
------------------------------------------------------------------------
4) Date Filed:
May 24, 1995
------------------------------------------------------------------------
<PAGE>
[LOGO]
BRITE VOICE SYSTEMS, INC.
June 20, 1995
DEAR STOCKHOLDER:
You are cordially invited to attend the Special Meeting of the Stockholders
of BRITE VOICE SYSTEMS, INC. to be held at 10:00 a.m., local time, on July 21,
1995 at the principal offices of the Company, 7309 East 21st Street North,
Wichita, Kansas.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Reorganization and
Merger (the "Merger Agreement"), dated as of May 24, 1995, between the Company,
each of Telecom Services Limited (U.S.), Inc., Telecom Services Limited (West),
Inc., TSL Software Services, Inc., and TSL Management Group, Inc. (collectively
the "TSL Companies"), and the shareholders of the TSL Companies (the "TSL
Shareholders"), to approve the mergers (the "Mergers") of each of the TSL
Companies with and into the Company pursuant to the Merger Agreement and to
approve the issuance of shares of Common Stock in the Mergers. As a result of
the Mergers, the TSL Shareholders will receive an aggregate of 3,331,000 shares
of the Company's common stock for all of the outstanding shares of common stock
of the TSL Companies.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGERS AND RECOMMENDS
THAT YOU VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT, APPROVAL OF THE
MERGERS AND APPROVAL OF THE ISSUANCE OF SHARES OF THE COMPANY'S COMMON STOCK IN
THE MERGERS.
Details of the proposed Mergers and other important information concerning
the Company and the TSL Companies appear in the accompanying Proxy Statement.
Please give this material your careful attention.
Whether or not you plan to attend the Special Meeting, please complete, sign
and date the accompanying proxy card and return it in the enclosed 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 Special Meeting. If
you attend the Special Meeting, you may vote in person even if you have
previously returned your proxy card. Your prompt cooperation will be greatly
appreciated.
Sincerely,
Stanley G. Brannan
PRESIDENT AND CHAIRMAN
OF THE BOARD OF DIRECTORS
<PAGE>
BRITE VOICE SYSTEMS, INC.
------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 21, 1995
---------------------
To the Stockholders of
BRITE VOICE SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of BRITE VOICE
SYSTEMS, INC. ("Brite" or the "Company"), a Kansas corporation, will be held at
10:00 a.m., local time, on July 21, 1995, at the principal offices of the
Company, 7309 East 21st Street North, Wichita, Kansas.
1. To approve and adopt the Agreement and Plan of Reorganization and Merger
(the "Merger Agreement"), dated as of May 24, 1995, between the Company,
each of Telecom Services Limited (U.S.), Inc., Telecom Services Limited
(West), Inc., TSL Software Services, Inc., and TSL Management Group, Inc.
(collectively the "TSL Companies"), and the shareholders of the TSL
Companies (the "TSL Shareholders"), to approve the mergers (the
"Mergers") of the TSL Companies with and into the Company pursuant to the
Merger Agreement and to approve the issuance of shares of the Company's
Common Stock in the Mergers. As a result of the Mergers, the TSL
Shareholders will receive an aggregate of 3,331,000 shares of common
stock for all of the shares of common stock of the TSL Companies. Upon
consummation of the Mergers there will be approximately 11,420,523 shares
of the Company's Common Stock outstanding.
2. 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 June 13, 1995 are
entitled to notice of and to vote at the Special Meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to sign and
return the enclosed proxy card as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. YOU MAY REVOKE YOUR PROXY IN THE MANNER
DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT AT ANY TIME BEFORE IT HAS BEEN
VOTED AT THE SPECIAL MEETING. ANY STOCKHOLDER ATTENDING THE SPECIAL MEETING MAY
VOTE IN PERSON EVEN IF HE OR SHE HAS RETURNED A PROXY.
Sincerely,
Glenn A. Etherington
SECRETARY
Wichita, Kansas
June 20, 1995
<PAGE>
BRITE VOICE SYSTEMS, INC.
7309 EAST 21ST STREET NORTH,
WICHITA, KANSAS 67202
------------------------
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
JULY 21, 1995
---------------------
This Proxy Statement is being furnished to holders of common stock, no par
value per share ("Common Stock"), of Brite Voice Systems, Inc., a Kansas
corporation ("Brite" or the "Company"), in connection with the solicitation of
proxies by the Board of Directors of the Company for use at a Special Meeting of
the stockholders of the Company to be held at 10:00 a.m., local time, on July
21, 1995 or at any adjournments or postponements thereof, for the purposes set
forth herein and in the accompanying Notice of Special Meeting of Stockholders
(the "Special Meeting"). The Special Meeting will be held at the principal
offices of the Company, 7309 East 21st Street North, Wichita, Kansas.
THIS PROXY STATEMENT AND THE ACCOMPANYING FORM OF PROXY ARE FIRST BEING
MAILED TO STOCKHOLDERS ON OR ABOUT JUNE 20, 1995.
THE DATE OF THIS PROXY STATEMENT IS JUNE 20, 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (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 can 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 in
the New York Regional Office, Seven World Trade Center, 13th Floor, New York,
New York 10048, and the Chicago Regional Office, Room 1400, 500 West Madison
Street, Chicago, Illinois 60661. Copies of such material can 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 TSL Companies are not subject to the informational requirements of the
Exchange Act.
DOCUMENTS INCORPORATED BY REFERENCE
THIS PROXY STATEMENT INCORPORATES BY REFERENCE DOCUMENTS OF THE COMPANY
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH
DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS, ARE AVAILABLE WITHOUT CHARGE
TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT IS
DELIVERED, UPON WRITTEN OR ORAL REQUEST TO THE SECRETARY OF BRITE, 7309 EAST
21ST STREET NORTH, WICHITA, KANSAS 67206; TELEPHONE NUMBER (316) 652-6500. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, A REQUEST SHOULD BE MADE
BEFORE JULY 14, 1995.
THE FOLLOWING DOCUMENTS, HERETOFORE FILED WITH THE COMMISSION PURSUANT TO
THE EXCHANGE ACT, ARE INCORPORATED HEREIN BY THIS REFERENCE:
(1) THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1994;
(2) THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
MARCH 31, 1995; AND
(3) THE COMPANY'S PROXY STATEMENT FOR ITS ANNUAL MEETING OF STOCKHOLDERS
HELD ON MAY 9, 1995.
ANY STATEMENTS CONTAINED IN DOCUMENTS INCORPORATED BY REFERENCE HEREIN SHALL
BE DEEMED TO BE MODIFIED OR SUPERSEDED FOR PURPOSES HEREOF TO THE EXTENT THAT A
STATEMENT CONTAINED HEREIN (OR IN ANY OTHER SUBSEQUENTLY FILED DOCUMENT WHICH
ALSO IS INCORPORATED BY REFERENCE HEREIN) MODIFIES OR SUPERSEDES SUCH STATEMENT.
ANY STATEMENT SO MODIFIED OR SUPERSEDED SHALL NOT BE DEEMED TO CONSTITUTE A PART
HEREOF, EXCEPT AS SO MODIFIED OR SUPERSEDED.
ALL DOCUMENTS FILED BY THE COMPANY PURSUANT TO SECTIONS 13(A), 13(C), 14 AND
15(D) OF THE EXCHANGE ACT SUBSEQUENT TO THE DATE HEREOF AND PRIOR TO THE DATE OF
THE SPECIAL MEETING, AND ANY AND ALL ADJOURNMENTS THEREOF, SHALL BE DEEMED TO BE
INCORPORATED BY REFERENCE HEREIN AND TO BE A PART HEREOF FROM THE DATE ANY SUCH
DOCUMENT IS FILED. ALL INFORMATION APPEARING IN THIS PROXY STATEMENT IS
QUALIFIED IN ITS ENTIRETY BY THE INFORMATION AND FINANCIAL STATEMENTS (INCLUDING
NOTES THERETO) APPEARING IN THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE.
2
<PAGE>
TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION..................................................... 2
DOCUMENTS INCORPORATED BY REFERENCE....................................... 2
SUMMARY................................................................... 4
The Company............................................................. 4
The TSL Companies....................................................... 4
The Meeting............................................................. 5
Purpose of the Meeting.................................................. 5
Record Date; Stockholders Entitled to Vote; Vote Required............... 5
Appraisal Rights of Dissenting Stockholders............................. 5
Special Considerations.................................................. 5
Effect of Mergers; Consideration........................................ 5
Recommendation of the Board of Directors and Reasons for the Mergers.... 6
Opinion of Lazard Freres & Co........................................... 6
Effective Time of the Mergers........................................... 6
Conditions to the Mergers; Termination and Amendment.................... 6
Merger Expenses......................................................... 7
Accounting Treatment.................................................... 7
Federal Income Tax Treatment............................................ 7
Regulatory Matters...................................................... 7
Registration Rights..................................................... 7
Employment Agreements................................................... 8
SPECIAL CONSIDERATIONS.................................................... 8
Risks Related to the Mergers............................................ 8
Risks Related to the TSL Companies' Business............................ 9
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA................ 11
Selected Historical Financial Data...................................... 12
Selected Unaudited Pro Forma Financial Data............................. 13
Comparative Per Share Data.............................................. 13
THE MEETING............................................................... 14
General................................................................. 14
Matters to Be Considered at the Meeting................................. 14
Recommendation of the Board ofDirectors................................. 14
Record Date; Voting at the Meeting; Vote Required....................... 14
Proxies................................................................. 14
THE MERGERS............................................................... 15
Background of the Mergers............................................... 15
Reasons for the Mergers; Recommendation of the Board of Directors....... 17
PAGE
----
Conduct of Business of the Combined Company Following the Mergers....... 18
Opinion of Lazard Freres & Co........................................... 19
Federal Income Tax Treatment............................................ 21
Accounting Treatment.................................................... 21
Regulatory Matters...................................................... 21
Dissenters' Rights...................................................... 22
THE MERGER AGREEMENT...................................................... 23
General................................................................. 23
Effective Time of Mergers............................................... 23
Manner and Basis of Converting Shares................................... 23
Restrictions on Resale of Common Stock.................................. 24
Conduct of Business Prior to the Mergers................................ 24
Corporate Structure and Related Matters After the Mergers............... 25
Conditions to the Mergers............................................... 26
Registration Rights..................................................... 27
Termination; Amendment.................................................. 28
Expenses................................................................ 29
Indemnification......................................................... 29
THE EMPLOYMENT AGREEMENTS................................................. 30
SELECTED COMBINED FINANCIAL DATA OF THE TSL COMPANIES..................... 31
THE TSL COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...................................... 32
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS............................................................... 35
INFORMATION CONCERNING THE COMPANY........................................ 43
INFORMATION CONCERNING THE TSL COMPANIES.................................. 43
General................................................................. 43
Executive Officers, Directors and Shareholders.......................... 43
Products and Services................................................... 44
Markets and Customers................................................... 46
Research and Development................................................ 47
Competition............................................................. 47
Patents and Trademarks.................................................. 47
Employees............................................................... 47
Properties.............................................................. 48
Legal Proceedings....................................................... 48
OTHER MATTERS............................................................. 48
INDEX TO COMBINED FINANCIAL STATEMENTS OF THE TSL COMPANIES............... F-1
ANNEX A - AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
ANNEX B - FAIRNESS OPINION OF LAZARD FRERES & CO.
ANNEX C - KANSAS GENERAL CORPORATION CODE, SECTION 17-6712
3
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF THIS PROXY STATEMENT, THE ANNEXES HERETO AND THE DOCUMENTS INCORPORATED
BY REFERENCE HEREIN. STOCKHOLDERS ARE URGED TO READ THIS PROXY STATEMENT AND THE
ACCOMPANYING ANNEXES IN THEIR ENTIRETY. CAPITALIZED TERMS USED BUT NOT DEFINED
IN THIS SUMMARY SHALL HAVE THE MEANINGS ASCRIBED TO SUCH TERMS ELSEWHERE IN THIS
PROXY STATEMENT.
THE COMPANY
Brite Voice Systems, Inc. (together with its subsidiaries, "Brite" or "the
Company") designs, integrates, assembles and markets voice processing systems
and services which incorporate audiotex, voice response, voice recognition,
voice/facsimile messaging and interactive computer applications into customized
market solutions. The Company's customers include telephone companies,
government agencies, utility companies, yellow pages publishers, universities,
financial institutions, cellular network operators and newspapers.
The Company was incorporated in Kansas in 1984. Its principal executive
offices are located at 7309 East 21st Street North, Wichita, Kansas 67206, and
its telephone number at that location is (316) 652-6500.
THE TSL COMPANIES
Telecom Services Limited (U.S.), Inc. ("TSL(US)"), Telecom Services Limited
(West), Inc. ("TSL(West)"), TSL Software Services, Inc. ("TSL Software"), and
TSL Management Group, Inc. ("TSL Management") (collectively the "TSL Companies"
or "TSL"), are New Jersey corporations which are affiliated by common ownership.
TSL(US) was incorporated on July 14, 1986, TSL(West) was incorporated on
December 15, 1988, TSL Software was incorporated on September 21, 1989, and TSL
Management was incorporated on December 29, 1992. The principal executive office
of TSL (US), is located at 50 Broad Street, New York, New York 10004. The TSL
Companies' telephone number at that location is (212) 248-2000. The principal
executive office of TSL(West) is located at 220 Montgomery Street, Suite 917,
San Francisco, California 94104. The TSL Companies' telephone number at that
location is (415) 291-8440. The principal executive offices of TSL Software and
TSL Management are located at 1259 Route 46, Building 1, Parsippany, New Jersey.
The TSL Companies' telephone number at that location is (201) 334-4042.
The TSL Companies offer a broad array of services and products which assist
clients in managing various aspects of their telecommunications requirements,
including managing and reducing expenses, selecting service and equipment
vendors, designing and implementing telecommunications systems, managing
day-to-day operations, and developing management reports and applications. The
TSL Companies' operations are comprised of the following four symbiotic
categories:
MANAGEMENT SOFTWARE APPLICATIONS AND SERVICES: The TSL Companies, using
their proprietary software, manage the cost allocation and call accounting
activities of clients' telecommunications operations and provide consulting
services associated with the implementation of the TSL Companies' software. In
addition, the TSL Companies employ and license a PC-based operations management
system to aid facilities management, including the management of equipment
inventories and circuits, work orders, trouble reporting, invoice processing,
telephone directories and trading floors.
OPERATIONS MANAGEMENT: The TSL Companies offer on-site and off-site
operational support of clients' telecommunications invoice processing,
move-add-change, internal directory maintenance, help desk functions and related
activities.
BILLING VERIFICATION SERVICES: The TSL Companies audit clients'
telecommunications bills to verify that they reflect charges for telephone
services (voice and data) and equipment actually contracted for and used, and
that appropriate billing tariffs, rates, taxes and surcharges have been
4
<PAGE>
properly applied. The TSL Companies prepare and submit refund requests and
ensure that clients receive the appropriate reimbursement for incorrect prior
bills as well as ensuring that future bills are correct.
TECHNICAL CONSULTING: The TSL Companies analyze, design, implement,
engineer and procure clients' voice and data communications networks. The TSL
Companies also offer specialized services such as planning and overseeing
corporate relocations, designing voice and data networks, designing and
implementing trading floor networks, and developing disaster recovery plans.
THE MEETING
The Special Meeting will be held on July 21, 1995 at 10:00 a.m., local time,
at the principal offices of the Company, 7309 East 21st Street North, Wichita,
Kansas.
PURPOSE OF THE MEETING
At the Special Meeting, the stockholders of the Company will be asked to
consider and vote upon proposals to approve and adopt the Merger Agreement
(included as ANNEX A to this Proxy Statement and incorporated herein by
reference), to approve the Mergers and to approve the issuance of shares of the
Company's common stock, no par value per share (the "Common Stock") in the
Mergers. See "Record Date; Voting at the Meeting; Vote Required."
RECORD DATE; STOCKHOLDERS ENTITLED TO VOTE; VOTE REQUIRED
Only holders of record of Common Stock at the close of business on June 13,
1995 are entitled to notice of and to vote at the Special Meeting. At such date,
there were 8,097,573 shares of Common Stock outstanding, each of which will be
entitled to one vote. As of such date, directors and executive officers of the
Company and their affiliates may be deemed to be beneficial owners of Common
Stock representing approximately 23.4% of the outstanding Common Stock. Approval
of the Merger Agreement, the Mergers and the issuance of the shares of Common
Stock in the Mergers will require the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock. See "Record Date; Voting at
the Meeting; Vote Required."
APPRAISAL RIGHTS OF DISSENTING STOCKHOLDERS
Holders of Common Stock who file a written objection to and do not vote in
favor of the Mergers may, under certain circumstances and by following
procedures prescribed by the Kansas General Corporation Code, exercise
dissenters' rights and receive cash for their shares of Common Stock. The
failure of a dissenting stockholder to follow the appropriate procedures,
including not voting in favor of the Mergers, may result in the termination or
waiver of such rights. A proxy granted with respect to a stockholder's Common
Stock, if revoked prior to the vote on the Mergers, will not affect the
stockholder's ability to assert dissenters' rights.
The TSL Shareholders, pursuant to the Merger Agreement, have waived all
dissenters' rights available to them under applicable New Jersey law and have
agreed to vote all of their shares of common stock in each of the TSL Companies
(the "TSL Shares") in favor of the Mergers.
For information regarding dissenters' rights under Kansas law, see "The
Mergers -- Dissenters' Rights."
SPECIAL CONSIDERATIONS
For a discussion of certain factors that should be considered carefully in
evaluating the proposed Mergers, see "Special Considerations."
EFFECT OF MERGERS; CONSIDERATION
Upon consummation of the Mergers, each of the TSL Companies will be merged
with and into the Company. All of the TSL Shares outstanding immediately prior
to the Mergers will be converted into the right to receive an aggregate of
3,331,000 shares of Common Stock. For a discussion of the allocation of such
shares among the TSL Shareholders see "Information Concerning the TSL Companies
-- Shareholders."
5
<PAGE>
RECOMMENDATION OF THE BOARD OF DIRECTORS AND REASONS FOR THE MERGERS
The Board of Directors considered a number of potential benefits expected to
be derived from the Mergers, including the TSL Companies' history of growth and
profitability, a substantial increase in the percentage of the Company's
revenues expected to be derived from the provision of continuing services, the
opportunity to diversify the Company's business into a closely related and
rapidly developing industry, the potential sales synergies between the Company
and the TSL Companies, and in particular, the potential for sales of the TSL
Companies' services to the Company's customers, and the opportunity for
expansion of the TSL Companies' business throughout the United States and
possibly internationally. In addition, the Board considered the opinion of
Lazard Freres & Co., its financial advisor ("Lazard Freres"). See "The Mergers
-- Opinion of Lazard Freres & Co."
The Board also considered the risks associated with the proposed Mergers,
including that the potential benefits of the Mergers may not be realized. See,
"Special Considerations." However, the Board believes that the positive factors
outweigh any negative factors. For the reasons set forth above, the Board of
Directors has unanimously approved the Merger Agreement, the Mergers and the
issuance of the Common Stock in the Mergers and believes that the Mergers are
fair and in the best interests of the Company and its stockholders. The Board
unanimously recommends that the stockholders vote in favor of the Merger
Agreement, the Mergers and the issuance of the Common Stock in connection with
the Mergers. See "The Mergers -- Background of the Mergers," and "-- Reasons for
the Mergers; Recommendation of the Board of Directors."
OPINION OF LAZARD FRERES & CO.
Lazard Freres has rendered its written opinion dated June , 1995, to the
Company that, as of such date, the number of shares of Common Stock to be
delivered by the Company for the TSL Shares converted in the Mergers is fair,
from a financial point of view, to the Company and its stockholders. The full
text of Lazard Freres' opinion, which sets forth the assumptions made, matters
considered, procedures followed and limits of the review undertaken, is attached
at Annex B to this Proxy Statement and should be read in its entirety. In
consideration of Lazard Freres' services in rendering the fairness opinion, the
Company has agreed to pay Lazard Freres a fee of $300,000, contingent upon
consummation of the Mergers, and will reimburse a maximum of $25,000 of Lazard
Freres' out-of-pocket expenses, whether or not the Mergers are consummated. In
addition, the Company has agreed to indemnify Lazard Freres against certain
liabilities, including liabilities under the federal securities laws. Prior to
the Company's engagement of Lazard Freres to render a fairness opinion in
connection with the Mergers, Lazard Freres had not previously been engaged to
provide investment banking services to either the Company or the TSL Companies.
However, during a portion of the period of negotiations between the Company and
the TSL Companies, Lazard Freres' representatives consulted with the Company's
management regarding certain aspects of the negotiations, including the
consideration to be delivered by the Company in the Mergers. After execution of
the engagement letter on April 25, 1995, Lazard Freres participated to a limited
extent in the negotiations involving issues other than the number of shares of
Common Stock to be delivered in the Mergers. See "The Mergers -- Opinion of
Lazard Freres & Co."
EFFECTIVE TIME OF THE MERGERS
The closing of each Merger shall be contingent upon, and deemed to occur
simultaneously with, the other Mergers. Each Merger will become effective upon
the filing of a related Certificate of Merger with the Secretary of State of
Kansas and with the Secretary of State of New Jersey. Assuming all conditions to
the Mergers are met or waived prior thereto, it is anticipated that the
Effective Time will occur on or about July 21, 1995.
CONDITIONS TO THE MERGERS; TERMINATION AND AMENDMENT
The respective obligations of Brite and the TSL Companies to consummate the
Mergers are subject to certain conditions, including approval of the Mergers by
the Company's stockholders, receipt by the TSL Companies and the TSL
Shareholders of an opinion of counsel to the Company to the effect that each
Merger will constitute a tax-free reorganization for federal income tax
purposes,
6
<PAGE>
and certain other conditions customary in transactions of this nature. The
Merger Agreement may also be terminated under certain other circumstances,
including termination by mutual consent of Brite and the TSL Companies or
termination by either the Board of Directors of the Company or Telecom Services
Limited (U.S.), Inc. if the Mergers are not consummated on or before October 31,
1995. See "The Merger Agreement -- Conditions to the Mergers" and "--
Termination; Amendment."
The Merger Agreement may be amended prior to the Effective Time, to the
extent legally allowed, by the mutual written consent of the Boards of Directors
of the Company and each of the TSL Companies. Any amendment made subsequent to
the adoption of the Merger Agreement by the stockholders of any such company may
not (i) alter or change the amount or kind of consideration to be exchanged, or
any of the proceedings, in exchange for or on conversion of all or any of the
shares of common stock of such company; (ii) alter or change any term of the
Articles of Incorporation of Brite to be effected by the Mergers; or (iii) alter
or change any of the terms and conditions of the Merger Agreement, if such
alteration or change would adversely affect the stockholders of the company or
companies having approved the related Merger.
MERGER EXPENSES
In consideration of financial advisory services rendered to the TSL
Companies in connection with the Merger Agreement and the consummation of the
Mergers, Ladenburg, Thalmann & Co. Inc. ("Ladenburg") shall be paid a fee equal
to the value of 119,000 shares of Common Stock, such shares to be valued at the
average of the closing prices for the Common Stock on the Nasdaq Stock Market
for each of the twenty trading days ending on the last trading day prior to the
Closing Date. The fee is payable by the Company at the Effective Time.
All costs and expenses incurred in connection with the Merger Agreement and
the transactions contemplated thereby, including the fees and expenses of Kelley
Drye & Warren, special counsel to the TSL Companies, and of Ernst & Young LLP in
connection with the preparation of the TSL Companies' 1992, 1993 and 1994
audited financial statements, shall be paid by the Company subsequent to the
Effective Time. If the Merger Agreement is terminated other than as a result of
a breach of the Merger Agreement by another party, each party shall pay all of
its own costs and expenses. See "The Merger Agreement -- Expenses."
ACCOUNTING TREATMENT
Each Merger is intended to qualify as a pooling-of-interests for financial
reporting purposes. See "The Mergers -- Accounting Treatment."
FEDERAL INCOME TAX TREATMENT
Each Merger is intended to qualify as a tax-free reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
See "The Mergers -- Federal Income Tax Treatment."
REGULATORY MATTERS
The parties to the Merger Agreement are aware of no governmental or
regulatory approvals required for consummation of the Mergers.
REGISTRATION RIGHTS
The TSL Shareholders will have the right to require the Company to effect
the registration under the Securities Act of 1933, as amended (the "Securities
Act"), of up to 40%, in the aggregate, of the shares of Common Stock received by
them in the Mergers. Any such registration may be effected no sooner than six
months from the Effective Time. Under certain circumstances, the TSL
Shareholders will have the right to require the Company to effect a second
registration under the Securities Act if less than 30%, in the aggregate, of
such shares are sold pursuant to the first registration statement. Additionally,
if at any time commencing two years after the Effective Time, the Company
proposes to register securities under the Securities Act other than in
connection with a merger, for its own benefit
7
<PAGE>
or the benefit of stockholders of the Company desiring to sell shares of Common
Stock in a public offering, each TSL Shareholder will have the opportunity to
have registered up to 50% of the shares of Common Stock held by such TSL
Shareholder after any sale of shares registered as described above. See "The
Merger Agreement -- Registration Rights."
EMPLOYMENT AGREEMENTS
At the Effective Time, the Company will enter into Employment Agreements
with each of the three executive officers of the TSL Companies. Each Employment
Agreement will extend through December 31, 1997, and will contain covenants
restricting the employee from competing with the Company during the employment
period and for a period of time thereafter. See "The Employment Agreements."
SPECIAL CONSIDERATIONS
THE FOLLOWING FACTORS SHOULD BE CONSIDERED BY STOCKHOLDERS IN EVALUATING
WHETHER OR NOT TO APPROVE THE MERGER AGREEMENT AND THE ISSUANCE OF THE COMMON
STOCK IN THE MERGERS. THESE FACTORS SHOULD BE CONSIDERED IN CONJUNCTION WITH THE
OTHER INFORMATION INCLUDED AND INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT.
RISKS RELATED TO THE MERGERS
DIFFICULTY OF INTEGRATING THE COMPANIES. The TSL Companies maintain
principal facilities in New York City, New York, Parsippany, New Jersey and San
Francisco, California. Following consummation of the Mergers, the Company
anticipates that the TSL Division of the Company will continue operations from
such facilities. In addition, the Company does not anticipate material changes
in personnel, although it currently expects that personnel will be added,
particularly in sales and marketing, if the business of the TSL Division expands
geographically. Although initial integration efforts are expected to be minimal,
it should be expected that the Mergers will cause a diversion of the attention
of management. In addition, the process of combining the companies could cause
the interruption of, or a loss of momentum in, the activities of either the
Company or the TSL Companies, which could have an adverse effect on their
combined operations. There can be no assurance that the combined company will
realize any of the anticipated benefits of the Mergers.
EXPENSES OF MERGERS. In consideration of advisory services rendered to the
TSL Companies in connection with the Merger Agreement and the consummation of
the Mergers, Ladenburg will be paid a fee equal to the value of 119,000 shares
of Common Stock, such shares to be valued at the average of the closing prices
for the Common Stock on the Nasdaq Stock Market for each of the 20 trading days
ending on the last trading day prior to the Closing Date. Such fee will be paid
by the Company at the Effective Time. If the applicable price for the Common
Stock were $19, the closing price for the Common Stock on May 23, 1995, the
amount of the fee would be $2,261,000. The negotiation and consummation of the
Mergers will result in an estimated $900,000 of additional expenses, including a
financial advisory fee to Lazard Freres & Co. of $300,000, and attorneys' and
accountants' fees, including the fees and expenses of its independent auditors
in connection with the preparation of the TSL Companies' 1992, 1993, and 1994,
audited financial statements. The costs of integrating operations are expected
to result in additional non-recurring charges to the Company's results of
operations after consummation of the Mergers. Although the actual amount of such
charges cannot be determined until the transition plans are completed, the
Company currently estimates that the aggregate integration charges will range
between $100,000 and $200,000. In any event, the costs associated with the
Mergers may negatively impact results of operations of the combined company in
1995.
DILUTION. Following the Mergers, the current stockholders of the Company
will own approximately 71% of the outstanding Common Stock of the Company. This
represents a substantial dilution of the ownership interests of the Company's
current stockholders.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS. The shares to be
delivered to the TSL Shareholders in the Mergers will not have been registered
under the Securities Act in reliance upon
8
<PAGE>
exemptions from the registration requirements of such Act for non-public or
limited offerings. As a result, such shares will be nontransferable unless
subsequently registered under the Securities Act or transferred in transactions
exempt from registration. The Company has agreed to register for public sale at
any time after six months from the Effective Time, upon request of the TSL
Shareholders, a number of shares of Common Stock not exceeding 40% of the shares
received by the TSL Shareholders in the Mergers. Under certain circumstances,
the TSL Shareholders will have the right to require the Company to effect a
second registration under the Securities Act if less than 30%, in the aggregate,
of such shares are sold pursuant to the first registration statement. In
addition, at any time two years or more after the Effective Time, if the Company
registers its securities under the Securities Act for its own benefit or for the
benefit of stockholders of the Company, each TSL Shareholder will have the
opportunity to have registered up to an aggregate of 50% of the shares of Common
Stock held by him after the sale of shares pursuant to the demand registration
rights described above. Future sales of a substantial number of shares of Common
Stock of the TSL Shareholders, or even the possibility that such shares may be
registered and sold, could have a material adverse effect on the market price of
the Common Stock.
DISTRIBUTION OF THE TSL COMPANIES' PROFITS. Each of the TSL Companies has
elected to be subject to Subchapter S of the Code. Consequently, federal income
taxes are imposed at the shareholder level rather than at the corporate level.
As a result, each of the TSL Companies has historically distributed all of its
net profits to its shareholders. The Merger Agreement provides that each TSL
Company is entitled to pay to the TSL Shareholders as additional compensation,
on the Closing Date, an amount in the aggregate equal to the undistributed
profits of such TSL Company to such date. Such distributions will substantially
reduce the net assets of the TSL Companies. Although the TSL Shareholders are
obligated to make certain loans to the Company in the event that such
distributions reduce the consolidated cash balance or the consolidated working
capital of the TSL Companies below certain levels, there is a risk that such
distributions may cause the Company to fund the operations of the TSL Division
from other sources for a period of time.
RISKS RELATED TO THE TSL COMPANIES' BUSINESS
DEPENDENCE ON OFFICERS AND OTHER KEY PERSONNEL. The Company believes that
the past success of the TSL Companies is largely attributable to the efforts and
abilities of the executive officers and key employees of the TSL Companies. The
executive officers, Alan C. Maltz, Scott A. Maltz and Stephen B. Rockoff, will
each enter into an Employment Agreement with the Company at the Effective Time.
The loss of the services of one or more of these individuals for any reason
could have a material and adverse effect on the combined company's operating
results.
DEPENDENCE ON CERTAIN CUSTOMERS. For the year ended December 31, 1994, the
TSL Companies' ten largest customers represented approximately 60% of total
revenues. Although the Company believes that there is a substantial opportunity
to expand the TSL Companies' customer base, it should be recognized that the
loss of one or more of these larger customers would have a material and adverse
effect on the combined company's operating results.
COMPETITION. The TSL Companies experience substantial competition in each
of their business areas. In the telephone bill verification business,
competition is provided primarily from local or regional companies, although the
Company knows of no competitor having nationwide operations. However, there are
no significant technological barriers to entry in the business and it is
probable that the combined company will face additional competition, and future
competitors may include larger companies having greater financial and personnel
resources than the combined company.
The TSL Companies also experience substantial competition in the other areas
of their business and, because of the perceived growth opportunities in these
areas, it is expected that the combined company will experience intensified
competition from existing and new market entrants.
POSSIBLE ADVERSE EFFECTS FROM EXPANSION OF BUSINESS. Historically, a
substantial portion of the TSL Companies' revenues have been generated from
customers having their principal places of
9
<PAGE>
business within close proximity of the TSL Companies' facilities in New York,
New Jersey, and California. It is anticipated that following the Mergers, the
Company will endeavor to expand the business of the TSL Companies into other
major metropolitan areas in the United States, which will entail the addition of
regional offices and sales and marketing personnel. It is possible that the
costs incurred in connection with any such expansion of operations will be
significant and that such costs may not be offset by corresponding revenues for
an extended period of time, as a result of which the margins historically
realized by the TSL Companies may be diminished. It is also possible that the
Company will experience more substantial competition in market areas where it
does not have the reputation and contacts currently available to the TSL
Companies in their primary market areas, or that actual financial performance
will diminish.
10
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
The following summary historical consolidated balance sheet and statement of
operations data of the Company for each of the five years in the period ended
December 31, 1994, have been derived from the audited historical consolidated
financial statements, incorporated by reference in this Proxy Statement. The
Company's financial data as of and for the three months ended March 31, 1995 and
1994 is derived from unaudited financial statements, incorporated by reference
in this Proxy Statement, which have been prepared on the same basis as the
audited financial statements and, in the opinion of the Company, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation thereof. Operating results for the interim period are not
necessarily indicative of the results of operations of the Company that may be
expected for the entire year ending December 31, 1995.
The summary historical combined statement of operations data of the TSL
Companies for each of the five years in the period ended December 31, 1994 and
the combined balance sheet data as of December 31, 1994 have been derived from
the combined financial statements of the TSL Companies. The combined statement
of operations for each of the three years in the period ended December 31, 1994
and for each of the quarters ended March 31, 1995 and March 31, 1994 and the
combined balance sheets at March 31, 1995, December 31, 1994 and December 31,
1993 are included elsewhere herein. The statement of operations data for such
periods and the balance sheet data at such dates should be read in conjunction
with the combined financial statements of the TSL Companies, including the notes
thereto, and with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere herein. The balance sheet data at
March 31, 1995 and statement of operations data for the three months ended March
31, 1995 and March 31, 1994 for the TSL Companies are derived from unaudited
financial information. Management believes that this unaudited information
reflects all adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of the results of operations for the periods
presented. The financial information at March 31, 1995 and for the quarter then
ended is not necessarily indicative of the results of operations that may be
expected for the entire year.
The summary pro forma financial data of the Company and TSL are derived from
the unaudited pro forma combined condensed financial statements included
elsewhere herein and should be read in conjunction with such pro forma
statements and notes thereto. The pro forma combined information gives effect to
the Mergers on a pooling-of-interests basis, assuming that 3,331,000 shares of
the Company's Common Stock are issued in the Mergers in exchange for all of the
outstanding TSL Shares. This data includes the results of operations of each
company as of and for the years ended December 31, 1992, 1993 and 1994, and the
three months as of and for the period ended March 31, 1994 and 1995. The
unaudited pro forma combined financial data are not necessarily indicative of
the operating results that would have been achieved had the transaction been in
effect as of the beginning of the periods presented and should not be construed
as being representative of future operations. All information shown is in
thousands, except per share amounts.
11
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------- ----------------
1990 1991 1992 1993 1994 1994 1995
------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
BRITE STATEMENT OF OPERATIONS DATA:
Revenues......................................................... $29,273 $35,649 $35,599 $46,857 $66,304 $14,405 $19,040
Operating income (loss).......................................... (3,864) 1,148 (3,493) (2,304) 6,878 1,153 2,137
Net income (loss)................................................ (3,921) 1,548 (1,987) (1,963) 5,569 880 1,691
Net income (loss) per share...................................... $ (.52) $ .20 $ (.26) $ (.25) $ .68 $ .11 $ .20
Weighted average shares used in computation...................... 7,514 7,700 7,534 7,737 8,195 8,164 8,573
BRITE BALANCE SHEET DATA:
Working capital.................................................. $24,964 $25,182 $22,599 $20,038 $24,169 $20,403 $25,784
Total assets..................................................... 39,285 41,177 38,004 38,627 48,438 31,344 52,381
Long-term debt................................................... 1,440 1,255 1,055 830 -- 830 --
Stockholders' equity............................................. 31,132 32,824 30,378 28,703 35,739 29,727 37,865
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------- ----------------
1990 1991 1992 1993 1994 1994 1995
------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
TSL STATEMENT OF OPERATIONS DATA:
Revenues......................................................... $ 4,949 $ 6,196 $ 6,666 $ 9,554 $13,636 $ 2,719 $ 3,774
Operating income (loss)(1)....................................... (95) 869 (458) 698 (873) (219) 328
Net income (loss)(1)............................................. (127) 791 (436) 660 (1,144) (309) 302
TSL BALANCE SHEET DATA:
Working capital.................................................. $ (507) $ 302 $ (77) $ 880 $ (257) $ 587 $ 62
Total assets..................................................... 1,042 1,866 1,767 2,774 3,450 3,626 3,123
Long-term debt................................................... -- -- -- 210 140 193 123
Stockholders' equity............................................. (63) 728 292 952 (192) 644 110
<FN>
------------------------
(1) The TSL Companies have elected "S" corporation status under federal tax
laws, and accordingly, have distributed all taxable profits each year as
additional shareholder and officer compensation. See "Unaudited Pro Forma
Combined Condensed Financial Statements" for adjustment of historical
financial data to reflect comparable salary and income tax expense to be
recorded in future periods. The Company believes this information is
necessary for investors to assess realistically the impact of the
combination.
</TABLE>
12
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
THREE
MONTHS
YEAR ENDED DECEMBER 31, ENDED
--------------------------- MARCH 31,
1992 1993 1994 1995
------- ------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
UNAUDITED STATEMENT OF INCOME DATA:(1)
Net revenue........................................................................... $42,265 $56,411 $79,940 $22,814
Operating income...................................................................... (3,951) (1,606) 12,994 3,926
Net income............................................................................ (2,424) (1,303) 9,308 2,767
Net income per share.................................................................. $ (.22) $ (.12) $ .81 $ .23
Shares used to compute net income per share........................................... 10,865 11,068 11,526 11,904
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1995
--------------- PRO FORMA
BRITE TSL ADJUSTMENTS (1) COMBINED
------- ------ ---------------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
UNAUDITED BALANCE SHEET DATA:
Working capital.................................................................. $25,784 $ 80 $ $ 25,864
Total assets..................................................................... 52,381 3,123 55,504
Long-term obligations............................................................ 138 140 278
Total stockholders' equity....................................................... 37,865 111 37,976
<FN>
------------------------
(1) Brite and TSL estimate that they will incur direct transaction costs of
approximately $3,350,000 associated with the Mergers, which will be charged
to operations during the quarter in which the Mergers are consummated.
These costs are not reflected in the Unaudited Pro Forma Combined Condensed
Statements of Income. See Brite and TSL Pro Forma Combined Condensed
Financial information and the accompanying notes thereto.
</TABLE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical data of Brite and combined
per share data on an unaudited pro forma basis after giving effect to the
Mergers on a pooling-of-interests basis, assuming that 3,331,000 shares of
Common Stock are issued in exchange for all the outstanding TSL Shares in the
Mergers. This data should be read in conjunction with the selected financial
statements of Brite and TSL and the notes thereto, incorporated by reference
herein or included elsewhere in this Proxy Statement. The unaudited pro forma
combined financial data are not necessarily indicative of the operating results
that would have been achieved had the Mergers been consummated at the beginning
of the periods presented and should not be construed as representative of future
operations.
<TABLE>
<CAPTION>
THREE
YEAR ENDED DECEMBER 31, MONTHS
------------------------------- ENDED MARCH
1992 1993 1994 31, 1995
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
HISTORICAL -- BRITE
Net income (loss) per share.............................................. $ (.26) $ (.25) $ .68 $ .20
Book value per share..................................................... $ 4.08 $ 3.74 $ 4.51 $ 4.68
<CAPTION>
THREE
YEAR ENDED DECEMBER 31, MONTHS
------------------------------- ENDED MARCH
1992 1993 1994 31, 1995
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
UNAUDITED PRO FORMA COMBINED
Net income (loss) per share.............................................. $ (.22) $ (.12) $ .81 $ .23
Book value per share..................................................... $ $ $ 3.33 $ 3.16
</TABLE>
On May 23, 1995, the last full trading day preceding the public announcement
by Brite and TSL of the execution of the Reorganization Agreement, the closing
price of Brite Common Stock on The
13
<PAGE>
Nasdaq Stock Market was $19. There has never been a market for the TSL Shares
and there is no information as to the market value of such shares. Accordingly,
the Company cannot make a meaningful comparison between the market value of the
Common Stock and such shares.
THE MEETING
GENERAL
This Proxy Statement is being furnished to holders of the Company's Common
Stock in connection with the solicitation of proxies by the Board of Directors
for use at the Special Meeting to be held at the principal offices of the
Company, 7309 East 21st Street North, Wichita, Kansas, at 10:00 a.m., local
time, on July 21, 1995, or at any adjournments or postponements thereof, for the
purposes set forth herein and in the accompanying Notice of Special Meeting of
Stockholders.
This Proxy Statement and the accompanying form of proxy are first being
mailed to stockholders on or about June 20, 1995.
MATTERS TO BE CONSIDERED AT THE MEETING
At the Special Meeting, stockholders of the Company as of the close of
business on June 13, 1995, will be asked to consider and vote upon a proposal to
approve and adopt the Merger Agreement, approve the Mergers and approve the
issuance of the shares of Common Stock in the Mergers. The stockholders will
also transact such other business as may properly come before the Special
Meeting or any adjournments or postponements thereof.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors has unanimously approved the Merger Agreement, the
Mergers and the issuance of shares of Common Stock in the Mergers and recommends
a vote by stockholders FOR approval and adoption of the Merger Agreement,
approval of the Mergers and approval of the issuance of the shares of Common
Stock in the Mergers.
RECORD DATE; VOTING AT THE MEETING; VOTE REQUIRED
The Board of Directors has fixed June 13, 1995, as the record date for the
determination of stockholders entitled to notice of and to vote at the Special
Meeting. Accordingly, only holders of record of Common Stock on the record date
will be entitled to notice of, and to vote at, the Special Meeting. As of June
13, 1995, there were approximately 8,097,573 shares of Common Stock outstanding,
held by approximately 250 holders of record. No shares of the Company's
Preferred Stock were then outstanding. Each record holder of Common Stock on the
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 the Company at the Special Meeting. The presence, in person or
by properly executed proxy, of the holders of shares of Common Stock
representing a majority of the outstanding shares of Common Stock entitled to
vote at the Special Meeting is necessary to constitute a quorum at the Special
Meeting.
The approval of the Merger Agreement, the Mergers and the issuance of the
shares of Common Stock in the Mergers will require the affirmative vote by the
holders of a majority of the outstanding shares of Common Stock entitled to vote
at the Special Meeting. In counting votes with respect to each of the proposals
regarding the Mergers, abstentions and broker non-votes are equivalent to votes
against such proposal.
As of June 13, 1995, directors and executive officers of Brite and their
affiliates may be deemed to be the beneficial owners of approximately 23.4% of
the outstanding shares of Common Stock.
PROXIES
This Proxy Statement is being furnished to holders of Common Stock in
connection with the solicitation of proxies by and on behalf of the Board of
Directors for use at the Special Meeting. All shares of Common Stock that are
entitled to vote and are represented at the Special Meeting by properly executed
proxies received prior to or at the Special Meeting and not duly and timely
revoked,
14
<PAGE>
will be voted at the Special Meeting in accordance with the instructions
indicated on such proxies. If no such instructions are indicated, such proxies
will be voted FOR the approval and adoption of the Merger Agreement, approval of
the Mergers and approval of the issuance of shares of Common Stock in the
Mergers.
If any other matters are properly presented for consideration at the Special
Meeting (or any adjournments or postponements thereof) including, among other
things, consideration of a motion to adjourn or postpone the Special Meeting to
another time and/or place (including, without limitation, for the purpose of
soliciting additional proxies), the persons named in the enclosed form 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 the Company at or before the taking of the vote at the
Special 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 the Company before the taking of the vote at
the Special Meeting or (iii) attending the Special Meeting and voting in person
(although attendance at the Special 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 to Brite Voice Systems,
Inc., 7309 East 21st Street North, Wichita, Kansas 67206, Attention: Secretary,
or hand-delivered to the Secretary of the Company at or before the taking of the
vote at the Special Meeting.
The Company will bear the costs of solicitation of proxies from
stockholders. In addition to solicitation by use of the mails, proxies may be
solicited by directors, officers and employees of the Company in person or by
telephone, telegram or other means of communication. Such directors, officers
and employees 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 the Company will
reimburse such custodians, nominees and fiduciaries for reasonable expenses
incurred in connection therewith.
THE MERGERS
BACKGROUND OF THE MERGERS
The Company's Board of Directors unanimously believes that the proposed
Mergers and the issuance of the shares of Common Stock in connection therewith
are fair to and in the best interests of the Company and its stockholders.
Accordingly, on May 23, 1995, the Board unanimously approved the Mergers
pursuant to the terms of the Merger Agreement and recommended that the proposed
Mergers be approved by the Company's stockholders. The Board of Directors
believes that the Mergers will further the Company's long-term objective of
maximizing stockholder value.
On October 3, 1994, a representative of Ladenburg contacted Stanley G.
Brannan, President of the Company, by telephone and offered Mr. Brannan an
opportunity to review certain information pertaining to a client of Ladenburg.
In connection therewith, Mr. Brannan executed a nondisclosure agreement on
October 7, 1994, and within a week thereafter received from Ladenburg certain
information concerning the TSL Companies. This information was reviewed by Mr.
Brannan, Executive Vice-Presidents Donald L. Walsh and David F. Hemmings, and
Chief Financial Officer Glenn A. Etherington, in order to determine if
sufficient interest existed to warrant a meeting with the principals of the TSL
Companies.
On November 16, 1994, Mr. Brannan and Mr. Walsh attended a meeting at
Ladenburg's office in New York City with Alan C. Maltz, Stephen B. Rockoff,
executive officers of the TSL Companies, and
15
<PAGE>
representatives of Ladenburg. Scott A. Maltz, also an executive officer of the
TSL Companies, attended the meeting by speaker phone. During the meeting the
parties exchanged information concerning the companies' respective businesses
and their proposed future operations. In addition, officers of the TSL Companies
stated that they had consulted Ladenburg in February, 1994 to consider the
options of either effecting an initial public offering of common stock for the
TSL Companies or seeking potential purchasers of the TSL Companies. The formal
agreement between the TSL Companies and Ladenburg was entered into in July, 1994
at which time Ladenburg began developing an informational brochure pertaining to
the TSL Companies. Subsequent to the meeting, the parties and their
representatives continued to discuss a possible acquisition of the TSL Companies
by Brite.
On December 13, 1994, at a regularly scheduled meeting of the Company's
Board of Directors, Mr. Brannan provided certain information regarding the TSL
Companies as possible candidates for merger with the Company. After Mr.
Brannan's presentation, the TSL executive officers and representatives of
Ladenburg and Lazard Freres were invited into the meeting, at which time TSL
made a detailed presentation to the Brite Board concerning the TSL Companies'
business and prospects. Following this presentation, Mr. Brannan recommended
that the Board authorize management to continue discussions with the TSL
Companies, and the Board gave its approval for further discussions and
negotiations.
Subsequent to the December 13, 1994 meeting, a series of telephone
conversations ensued, primarily between Mr. Brannan, Alan C. Maltz and a
representative of Ladenburg. These discussions were generally informational, but
also involved discussions concerning the consideration to be given in connection
with any business combination and the anticipated manner of operations upon
consummation of a transaction.
On January 11, 1995, Messrs. Brannan, Walsh and Etherington, for the
Company, a representative of Triplett, Woolf & Garretson, LLP, legal counsel for
the Company, Messrs. A. Maltz, S. Maltz and Rockoff, the executive officers of
the TSL Companies, and representatives of Ladenburg, met at Ladenburg's offices
in New York City, at which time further information concerning the TSL
Companies' business was shared and Mr. Brannan provided further updates on the
Company's business. In addition, specific discussions were had concerning the
differences of opinion between the parties as to the consideration to be given
in connection with a merger.
On January 22, 1995, Messrs. Brannan, Walsh and Todd Crandall for the
Company, met with Messrs. A. Maltz, S. Maltz and Rockoff in Palm Beach, Florida,
at which meeting additional discussions were had concerning organizational
reporting and implementation issues in order to determine if the respective
corporate cultures were sufficiently compatible to permit a successful merger.
On February 9, 1995, at a meeting in New York City, Mr. Brannan and Mr. Alan
Maltz, President of the TSL Companies, resolved certain key issues and reviewed
a summary of issues remaining unresolved. Thereafter, in a telephone
conversation on February 12, 1995, Mr. Brannan and Mr. Maltz discussed further
the terms of a merger, the completion of due diligence by the Company, the
resolution of other significant issues and the negotiation, execution and
delivery of definitive documentation.
From that time through the first two weeks of May, 1995, a number of
additional telephonic meetings were held between the Company's management, the
TSL Companies' management and their legal and financial advisors. During this
time, Triplett, Woolf & Garretson, LLP, prepared and provided to the TSL
Companies and their legal and financial advisors, an initial draft of the Merger
Agreement and the Employment Agreements.
On April 19-20, 1995, Mr. Brannan, Mr. Etherington and a representative of
Triplett, Woolf & Garretson, LLP, participated in meetings with management and
certain key employees of the TSL Companies and representatives of Ladenburg at
the TSL Companies' facilities in New York City and
16
<PAGE>
Parsippany, New Jersey. Additional meetings were held at the offices of Kelley
Drye & Warren, special counsel to the TSL Companies, at which meetings
additional information concerning the parties was discussed and unresolved
issues were reviewed.
On May 10, 1995, the Board of Directors, as part of a regularly scheduled
Board meeting, received extensive presentations from management and
representatives of Triplett, Woolf & Garretson, LLP and Lazard Freres,
concerning the potential benefits and risks from a merger with the TSL Companies
and a review of the status of discussions. The Board of Directors authorized
management to continue negotiations with the TSL Companies.
On May 23, 1995, the Board of Directors met and management reported on the
status of discussions. Management again made presentations to the Board
regarding the risks and benefits of the Mergers. The company's legal advisors
reviewed the terms of the Merger Agreement and related agreements and the
Company's financial advisors provided the Board with the financial analysis
which formed the basis of their oral opinion that the proposed transaction was
fair to the Company from a financial point of view. The Board of Directors
authorized management to enter into the Merger Agreement with the TSL Companies
on the terms presented and discussed at the meeting. On May 24, 1995, the
parties executed the definitive Merger Agreement.
REASONS FOR THE MERGERS; RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors believes that the proposed Mergers and the issuance
of the Common Stock in connection therewith are fair to and in the best
interests of the Company and its stockholders. Accordingly, on May 23, 1995, the
Board approved the Merger Agreement and recommended that the proposed Mergers
and the issuance of the shares of Common Stock in connection therewith be
approved by the Company's stockholders. The Board of Directors believes that the
proposed transaction will further the Company's long-term objective of
maximizing stockholder value.
The Board of Directors considered the following material factors as reasons
for stockholders to vote FOR approval and adoption of the Merger Agreement,
approval of the Mergers, and approval of the issuance of shares of Common Stock
in the Mergers:
(i) Since 1992, the Company has sought to increase the percentage of its
revenues derived from the provision of services, primarily because of the
more predictable and repetitive nature of services revenues. The Board
believes that the acquisition of TSL will increase both the Company's
revenues and operating margins derived from services.
(ii) The acquisition of TSL represents a diversification for the Company
from the voice processing industry into a closely related and developing
industry having substantial opportunity for growth. This diversification
will reduce the risk and impact of a significant adverse development in
other areas of the Company's business.
(iii) The Company's customers are high volume consumers of
telecommunications services and represent potential clients for TSL's
products and services. To a lesser extent, certain of TSL's clients may
represent potential customers for the Company's products and services.
(iv) The acquisition of TSL will create a combined company with
significantly greater resources, particularly in terms of sales and
marketing capabilities, which should enable the combined company to more
rapidly develop business in areas of the United States where TSL has not had
any significant presence. The Board also believes that, because of the
existence of the Company's offices in England, Germany, Switzerland, Italy,
and Dubai, and its strategic marketing alliances with companies in other
countries around the world, there is substantial potential for the offering
of TSL's products and services in international markets.
(v) TSL has a substantial backlog of services to be performed for new
and existing clients. Although revenues to be derived from these contracts
are not quantifiable, the Company believes
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that such revenues will be realized over a period of one to two years. The
Board believes that the amount of business under contract provides
substantial support for the assumption that TSL's business will grow at
acceptable levels during such period.
In reaching its conclusion to approve the Merger Agreement, the Board of
Directors considered, among other things, (i) information concerning the
financial performance, condition, business operations, and prospects of each of
the Company and TSL and on a pro forma combined basis; (ii) the terms and
structure of the Merger Agreement; (iii) the terms of the Employment Agreements
with the three executive officers of TSL; (iv) the belief that the terms of the
Merger Agreement, including the parties' mutual representations, warranties and
covenants and the conditions to their respective obligations, are reasonable;
(v) the ability of the Company to devote management time and energy to the
integration and the assimilation of TSL's business and organization should the
Mergers be consummated; (vi) the fact that each 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 the Company as a result thereof; (vii) a financial
presentation by Lazard Freres, including the oral opinion of Lazard Freres
rendered on May 23, 1995, stating that the transaction was fair from a financial
point of view to the Company (which was subsequently delivered in writing on
June , 1995); (viii) the business advantages expected to result from the
Mergers; and (ix) reports from management, financial advisers and legal advisers
as to the results of their due diligence investigation of the TSL Companies. The
Board of Directors also considered a number of potentially negative factors in
its deliberations concerning the Mergers, including, but not limited to, (i) the
risks that the benefits sought to be achieved in the Mergers will not be
achieved; (ii) the risk that the market price of the Company's Common Stock
might be adversely affected by the public announcement of the execution of the
definitive Merger Agreement; and (iii) the other risks described above under
"Special Considerations." The Board of Directors did not consider these negative
factors, either individually or in the aggregate, as material enough to outweigh
the merits of the proposed transaction.
In view of the wide variety of factors, both positive and negative,
considered by the Board, the Board did not find it practicable to quantify or
otherwise assign relative weights to the specific factors considered.
CONDUCT OF BUSINESS OF THE COMBINED COMPANY FOLLOWING THE MERGERS
Upon approval of the Mergers, each of the TSL Companies will be merged with
and into the Company and the TSL Companies will cease to exist as distinct legal
entities. Under Kansas and New Jersey law, the Company will acquire all of the
assets and assume all of the liabilities of the TSL Companies.
The principal executive offices of the Company will be maintained at Brite's
offices in Wichita, Kansas, and TSL, as an operating division of the Company,
will continue to occupy facilities in New York City, Parsippany, New Jersey and
San Francisco, California.
As soon as practicable and no more than 30 days after the Effective Time,
the Board of Directors will be expanded to seven Directors, Glenn A. Etherington
will resign as a Director of Brite, and Alan C. Maltz and Scott A. Maltz will be
appointed to fill the vacancies on the Board. Information concerning such
persons is set forth herein under the heading "Information Concerning the TSL
Companies -- Management."
Alan C. Maltz will become Executive Vice President of the Company having
primary responsibility for the TSL Division and will report directly to Mr.
Brannan, President of the Company. Scott A. Maltz and Stephen B. Rockoff, will
become Vice Presidents of the Company and will be primarily responsible for TSL
Division sales and operations. Scott Maltz and Mr. Rockoff will report to the
Executive Vice President of the TSL Division. At the Effective Time, each of
these individuals will enter into an Employment Agreement with the Company. See
"Employment Agreements."
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OPINION OF LAZARD FRERES & CO.
Lazard Freres has delivered its written opinion to the Brite Board to the
effect that, based upon and subject to the matters set forth in its opinion, as
of the date of this Proxy Statement, the consideration to be paid in connection
with the proposed Mergers is fair to Brite from a financial point of view.
The full text of the opinion of Lazard Freres dated as of the date of this
Proxy Statement, which sets forth the assumptions made, matters considered and
limitations on the review undertaken in connection with the opinion, is attached
as Appendix B to this Proxy Statement and is incorporated herein by reference.
Stockholders are urged to read such opinion in its entirety. The summary of the
opinion of Lazard Freres set forth in this Proxy Statement does not purport to
be complete and is qualified in its entirety by reference to the full text of
such opinion. The opinion of Lazard Freres is not intended to be, and does not
constitute, a recommendation to any stockholder of Brite as to how such
stockholder should vote at the Special Meeting.
In rendering its opinion to the Brite Board, Lazard Freres, among other
things: (i) reviewed and analyzed the financial terms of the Merger Agreement;
(ii) reviewed certain publicly available business and financial information
relating to Brite and TSL; (iii) reviewed certain other information, including
financial forecasts and other data provided to Lazard Freres by Brite and TSL
relating to their businesses; (iv) held discussions with members of senior
management of Brite and TSL with respect to the businesses and prospects of
Brite and TSL; (v) reviewed the pro forma impact of the Mergers on Brite's
financial results and financial condition; (vi) considered certain financial
data for Brite and TSL, and compared that data with similar data for other
publicly held companies in lines of businesses believed by Lazard Freres to be
generally comparable to those of Brite and TSL, respectively; (vii) reviewed the
historical stock prices, trading volumes and other stock market data of Brite
Common Stock; and (viii) conducted such other financial studies, analyses and
investigation as Lazard Freres deemed appropriate.
In connection with its review, Lazard Freres relied upon the accuracy and
completeness of the financial and other information reviewed by it and did not
assume any responsibility for any independent verification of such information
or any independent valuation or appraisal of any of the assets or liabilities of
Brite or TSL. With respect to the financial forecasts provided to it, Lazard
Freres assumed that such financial forecasts were reasonably prepared on bases
reflecting the best currently available estimates and judgments of Brite and TSL
management as to the future financial performance of Brite and TSL,
respectively. In rendering its opinion, Lazard Freres assumed no responsibility
for and expressed no view as to such forecasts or the assumptions on which they
were based. Lazard Freres' opinion was based on economic, monetary, market and
other conditions as in effect on, and the information made available to Lazard
Freres on, the date of its opinion.
In rendering its opinion, Lazard Freres assumed that the transaction
contemplated by the Merger Agreement will be consummated on the terms described
in the Merger Agreement, without any waiver of or modification to any of the
material terms or conditions thereof by Brite, and that obtaining any necessary
regulatory approvals for the transaction will not have an adverse effect on
Brite or TSL.
The following is a summary of the material factors considered and principal
financial analyses performed by Lazard Freres in connection with providing its
opinion to the Board of Directors of Brite on June , 1995.
COMPANY TRADING ANALYSIS. Lazard Freres reviewed and compared certain
actual and estimated financial, operating and, where applicable, stock market
information for Brite, TSL and companies in lines of business believed by Lazard
Freres to be somewhat comparable to those of TSL. However, Lazard Freres
indicated that, given TSL's strong market position in a very fragmented
business, no publicly traded company provides particularly relevant valuation
benchmarks. In performing its analysis, Lazard computed an implied equity
purchase price of $ million for the
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transaction (the "Equity Purchase Price") based on the issuance of shares
of Brite Common Stock at a price of $ per share (the closing price on
, 1995). Lazard Freres determined that the total purchase price
for TSL of $ million represented a multiple of
times estimated 1995 sales and a multiple of times estimated 1995 earnings
before interest and taxes ("EBIT"), while the Equity Purchase Price was a
multiple of times estimated 1995 earnings per share.
Based on the , 1995, closing price of $ per share of Brite
Common Stock and taking into account Brite's cash on hand at December 31, 1994,
Lazard Freres calculated Brite's market capitalization at $ million, which
represented a multiple of times estimated 1995 sales and a multiple of
times estimated 1995 EBIT. Lazard Freres also indicated that Brite Common Stock
was trading at 18.2 times estimated 1995 earnings per share and 16.3 times
estimated 1996 earnings per share. Lazard Freres determined that, on balance,
the multiples implied by the Mergers compared favorably with the reference
group. However, given the uniqueness of TSL's business when compared to other
companies in the reference group, Lazard Freres did not view the multiples
comparison as an important consideration in its opinion.
CONTRIBUTION ANALYSIS. Lazard Freres reviewed and analyzed certain
historical and estimated future financial information (including net revenues,
operating income and net income) for Brite, TSL and for the pro forma combined
entity resulting from the Mergers. Lazard Freres analyzed the relative
contributions for Brite and TSL based on historical financial performance for
1993 and based on Brite and TSL managements' financial estimates for 1995 and
1996. Lazard Freres determined that on a pro forma basis, the Mergers would
result in an improvement of Brite's operating margins and growth rates. The
results of the pro forma contribution analyses are not necessarily indicative of
results which could be achieved after the Mergers.
SELECTED TRANSACTION ANALYSIS. Lazard Freres reviewed certain publicly
available information on announced sale transactions in the telecommunication
services and related industries. However, Lazard Freres noted that the reasons
for, and circumstances surrounding, each of the transactions considered were
diverse, and the characteristics of the companies involved were not particularly
comparable to those of the Mergers.
DISCOUNTED CASH FLOW ANALYSIS. Based upon forecasts prepared by the
management of Brite and TSL, Lazard Freres performed an analysis of the net
present value of the future cash flows of Brite's businesses. In conducting this
analysis, Lazard Freres assumed discount rates ranging from % to % and
terminal value multiples ranging from times to times EBIT. This analysis
indicated, based upon management estimates and using the discount rates and
terminal values noted above, a discounted cash flow valuation of between $
million and $ million for 100% of the Common Stock of Brite. This valuation is
consistent with the value, as of the date of Lazard's opinion, of the shares of
Brite commons stock proposed to be issued in the Mergers.
PRO FORMA MERGER ANALYSIS. Lazard Freres analyzed the pro forma impact of
the consummation of the Mergers on the earnings per share and financial
condition of Brite, and compared such results to earnings per share and balance
sheet ratios on a stand-alone basis for Brite. Based upon forecasts prepared by
managements of TSL and Brite, such analyses indicated that, after giving effect
to the Mergers, holders of Brite Common Stock would incur an increase in
earnings per share of approximately % in 1995 and % in 1996. The results of
the pro forma merger analysis are not necessarily indicative of future operating
results or financial position.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above without considering
the analyses as a whole could create an incomplete or misleading view of the
process underlying the opinion of Lazard Freres. No company or transaction used
in the above analysis as a comparison is identical to Brite or TSL or the
transactions contemplated by the Merger Agreement. The analyses were prepared
solely for purposes of Lazard Freres providing its opinion to the Brite Board as
to the fairness of the Merger consideration to Brite from a financial point of
view
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and do not purport to be appraisals or necessarily reflect the prices at which
businesses or securities actually may be sold, which may be significantly more
or less favorable than as set forth in these analyses. Similarly, any estimate
of values or forecast of future results contained in the analyses is not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than those suggested by such analyses.
In performing its analyses, Lazard Freres made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties or
their respective advisors, none of Brite, Lazard Freres or any other person
assumes responsibility if future results or actual values are materially
different from those forecasts or estimates contained in the analyses. As
described above, Lazard Freres' opinion to the Brite Board was one of several
factors taken into consideration by the Brite Board in making its determination
to approve the Merger Agreement. The foregoing summary does not purport to be a
complete description of the analyses performed by Lazard Freres and is qualified
in its entirety by reference to the written opinion of Lazard Freres set forth
in Appendix B.
Lazard Freres is an internationally recognized investment banking firm and
is continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements, leveraged
buyouts, and valuations for estate, corporate and other purposes. The Brite
Board selected Lazard Freres to act as its financial advisor on the basis of
Lazard Freres expertise and its reputation in investment banking and mergers and
acquisitions.
In connection with Lazard Freres' services as financial advisor to Brite,
Brite has agreed to pay Lazard Freres $300,000 upon consummation of the Mergers.
Brite has also agreed to reimburse Lazard Freres for its reasonable
out-of-pocket expenses, including, but not limited to, fees and expenses of its
counsel, such out-of-pocket expenses not to exceed $25,000. Brite has agreed to
indemnify Lazard Freres and certain related parties against certain liabilities,
including liabilities arising under the federal securities laws.
FEDERAL INCOME TAX TREATMENT
Based on certain assumptions and subject to certain limitations and
qualifications, it is the Company's counsel's opinion that each Merger will
constitute a reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended. Accordingly, the Company will not recognize
any gain or loss as a result of the Mergers. The basis in the property acquired
by the Company pursuant to the Mergers will be the same as the TSL Companies'
basis in such property. It is not anticipated that the Company will benefit from
any tax attributes of the TSL Companies transferred to the Company as a result
of the Mergers.
ACCOUNTING TREATMENT
It is expected that each Merger will be accounted for as a
pooling-of-interests for financial reporting purposes. The pooling-of-interests
method accounts for a business combination as the uniting of the ownership
interests of two or more companies by the exchange of equity securities. Assets
and liabilities of the companies are carried forward to the combined company at
their historical amounts. Revenues and net income of the combined company for
the entire fiscal period in which the combination occurs, and the reported
incomes of the companies for prior periods are combined and restated, including
adjustments to conform accounting policies, as income of the combined company.
REGULATORY MATTERS
The parties to the Merger Agreement are aware of no governmental or
regulatory approvals required for consummation of the Mergers.
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DISSENTERS' RIGHTS
The Company's stockholders have dissenters' rights in connection with the
Mergers. The Company will not be obligated to consummate the Mergers if any
stockholder initiates steps necessary to perfect dissenters' rights to receive
cash for shares of Common Stock and the number of shares with respect to which
such step may have been initiated exceeds a number equal to five percent of the
shares of Common Stock issued and outstanding immediately prior to the Closing
Date.
Kansas General Corporation Code ("KGCC") Section 17-6712 (a copy of which is
attached as ANNEX C to this Proxy Statement) entitles any holder of record of
shares of Common Stock who files a written objection to the Mergers prior to the
taking of the vote at the Special Meeting and who does not consent to or vote in
favor of the Mergers, to demand in writing that the Company pay to such
stockholder in cash the fair market value of such shares determined by appraisal
(exclusive of any element of value arising from the accomplishment or
expectation of the Mergers).
Any stockholder of record contemplating making a demand for appraisal is
urged to review carefully the provisions of Section 17-6712, particularly the
procedural steps required to perfect dissenters' rights thereunder. Dissenters'
rights will be lost if the procedural requirements of Section 17-6712 are not
fully satisfied.
Set forth below is a summary of the procedures relating to the exercise of
dissenters' rights. The following summary does not purport to be a complete
statement of the provisions of KGCC Section 17-6712 and is qualified in its
entirety by reference to the full text thereof attached hereto as ANNEX C.
FILING WRITTEN DEMAND. Stockholders of record who, in accordance with KGCC
Section 17-6712, file written notice of their objection to the Mergers before
the vote on the Mergers at the Special Meeting and whose shares were not voted
in favor of the Mergers have the right to receive the value of their shares in
cash. Such written objection may be sent to the Company at 7309 East 21st Street
North, Wichita, Kansas 67206, Attention: Secretary. Such objections will be
deemed to be timely filed if they were mailed to the above address prior to the
date on which the Special Meeting is to be held by certified mail, return
receipt requested, postage prepaid and received by the Secretary within three
days after the date of the Special Meeting. Failure to comply with the
requirements of KGCC Section 17-6712 will result in a forfeiture of those
rights. Voting against the Merger will be deemed insufficient to satisfy the
notice requirements of KGCC Section 17-6712.
NOTICE BY THE COMPANY. Within 10 days after the Mergers become effective,
the Company will notify each stockholder who objected thereto in writing and
whose shares were not voted in favor of the Mergers, and who filed such written
objection to the Mergers with the Company before the taking of the vote on the
Mergers at the Special Meeting, that the Mergers have become effective.
WRITTEN DEMAND. Within 20 days after the mailing of notice by the Company,
any dissenting stockholder must demand in writing from the Company, payment of
the value of the stockholder's stock. The Company shall pay to the stockholder,
within 30 calendar days after the expiration of the 20 calendar day period, the
value of the stockholder's stock on the Effective Date of the Mergers.
SETTLEMENT OF APPRAISAL. If, during the 30 day period, the Company and the
dissenting stockholder fail to agree upon the value of such stock, any such
stockholder or the Company may demand a determination of the value of the stock
of all such stockholders by an appraiser or appraisers to be appointed by a
District Court of the State of Kansas (the "Kansas Court"), by filing a petition
with the Kansas court within four months after the expiration of the 30 day
period. If a petition is filed by a dissenting stockholder, within 10 days after
notice of such petition is served upon the Company, the Company must file with
the Kansas Court a duly verified list of all stockholders who have demanded
payment for their shares and have not reached any agreement with the Company. If
the petition is filed by the Company, the petition shall be accompanied by such
duly verified list. The clerk of the Kansas Court will give notice of the time
and place of the hearing on the petition at least one week before the date of
the hearing by registered or certified mail to the Company and to the
stockholders
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shown upon the list at the addresses therein listed and notice shall also be
given by publication in a newspaper of general circulation. The Kansas Court
will appoint an appraiser or appraisers after the hearing. At such time, the
Kansas Court shall require the dissenting stockholders to submit their stock to
the clerk of the Kansas Court, to be held by the clerk pending the appraisal
proceedings. If any dissenting stockholder fails to comply with such direction,
the Kansas Court shall dismiss the proceedings as to such stockholder. After the
appraiser or appraisers determine the value of the shares of stock, such
appraisals will be filed with the Kansas Court. The Kansas Court may hear
arguments on the appraisals, if any, and then will determine the value of the
stock as well as any interest thereon, if any, to be paid to the dissenting
stockholders.
PAYMENTS AND COSTS. When the value is so determined, the Kansas Court will
direct the payment by the Company of such value, with interest thereon as the
Kansas Court determines, to the stockholders entitled to receive the same. Costs
of the appraisal proceeding (exclusive of attorneys' and experts' fees) shall be
determined by the Kansas Court and taxed upon the parties as the Kansas Court
deems equitable in the circumstances. Costs of giving notice by publication and
by registered or certified mail shall be borne by the Company.
Stockholders who receive cash for their Common Stock upon exercise of
dissenters' rights will realize taxable gain or loss.
Pursuant to the Merger Agreement, the TSL Shareholders have waived all
dissenters' rights available under New Jersey law.
THE MERGER AGREEMENT
The following paragraphs summarize, among other things, the material terms
of the Merger Agreement, which is attached to this Proxy Statement as ANNEX A
and incorporated by reference herein. Stockholders are urged to read the Merger
Agreement in its entirety for a more complete description of the Mergers.
GENERAL
The Company, the TSL Companies and the TSL Shareholders have entered into
the Merger Agreement, which provides that (i) each TSL Company will be merged
into and with the Company and (ii) at the time the Mergers become effective the
TSL Shareholders will receive an aggregate of 3,331,000 shares of Common Stock,
or approximately 29% of the shares of Common Stock outstanding after the
Mergers, in conversion of all of the outstanding TSL Shares. The Mergers are
subject to the satisfaction of a number of conditions, including approval by the
stockholders of the Company. See "Conditions to the Mergers."
EFFECTIVE TIME OF MERGERS
The Merger Agreement provides that the Mergers will become effective upon
the filing of related Certificates of Merger with the Secretary of State of
Kansas and with the Secretary of State of New Jersey (the "Effective Time"). See
"Conditions to the Mergers." It is anticipated that, if the Merger Agreement is
approved and adopted at the Special Meeting and all other conditions of the
Mergers have been fulfilled or waived, the Effective Time will occur on July 21,
1995, or on a date as soon as practicable thereafter.
MANNER AND BASIS OF CONVERTING SHARES
At the Effective Time, the 3,331,000 shares of Common Stock to be delivered
by the Company in conversion of the TSL Shares will be allocated among the TSL
Shareholders as described under the heading "Information Concerning the TSL
Companies -- Executive Officers, Directors and Principal Shareholders."
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Promptly after the Effective Time and upon receipt of certificates
evidencing the shares of Common Stock of the TSL Companies converted in the
Mergers, the Company will deliver to each TSL Shareholder the number of shares
of Common Stock to which he is entitled as specified in Exhibit B to the Merger
Agreement.
Until a certificate representing shares of Common Stock of a TSL Company has
been surrendered to the Company, each such certificate will be deemed at any
time after the Effective Time of the Mergers to represent only the right to
receive upon such surrender the number of shares of Common Stock to which the
TSL Shareholder is entitled under the Merger Agreement.
RESTRICTIONS ON RESALE OF COMMON STOCK
The shares of Common Stock to be delivered in connection with the Mergers
have not been registered under the Securities Act in reliance upon exemptions
for non-public or limited offerings, and may not be offered, sold or transferred
by the persons receiving such shares in the Mergers unless (i) they are
subsequently registered under the Act; (ii) there is presented to the Company an
opinion of counsel reasonably satisfactory to the Company to the effect that
such registration is not necessary; or (iii) they are sold pursuant to, and in
compliance with, Rule 144 of the Commission. Each of the certificates evidencing
the shares of Common Stock delivered under the Merger Agreement will bear a
legend to such effect.
The Merger Agreement provides that the TSL Shareholders may request
registration of a portion of their shares of the Company's Common Stock at
certain times subsequent to the Effective Time. See "-- Registration Rights."
CONDUCT OF BUSINESS PRIOR TO THE MERGERS
Pursuant to the terms of the Merger Agreement, the TSL Companies and the TSL
Shareholders have agreed that, until the Effective Time or the earlier
termination of the Merger Agreement, each TSL Company will continue to conduct
its operations in the ordinary course of business, and, without limiting the
generality of the foregoing, shall not, without the written consent of the
Company: (i) dispose or contract to dispose of any property or other assets,
voluntarily incur any absolute or contingent debt obligation or engage in any
activity or transaction except, in each case, in the ordinary course of
business; (ii) borrow any money, except in the ordinary and usual course of
business under currently existing lines of credit; (iii) enter into any lease or
contract for the purchase or sale of real estate or of any interest therein;
(iv) encumber any property or other assets; (v) grant any option, right or
warrant to purchase shares of its capital stock; (vi) declare or pay any
dividend; provided, however, that each TSL Company is entitled to pay to the TSL
Shareholders as additional compensation on the Closing Date an amount in the
aggregate equal to the undistributed profits of such TSL Company, if any, prior
to giving effect to such payment, through the Closing Date as reflected on the
books and records of such TSL Company in accordance with past practices; (vii)
purchase or redeem any shares, notes or other securities or make any other
distribution to stockholders; (viii) other than in accordance with normal
compensation adjustment policies, increase the rate of remuneration of any of
its directors, officers, employees or other representatives, or agree to do so;
(ix) adopt any new, or amend any existing, employee benefit plan; (x) form, or
cause to be formed, any subsidiary; (xi) issue, sell, distribute or dispose of
any shares, notes or other securities of the TSL Company; (xii) make any
commitments for capital improvements or materially alter standing commitments
for capital improvements, except as set forth in the Merger Agreement; (xiii)
fail to keep its properties insured to the same extent as they are represented
to be insured in the Merger Agreement; or (xiv) commit itself to do any of the
foregoing.
If, after giving effect to the payments permitted under clause (vi)
immediately above, the consolidated cash balance of the TSL Companies is less
than $750,000 or the consolidated working capital of the TSL Companies is less
than $2,400,000, the TSL Shareholders shall be required to lend to the Company
on the Closing Date the amount necessary to increase the consolidated cash
balance of the TSL Companies to not less than $750,000 and increase the working
capital of the TSL companies to not less than $2,400,000 (the "Loans");
provided, however, that the amount of the Loans will not
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exceed the amounts paid to the TSL Shareholders as described in clause (vi)
above, net of all federal, state and local taxes paid with respect thereto. The
Loans shall be general unsubordinated debt obligations of the Company,
consistent with past practices of the TSL Companies, payable by the Company to
the TSL Shareholders on April 1, 1996, at which time all amounts outstanding
under the Loans shall be due and payable; provided, however, if, based upon the
monthly balance sheet of the TSL Companies (as an operating division of the
Company), to be prepared by the Company on and as of the first day of each month
after the Effective Time in accordance with generally accepted accounting
principles on an accrual basis, the TSL Companies (as an operating division of
the Company) have a cash balance of at least $750,000 and working capital of at
least $2,400,000, then the Company shall be required to prepay the Loans to the
extent that working capital exceeds $2,400,000, such prepayment to be made
within five days of the date of the balance sheet. Absent a default by the
Company for failure to repay the Loans, the Loans shall bear no interest except
to the extent of any tax liability of the TSL Shareholders which may arise as a
result of interest income imputable on the Loans. If the Company defaults in
repaying the Loans, the Loans shall bear interest at the rate of two percent per
annum in excess of the Prime Rate, as reported in the Wall Street Journal,
adjusted monthly. All interest accrued thereafter and the principal amount of
the Loans shall become immediately due and payable to the TSL Shareholders upon
the occurrence of a default in payment.
The TSL Companies and the TSL Shareholders have further agreed that neither
any TSL Company nor any TSL Shareholder will permit its officers, employees,
representatives or other agents to, directly or indirectly, encourage, solicit
or initiate discussions or negotiations with any corporation, partnership,
person or other entity or group (other than the Company or an officer, director,
employee or other authorized representative or agent of the Company) concerning
any bid, merger or sale of the assets of any TSL Company other than in the
ordinary course of business, sale of shares of capital stock of any TSL Company
or similar transaction involving any TSL Company. Promptly upon receiving any
inquiry, request or proposal from or contact by any person with respect to any
bid, merger, sale, or similar transaction, the TSL Company shall advise the
Company of such inquiry, request, proposal or contact and provide the Company
all relevant information with respect thereto.
Each of the parties intends that: (a) each Merger be accounted for as a
pooling-of-interests; and (b) each Merger be treated as a reorganization within
the meaning of Section 368(a) of the Code.
CORPORATE STRUCTURE AND RELATED MATTERS AFTER THE MERGERS
The consummation of each Merger is contingent upon, and deemed to occur
simultaneously with, the other Mergers. At the Effective Time, the TSL Companies
will be merged with and into the Company which will be the surviving
corporation. The TSL Shareholders will receive an aggregate of 3,331,000 shares
of Common Stock in conversion of all of the outstanding TSL Shares. The shares
of Common Stock to be issued in the Mergers will be validly issued, fully paid,
and nonassessable shares of Common Stock.
As soon as practicable, and in any event within 30 days after the Effective
Time, the Board of Directors will be expanded to seven directors, Glenn A.
Etherington will resign from the Board and Alan C. Maltz and Scott A. Maltz will
be appointed to serve as members of the Board. Thereafter, as long as the TSL
Shareholders own at least 20% of the issued and outstanding Common Stock, the
Board of Directors will nominate for election to the Board at each Annual
Meeting of the Stockholders of the Company, two persons to be designated by the
TSL Shareholders. The number of nominees to be designated by the TSL
Shareholders shall be reduced to one when their collective ownership of Common
Stock is less than 20% of the issued and outstanding shares and, when their
collective ownership is less than 10% of such shares, the right of the TSL
Shareholders to designate a nominee shall terminate. As used in this paragraph,
"TSL Shareholders" includes the executor, personal representative or heirs of a
TSL Shareholder. See "Information Concerning the TSL Companies -- Management"
for certain information regarding the TSL designees to the Board of Directors.
25
<PAGE>
In connection with the Mergers, the Company will enter into an Employment
Agreement with each of the three principal TSL Shareholders. See "Employment
Agreements." After the Effective Time, the Company intends to attempt to enter
into employment agreements with other key employees of the TSL Companies.
As soon as practicable after the Effective Time, the Company will grant
incentive stock options to certain management personnel of the TSL Companies
(other than the TSL Shareholders) under the Company's 1994 Stock Option Plan.
The terms and conditions of the option grants will be mutually agreed upon by
the Company and the TSL Shareholders and will cover an aggregate of 116,000
shares of Common Stock.
CONDITIONS TO THE MERGERS
The respective obligations of the parties to consummate the Mergers are
subject to the satisfaction of a number of conditions, including but not limited
to the following: (a) the Merger Agreement shall have been approved and adopted
by the requisite vote of the stockholders of each of the Company and the TSL
Companies (the TSL Shareholders have agreed to vote all of their TSL Shares in
favor of the Mergers by written consent or at duly convened meetings of the TSL
Shareholders held for such purposes) and the Company shall have furnished to the
TSL Companies and each TSL Company shall have furnished to the Company a
certified copy of the resolutions duly adopted by its Board and a certified copy
of the resolutions duly adopted by its stockholders entitled to vote on the
Mergers, approving the Merger Agreement; (b) no provisions of any applicable law
or regulation and no judgment, injunction, order or decree shall prohibit the
consummation of the Mergers or materially impair the effective operation of the
business of the Company after the Mergers; (c) no litigation, proceeding or
governmental investigation shall be pending (whether or not both the Company and
any TSL Company are parties to such litigation, proceeding or investigation)
seeking to restrain, prevent or rescind the transactions contemplated by the
Merger Agreement or change the terms of the Merger Agreement or terminate the
Merger Agreement, which litigation, proceeding or governmental investigation
makes it inadvisable in the opinion of the Board of either the Company or a TSL
Company to consummate the transactions contemplated by the Merger Agreement; (d)
all statutory requirements for the valid consummation by the parties of the
transactions contemplated by the Merger Agreement shall have been fulfilled and
all authorizations, consents and approvals of federal, state and local
governmental agencies and authorities required to be obtained in order to permit
consummation of the transactions contemplated by the Merger Agreement, and to
permit the business presently carried on by the Company and the TSL Companies to
continue unimpaired immediately following the Mergers, shall have been obtained;
(e) the holders of not more than 5% of the issued and outstanding Common Stock
shall have initiated steps necessary to perfect their dissenters' rights; and
(f) the Employment Agreements shall have been executed and delivered.
In addition, the obligation of the Company to consummate the Mergers is
further subject to the satisfaction of a number of conditions, unless waived in
writing by it, including but not limited to the following: (a) the truth and
accuracy in all material respects of the representations and warranties of the
TSL Shareholders set forth in the Merger Agreement; (b) the TSL Companies' and
the TSL Shareholders' compliance in all material respects with the covenants,
obligations and conditions to be performed by them pursuant to the Merger
Agreement; (c) the non-occurrence of any material adverse change in the TSL
Companies' business, properties, results of operations or financial condition,
or any loss or damage to any of the properties of, or assets of, the TSL
Companies taken as an entirety, which would materially affect or impair their
ability to conduct the business now being conducted by them after the Mergers;
(d) the receipt by the Company of an opinion of counsel to the TSL Companies and
the TSL Shareholders with respect to such matters as are set forth in the Merger
Agreement; (e) the receipt by the Company of a letter from the TSL Companies'
independent auditors with respect to such matters as are set forth in the Merger
Agreement; and (f) the receipt by the Company of an opinion of Lazard Freres
dated not more than five days prior to the mailing of this Proxy Statement, that
the terms of the Mergers are fair to the Company from a financial point of view,
and such opinion shall not have been withdrawn.
26
<PAGE>
In addition, the obligations of the TSL Companies and the TSL Shareholders
to consummate the Mergers are further subject to the satisfaction of a number of
conditions, unless waived in writing by them, including but not limited to the
following: (a) the truth and accuracy in all material respects of the
representations and warranties of the Company set forth in the Merger Agreement;
(b) the Company's compliance in all material respects with the covenants,
obligations and conditions to be performed by the Company pursuant to the Merger
Agreement; (c) the non-occurrence of a material adverse change in the Company's
business, properties, results of operations or financial condition, or any loss
or damage to any of the properties of, or assets of, the Company which would
materially affect or impair its ability to conduct the business now being
conducted by it after the Mergers; (d) the receipt by the TSL Companies of an
opinion of counsel to the Company with respect to such matters as are set forth
in the Merger Agreement; and (e) the average of the closing prices for the
Common Stock for the 20 trading days ending on the last trading day prior to the
Closing Date shall not be less than $12.
At any time prior to the Effective Time, the parties may, to the extent
legally allowed, waive compliance with any of the terms or conditions contained
in the Merger Agreement.
REGISTRATION RIGHTS
The Company will provide certain registration rights to the TSL Shareholders
with respect to the shares of Common Stock received in the Mergers.
DEMAND REGISTRATION. Any TSL Shareholder has the right to make a written
demand on the Company to register shares of the Common Stock received in the
Mergers under the Securities Act (the "Demand Registration"). Upon receiving
such demand, the Company will provide written notice of the proposed
registration to all other TSL Shareholders and use its best efforts to effect
the registration through an underwritten public offering to permit or facilitate
the sale and distribution of such portions of the TSL Shareholders' shares of
Common Stock as are specified in the original request or subsequent requests
given by the remaining TSL Shareholders. A registration statement covering the
shares of Common Stock sought to be registered by the TSL Shareholders shall be
filed as soon as practicable, but in any event, within 45 days after the
Company's receipt of the request or requests for registration. However, if the
Company determines that it would be seriously detrimental to the Company and its
Stockholders for such registration statement to be filed on the date filing
would be required, due to the fact that the disclosure at such time of
information contained in such registration statement would be premature, upon so
certifying to the TSL Shareholders, the Company may defer the filing of the
registration statement for a period of not more than 30 days. Furthermore, no
such registration statement shall be declared effective by the Commission less
than six months from the Effective Time. Either the Company or any Company
stockholder, with the consent of the Company, may include shares in any such
registration provided that the addition of any such shares shall not cause the
number of shares requested to be registered by the TSL Shareholders to be
reduced.
The Company shall not be obligated to take any action in response to a
request for a Demand Registration if (i) it has effected one such registration
and the TSL Shareholders (A) have either sold at least 30% in the aggregate of
the Shares of Common Stock received by them at the Effective Time or (B) have
sold less than 30% of such amount and the failure to sell at least 30% of such
amount is a result of the TSL Shareholders having requested registration of such
lesser number or of a voluntary withdrawal of shares from the registration by
the TSL Shareholders; or (ii) if the number of shares with respect to which
Demand Registration is requested by all TSL Shareholders is less than 10% of the
number of shares of Common Stock received at the Effective Time; (iii) after two
years shall have elapsed since the Effective Time; or (iv) after the Company has
effected two such Demand Registrations. Furthermore, in no event shall the
Company be required to effect the Demand Registration of any shares of Common
Stock which, when added to any other shares registered pursuant to a Demand
27
<PAGE>
Registration, exceed 40% in the aggregate of the shares of Common Stock received
by the TSL Shareholders at the Effective Time. The TSL Shareholders may not
request that a Demand Registration shall become effective under the Securities
Act until six months after the Effective Time.
INCIDENTAL REGISTRATION. The Company has also agreed that if, at any time
two years or more after the Effective Time, it decides to register any of its
securities under the Securities Act, other than in connection with a merger, for
its own benefit or for the benefit of stockholders of the Company, it will
notify the TSL Shareholders who may then request to have registered under all
such registration statements up to an aggregate of 50% of the shares of Common
Stock held by such TSL Shareholder, after the sale by such TSL Shareholder of
shares of Common Stock pursuant to one or more Demand Registrations. In the
event an Incidental Registration is for an underwritten public offering, if the
underwriter determines that marketing considerations require a limitation in the
number of shares to be registered, the underwriter may limit the number of
shares to be sold in the registration by all selling shareholders, prorata
according to their respective ownership interests, provided, however, that no
such reduction shall apply to a selling shareholder holding 100,000 shares of
Common Stock or less, up to a maximum of 500,000 shares of Common Stock, held by
such selling shareholders.
EXPENSES. The TSL Shareholders will pay their proportionate shares (based
on the total number of shares of Common Stock being sold) of all expenses
incurred in connection with the first Demand Registration or any Incidental
Registration, including, without limitation, all expenses, fees and
disbursements of counsel for the Company and expenses of any special audits
incidental to or required by such registration. In no event shall the Company be
required to pay for any portion of the expenses of any registration begun at the
request of the TSL Shareholders and subsequently voluntarily withdrawn by the
TSL Shareholders, in which such case such expenses will be borne by the TSL
Shareholder or Shareholders requesting the withdrawal, nor shall the Company be
required to pay the fees of legal counsel for the TSL Shareholders. In any
event, underwriters' fees, discounts or commissions will be paid by the persons
selling shares of Common Stock pursuant to a registration, proportionate to the
number of shares sold by each such seller.
INDEMNIFICATION. The Company will indemnify and hold harmless each TSL
Shareholder and each underwriter (as defined in the Securities Act) and each
person, if any, who controls such underwriter within the meaning of the
Securities Act against losses, claims, damages or liabilities, joint or several
("Losses"), to which such TSL Shareholder or underwriter or controlling person
may become subject under the Securities Act or otherwise insofar as such Losses
(or actions in respect thereof) arise out of a registration of Common Stock as
provided for in the Merger Agreement, except to the extent any Loss arises out
of or is based on any untrue statement or omission based upon written
information furnished to the Company by the TSL Shareholder for use in a
Registration Statement. The TSL Shareholders will indemnify and hold harmless
the Company, its officers and directors, and each person, if any, who controls
the Company within the meaning of the Securities Act, against Losses to which
they become subject as a result of a registration of Common Stock as provided
for in the Merger Agreement, if such Losses arise out of, or are based on, any
untrue statement or omission which is based upon written information furnished
by the TSL Shareholders for use therein.
TERMINATION; AMENDMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the Mergers by the Company's
stockholders and the TSL Shareholders, by mutual written consent of the
Company's and each of the TSL Companies' respective Boards, or by either party
if the Mergers are not consummated in accordance with the terms of the Merger
Agreement on or before October 31, 1995.
The Merger Agreement may be amended prior to the Effective Time, to the
extent legally allowed, by the mutual written consent of the Company's and each
of the TSL Companies' respective Boards. Any amendment made subsequent to the
adoption of the Merger Agreement by the stockholders of any company may not (i)
alter or change the amount or kind of consideration to be exchanged, or any of
the proceedings, in exchange for or on conversion of all or any of the shares of
common stock of such
28
<PAGE>
company; (ii) alter or change any term of the Articles of Incorporation of the
Company to be effected by the Merger; or (iii) alter or change any of the terms
and conditions of the Merger Agreement, if such alteration or change would
adversely affect the stockholders of the company or companies having approved
the related Merger.
EXPENSES
In consideration of advisory services rendered to the TSL Companies in
connection with the Merger Agreement and the consummation of the Mergers,
Ladenburg will be paid a fee equal to the value of 119,000 shares of Common
Stock, such shares to be valued at the average of the closing prices for the
Common Stock on the Nasdaq Stock Market for each of the 20 trading days ending
on the last trading day prior to the Closing Date. Such fee will be paid by the
Company at the Effective Time. Based upon an assumed price for the Common Stock
of $19, the closing price for the Common Stock on May 23, 1995, the amount of
the fee would be $2,261,000. Also at the Effective Time all costs and expenses
of the Company, the TSL Companies, and the TSL Shareholders incident to the
negotiations and preparation of the Merger Agreement and consummation of the
transactions contemplated thereby, including the fees and expenses of the TSL
Companies' attorneys, and the fees and expenses of its independent public
accountants in connection with the preparation of the TSL Companies' 1992, 1993
and 1994 audited financial statements, will be paid by the Company. If the
Merger Agreement is terminated as permitted therein and such termination is not
attributable to a breach of the Merger Agreement by any party, each party shall
pay all fees and expenses incurred by it in connection with the Merger Agreement
and the transactions contemplated thereby.
Assuming that the fee payable to Ladenburg is $2,261,000, the negotiation
and consummation of the Mergers will result in aggregate expenses to the Company
of approximately $3,350,000, including nonrecurring expenses paid to financial
advisors, attorneys and accountants. The costs of integrating operations are
expected to result in an additional nonrecurring charge to the combined
company's results of operations after consummation of the Mergers. Although the
actual amount of such charge cannot be determined until the operational and
transition plans are completed, the Company currently estimates that the
aggregate integration charge will range between $100,000 and $200,000. In any
event, costs associated with the Mergers, which will be reflected separately as
nonrecurring charges in the Company's financial statements, may negatively
impact results of operations in 1995.
INDEMNIFICATION
Each TSL Shareholder has agreed to indemnify and hold harmless the Company
from and against any Losses resulting from any breach of any representation or
warranty made by such TSL Shareholder in the Merger Agreement with respect to
certain individual representations and warranties pertaining to such TSL
Shareholders' ownership of the TSL shares delivered by him in connection with
the Mergers. In addition, the TSL Shareholders, severally and not jointly, have
agreed to indemnify and hold harmless the Company from and against any Losses
resulting from any breach of any other representation or warranty contained in
the Merger Agreement, but only to the extent that the aggregate amount of such
Losses exceeds $300,000. The TSL Shareholders' aggregate indemnification
obligation, calculated at the time a request for indemnification is made, is
limited to the lesser of (i) $20 million, and (ii) 33 1/3% of the sum of (x) the
net proceeds received, after taxes, fees, and expenses incurred, by the TSL
Shareholders from the sale of shares of Common Stock received under the Merger
Agreement and (y) the market value of the remaining shares of Common Stock
received under the Merger Agreement then held by such TSL Shareholders valued at
the average of the closing prices for the Common Stock on the Nasdaq Stock
Market for the 20 trading days ending on the last trading day prior to the date
of payment. The aggregate liability of each TSL Shareholder is limited to the
product of (i) the aggregate liability of the TSL Shareholders calculated as
described above and (ii) a fraction, the numerator of which is the total number
of shares of Common Stock issued to such TSL Shareholder pursuant to the Merger
Agreement, and the denominator of which is 3,331,000.
29
<PAGE>
EMPLOYMENT AGREEMENTS
At the Effective Time, the Company will enter into employment agreements
with each of Alan C. Maltz, Scott A. Maltz and Stephen B. Rockoff (the
"Employment Agreements"). Under the Employment Agreements, each employee will be
required to use his best efforts on a full-time basis to promote the best
interests of the Company. The Employment Agreements continue for a term ending
December 31, 1997.
Each employee will receive a salary ("Base Pay"), which will be increased by
2 1/2% as of January 1, 1996, and by an additional 5% as of January 1, 1997. In
addition, each employee will receive an incentive bonus ("Base Bonus") if the
TSL Division of the Company meets a mutually agreed upon financial performance
target for the subject fiscal year, established during the annual budget
preparation of the Company for such fiscal year, which Base Bonus will be
reduced on a sliding scale basis if targeted performance is not met, to 0% of
the Base Bonus if the TSL Division fails to meet the financial performance
target by 25% or more and increased on a sliding scale basis to a maximum of
200% of the Base Bonus if TSL exceeds the financial performance target by 25% or
more. The Base Bonus will be increased by 2 1/2% for the year commencing January
1, 1996, and an additional 5% for the year commencing January 1, 1997. Each
month during the period from the Effective Time through the later of (i)
December 31, 1996, and (ii) the last day of the 16th month after the Effective
Time, the employee will be paid an advance in an amount equal to one-twelfth of
the Base Bonus for the year in progress and such advance shall be non-refundable
to the Company regardless of the TSL Division's financial performance during
such year.
Alan C. Maltz will serve as Executive Vice President of the Company in
charge of the TSL Division and will receive, on an annual basis, beginning Base
Pay of $200,000 and beginning Base Bonus of $85,000. Scott A. Maltz and Stephen
B. Rockoff, as Vice Presidents, will each receive, on an annual basis, beginning
Base Pay of $175,000 and beginning Base Bonus of $65,000.
Each Employment Agreement is terminable by the Company for "cause" as
defined therein, and by the employee if the Company materially breaches the
Employment Agreement, including (i) making a material change in the duties and
responsibilities of the employee, (ii) relocating the employee, (iii) changing
the conditions of employment of the employee which are, in the aggregate,
material, or (iv) materially failing to support TSL as an operating division of
the Company.
Each Employment Agreement provides, generally, that the employee will not
compete with the Company during the period in which he is employed by the
Company and thereafter, if termination of employment was for cause, for a period
of three years, or, if the employee was employed by the Company for less than a
full year at the time of termination of employment, an additional number of days
equal to the difference between 365 and the number of days elapsed from the date
of the Employment Agreement to the termination date. If the employee's
employment is terminated other than for cause, the Company is required to
continue the employee's compensation payments throughout the term of the
Employment Agreement, during which the employee will be prohibited from
competing with the Company. In addition, the Company will have the option of
extending the period of noncompetition to the fourth anniversary of the date of
the Employment Agreement, provided that during such extended period the Company
makes payments of an amount equal to the product of the employee's Base Pay plus
his Base Bonus (both as in effect on December 31, 1997), multiplied by a
fraction (i) the numerator of which is the difference between $20 million and
the aggregate net proceeds received by the TSL Shareholders from sales of the
Common Stock (after deducting all taxes, fees and expenses incurred in
connection with such sales) from the Effective Time to December 31, 1997 and
(ii) the denominator of which is $20 million.
During the period in which the noncompetition provision described above is
in effect, the employee is prohibited from soliciting any person who is, or at
any time during the employment period was, an employee of the Company (other
than secretarial and other personnel whose duties are ministerial in nature) to
become employed by any other person in competition with the Company. In
addition, during the four year period following termination of the employee's
employment with the
30
<PAGE>
Company, regardless of the basis for termination, the employee is prohibited
from soliciting any entity which was a customer of the Company during the period
of five years prior to the termination of the employee's employment for purposes
of obtaining business which would constitute a Prohibited Business as defined in
each Employment Agreement.
SELECTED COMBINED FINANCIAL DATA OF THE TSL COMPANIES
The summary historical combined statement of operations data of the TSL
Companies for each of the five years in the period ended December 31, 1994 and
the combined balance sheet data as of December 31, 1994 have been derived from
the combined financial statements of the TSL Companies. The combined statements
of operations for each of the three years in the period ended December 31, 1994
and for each of the quarters ended March 31, 1995 and March 31, 1994 and the
combined balance sheets at March 31, 1995, December 31, 1994 and December 31,
1993 are included elsewhere herein. The statement of operations data for such
periods and the balance sheet data at such dates should be read in conjunction
with the combined financial statements of the TSL Companies, including the notes
thereto, and with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere herein. The balance sheet data at
March 31, 1995 and statement of operations data for the three months ended March
31, 1995 and March 31, 1994 for the TSL Companies are derived from unaudited
financial information. Management believes that this unaudited information
reflects all adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of the results of operations for the periods
presented. The financial information at March 31, 1995 and for the quarter then
ended is not necessarily indicative of the results of operations that may be
expected for the entire year.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------------------- --------------------
1990 1991 1992 1993 1994 1994 1995
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
TSL Statement of Operations Data:
Revenues.............................. $ 4,949 $ 6,196 $ 6,666 $ 9,554 $ 13,636 $ 2,719 $ 3,774
Operating income (loss)(1)............ (95) 869 (458) 698 (873) (219) 328
Net income (loss)(1).................. (127) 791 (436) 660 (1,144) (309) 302
TSL Balance Sheet Data:
Working Capital....................... $ (507) $ 302 $ (77) $ 880 $ (257) $ 587 $ 62
Total assets.......................... 1,042 1,866 1,767 2,774 3,450 3,626 3,223
Long Term Debt........................ -- -- -- 210 140 193 123
Stockholders' equity.................. (63) 728 292 952 (192) 644 110
<FN>
------------------------
(1) The TSL Companies have elected "S" corporation status under federal tax
laws, and accordingly, have distributed all taxable profits each year as
additional shareholder and officer compensation. See "Unaudited Pro Forma
Combined Condensed Financial Statements" for adjustment of historical
financial data to reflect comparable salary and income tax expense to be
recorded in future periods. The Company believes this information is
necesary for investors to assess realistically the impact of the
combination.
</TABLE>
31
<PAGE>
THE TSL COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth for the period indicated the percentage of
net sales represented by each item reflected in the TSL Companies Combined
Statement of Operations. This table and the subsequent discussion should be read
in conjunction with the Selected Combined Financial Data and the Combined
Financial Statements and Notes to Combined Financial Statements contained
elsewhere herein.
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
----------------------------------------------------------
3 MONTHS ENDED FISCAL YEAR ENDED
---------------------- ----------------------------------
3/31/95 3/31/94 12/31/94 12/31/93 12/31/92
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues............................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Salaries & Wages.................................... 27.0% 26.6% 24.9% 32.1% 34.4%
Additional Compensation to Shareholders and
Officers........................................... 41.6% 60.3% 55.2% 28.9% 39.2%
Other Operating Expenses............................ 22.7% 21.2% 26.3% 31.7% 33.3%
---------- ---------- ---------- ---------- ----------
Income from Operations.............................. 8.7% (8.1%) (6.4%) 7.3% (6.9%)
Interest Income..................................... .1% .3% .9% .4% .7%
Interest Expense.................................... -- -- -- -- (.1%)
Income (loss) before state income taxes............. 8.8% (7.8%) (5.5%) 7.7% (6.3%)
Provision for state income tax...................... (.8%) (3.6%) (2.8%) (.8%) (.2%)
---------- ---------- ---------- ---------- ----------
Net Income.......................................... 8.0% (11.4%) (8.3%) 6.9% (6.5%)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
THREE MONTHS ENDED MARCH 31, 1995, AND MARCH 31, 1994
Revenues during the quarter ended March 31, 1995 increased $1,055,661, or
38.8%, compared to the same quarter in 1994. This increase was due primarily to
a 53% increase in operations management revenues and a 50% increase in technical
consulting revenues. These revenue increases were the result of the provision of
services to a larger number of clients compared to the prior year, and in
consulting, principally due to an increase in the number of corporate relocation
projects. There were no price increases for such services during the period.
Salaries and wages increased $296,825, or 41.1%, during the first quarter of
1995, compared to the first quarter of 1994. As a percentage of revenues, these
expenses increased to 27.0% of revenues in 1995 from 26.6% of revenues in 1994.
The increase in actual costs was due to an increase in the number of employees
from approximately 56 employees in 1994 to 74 employees during the same period
in 1995, in order to service the increased demand for the TSL Companies'
services. The TSL Companies believe that, as a percentage of revenues, the
salaries and wages for the first quarter of 1994 and 1995 are comparable and the
differences are the result of changes in product mix during the periods.
The TSL Companies have elected "S" corporation treatment for federal income
tax purposes, and have generally filed their income tax returns on a cash basis.
All taxable profits have been distributed as additional compensation to
shareholders and officers each period based on estimated taxable income.
Additional compensation to shareholders and officers was $1,571,717 in the first
quarter of 1995, compared to $1,639,396 during the same period in 1994. This
reduction is principally due to a decrease in tax basis profits available for
distribution in 1995 compared to 1994.
Other operating expenses increased $279,809, or 48.6%, during the first
quarter of 1995 compared to the first quarter of 1994. As a percentage of
revenues, other operating expenses increased from 21.2% in 1994 to 22.7% in
1995. The most significant increase in actual costs was due to increased use of
outside consulting services to support increased demand for the companies'
services.
32
<PAGE>
The increase as a percentage of revenues was due principally to the timing of
certain purchases, such as data center supplies, travel and other similar
expenses which are not directly related to revenue generation.
Income tax expense was $31,115 during the first quarter of 1995, compared to
$97,000 during the first quarter of 1994. The TSL Companies have elected "S"
corporation treatment for federal income tax purposes; therefore the provision
for income taxes consists of state and local taxes in those jurisdictions in
which the TSL Companies did not elect "S" corporation status, or for
jurisdictions which do not recognize "S" corporations for local tax purposes.
The 1994 income tax provision reflects a charge of $97,000 on a loss before
taxes of $211,550, representing a provision for additional state and local taxes
related to the potential treatment by taxing authorities of certain tax
deductions taken and management fees charged between the four TSL Companies.
YEARS ENDED DECEMBER 31, 1994 AND DECEMBER 31, 1993
Revenues increased $4,082,519, or 42.7%, in fiscal 1994 compared to fiscal
1993. This improvement was principally due to the signing of consulting and
operations management contacts with two large banking clients for which TSL had
previously provided billing verification services. Also contributing to this
improvement was the signing of a large contract with a brokerage firm,
principally for technical consulting related to the design and project
management of the brokerage firm's trading floor activities. There were no price
increases for such services during the periods.
Salaries and wages increased $326,226, or 10.6%, while decreasing as a
percentage of revenue from 32.1% to 24.9%. The increase in actual costs was due
to an increase in the number of employees from 60 at the end of 1993 to 71 at
the end of 1994, as a result of increased demand for the TSL Companies'
services. The decrease as a percentage of revenues was due to increased
efficiency and a larger revenue base over which to spread the fixed costs of
services and support.
The TSL Companies have elected "S" corporation treatment for federal income
tax purposes, and have generally filed their income tax returns on a cash basis.
All taxable profits have been distributed as additional compensation to
shareholders and officers each period based on estimated taxable income.
Additional compensation to shareholders and officers was $7,529,470 in 1994,
compared to $2,760,602 during 1993. This increase is due to additional profits
available for distribution in 1994 compared to the prior year.
Other operating expenses increased $558,494, or 18.4%, while decreasing as a
percentage of revenues from 31.7% to 26.3%. The increase in actual costs was due
to increased use of outside consulting services to support increased demand for
the companies' services, while the decrease as a percentage of revenues was
principally due to an increase in the revenue base over which to spread the
fixed costs of service and support.
Income tax expense was $387,885 in 1994 compared to $72,354 in 1993. The
provision for income taxes consists of state and local taxes in those
jurisdictions in which the TSL Companies did not elect "S" corporation status,
or for jurisdictions which do not recognize "S" corporations for local tax
purposes. The 1994 income tax provision reflects a charge of $387,885 compared
to a loss before taxes of $756,201, representing a provision for additional
state and local taxes related to the potential treatment by taxing authorities
of certain tax deductions taken and management fees charged between the four TSL
Companies.
YEARS ENDED DECEMBER 31, 1993 AND DECEMBER 31, 1992
Revenues increased $2,887,149, or 43.3%, compared to fiscal 1992. In 1993
operations management services were introduced which contributed revenues of
$709,000 during such period. Also contributing to this improvement was an
increase in consulting revenues due to additional revenues generated from
existing technical consulting clients. There were no price increases for such
services during the periods.
33
<PAGE>
Salaries and wages increased $772,787, or 33.7%, while decreasing as a
percentage of revenue from 34.4% to 32.1%. The increase in actual costs was due
to an increase in the number of full time employees from 46 at the end of 1992
to 60 at the end of 1993, principally to service the increasing demand for the
TSL Companies' services.
Additional compensation to shareholders and officers was $2,760,602 in 1993,
compared to $2,615,882 during 1992, principally due to an increase in tax basis
profits available for distribution in 1993 compared to 1992.
Other operating expenses increased $813,719, or 36.7%, while decreasing as a
percentage of revenues from 33.3% to 31.7%. The increase in actual costs was due
to increased use of outside consulting services to support increased demand for
the companies' services, while the decrease as a percentage of revenues was
principally due to an increase in the revenue base over which to spread the
fixed costs of service and support.
Income tax expense was $72,354 in 1993 compared to $15,900 in 1993. The
provision for income taxes consists of state and local taxes in those
jurisdictions in which the TSL Companies did not elect "S" corporation status,
or for jurisdictions which do not recognize "S" corporations for local tax
purposes.
RECENT FASB PRONOUNCEMENTS
In December 1990, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 106. "Employers' Accounting for
Post Retirement Benefits Other than Pensions" ("SFAS No. 106"). SFAS No. 106
became effective for fiscal years beginning after December 15, 1992. The TSL
Companies do not offer any post retirement benefits subject to the provision of
SFAS No. 106, and believe that it will have no impact on the TSL Companies'
financial position or results of operations.
In November 1992, the FASB issued Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Post Employment Benefits." This
statement became effective for fiscal years beginning after December 31, 1993.
The TSL Companies do not offer any post employment benefits and believe this
pronouncement will have no impact on TSL's financial position or results of
operations.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1995, the TSL Companies had working capital of $61,924 and a
current ratio of 1.02 to 1. This compares to a working capital deficit of
$256,878 and a current ratio of .93 to 1 at December 31, 1994 and working
capital of $880,483 and a current ratio of 1.55 to 1 at December 31, 1993.
The working capital deficit at December 31, 1994 resulted from a decrease in
accounts receivable, and an increase in loans payable -- officers, accounts
payable and income taxes payable. This working capital deficit had no impact on
the TSL Companies' ability to meet its obligations as they came due, as loans
payable -- officers are retired only upon the payment of other obligations.
The TSL Companies have typically funded their cash requirements through
internally generated cash flow and periodic loans from shareholders, which are
usually made at year end upon distribution of the taxable profits of the
companies. Such loans are generally repaid during the following year as
internally generated cash flow permits.
The TSL Companies have no material capital expenditure obligations and
believe that they have adequate borrowing capacity should the need arise. The
TSL Companies believe that funds provided by operations and proceeds from
stockholder loans as necessary will be adequate to fund any working capital
requirements on both a short-term and long-term basis.
34
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial statements
have been prepared to give effect to the Mergers, using the pooling-of-interests
method of accounting.
The unaudited pro forma combined condensed balance sheet as of March 31,
1995 gives effect to the Mergers as if they had occurred on March 31, 1995, and
combines the audited condensed consolidated balance sheets of Brite and TSL as
of March 31, 1995.
The unaudited pro forma combined condensed statements of income combine the
historical consolidated statements of income of Brite and TSL for each of the
three fiscal years ended December 31, 1994 and the unaudited three months ended
March 31, 1995 and 1994, in each case as if the Mergers had occurred at the
beginning of the earliest period presented.
Such unaudited pro forma combined condensed 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
Mergers 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 Brite and TSL and
should be read in conjunction with the respective historical consolidated
financial statements and notes thereto of Brite and TSL, incorporated by
reference herein or included elsewhere in this Proxy Statement, and do not
incorporate any benefits from cost savings or synergies of operations of the
combined company.
35
<PAGE>
BRITE VOICE SYSTEMS, INC.
AND
THE TSL COMPANIES
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
BRITE TSL PRO FORMA PRO FORMA
MARCH 31, 1995 MARCH 31, 1995 ADJUSTMENTS COMBINED
-------------- --------------- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current Assets:
Cash and equivalents................................ $ 4,022 $ 1,187 $ $ 5,209
Short-term investments, at cost which approximates
market............................................. 3,704 -- 3,704
Accounts receivable, net of allowances.............. 21,373 1,759 23,132
Inventories......................................... 9,180 -- 9,180
Other current assets................................ 1,883 6 1,889
-------------- ------- ------ -----------
Total current assets............................ 40,162 2,952 43,114
-------------- ------- ------ -----------
Property and equipment, net........................... 9,928 171 10,099
Other Assets.......................................... 2,291 -- 2,291
-------------- ------- ------ -----------
Total............................................. $ 52,381 $ 3,123 $ $ 55,504
-------------- ------- ------ -----------
-------------- ------- ------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities................................... $ 14,378 $ 2,889 $ $ 17,267
-------------- ------- ------ -----------
Deferred Income Taxes................................. 138 -- 138
-------------- ------- ------ -----------
Long-Term Debt........................................ -- 123 143
-------------- ------- ------ -----------
Stockholders' Equity:
Common stock........................................ 33,429 6 127(C) 33,562
Capital in excess of par value...................... -- 127 (127)(C) --
Retained earnings (deficit)......................... 4,448 (22) 4,426
Foreign currenty translation adjustment............. (12) -- (12)
-------------- ------- ------ -----------
Total stockholders' equity........................ 37,865 111 37,976
-------------- ------- ------ -----------
Total........................................... $ 52,381 $ 3,123 $ $ 55,504
-------------- ------- ------ -----------
-------------- ------- ------ -----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
36
<PAGE>
BRITE VOICE SYSTEMS, INC.
AND
THE TSL COMPANIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
FIRST QUARTER ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
BRITE TSL ADJUSTMENTS COMBINED
--------- --------- -------------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues....................................................... $ 19,040 $ 3,774 $ $ 22,814
Costs and Expenses............................................. 16,903 3,446 (1,461)(A) 18,888
--------- --------- ------- -----------
Income from Operations......................................... 2,137 328 1,461 3,926
Other Income, Net.............................................. 148 5 153
--------- --------- ------- -----------
Income Before Taxes............................................ 2,285 333 1,461 4,079
Provision for Income Taxes..................................... 594 31 687(B) 1,312
--------- --------- ------- -----------
Net Income..................................................... $ 1,691 302 $ 774 $ 2,767
--------- --------- ------- -----------
--------- --------- ------- -----------
Earnings Per Share............................................. $ .20 $ $ $ .23
--------- --------- ------- -----------
--------- --------- ------- -----------
Average Number of Common and Common Equivalent Shares.......... 8,573 3,331 11,904
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
37
<PAGE>
BRITE VOICE SYSTEMS, INC.
AND
THE TSL COMPANIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
FIRST QUARTER ENDED MARCH 31, 1994
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
BRITE TSL ADJUSTMENTS COMBINED
--------- --------- -------------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues....................................................... $ 14,405 $ 2,719 $ $ 17,124
Costs and Expenses............................................. 13,252 2,937 (1,505)(A) 14,684
--------- --------- ------- -----------
Income (Loss) from Operations.................................. 1,153 (218) 1,505 2,440
Other Income, Net.............................................. 72 7 79
--------- --------- ------- -----------
Income (Loss) Before Taxes..................................... 1,225 (211) 1,505 2,519
Provision for Income Taxes..................................... 345 97 421(B) 863
--------- --------- ------- -----------
Net Income (Loss).............................................. $ 880 $ (308) $ 1,084 $ 1,656
--------- --------- ------- -----------
--------- --------- ------- -----------
Earnings Per Share............................................. $ .11 $ $ $ .14
--------- --------- ------- -----------
--------- --------- ------- -----------
Average Number of Common and Common Equivalent Shares.......... 8,164 3,331 11,495
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
38
<PAGE>
BRITE VOICE SYSTEMS, INC.
AND
THE TSL COMPANIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
BRITE TSL ADJUSTMENTS COMBINED
--------- --------- -------------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues...................................................... $ 66,304 $ 13,636 $ $ 79,940
Costs and Expenses............................................ 59,426 14,509 (6,989)(A) 66,946
--------- --------- ------- -----------
Income (Loss) from Operations................................. 6,878 (873) 6,989 12,994
Other Income, Net............................................. 470 116 586
--------- --------- ------- -----------
Income (Loss) Before Taxes.................................... 7,348 (757) 6,989 13,580
Provision for Income Taxes.................................... 1,779 388 2,105(B) 4,272
--------- --------- ------- -----------
Net Income (Loss)............................................. $ 5,569 $ (1,145) $ 4,884 $ 9,308
--------- --------- ------- -----------
--------- --------- ------- -----------
Earnings Per Share............................................ $ .68 $ $ $ .81
--------- --------- ------- -----------
--------- --------- ------- -----------
Average Number of Common and Common Equivalent Shares......... 8,195 3,331 11,526
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
39
<PAGE>
BRITE VOICE SYSTEMS, INC.
AND
THE TSL COMPANIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
BRITE TSL ADJUSTMENTS COMBINED
--------- --------- -------------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues...................................................... $ 46,857 $ 9,554 $ 56,411
Costs and Expenses............................................ 49,161 8,856 58,017
--------- --------- ------- -----------
Income (Loss) from Operations................................. (2,304) 698 (1,606)
Other Income, Net............................................. 377 34 411
--------- --------- ------- -----------
Income (Loss) Before Taxes.................................... (1,927) 732 (1,195)
Provision for Income Taxes.................................... 36 72 108
--------- --------- ------- -----------
Net Income (Loss)............................................. $ (1,963) $ 660 $ $ (1,303)
--------- --------- ------- -----------
--------- --------- ------- -----------
Earnings (Loss) Per Share..................................... $ (.25) $ $ $ (.12)
--------- --------- ------- -----------
--------- --------- ------- -----------
Average Number of Common and Common Equivalent Shares......... 7,737 3,331 11,068
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
40
<PAGE>
BRITE VOICE SYSTEMS, INC.
AND
THE TSL COMPANIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1992
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
BRITE TSL ADJUSTMENTS COMBINED
--------- --------- -------------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues...................................................... $ 35,599 $ 6,666 $ $ 42,265
Costs and Expenses............................................ 39,092 7,124 46,216
--------- --------- ------- -----------
Income (Loss) from Operations................................. (3,493) (458) (3,951)
Other Income, Net............................................. 608 38 646
--------- --------- ------- -----------
Loss Before Taxes............................................. (2,885) (420) (3,305)
Provision (Credit) for Income Taxes........................... (898) 16 (882)
--------- --------- ------- -----------
Net Loss...................................................... $ (1,987) $ (436) $ $ (2,423)
--------- --------- ------- -----------
--------- --------- ------- -----------
Earnings (Loss) Per Share..................................... $ (.26) $ $ $ (.22)
--------- --------- ------- -----------
--------- --------- ------- -----------
Average Number of Common and Common Equivalent Shares......... 7,534 3,331 10,865
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
41
<PAGE>
BRITE VOICE SYSTEMS, INC.
AND
THE TSL COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed combined financial statements
are presented for illustrative purposes only and do not give effect to
synergies, if any, which may occur due to the integration of Brite and TSL's
operations. Additionally, the pro forma combined condensed financial statements
exclude the transaction costs of the Merger, which are estimated at $3,350,
including fees to investment bankers, financial advisors, legal, accounting,
printing and other related expenses. This estimate is preliminary only, and is
therefore subject to change. The transaction costs and other nonrecurring
expenses will be charged to operations upon consummation of the Merger.
2. PRO FORMA ADJUSTMENTS
(A) Shareholders compensation -- Compensation of the TSL shareholders has
been reduced by $6,989, $1,505, and $1,461 for the year ended December 31, 1994
and the three months ended March 31, 1994 and 1995, respectively. Such
reductions represent the difference between actual compensation and compensation
contracted for under the employment agreements to be entered into assuming
consummation of the Merger. The TSL shareholders' duties and responsibilities
will not be diminished with the result that other costs will be incurred that
offset the pro forma financial adjustments to compensation expense. The Company
believes such information is necessary for investors to assess realistically the
impact of the combination.
(B) Income taxes -- TSL has elected "S Corporation" status, and as a
result, TSL earnings were taxed at the stockholder level rather than the
corporate level. The provision for income taxes has been adjusted to reflect an
effective income tax rate of 40% of pro forma taxable income (as adjusted for
the reduction in shareholders compensation) for the year ended December 31, 1994
and the three months ended March 31, 1994 and 1995.
(C) Common Stock and additional paid in capital -- The common stock and
additional paid in capital of TSL have been adjusted to reflect the assumed
issuance of 3,331 shares of Brite Common Stock in exchange for all of the
outstanding shares of TSL.
3. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The pro forma combined condensed financial statements assume that the Merger
qualifies as a "tax-free" reorganization for federal income tax purposes.
42
<PAGE>
INFORMATION CONCERNING THE COMPANY
The Company was incorporated under the laws of the state of Kansas in 1984.
The Company and its subsidiaries design, integrate, assemble and market voice
processing systems and services which incorporate audiotex, voice response,
voice recognition, voice/facsimile messaging and interactive computer
applications into customized market solutions. The Company's customers include
telephone companies, government agencies, utility companies, yellow pages
publishers, universities, financial institutions, cellular network operators and
newspapers.
Except as set forth herein, all information concerning the Company,
including the business, financial statements, management and security ownership
of the Company, is incorporated herein by reference from the documents listed
under "Documents Incorporated by Reference." Interested stockholders are urged
to request copies of those documents by contacting the Company as indicated
under such caption.
INFORMATION CONCERNING THE TSL COMPANIES
GENERAL
Telecom Services Limited (U.S.), Inc. ("TSL(US)"), Telecom Services Limited
(West), Inc. ("TSL(West)"), TSL Software Services, Inc. ("TSL Software"), and
TSL Management Group, Inc. ("TSL Management") (collectively the "TSL Companies"
or "TSL"), are New Jersey corporations which are affiliated by common ownership.
TSL(US) was incorporated on July 14, 1986, TSL(West) was incorporated on
December 15, 1988, TSL Software was incorporated on September 21, 1989, and TSL
Management was incorporated on December 29, 1992. The principal executive office
of TSL (US) is located at 50 Broad Street, New York, New York 10004. The TSL
Companies' telephone number at that location is (212) 248-2000. The principal
executive office of TSL(West) is located at 220 Montgomery Street, Suite 917,
San Francisco, California 94104. The TSL Companies' telephone number at that
location is (415) 291-8440. The principal executive offices of TSL Software and
TSL Management are located at 1259 Route 46, Building 1, Parsippany, New Jersey.
The TSL Companies' telephone number at that location is (201) 334-4042.
The TSL Companies offer a broad array of services and products which assist
clients in managing various aspects of their telecommunications requirements,
including managing and reducing expenses, selecting service and equipment
vendors, designing and implementing telecommunications systems, managing
day-to-day operations, and developing management reports and applications.
EXECUTIVE OFFICERS, DIRECTORS AND SHAREHOLDERS
The executive officers, directors and principal shareholders of TSL are Alan
C. Maltz, Scott A. Maltz and Stephen B. Rockoff. Information concerning each of
these individuals, their stock ownership in each of the TSL Companies and the
number of shares of Common Stock to be received in the Mergers, is as follows:
ALAN C. MALTZ, 45, co-founded each of the TSL Companies and has served as
President and a Director of TSL(US), TSL Software and TSL Management, and as
Vice President and a Director of TSL(West), since their respective dates of
incorporation. Prior to co-founding the TSL Companies, Mr. Maltz was Vice
President of Telecommunications Systems at Bankers Trust Company, where he
managed the engineering, design, and operation of all global telecommunications
systems since 1974. Prior to his employment by Bankers Trust Company, Mr. Maltz
was employed as a project engineer by Western Union and New York Telephone
Company.
Mr. Maltz holds degrees in electrical engineering and business
administration from City College of New York and Pace University, respectively,
and is a registered professional engineer in the State of New York and the State
of New Jersey.
SCOTT A. MALTZ, 38, was a co-founder of TSL(West) in 1989, and has served as
President and a Director since that time. Mr. Maltz is responsible for all
western United States business of TSL(West).
43
<PAGE>
In addition to his tariff and negotiating expertise, Mr. Maltz is involved in
procuring new business and managing existing key client relationships. Prior to
joining TSL(West), Mr. Maltz was employed by Bain & Company, a management
consulting firm, as a Manager where he consulted clients in the
telecommunications, financial services and personal computer industries. Mr.
Maltz holds an MBA degree in finance and marketing from the University of
Chicago and a BSBA degree in accounting from the University of Florida. In
addition, Mr. Maltz is a certified public accountant.
STEPHEN B. ROCKOFF, 44, is Vice President, Secretary and a Director of
TSL(US), TSL Software and TSL Management, having joined these companies in 1991.
Mr. Rockoff serves as corporate counsel, and is also involved in sales and
marketing and in supervising consulting assignments. Prior to joining TSL, Mr.
Rockoff was a partner in the law firm of Hersh, Ramsey, Berman & Rockoff located
in Morristown, New Jersey, where he served as the TSL Companies' counsel from
their respective dates of incorporation. Mr. Rockoff holds an LLM degree in
taxation from New York University, a JD degree from Boston College and an AB
degree from Syracuse University.
<TABLE>
<CAPTION>
TSL STOCK OWNERSHIP TOTAL BRITE
------------------------------------------------------ COMMON STOCK
TSL SHAREHOLDER TSL(US) TSL(WEST) TSL SOFTWARE TSL MANAGEMENT TO BE RECEIVED
---------------------------------------- --------- ----------- ------------ ---------------- --------------
<S> <C> <C> <C> <C> <C>
Alan C. Maltz 160 47 80 800* 2,184,559
-- Brite Common Stock to be received 800,000 683,979 620,580 80,000*
Scott A. Maltz -- 53 -- -- 771,296
-- Brite Common Stock to be received -- 771,296 -- --
Stephen B. Rockoff 40 -- 20 200 375,145
-- Brite Common Stock to be received 200,000 -- 155,145 20,000
<FN>
------------------------
*The shares are held by Mr. Maltz as custodian for his two minor children.
</TABLE>
On the date of this Proxy Statement, there were 8,097,573 shares of Common
Stock outstanding. After issuance of the shares in connection with the Mergers,
Alan C. Maltz, Scott A. Maltz and Stephen B. Rockoff will own approximately
19.1%, 6.8% and 3.3% of the outstanding Common Stock, respectively.
PRODUCTS AND SERVICES
TSL's business is comprised of (1) customized software products and services
for ongoing management of telecommunications utilization and expense; (2)
operations management services; (3) telecommunications billing
verification/audit services; and (4) technical consulting services.
MANAGEMENT SOFTWARE APPLICATIONS AND SERVICES. TSL has developed software
which enables its clients to better understand, control and allocate their
telephone and fax expenses. The software utilizes modems and data-links to poll
call activity at each of a client's facilities and combines this information
with call detail records which are available from local and long distance
service providers. Telecommunications expense management software products and
services are provided either on a service bureau basis through TSL's New Jersey
data center, or on a licensed basis with ongoing service aimed at tracking,
processing, and allocating the expenses associated with a client's daily calls.
These products and services include: (i) call accounting services for
telecommunications expense management; (ii) the Fraud-Chek-Registered Trademark-
service which curtails unauthorized employee phone calls and abuses, which are
detected automatically once predetermined thresholds are reached, triggering an
alarm call to the TSL's 24 hour toll fraud line; (iii) the EZ-View reporting
product which enables a client to view its call record details, search for and
sort data in order to manage call efficiencies and costs, and
44
<PAGE>
produce management reports on CD-ROM; and (iv) Telecommunications On-Line
Management Systems ("TOMS"), a PC-based on-line operations management system,
which aids clients in more effectively managing facilities, including equipment
inventories and circuits, work orders, and phone and data systems expenses.
TSL's call accounting service collects call information from all types of
PBX systems, Centrex services, and carrier activity tapes, and is regularly
updated for new discount programs such as SDN, Megacom, VNET, and Tariff 12.
This information is stored in a mainframe database computer in TSL's Parsippany,
New Jersey facility. Western Telematic PollCats record the data, which, at a
minimum, consist of originating line numbers, authorization numbers, dates and
durations of calls, dial access and called numbers, and trunk groups used. The
various call records are then processed into a user-defined format and provided
to clients on a monthly basis. Traffic volumes monitored by TSL's data center
identify unusual volume variances in order to adjust schedules and recommend
upgrades or downgrades to field units. The call accounting service provides bill
consolidation and is often packaged with one or more of TSL's software products
described above.
TSL's monthly reports, which include details such as the ten most expensive
calls, repeated calls to local or long distance numbers, and the amount of
telephone usage by each employee, enable managers to easily spot misuse and
waste. The ability of the Fraud-Chek-Registered Trademark- service to detect
misuse can result in substantial decreases in long distance charges once
employees become aware of the information that is available to management. Most
call accounting services are provided on a monthly basis, usually pursuant to
contracts which are cancelable upon 30 days notice.
TOMS is typically licensed to clients on a perpetual basis, with the fee
being based primarily upon the number of modules licensed and the degree of
customization required. The TOMS system license is generally coupled with an
ongoing maintenance service contract which includes: (i) diagnosis and
correction of system errors, malfunctions, and defects; (ii) technical services
which maintain compatibility between TSL's software services and products and
the client's hardware and operating systems; and (iii) enhancements and
modifications to TSL's software as might benefit the client, or as required.
Among its many features, the reports generated by TOMS allow managers to verify
that warranty and service contracts are current and that repairs are
appropriately billed against contracts, and facilitates the allocation of the
costs of telecommunications equipment and circuits among departments.
OPERATIONS MANAGEMENT. Operations management services have developed as an
outgrowth of TSL's other products and services, and consist of on-site and
off-site continuing support to clients wishing to outsource certain
telecommunications related functions, such as telephone moves and installations,
telephone circuit installations and moves for data service providers, trouble
reporting and resolution, and internal telephone billing. The services also
maintain an up-to-date telephone directory for the client and manage equipment
warranties. These services are typically delivered pursuant to oral agreements,
and often provide TSL the opportunity to provide additional software services to
clients.
BILLING VERIFICATION SERVICES. TSL's billing verification service consists
of auditing telephone rates, tariffs, taxes, surcharges, and other charges
billed by voice and data telecommunications carriers and vendors. TSL (i)
verifies that the client pays only for the services, circuits, and equipment it
actually uses and for which it has contracted; (ii) ensures that the proper
rates, tariffs, taxes and surcharges, primarily for services and equipment, and
also usage, are applied; (iii) corrects billing discrepancies; and (iv) prepares
claims and negotiates and collects refunds. Billing verification services
generate refunds of historical overcharges and reduce costs, producing ongoing
savings to TSL's clients generally ranging from 5% to as much as 15% of basic
monthly service charges.
TECHNICAL CONSULTING. Technical consulting consists of designing,
engineering, procuring and implementing telecommunications services, networks,
systems, and equipment. TSL provides clients with both technical and engineering
expertise, drawing upon the experience of TSL's consultants, engineers, and
management to complete large projects. Projects include strategic planning
related to telecommunications systems, such as a corporate relocation, data
communications network design,
45
<PAGE>
voice communications system design, disaster recovery planning, the relocation
or creation of financial institution trading floor systems, and other technical
advice regarding available systems and services.
All consulting projects are based on agreements or contracts which require
specific performance and are cancelable by the client in the event of
non-performance. Project durations range from two months to an ongoing basis,
averaging approximately 12 months, and often require follow-up maintenance work
or other complementary products and services.
MARKETS AND CUSTOMERS
MARKETS. The market for TSL's products and services consists of almost any
public or private entity, for profit or not for profit, which is a substantial
user of voice and/or data telecommunications. As more providers of voice and
data communications services have entered the industry, choosing the most
appropriate and cost effective supplier from the many available sources has
become increasingly complicated. Verifying that carriers have billed correctly
according to their complex tariffs and stated billing rates has also become more
difficult. As these trends continue, and the number of in-house
telecommunications departments increases, the outsourcing of non-strategic
services, such as those provided by TSL, is expected to expand. The ongoing
process of deregulation in the industry is also expected to increase the demand
for TSL's expertise in assisting clients with these and other complex
telecommunications issues.
Many of TSL's existing products and services are designed to meet the needs
of large clients in particular businesses and are priced based on the volume of
activity these clients generate; however, many companies in the same businesses,
including smaller entities, could benefit from TSL's products and services.
Consequently, TSL is marketing its previously developed software to other users
having similar requirements and, along with such software, selling customization
and add-on services.
CUSTOMERS. TSL has an active account base of approximately 250 clients.
Although the majority of TSL's clients are based in the vicinities of its
facilities in New York/New Jersey and California, TSL has also developed
business in other locations across the United States. TSL's initial client base
of prestigious financial services firms has enabled it to develop a client list
consisting primarily of Fortune 1000 companies, major financial institutions,
utility and healthcare companies, governments and other public agencies.
TSL has approximately 40 active accounts in its telecommunications
management software service business. Clients include Bank of New York, Kraft
Foods, Memorial Sloan Kettering Cancer Center, the New York Stock Exchange and
the County of Sacramento, California.
In its relatively new operations management service business, TSL currently
has approximately five active accounts, including J.P. Morgan, Chemical Bank and
ConEdison.
TSL has approximately 200 active accounts in its billing verification
service business. Representative clients include the State of New York, Bank of
America, Capital Cities/ABC, J.C. Penney and J.P. Morgan.
To date, TSL's technical consulting services have been limited to entities
within a reasonable proximity of New York City. TSL currently has approximately
10 active projects in this service area, with clients including Smith Barney
Shearson, Morgan Stanley, Bank of America and Credit Agricole.
Because of the ongoing nature of TSL's client relationships, its top
customer list demonstrates a relatively high degree of consistency. Each of
TSL's largest ten accounts in 1993 had been a client for at least four years. In
1994, ten accounts represented approximately 58% of total revenues, and two
customers each accounted for approximately 17% of total revenues.
46
<PAGE>
RESEARCH AND DEVELOPMENT
TSL has an opportunity to develop PC-based versions of its call accounting
and facilities management software services. In developing these new
standardized software packages, TSL believes it will develop a market that
typically cannot afford the more expensive customized software programs due to a
lower volume of telecommunications usage and small capital base.
COMPETITION
TSL experiences varying levels of competition in each of its four business
segments. Since industry data are scarce, management's assessment of competition
is based on its knowledge of the industry and information received from clients.
TELECOMMUNICATIONS MANAGEMENT SOFTWARE APPLICATIONS. Competition with
respect to management software applications and services occurs primarily on a
regional basis. Competitors furnish customized or "shrink-wrapped" software
solutions or provide services on a service bureau basis. TSL's competitors
include Xiox (Burlingame, California), Telco Research (Nashville, Tennessee),
Stonehouse (Denver, Colorado), Account-A-Call (Irvine, California), and
Communications Sciences (Edison, New Jersey).
OPERATIONS MANAGEMENT. TSL's competition in operations management consists
largely of nationally known firms such as AT&T, Electronic Data Systems (owned
by General Motors), and IBM, which often attempt to capture an organization's
entire telecommunications operation. TSL, on the other hand, limits its products
and services as described herein, and believes that its software resources and
the abilities of its personnel enable it to compete favorably in these areas.
BILLING VERIFICATION. TSL believes that most of its competitors in the
billing verification service business are small regional firms lacking the
breadth of TSL's products and services. Although there are no significant
barriers to entry into this business, because revenues provided from this
service are contingent upon the recovery of refunds or the securing of savings,
the substantial period of time between the commencement of an audit and the
recovery of fees has impeded some competitors' ability to remain in the
business.
TSL believes that its well recognized client base, general reputation,
credibility with telecommunications vendors, proven methodology, and physical
presence on the east and west coasts, enable it to compete favorably in this
business.
TECHNICAL CONSULTING. TSL's technical consulting services are provided
primarily to clients within close proximity of its New York City area offices.
Competitors in this area consist largely of technical consulting firms in such
area, including Walsh-Lowe & Associates, Communications Sciences, and DVI. Most
of TSL's competitors in this area do not provide other services comparable to
those offered by TSL.
PATENTS AND TRADEMARKS
TSL holds no patents. Management of TSL believes that technical expertise,
responsiveness to user requirements and implementation of technological advances
are more important factors in TSL's business than patent protection. TSL has
registered with the United States Patent and Trademark Office a trademark on
Fraud-Chek-Registered Trademark-, which is used by TSL in its management
software applications and services business.
EMPLOYEES
The TSL Companies currently have a total of 77 employees located nationwide,
of which 72 are full time and five are part time. The employees are distributed
among the various service areas of TSL as follows: 13 concentrate on billing
verification audits; five focus on technical consulting services; 22 are
involved in operations management services; nine are sales personnel; 10
specialize in software and product/service development; three serve as
management of TSL; and 12 serve in a variety of other capacities.
47
<PAGE>
Approximately 22 TSL employees, including the three executive officers, are
parties to either written employment agreements with TSL or have executed
acknowledgements of their "at-will" employment status and their obligations
under the TSL Employee Handbook. The Employee Handbook includes an agreement
prohibiting disclosure of confidential or proprietary information of TSL. Three
employees are parties to one year employment agreements which are terminable on
30 days notice prior to the end of the employment anniversary date. The balance
of the written agreements are "at-will" agreements.
Generally, the employment agreements provide for payment of a base salary
and certain incentive compensation. Certain of the agreements contain provisions
which prohibit the employee from competing with TSL for periods ranging from six
months to two years after termination of employment. The agreements vary as to
geographic areas to which the noncompetition provisions apply.
The Company will enter into new employment agreements with the executive
officers of TSL at the Effective Time. See "Employment Agreements." All other
TSL employment agreements will be assumed by the Company in the Mergers.
TSL also engages 16 independent consultants, on a contract basis, to work on
specific projects as they arise. These consultants are compensated on an hourly
basis and do not receive medical, disability or other benefits from TSL.
None of TSL's employees are represented by a labor union. TSL has never
experienced any strike or work stoppage and believes that its relations with its
employees and independent consultants are favorable.
PROPERTIES
TSL(US) leases approximately 4,500 square feet of office space at 50 Broad
Street, New York, New York, which serves as TSL(US)'s primary base of
operations, as well as serving as the principal headquarters for all the TSL
Companies. The lease for this facility terminates on February 29, 2000. In
addition, TSL(West) leases a 1,548 square foot office facility in San Francisco,
California, from which its operations are principally conducted. The lease of
the San Francisco office terminates on September 30, 1996. TSL Software leases
3,600 square feet of office space in Parsippany, New Jersey, which is used as
its data center. It is expected that TSL Software will relocate to a larger
facility in Parsippany prior to the expiration of the current lease on October
31, 1995.
The TSL Companies have field offices in Chicago, Illinois; Dallas, Texas;
Los Angeles, California and Winston-Salem, North Carolina. These offices are
usually operated out of one field employee's home (two in Los Angeles) or a
small office, with TSL incurring only the costs of a business telephone and mail
drop.
LEGAL PROCEEDINGS
The TSL Companies are not currently involved in any legal proceedings.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
intend to bring any matters before the Special Meeting other than those
specifically set forth in the Notice of Special Meeting, and has not been
informed of any matter to be brought before the Special Meeting by others. If
any other matter properly comes before the Special Meeting, it is the intention
of the persons named in the accompanying proxy to vote such proxy in accordance
with the judgment of the Board of Directors.
48
<PAGE>
TELECOM SERVICES LIMITED (U.S.), INC. AND AFFILIATES
COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
MARCH 31, 1995 AND 1994 (UNAUDITED)
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors........................................................ F-2
Combined Balance Sheets............................................................... F-3
Combined Statements of Operations and Retained Earnings (Deficit)..................... F-4
Combined Statements of Cash Flows..................................................... F-5
Notes to Combined Financial Statements................................................ F-6
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Boards of Directors
Telecom Services Limited (U.S.), Inc.
Telecom Services Limited (West), Inc.
TSL Software Services, Inc.
TSL Management Group, Inc.
We have audited the accompanying combined balance sheets of Telecom Services
Limited (U.S.), Inc., Telecom Services Limited (West), Inc., TSL Software
Services, Inc., and TSL Management Group, Inc. as of December 31, 1994 and 1993,
and the related combined statements of operations and retained earnings
(deficit), and cash flows for each of the three years in the period ended
December 31, 1994. 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Telecom
Services Limited (U.S.), Inc., Telecom Services Limited (West), Inc., TSL
Software Services, Inc., and TSL Management Group, Inc. at December 31, 1994 and
1993, and the combined results of their operations and their cash flows for each
of the three years in the period ended December 31, 1994 in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
April 7, 1995
F-2
<PAGE>
TELECOM SERVICES LIMITED (U.S.), INC. AND AFFILIATES
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
MARCH 31,
1995 1994 1993
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................ $1,186,528 $1,524,616 $ 456,075
Accounts receivable.................................. 1,759,004 1,714,265 2,018,096
Prepaid expenses..................................... 6,107 6,107 17,906
---------- ---------- ----------
Total current assets............................... 2,951,639 3,244,988 2,492,077
Furniture and equipment................................ 692,092 692,092 639,048
Less accumulated depreciation.......................... (521,135) (486,944) (382,794)
---------- ---------- ----------
Net furniture and equipment............................ 170,957 205,148 256,254
Intangible assets:
Restrictive covenants................................ 137,500 137,500 137,500
Deferred acquisition costs........................... 13,043 13,043 13,043
Organization costs................................... 5,000 5,000 5,000
---------- ---------- ----------
155,543 155,543 155,543
Less accumulated amortization........................ (155,543) (155,543) (129,924)
---------- ---------- ----------
-- -- 25,619
---------- ---------- ----------
$3,122,596 $3,450,136 $2,773,950
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Current portion of long-term debt (Note 2)........... $ 7,081
Current portion of long-term debt to former
stockholder (Note 2)................................ $ 70,000 $ 70,000 70,000
Accounts payable and accrued expenses................ 377,999 280,984 121,251
Loans payable -- officers (Note 3)................... 1,971,716 2,711,997 1,340,908
Income taxes payable................................. 470,000 438,885 72,354
---------- ---------- ----------
Total current liabilities.......................... 2,889,715 3,501,866 1,611,594
Long-term debt due to former stockholder, less current
portion (Note 2)...................................... 122,500 140,000 210,000
Commitments (Note 5)
Stockholders' equity (deficiency):
Common stock (Note 4)................................ 6,000 6,000 6,000
Additional paid-in capital........................... 127,000 127,000 127,000
Retained earnings (deficit).......................... (22,619) (324,730) 819,356
---------- ---------- ----------
Total stockholders' equity (deficiency)............ 110,381 (191,730) 952,356
---------- ---------- ----------
$3,122,596 $3,450,136 $2,773,950
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
SEE ACCOMPANYING NOTES.
F-3
<PAGE>
TELECOM SERVICES LIMITED (U.S.), INC. AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31 YEAR ENDED DECEMBER 31
---------------------------- --------------------------------------------
1995 1994 1994 1993 1992
------------- ------------- -------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues............................. $ 3,774,455 $ 2,718,794 $ 13,636,254 $ 9,553,735 $ 6,666,586
Costs and expenses:
Salaries and wages................. 1,019,453 722,628 3,390,268 3,064,042 2,291,255
Additional compensation to
shareholders and officers......... 1,571,717 1,639,396 7,529,470 2,760,602 2,615,882
Other operating expenses........... 855,085 575,276 3,589,380 3,030,886 2,217,167
------------- ------------- -------------- ------------- -------------
3,446,255 2,937,300 14,509,118 8,855,530 7,124,304
------------- ------------- -------------- ------------- -------------
Income (loss) from operations........ 328,200 (218,506) (872,864) 698,205 (457,718)
Other income and (expenses):
Interest income.................... 5,026 6,956 116,663 37,478 44,755
Interest expense................... (3,144) (7,197)
------------- ------------- -------------- ------------- -------------
5,026 6,956 116,663 34,334 37,558
------------- ------------- -------------- ------------- -------------
Income (loss) before state income
taxes............................... 333,226 (211,550) (756,201) 732,539 (420,160)
Provision for state income taxes..... 31,115 97,000 387,885 72,354 15,900
------------- ------------- -------------- ------------- -------------
Net income (loss).................... 302,111 (308,550) (1,144,086) 660,185 (436,060)
Retained earnings (deficit) at
beginning of period................. (324,730) 819,356 819,356 159,171 595,231
------------- ------------- -------------- ------------- -------------
Retained earnings (deficit) at end of
period.............................. $ (22,619) $ 510,806 $ (324,730) $ 819,356 $ 159,171
------------- ------------- -------------- ------------- -------------
------------- ------------- -------------- ------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-4
<PAGE>
TELECOM SERVICES LIMITED (U.S.), INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31 YEAR ENDED DECEMBER 31
-------------------------- ---------------------------------------
1995 1994 1994 1993 1992
------------ ------------ ------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities
Net income (loss).............................. $ 302,111 $ (308,550) $ (1,144,086) $ 660,185 $ (436,060)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization................ 34,191 32,443 129,769 132,787 127,518
Severance to former stockholder.............. 280,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts
receivable................................ (44,739) 356,193 303,831 (1,214,634) 189,732
Decrease (increase) in prepaid expenses.... 11,799 (8,978) (501)
Increase (decrease) in accounts payable and
accrued expenses.......................... 97,015 (13,495) 159,733 37,098 (19,949)
Increase (decrease) in income taxes
payable................................... 31,115 366,531 47,083 (20,982)
------------ ------------ ------------ ------------ -----------
Net cash provided by (used in) operating
activities.................................... 419,693 66,591 (172,423) (66,459) (160,242)
Investing activities
Purchases of furniture and equipment........... (53,044) (46,594) (69,879)
------------ ------------ ------------ ------------ -----------
Net cash used in investing activities.......... -- -- (53,044) (46,594) (69,879)
Financing activities
(Decrease) increase in loans payable --
officers...................................... (740,281) 1,198,488 1,371,089 21,981 414,606
Principal payments on long-term debt........... (7,081) (7,081) (39,934) (36,791)
Principal payment of debt to former
stockholder................................... (17,500) (17,500) (70,000)
Proceeds from sale of common stock............. 1,000
------------ ------------ ------------ ------------ -----------
Net cash (used in) provided by financing
activities.................................... (757,781) 1,173,907 1,294,008 (16,953) 377,815
------------ ------------ ------------ ------------ -----------
(Decrease) increase in cash and cash
equivalents................................... (338,088) 1,240,498 1,068,541 (130,006) 147,694
Cash and cash equivalents at beginning of
period........................................ 1,524,616 456,075 456,075 586,081 438,387
------------ ------------ ------------ ------------ -----------
Cash and cash equivalents at end of period..... $ 1,186,528 $ 1,696,573 $ 1,524,616 $ 456,075 $ 586,081
------------ ------------ ------------ ------------ -----------
------------ ------------ ------------ ------------ -----------
Non-cash financing activity
Debt to former stockholder..................... $ 280,000
------------
------------
Interest paid during the period................ $ -- $ 127 $ 127 $ 3,144 $ 7,197
------------ ------------ ------------ ------------ -----------
------------ ------------ ------------ ------------ -----------
Income taxes paid (refunded) during the
period........................................ $ 21,463 $ 7,471 $ 22,354 $ 25,271 $ (9,371)
------------ ------------ ------------ ------------ -----------
------------ ------------ ------------ ------------ -----------
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE>
TELECOM SERVICES LIMITED (U.S.), INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
MARCH 31, 1995 AND 1994 (UNAUDITED)
1. DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of Telecom Services
Limited (U.S.), Inc., Telecom Services Limited (West), Inc., TSL Software
Services, Inc., and TSL Management Group, Inc. (collectively, the Company).
These companies are affiliated through common ownership. All significant
intercompany accounts and transactions have been eliminated in the preparation
of the combined financial statements.
The Company, formed in 1986, maintains corporate locations in New York, New
York, Parsippany, New Jersey and San Francisco, California and performs
telephone billing verifications, provides propriety tele-management and call
accounting software, and offers consulting assistance for systems integration
and implementation. In 1989, the Company acquired the business of Aud/Cyn
Associates which has developed and marketed mainframe and PC-based
telecommunications management software applications. The Company's principal
customers are headquartered in the New York metropolitan region and California.
INTERIM FINANCIAL STATEMENTS
The accompanying combined financial statements at March 31, 1995 and for the
three months ended March 31, 1995 and 1994 have been prepared in accordance with
generally accepted accounting principles for interim financial information and,
in the opinion of the Company, include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation thereof.
Operating results for the three months ended March 31, 1995 are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 1995.
REVENUE RECOGNITION
Revenue is recognized at the time services are provided or, in the case of
telephone billing verifications, when claim proceeds are received from the
telephone company.
CASH EQUIVALENTS
Cash equivalents consist of highly liquid investments with a maturity when
purchased of three months or less.
FURNITURE AND EQUIPMENT
Furniture and equipment is stated at cost. Depreciation is computed
principally by the straight-line method over periods of 5 to 7 years.
INTANGIBLE ASSETS
Intangible assets consist principally of assets arising from the acquisition
of Aud/Cyn Associates. Amortization has been computed by the straight-line
method over a five-year period.
INCOME TAXES
All entities of the Company have elected to be taxed under the provisions of
Subchapter "S" of the Internal Revenue Code. This election eliminates federal
income taxes at the corporate level and the Company's profits are includable in
the income tax return of its stockholders. State income taxes have been provided
in certain states in which the S Corporation election has not been made.
Effective January 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes". There
was no cumulative effect adjustment to net income as a result of adopting the
new statement.
F-6
<PAGE>
TELECOM SERVICES LIMITED (U.S.), INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. LONG-TERM DEBT
The Company had an installment loan note with a financial institution, with
an annual interest rate of 10.75%, which expired in February 1994.
In accordance with the terms of a separation agreement dated December 31,
1993, the Company agreed to pay an individual $280,000 over four years in equal
installments of $70,000. These payments began in 1994 and will be made each
calendar year after that through 1997. No interest is associated with this debt.
3. LOANS PAYABLE -- OFFICERS
Loans payable -- officers represents short-term, non-interest bearing
borrowings generally repaid within one year of the respective balance sheet
date.
4. COMMON STOCK
The authorized, issued and outstanding common stock for each entity of the
Company is as follows:
<TABLE>
<CAPTION>
TELECOM TELECOM TSL
SERVICES LIMITED SERVICES LIMITED TSL SOFTWARE MANAGEMENT
(U.S.), INC. (WEST), INC. SERVICES, INC. GROUP, INC.
---------------------- ---------------------- ---------------------- ----------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
SHARES $ SHARES $ SHARES $ SHARES $
----------- --------- ----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Authorized, no par........... 1,000 1,000 2,500 2,500
Issued and outstanding at
December 31, 1992........... 200 $ 1,000 100 $ 3,000 100 $ 1,000
Issued and outstanding at
December 31,1993 and 1994... 200 1,000 100 3,000 100 1,000 1,000 $ 1,000
<CAPTION>
COMBINED
----------------------
NUMBER OF
SHARES $
----------- ---------
<S> <C> <C>
Authorized, no par........... 7,000
Issued and outstanding at
December 31, 1992........... 400 $ 5,000
Issued and outstanding at
December 31,1993 and 1994... 1,400 6,000
</TABLE>
1,000 shares of TSL Management Group, Inc. common stock were issued in 1993.
5. COMMITMENTS
The Company leases its corporate offices under operating leases. The leases
are renewable at the option of the Company upon expiration based on terms
specified in the lease agreements. Rent expense amounted to $126,474, $139,170
and $110,454 in 1994, 1993 and 1992, respectively. Rent expense for the quarters
ended March 31, 1995 and 1994 was $46,241 and $39,119, respectively.
Aggregate future minimum lease payments under noncancelable leases are as
follows:
<TABLE>
<S> <C>
1995................................................ $ 133,515
1996................................................ 88,967
1997................................................ 73,763
1998................................................ 73,763
1999................................................ 73,763
Thereafter.......................................... 12,294
</TABLE>
Effective December 31, 1993, the Company entered into an employment
agreement with one individual which entitles the employee to receive an amount
equal to 2% of the fair market value of the capital stock of each of the
entities comprising the Company upon the occurrence of (a) a sale of
substantially all of the capital stock of the Company; (b) death of the
employee; or (c) termination of employment without cause. The employee will not
be entitled to receive the payment if employment is terminated by the Company
for cause or if the individual terminates his employment voluntarily.
F-7
<PAGE>
TELECOM SERVICES LIMITED (U.S.), INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
5. COMMITMENTS (CONTINUED)
Effective June 1, 1991, the Company entered into an employment agreement
with an officer of the Company. In addition to base compensation, the officer is
entitled to receive additional compensation of 20% of the net profits (as
defined in the agreement) of two of the companies for each fiscal year.
In July 1994, the Company entered into an agreement with an investment
banking firm to represent and assist the Company in connection with the possible
sale of the Company. The Company paid a $25,000 fee charged to the Company in
1994 for services provided. Additionally, in accordance with the compensation
terms of the agreement, the Company has accrued a $150,000 performance fee which
is due when the Company and its shareholders receive a bonafide transaction
proposal from one or more third-parties. Such transaction proposal was received
in 1994. A fee equal to 3.5% of the selling price is due to the investment
banking firm upon the successful consummation of a transaction.
6. RETIREMENT PLANS
Telecom Services Limited (U.S.), Inc. has a qualified employee 401(k)
retirement savings plan in which eligible employees may elect to participate by
authorizing a withholding from compensation. The Company does not currently
provide an employer matching contribution into this plan.
Telecom Services Limited (West), Inc. has a 401(k) retirement savings plan
in which employer contributions are made. The employer will match 50% of
employee contributions up to a maximum of 5% of yearly compensation. Employer
contributions under this plan amounted to $17,575, $31,607 and $11,925 in 1994,
1993 and 1992, respectively. Employer contributions for the quarters ended March
31, 1995 and 1994 were $2,319 and $1,434, respectively.
7. MAJOR CUSTOMERS
One customer accounted for 17%, 14% and 12% of total revenues for the years
ended December 31, 1994, 1993 and 1992, respectively. A second customer
accounted for 17% of total revenues for the year ended December 31, 1994, and
10% of total revenues for the year ended December 31, 1992. No other customer
accounted for more than 10% of total revenues.
8. SUBSEQUENT EVENTS
In February 1995, the Company reached a settlement agreement on litigation
that was pending against former employees of the Company. Under terms of the
settlement agreement, the Company received $155,000.
On May 24, 1995, the Company entered into an Agreement and Plan of
Reorganization and Merger in which they will be merged with and into Brite Voice
Systems, Inc. (Brite) in exchange for 3,331,000 shares of Brite common stock.
F-8
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
BY AND AMONG
BRITE VOICE SYSTEMS, INC.,
TELECOM SERVICES LIMITED (U.S.), INC.,
TELECOM SERVICES LIMITED (WEST), INC.,
TSL SOFTWARE SERVICES, INC.
TSL MANAGEMENT GROUP, INC.
AND
ALAN C. MALTZ,
SCOTT A. MALTZ,
STEPHEN B. ROCKOFF, AND
ALAN C. MALTZ, AS CUSTODIAN
FOR SARI MALTZ AND
LORI MALTZ
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE(S)
-----------
<C> <S> <C>
ARTICLE I ................................................................................................ 1
1.1 The Mergers.................................................................................... 1
1.2 Brite Board of Directors Approval and Recommendation........................................... 1
1.3 Approval and Recommendation by the Board of Directors of Each TSL Company...................... 1
1.4 Approval by Shareholders of the TSL Companies.................................................. 2
ARTICLE II ............................................................................................... 2
2.1 Conversion..................................................................................... 2
2.2 Effect of Conversion........................................................................... 2
ARTICLE III .............................................................................................. 2
3.1 Effect of the Mergers.......................................................................... 2
3.2 Articles of Incorporation and Bylaws........................................................... 2
3.3 Directors and Officers......................................................................... 2
3.4 Tax and Accounting Consequences................................................................ 3
3.5 Further Assurances............................................................................. 3
ARTICLE IV ............................................................................................... 3
4.1 Representations, Warranties and Covenants of the Shareholders.................................. 3
ARTICLE V ................................................................................................ 11
5.1 Representations, Warranties and Covenants of Brite............................................. 11
ARTICLE VI ............................................................................................... 15
6.1 Further Covenants of the TSL Companies and the Shareholders.................................... 15
6.2 Further Covenants of Brite..................................................................... 17
ARTICLE VII .............................................................................................. 18
7.1 Conditions to the Obligations of the TSL Companies and the Shareholders........................ 18
ARTICLE VIII ............................................................................................. 20
8.1 Conditions to the Obligations of Brite......................................................... 20
ARTICLE IX ............................................................................................... 22
9.1 Further Conditions to the Obligations of the TSL Companies, the Shareholders and Brite......... 22
ARTICLE X ................................................................................................ 22
10.1 Restriction on Sale of Brite Common by the Shareholders........................................ 22
10.2 Registration Rights............................................................................ 23
ARTICLE XI ............................................................................................... 30
11.1 Expenses....................................................................................... 30
ARTICLE XII .............................................................................................. 31
12.1 Indemnification................................................................................ 31
ARTICLE XIII ............................................................................................. 32
13.1 Further Assurances............................................................................. 32
13.2 Termination by the TSL Companies and the Shareholders.......................................... 32
13.3 Termination by Brite........................................................................... 33
13.4 Termination by Mutual Agreement................................................................ 33
13.5 Waivers........................................................................................ 33
13.6 Amendments..................................................................................... 33
13.7 Confidentiality................................................................................ 33
13.8 Effect of Termination.......................................................................... 33
</TABLE>
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<TABLE>
<CAPTION>
PAGE(S)
-----------
ARTICLE XIV .............................................................................................. 34
<C> <S> <C>
14.1 Notices........................................................................................ 34
ARTICLE XV ............................................................................................... 34
15.1 Survival of Representations and Warranties..................................................... 34
15.2 Rights of Parties.............................................................................. 34
15.3 Complete Agreement............................................................................. 35
15.4 Governing Law.................................................................................. 35
15.5 Headings....................................................................................... 35
15.6 Counterparts................................................................................... 35
EXHIBIT A ................................................................................................ A-1
EXHIBIT B ................................................................................................ B-1
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER, is entered into this
24th day of May, 1995 ("Agreement"), by and among BRITE VOICE SYSTEMS, INC., a
Kansas corporation ("Brite"); TELECOM SERVICES LIMITED (U.S.), INC., TELECOM
SERVICES LIMITED (WEST), INC., TSL SOFTWARE SERVICES, INC. and TSL MANAGEMENT
GROUP, INC., New Jersey corporations (each a "TSL Company" and collectively the
"TSL Companies"); and ALAN C. MALTZ, SCOTT A. MALTZ, STEPHEN B. ROCKOFF and ALAN
C. MALTZ, as custodian for SARI MALTZ and LORI MALTZ (each individually a
"Share-holder" and collectively the "Shareholders").
RECITALS
A. The Shareholders are the owners of all of the issued and outstanding
shares of capital stock of the TSL Companies.
B. Brite, each TSL Company and the Shareholders deem it advisable and for
their mutual benefit that each TSL Company be merged into Brite upon the terms
and conditions hereinafter set forth (each such transaction being called a
"Merger" and all such transactions collectively being called the "Mergers"); and
C. Each Merger contemplated by this Agreement is intended to (i) constitute
a tax-free reorganization pursuant to Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code") and (ii) qualify for accounting
treatment as a pooling of interests.
NOW, THEREFORE, in consideration of the premises hereof and the mutual
agreements herein contained and in accordance with the laws of Kansas and New
Jersey, Brite, the TSL Companies and the Shareholders have agreed, and do hereby
agree, as follows:
ARTICLE I
1.1 THE MERGERS. In accordance with the provisions of this Agreement, the
Kansas General Corporation Code and the New Jersey Corporation Act, each TSL
Company shall be merged with and into Brite. The closing of the Mergers shall be
held at such place and at such time as shall be mutually agreed upon on the
first business day following the date on which all of the conditions to the
Mergers set forth in Articles VII, VIII and IX have been satisfied or waived or
such other date to which the parties may agree (the date of the closings being
referred to herein as the "Closing Date"). The closing of each Merger shall be
contingent upon, and deemed to occur simultaneously with, the other Mergers.
Immediately after the satisfaction or waiver of all of the conditions specified
in Articles VII, VIII and IX of this Agreement, Brite and the TSL Companies
shall execute the Certificates of Merger, in substantially the forms set forth
in Exhibit A hereto, and the parties shall also execute any other documents or
certificates as may be required by the laws of Kansas and New Jersey to
effectuate the filing thereof, and on the Closing Date shall, to the extent
required by applicable law, cause the same to be filed in the offices of the
Secretary of State of Kansas and the Secretary of State of New Jersey and the
Mergers to become effective upon such filings. As used in this Agreement, the
term "Effective Time" means the time at which such filings are made.
1.2 BRITE BOARD OF DIRECTORS APPROVAL AND RECOMMENDATION. Brite represents
that its Board of Directors has (i) unanimously determined that this Agreement
and the transactions contemplated hereby, including the Mergers, are fair to and
in the best interest of Brite's stockholders, and (ii) unanimously approved this
Agreement and the transactions contemplated hereby, including the Mergers, and
(iii) unanimously resolved to recommend approval and adoption of this Agreement
and the Mergers by its stockholders.
1.3 APPROVAL AND RECOMMENDATION BY THE BOARD OF DIRECTORS OF EACH TSL
COMPANY. Each of the TSL Companies represents that its Board of Directors has
(i) unanimously determined that this
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Agreement and the transactions contemplated hereby, including the Merger to
which it is a party, is fair to and in the best interest of its respective
Shareholders, and (ii) unanimously approved this Agreement and the transactions
contemplated hereby, including such Merger, and (iii) unanimously resolved to
recommend approval and adoption of this Agreement and such Merger by its
Shareholders.
1.4 APPROVAL BY SHAREHOLDERS OF THE TSL COMPANIES. Each of the
Shareholders hereby approves this Agreement and the transactions contemplated
hereby, including the Merger of each TSL Company in which he holds shares,
waives any and all applicable rights of a dissenter afforded to him under New
Jersey law with respect to such Mergers, and agrees to vote all of his shares of
common stock in each of the TSL Companies in favor of the Mergers by written
consent or at duly convened meetings of the Shareholders held for such purposes.
ARTICLE II
2.1 CONVERSION. At the Effective Time, all of the shares of common stock
of the TSL Companies then outstanding shall thereupon and without more be
converted into an aggregate of 3,331,000 shares of Brite common stock, no par
value ("Brite Common"), with the number of shares of Brite Common to be received
by each Shareholder to be the number set forth opposite such Shareholder's name
in Exhibit B hereto.
2.2 EFFECT OF CONVERSION. At the Effective Time, the Shareholders, as the
holders of certificates for shares of common stock of the TSL Companies, shall
cease to have any rights as shareholders of the TSL Companies and their sole
rights shall pertain to the shares of Brite Common into which their shares of
common stock of the TSL Companies shall have been converted by the Mergers.
After the Effective Time, each Shareholder shall surrender his certificate or
certificates for shares of common stock of the TSL Companies, to Brite,
whereupon Brite shall cause such Shareholder to receive, in exchange therefor, a
certificate or certificates representing the shares of Brite Common into which
such Shareholder's shares of common stock of the TSL Companies shall have been
converted by the Mergers, as set forth on Exhibit B hereto. Pending such
surrender and exchange, such Shareholder's certificate or certificates for
shares of common stock of the TSL Companies shall be deemed to evidence the full
number of shares of Brite Common into which such shares shall have been
converted by the Mergers.
ARTICLE III
3.1 EFFECT OF THE MERGERS. At the Effective Time, the effect of the
Mergers shall be as provided by the applicable provisions of the laws of Kansas
and New Jersey. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, the separate existence of each TSL Company shall
cease; Brite shall possess all assets and property of every description, and
every interest therein, wherever located, and all and singularly the rights,
privileges, immunities, powers, franchises and authority, of a public as well as
of a private nature, of each of Brite and the TSL Companies, and subject to all
the restrictions, disabilities and duties of each of Brite and the TSL
Companies; all property, real, personal and mixed, and all debts due to either
of Brite or the TSL Companies, on whatever account, shall be vested in Brite;
all obligations of or due from each of Brite and the TSL Companies shall be
vested in, and become the obligations of, Brite without further act or deed; and
title to any real estate or any interest therein vested by deed or otherwise in
either of Brite or any TSL Company shall not revert or in any way be impaired by
reason of the Mergers.
3.2 ARTICLES OF INCORPORATION AND BYLAWS. The Articles of Incorporation
and Bylaws of Brite in effect at the Effective Time shall, until amended in
accordance with applicable law, be the Articles of Incorporation and Bylaws of
Brite from and after the Effective Time.
3.3 DIRECTORS AND OFFICERS. Until successors are duly elected or appointed
and qualified in accordance with applicable law, the directors and officers of
Brite at the Effective Time shall be the directors and officers of Brite from
and after the Effective Time; provided, however, that as soon as
2
<PAGE>
practicable (and in any event not later than 30 days) after the Effective Time,
the Board of Directors of Brite shall be expanded to seven directors, Brite
shall cause one director to resign from the Board of Directors of Brite, and the
remaining directors to appoint Alan C. Maltz and Scott A. Maltz to fill the
vacancies created by such expansion and resignation. Thereafter, for the period
during which the Shareholders (or their executors, personal representatives or
heirs) own collectively at least twenty percent of the issued and outstanding
shares of Brite Common, the Board of Directors of Brite shall nominate for
election to the Brite Board of Directors, at each Annual Meeting of the
Stockholders of Brite, two persons to be designated by the Shareholders (or
their executors, personal representatives or heirs). At such time as the
collective ownership of Brite Common of the Shareholders (or their respective
executors, personal representatives or heirs) is less than twenty percent of the
issued and outstanding shares of Brite Common, the Brite Board shall nominate
for election to the Brite Board of Directors, at each Annual Meeting of the
Shareholders of Brite, one person to be designated by the Shareholders (or their
executors, personal representatives or heirs). At such time as the collective
ownership of Brite Common of the Shareholders is less than ten percent of the
issued and outstanding shares of Brite Common, the right of the Shareholders (or
their executors, personal representatives or heirs) to designate a nominee to
the Brite Board of Directors shall terminate. All designees of the Shareholders
(or their executors, personal representatives or heirs) for nomination to the
Brite Board of Directors shall be determined in accordance with the results of a
vote of the Shareholders (or their executors, personal representatives or
heirs), whereby each Shareholder (or his executor, personal representative or
heirs) shall be entitled to one vote for each share of Brite Common then held by
him. Such designees receiving the most votes of the Shareholders (or their
executors, personal representatives or heirs) shall become the nominees to the
Board of Directors of Brite for purposes of this Section 3.3.
3.4 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties hereto
that each of the Mergers shall (a) constitute a tax-free reorganization within
the meaning of Section 368(a)(1)(A) of the Code and (b) qualify for accounting
treatment as a pooling of interests.
3.5 FURTHER ASSURANCES. From time to time if Brite shall reasonably
consider or be reasonably advised that any further deeds, assignments or
assurances in law or any other things necessary or reasonably desirable or
proper to vest, perfect or confirm, of record or otherwise, in Brite, the title
to any property or rights of a TSL Company acquired or to be acquired by reason
of, or as a result of the Mergers, Brite and such TSL Company agree that the
proper directors and officers of such TSL Company last in office shall and will
execute and deliver all such proper deeds, assignments and assurances in law and
do all things necessary or reasonably desirable or proper to vest, perfect or
confirm title to such property or rights in Brite and otherwise to carry out the
purposes of this Agreement, and that the proper officers and directors of such
TSL Company are fully authorized to take any and all such action.
ARTICLE IV
4.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SHAREHOLDERS.
(a) Each Shareholder represents and warrants for himself, severally and
not jointly, that:
(i) At the Closing Date he will own, beneficially and of record, the
number of shares of common stock of each TSL Company which appears
opposite his name on Exhibit B hereto and that at the Closing Date, such
shares will be free and clear of all liens, encumbrances or claims of
others whatsoever, and that he has, and at the Closing Date shall have,
the full legal right, power and authority to sell, assign and transfer
such shares and to vote such shares in favor of the Mergers.
(ii) He has received and carefully read the SEC Filings (as
hereinafter defined) and has reviewed the same with the accountants for
the TSL Companies and the Shareholders, Ernst & Young LLP, and the
attorneys for the TSL Companies and the Shareholders, Kelley
3
<PAGE>
Drye & Warren (such accountants and attorneys being herein collectively
referred to as the "Representatives"), and the Representatives have
counseled with the Shareholder with respect to the Mergers and have
assisted the Shareholder in negotiating the terms of this Agreement and
the Employment Agreement (as hereinafter defined).
(iii) He has been given reasonable opportunity to ask questions of
Brite and has received satisfactory answers concerning the terms and
conditions of the Mergers and to obtain such additional information which
Brite possesses or can acquire without unreasonable effort or expense
that is necessary to verify the accuracy or completeness of any of the
information provided to him by Brite.
(iv) He has been furnished access to any and all information that he
has requested, he is capable of evaluating the fairness and adequacy of
the consideration to be received by him hereunder, and after consulting
with his financial advisor, Ladenburg, Thalmann & Co., Inc., as to the
adequacy of the consideration to be received by him hereunder, such
consideration is, in his judgment, fair and adequate.
(v) He understands that the shares of Brite Common to be received by
him in connection with the Merger have not been registered under the
Securities Act of 1933, as amended, (the "Act") in reliance upon an
exemption for nonpublic offerings, and that the representations and
warranties provided by him in this Section 4.1(a) are being furnished, in
part, in order to allow Brite to verify that the issuance to him of the
shares of Brite Common in connection with the Mergers may be effected in
reliance upon such exemption.
(vi) He understands that no federal or state agency has passed upon
this Agreement or made any finding with respect to the fairness of the
consideration to be received by him in connection with the Mergers.
(vii) The shares of Brite Common to be issued to him are being
acquired for investment and not with a view to any distribution thereof
in violation of the Act.
(viii) He understands and agrees that Brite's transfer agent will place
a stop transfer order on the transfer books maintained with respect to
the shares of Brite Common being conveyed to him in connection with the
Mergers, which will give effect to the restrictive legend set forth in
Section 10.1 hereof.
(ix) In entering into this Agreement, he has relied only on the
information set forth in the SEC Filings and the representations and
warranties of Brite set forth in this Agreement, and, without limiting
the generality of the foregoing, he has not relied on any written or oral
communication made by any officer, employee, or agent of Brite which is
in any way inconsistent with the information set forth in said SEC
Filings, representations and warranties.
(x) He is an "accredited investor" as that term is defined in Rule
501(a) of Regulation D, promulgated under the Act.
(b) Each Shareholder, jointly and severally with the other
Shareholder(s) who hold shares in the same TSL Company, represents,
warrants, and covenants with respect to each TSL Company in which he holds
shares that, except as disclosed in the disclosure schedule herewith
delivered to
4
<PAGE>
Brite and initialed or signed for identification by the president of each of
the TSL Companies (the "Disclosure Schedule"), which Disclosure Schedule
shall, for each item disclosed, identify specifically the TSL Company and
the representation, warranty or covenant to which it relates:
(i) The TSL Companies are corporations duly organized, validly
existing and in good standing under the laws of New Jersey. The
authorized capital stock and the number of shares of capital stock issued
and outstanding of each of the TSL Companies is as follows:
<TABLE>
<CAPTION>
SHARES ISSUED
TSL COMPANY AUTHORIZED CAPITAL AND OUTSTANDING
----------------------- ------------------ ---------------
<S> <C> <C>
Telecom Services 1,000 shares of 200 shares
Limited (U.S.), Inc. common stock
Telecom Services 1,000 shares of 100 shares
Limited (West), Inc. common stock
TSL Software 2,500 shares of 100 shares
Services, Inc. common stock
TSL Management 2,500 shares of 1000 shares
Group, Inc. common stock
</TABLE>
All of the outstanding shares of common stock of each TSL company are
validly issued, fully paid and non-assessable.
(ii) No TSL Company has any commitment or obligation to issue or
sell, whether pursuant to stock option agreements, stock bonus
agreements, warrants, conversion rights or otherwise, any shares of its
capital stock or other securities.
(iii) Each TSL Company has full corporate power and authority to own
its properties and to carry on its business as it has been and is
conducted and is duly qualified to do business as a foreign corporation
in the jurisdictions set forth in the Disclosure Schedule under "Foreign
Qualifications", being all jurisdictions where the failure to so qualify
might have a material and adverse affect on such TSL Company.
(iv) No TSL Company owns 50% or more of the effective voting power or
a 50% or greater equity interest in any entity.
(v) The (A) audited combined balance sheets of the TSL Companies as
at December 31, 1994 and 1993 and the audited combined statements of
operations, stockholders' equity and cash flows of the TSL Companies for
the fiscal years ended December 31, 1994, 1993 and 1992, including in
each case the related notes, certified by Ernst & Young LLP, independent
auditors (the audited combined balance sheet as at December 31, 1994,
being herein referred to as the "TSL Companies Balance Sheet"), and (B)
the unaudited combined balance sheet (the "Unaudited Balance Sheet") of
the TSL Companies as at March 31, 1995 and the unaudited combined
statements of operations, stockholders' equity and cash flows of the TSL
Companies for the three months ended March 31, 1995 (all of which have
heretofore been delivered to Brite and initialed for identification by
the president of the appropriate TSL Company) fairly present the
financial condition of the TSL Companies as at their respective dates and
the results of their operations for the periods involved (subject only to
normal recurring adjustments as to the Unaudited Balance Sheet and the
unaudited combined statements of operations, stockholders' equity and
cash flows for the three month period ended March 31, 1995), and, except
as disclosed in the Unaudited Balance Sheet, the TSL Companies have no
material liabilities, contingent or otherwise, not reflected in the TSL
Companies Balance Sheet and related notes that are required to be so
reflected under generally accepted accounting principles, except for
liabilities incurred since the date of the TSL Companies Balance Sheet in
the ordinary course of business which, in the aggregate, are not material
or have no substantial adverse effect on the financial position or the
operations
5
<PAGE>
of the business of the TSL Companies, and all such financial statements
have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved (except
as disclosed in the notes thereto).
(vi) Except as disclosed in the Unaudited Balance Sheet, since the
date of the TSL Companies Balance Sheet the TSL Companies have conducted
their business only in the ordinary and usual course, and there has been
no material adverse change in the condition, financial or other, of the
TSL Companies and there has been no occurrence, circumstance or
combination thereof which the TSL Companies expect to result in any such
material change before or after the Effective Time.
(vii) Since the date of the TSL Companies Balance Sheet, the business,
properties and assets of the TSL Companies, taken as an entirety, have
not been materially and adversely affected in any way as the result of
any strike, fire, explosion, earthquake, disaster, accident, or other
event or casualty.
(viii) Except as disclosed in the Unaudited Balance Sheet and for
property acquired or disposed of in the ordinary course of business since
the date of the TSL Companies Balance Sheet and property subject to lease
or license agreements, the TSL Companies Balance Sheet reflects
substantially all of the assets and property used by the TSL Companies in
their businesses, and the TSL Companies have good and marketable title,
free and clear of any lien, claim, encumbrance, restriction, charge or
equity, or valid licenses or leases to substantially all property used by
them in their businesses. All of the properties used by the TSL Companies
in their businesses are in satisfactory operating condition except for
maintenance and repairs necessary in the ordinary course of operations.
(ix) Except as disclosed in the Unaudited Balance Sheet and for
transactions in connection with the making and performance of this
Agreement and transactions expressly permitted by this Agreement, since
the date of the TSL Companies Balance Sheet, the TSL Companies have not
agreed to and have not (i) issued any stocks, bonds, notes, or other
corporate securities; (ii) incurred any obligation or liability (absolute
or contingent) except in the ordinary course of business; (iii)
discharged or satisfied any lien or encumbrance or paid any obligation or
liability (absolute or contingent) other than (A) current liabilities
shown on the TSL Companies Balance Sheet, (B) current liabilities
incurred since the date of the TSL Companies Balance Sheet in the
ordinary course of business, and (C) obligations incurred and liens
granted under contracts entered into in the ordinary course of business;
(iv) declared or made any payment or dividend or distribution to the
Shareholders as such or purchased or redeemed any of its capital stock;
(v) mortgaged, pledged or subjected to lien or any other encumbrance any
of its assets, tangible or intangible, except in the ordinary course of
business; (vi) sold or transferred any of their assets except in the
ordinary course of business; (vii) suffered any extraordinary losses or
waived any right of substantial value, except for the waiver of claims
submitted on behalf of clients; (viii) entered into any transactions
other than in the ordinary course of business; or (ix) paid or committed
themselves to pay to or for the benefit of any director, officer,
employee or sales representative any compensation of any kind other than
wages, bonuses, salaries and sales commissions at rates then in effect
other than as changed in accordance with customary salary and wage
administration practices.
(x) The TSL Companies Balance Sheet does not include among the assets
of any TSL Company any material amount of inventory which is obsolete or
not usable or saleable in the ordinary course of business, other than as
included in a general or specific obsolescence reserve.
(xi) (i) All federal, state and other tax returns and reports of the
TSL Companies required by law to be filed have been duly filed, and all
taxes, assessments, fees and other governmental charges shown to be due
thereon have been paid; (ii) no federal income tax
6
<PAGE>
return of any TSL Company is currently being examined by the Internal
Revenue Service; and (iii) the TSL Companies Balance Sheet includes
materially adequate provision for all taxes, assessments, fees and
charges for all periods through the date thereof.
(xii) As of the date hereof, there is no litigation, action, suit,
investigation, claim or proceeding pending, or to the best knowledge of
the Shareholders, threatened against or affecting any TSL Company, or
involving any of its properties or assets, at law or in equity or before
any federal, state, municipal, local or other governmental authority or
any arbitration panel. As of the Closing Date there shall be no
litigation, action, suit, investigation, claim or proceeding pending, or
to the best knowledge of the Shareholders, threatened against or
affecting any TSL Company, or involving any of its properties or assets,
at law or in equity or before any federal, state, municipal, local or
other governmental authority or any arbitration panel which, if adversely
determined, could have a material and adverse effect on the TSL
Companies, taken as an entirety. Each TSL Company is, to the best
knowledge of the Shareholders after reasonable investigation, in
compliance with all, and has received no notice of violation of any,
laws, regulations and orders applicable to its assets or to the operation
of its business, including laws, regulations and orders relating to
health, safety and equal employment opportunity of employees, and
environmental pollution, where failure to comply would have a material
and adverse effect on the TSL Companies, taken as an entirety. No TSL
Company is, to the best knowledge of the Shareholders, subject to or in
default under any order, writ, injunction or decree of any court or any
federal, state, municipal, local or other governmental authority or any
arbitration panel.
(xiii) Under the heading "Contracts and Commitments" in the Disclosure
Schedule is a full and complete list of (i) all outstanding contracts
with, or orders from, customers of the TSL Companies as of a date not
more than ten (10) days prior to the date of this Agreement, providing
for the payment of an amount in excess of $10,000, identifying in each
case the TSL Company involved, the customer and the amount of the
contract or, if the amount of the contract is not determinable, an
estimate of the revenues to be derived therefrom, and (ii) with respect
to each TSL Company, each of the following:
(1) All contracts and agreements for the purchase of goods,
materials, equipment, supplies or capital assets involving more than
$10,000 per contract and not cancelable within 90 days;
(2) All instruments evidencing liens or secured transactions
where the obligation in favor of such TSL Company exceeds $10,000;
(3) All management or employment contracts or collective
bargaining agreements;
(4) All notes, loan agreements, guarantees and other evidences
of indebtedness of the TSL Company, where the obligation of such TSL
Company exceeds $10,000, together with evidences of all forms of
security given by the TSL Company in connection therewith;
(5) The contracts or agreements with the ten largest (measured
by dollar volume of sales) licensees, distributors, dealers or sales
representatives of the TSL Company in each of fiscal years 1993 and
1994;
(6) All contracts or agreements with employees, directors,
officers, consultants or Shareholders (other than as set forth in
clause (3) above);
(7) All patent licenses and contracts and agreements related
thereto;
(8) All contracts and agreements related to trade secrets;
7
<PAGE>
(9) All contracts and agreements related to trademarks, trade
names and copyrights. As used herein, the terms "contract" and
"agreement" mean and include every contract, agreement, commitment,
understanding and promise, whether written or oral; and
(10) All bonus, profit sharing, compensation, or other plans,
agreements, trusts, funds or arrangements for the benefit of
directors, officers or employees.
(xiv) Under the heading "Leased Real Estate" in the Disclosure Schedule
is a full and complete list of all real properties leased by each TSL
Company. No TSL Company owns any real property.
(xv) Under the heading "Patents and Trademarks" in the Disclosure
Schedule is a full and complete list, as of the date hereof, of (i) all
patents owned, or patent applications filed by, each TSL Company and (ii)
all trademarks, trade names and copyrights owned or used by each TSL
Company. Except as set forth on said schedule, each TSL Company owns or
possesses substantially adequate licenses or other rights to use said
trademarks, trade names and copyrights listed thereon, and Shareholders
have no knowledge of a conflicting registration or claim to the aforesaid
trade names, trademarks and copyrights and the same are sufficient to
conduct its business substantially as now conducted. All patents, patent
applications, copyrights, copyright applications, trade secrets and
rights to inventions owned or held by any officer, director or employee
of any TSL Company relating to its business, and to which such TSL
Company is entitled, have been, or at the Effective Time will have been,
duly and effectively transferred to the TSL Company or to Brite; and the
operations of the TSL Companies do not infringe, and no demand or claim
has been made to any TSL Company that such operations do infringe, the
patents, trademarks, trade secrets, copyrights, or other rights of
anyone.
(xvi) Under the heading "Insurance Policies" in the Disclosure Schedule
is a list of each of the TSL Company's insurance policies, indicating the
carrier, amount of coverage, annual premium, risk covered and placing
broker or agent. Each of such insurance policies is in full force and
effect. No TSL Company has received, within the past three years, any
notice of cancellation of any insurance agreement.
(xvii) Any information contained in the Disclosure Schedule, and any
other information or documents furnished to Brite by the TSL Companies
pursuant to the terms of, or in connection with, the execution of this
Agreement, shall not contain any untrue statement of a material fact and
shall not omit to state any material fact required to be stated therein
or necessary to make any statement therein, in light of the circumstances
under which such statements are made, not misleading.
(xviii) Copies of any underlying documents incorporated in the
Disclosure Schedule and furnished by the TSL Companies at the request of
Brite, or otherwise, are true and correct copies, and there are no
amendments or modifications thereto except as set forth in the schedules
in which such documents are incorporated.
(xix) Except as provided in Section 11.1 hereof, the TSL Companies (A)
have not taken and will not take any action that would cause Brite to
have any obligation or liability to any person for a finder's or broker's
fee, and (B) the Shareholders agree to indemnify Brite for breach of the
foregoing representation and warranty, whether or not the closing occurs.
(xx) The execution of this Agreement by each TSL Company and the
performance of its obligations hereunder (A) will not be in violation of,
conflict with, or constitute a default under, the articles of
incorporation or bylaws of such TSL Company, or any note, debt
instrument, security agreement or mortgage, or any other agreement or
commitment to which such TSL Company is a party or by which any of its
assets or properties are bound,
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(B) will not result in the creation or imposition of any lien,
encumbrance, equity, or restriction in favor of any third person upon any
of the assets or properties of such TSL Company, and (C) will not result
in the violation of any judgment, order, decree, law, statute, ordinance,
rule or regulation applicable to such TSL Company or any of its
properties.
(xxi) As of the date hereof, each TSL Company has in all respects
performed, or is now performing the obligations of, and is not in default
(or by the lapse of time and/or the giving of notice would not be in
default) in respect of, any note, debt instrument, security agreement or
mortgage, or, to the best knowledge of the Shareholders, in respect of
any other agreement or commitment binding upon such TSL Company. As of
the Closing Date, each TSL Company shall have in all respects performed,
or shall be then performing the obligations of, and shall not be in
default (or by the lapse of time and/or the giving of notice would be in
default) in respect of, any note, debt instrument, security agreement or
mortgage, or, to the best knowledge of the Shareholders, in respect of
any other agreement or commitment binding upon such TSL Company, except
where such default would not have a material adverse effect on the TSL
Companies, taken as an entirety. Each of such TSL Company's obligations
shown on the Disclosure Schedule is a legal, binding, and enforceable
obligation of such TSL Company.
(xxii) Except for the consent of a majority of the Shareholders of each
of the TSL Companies to the Mergers and the filing of appropriate
documents to effect the Mergers, no consent, approval or authorization
of, or declaration, filing or registration with, any governmental or
regulatory authority, or any other person, is required to be made or
obtained by the TSL Companies in connection with the execution and
delivery of this Agreement by the TSL Companies, the performance by the
TSL Companies of their obligations hereunder and the consummation of the
transactions contemplated hereby, other than consents, approvals,
authorizations, declarations, filings or registrations which the failure
to make or obtain, either individually or in the aggregate, would not
have a material adverse affect upon the TSL Companies, taken as an
entirety.
(xxiii) No Shareholder (nor any ancestor, sibling, descendant or spouse
of any of such persons, or any trust, partnership or corporation in which
any of such persons has or has had an interest), has or has had, directly
or indirectly, (i) an interest in any entity, other than a TSL Company,
that furnished or sold, or furnishes or sells, services or products that
any TSL Company furnishes or sells, or proposes to furnish or sell, or
(ii) any interest in any entity, other than a TSL Company, that purchases
from or sells or furnishes to, any TSL Company, any goods or services.
(xxiv) The execution, delivery and performance by each TSL Company of
this Agreement and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of such TSL Company. This Agreement has been duly
executed and delivered by each TSL Company and constitutes a valid and
binding obligation of such TSL Company.
(xxv) (A) Under the heading "Employee Benefit Plans" in the Disclosure
Schedule is a list of all employee benefit plans (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), and all bonus, stock option, stock purchase, incentive,
deferred compensation, supplemental retirement, severance, fringe benefit
and other similar employee benefit plans, programs or arrangements, and
any current employment or executive compensation or severance agreements,
written or otherwise, for the benefit of, or relating to, any current or
former employee of each TSL Company or any trade or business (whether or
not incorporated) that is a member or that is under common control with
such TSL Company (an "ERISA Affiliate") (collectively, "TSL Employee
Plans").
(B) (1) None of the TSL Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any person except as
required by applicable law; (2) none of the TSL Employee Plans provides
for the payment of separation, severance, termination or
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similar-type benefits to any person or obligates any TSL Company to pay
separation, severance, termination or similar-type benefits solely as a
result of any transaction contemplated by this Agreement, or as a result
of a "change in control" within the meaning of Section 280G of the Code;
(3) no TSL Employee Plan which is an employee pension benefit plan within
the meaning of Section (3)(2) of ERISA has been completely or partially
terminated or been the subject of a reportable event within the meaning
of Section 4043 of ERISA and no proceeding by the Pension Benefit
Guaranty Corporation ("PBGC") to terminate any such employee pension
benefit plan has been instituted or threatened; (4) no TSL Company
contributes or has ever contributed to, or been required to contribute,
to any multi-employer plan within the meaning of Section 3(37) of ERISA
or has any liability (including withdrawal liability) under any
multi-employer plan; and (5) no TSL Employee Plan is or within the prior
six years has been subject to, and no TSL Company has incurred, and does
not expect to incur, any liability under, Title IV of ERISA or Section
412 of the Code.
(C) (1) All TSL Employee Plans are in compliance in all material
respects, in form and in operation, with the requirements prescribed by
any and all applicable statutes (including ERISA and the Code), orders,
or governmental rules and regulations currently in effect with respect
thereto (including all applicable requirements for notification to
participants or beneficiaries or the Department of Labor, the Internal
Revenue Service (the "IRS"), or the Secretary of the Treasury and the
requirements of Section 4980B of the Code), and each TSL Company has
performed all obligations required to be performed by it under, is not in
default under or in violation of, and has no knowledge of any default or
violation by any other party to, any of the TSL Employee Plans; (B) with
respect to each TSL Employee Plan intended to qualify under Section
401(a) of the Code and each trust intended to qualify under Section
501(a) of the Code, either a favorable determination letter with respect
to each such Employee Plan and trust has been received from the IRS or
there is still remaining a period of time under applicable Treasury
Regulations or IRS pronouncements in which to apply for such a
determination letter and to make any amendments necessary to obtain a
favorable determination.
(D) None of the following now exists or has existed within the six
year period ending on the date hereof with respect to any TSL Employee
Plan: (1) any act or omission by a TSL Company constituting a violation
of Section 402, 403, 404 or 405 of ERISA; (2) any act or omission by a
TSL Company that constitutes a violation of Sections 406 and 407 of ERISA
and is not exempted by Section 408 of ERISA or that constitutes a
violation of Section 4975(c) of the Code and is not exempted by Section
4975(d) of the Code; (3) any act or omission by a TSL Company
constituting a violation of Section 503, 510 or 511 of ERISA; or (4) any
act or omission by a TSL Company that could give rise to liability under
Section 502 of ERISA.
(E) (1) Each TSL Employee Plan has been maintained in substantial
compliance with its terms, and all material contributions, premiums or
other payments due from a TSL Company to (or under) any such TSL Employee
Plan have been fully paid or adequately provided for on the TSL Companies
Balance Sheet as of the date thereof; (2) there has been no amendment,
written interpretation or announcement (whether or not written) by a TSL
Company with respect to, or change in, employee participation or coverage
under, any TSL Employee Plan that would increase materially the expense
of maintaining such plans or arrangements, individually or in the
aggregate, above the level of expense incurred with respect thereto for
the most recently-ended fiscal year; (3) the market value of assets under
each Plan which is an employee pension benefit plan equals or exceeds the
present value of all vested and nonvested liabilities thereunder
determined in accordance with PBGC methods, factors, and assumptions
applicable to an employee pension benefit plan terminating on the date
for determination.
(F) Each TSL Company has made available to Brite complete, accurate
and current copies of all TSL Employee Plans and all amendments,
documents, correspondence and
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filings relating thereto, including, but not limited to, any statements,
filings, reports or returns filed with any governmental agency with
respect to the Employee Plans at any time within the three-year period
ending on the date hereof.
ARTICLE V
5.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF BRITE. Brite represents,
warrants and covenants that, except as disclosed in the disclosure schedule (the
"Brite Disclosure Schedule") herewith delivered to the TSL Companies and the
Shareholders and initialed or signed for identification by the President of
Brite, which disclosure schedule shall, for each item disclosed, identify
specifically the representation, warranty or covenant to which it relates:
(a) Brite is a corporation duly organized, validly existing and in good
standing under the laws of Kansas. Each of Brite's subsidiaries, as
identified in the Brite Disclosure Schedule ("Subsidiaries"), is a
corporation duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation. Brite has an
authorized capital of (i) 30,000,000 shares of Brite Common, of which, as of
the date of this Agreement, 8,097,573 shares are issued and outstanding, and
no shares are treasury shares, and (ii) 10,000,000 shares of preferred
stock, no par value, of which no shares are outstanding. All of the
outstanding shares of Brite Common are, and the shares of Brite Common to be
issued in connection with the Merger pursuant to this Agreement will be,
when issued, validly issued, fully paid and nonassessable.
(b) Brite has no commitment or obligation to issue or sell, whether
pursuant to stock option agreements, stock bonus agreements, warrants,
conversion rights or otherwise, any shares of its capital stock or other
securities, except under (i) Brite's Amended and Restated 1984 Incentive
Stock Option Plan adopted and approved by Brite stockholders on July 30,
1993; (ii) Brite's 1990 Non-Employee Director Stock Option Plan adopted and
approved by Brite stockholders on May 9, 1990; (iii) Brite's 1994 Stock
Option Plan adopted and approved by Brite stockholders on May 10, 1994; (iv)
Brite's Employee Stock Purchase Plan adopted and approved by Brite
stockholders on May 10, 1994; (v) the Perception Technology Corporation
("Perception") 1987 Stock Plan, which plan was assumed by Brite upon the
merger of Perception into Brite; (vi) the Perception Technology Corporation
Amended and Restated 1989 Non-Employee Director Stock Option Plan, adopted
by Perception stockholders on February 17, 1993, which plan was assumed by
Brite upon the merger of Perception into Brite; and (vii) the Non-Statutory
Stock Option Agreement between Brite and David Hemmings dated September 8,
1993 (collectively the "Brite Stock Plans"), complete, accurate and current
copies of which have heretofore been provided by Brite to the Shareholders
and the TSL Companies.
(c) Each of Brite and its Subsidiaries has full corporate power and
authority to own its properties and to carry on its business as it has been
and is conducted and each is duly qualified to do business as a foreign
corporation in the jurisdictions where the conduct of its business in such
jurisdictions makes such qualification necessary.
(d) Brite has delivered to each of the Shareholders copies of its (i)
Annual Report on Form 10-K for the year ended December 31, 1994, (ii) its
Proxy Statement relating to its annual meeting of stockholders held on May
9, 1995, (iii) its Proxy Statement relating to the Special Meeting of
Stockholders of Brite to be held for the purpose of approving this Agreement
and the Mergers (the "Merger Proxy Statement"), and (iv) all other reports
and statements filed with the Securities and Exchange Commission (the "SEC")
since January 1, 1992 (hereinafter collectively referred to as the "SEC
Filings"). The audited consolidated balance sheets of Brite as at December
31, 1994, 1993 and 1992, and the audited consolidated statements of income,
stockholders' equity, and cash flows of Brite for the years ended December
31, 1994, 1993 and 1992, including the related notes (the audited
consolidated balance sheet dated December 31, 1994 being herein referred to
as the "Brite Balance Sheet") and the unaudited consolidated balance sheet
(the "Brite Unaudited Balance Sheet") of Brite as at March 31, 1995, and the
unaudited consolidated
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statements of income, stockholders' equity, and cash flows of Brite for the
three months ended March 31, 1995, are correct and fairly present the
financial condition of Brite and its consolidated Subsidiaries as at the
respective dates and the results of their operations for the periods
involved, and all such financial statements have been prepared in accordance
with generally accepted accounting principles consistently applied
throughout the periods involved (except as disclosed in the notes thereto
and subject only to normal recurring adjustments as to the Brite Unaudited
Balance Sheet and the unaudited consolidated statements of income,
stockholders' equity, and cash flows for the three-month period ended March
31, 1995). All SEC Filings complied with the requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the rules promulgated
thereunder, and did 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 therein, in light of the circumstances in which they
were made, not misleading. Since January 1, 1995, no event has occurred
which was required to be reported on Form 8-K and which was not so reported.
(e) Except as otherwise disclosed in the Brite Unaudited Balance Sheet,
since the date of the Brite Balance Sheet, Brite and its Subsidiaries have
conducted their business only in the ordinary and usual course, and there
has been no material adverse change in the condition, financial or other, of
Brite and its Subsidiaries, taken as a whole, and there has been no
occurrence, circumstance or combination thereof which might reasonably be
expected to result in any such material change before or after the Effective
Time.
(f) Except as disclosed in the Brite Unaudited Balance Sheet and for
property acquired or disposed of in the ordinary course of business since
the date of the Brite Balance Sheet and property subject to lease or license
agreements, the Brite Balance Sheet reflects substantially all of the assets
and property used by Brite and its Subsidiaries in their business, and
except as set forth in the schedules referred to in this Agreement, Brite or
its Subsidiaries have good and marketable title, free and clear of any lien,
claim, encumbrance, restriction, charge or equity, or valid leases or
licenses to substantially all property used by them in their business. All
of the properties used by Brite or its Subsidiaries in their business are in
satisfactory operating condition except for maintenance and repairs
necessary in the ordinary course of operations.
(g) Except as disclosed in the Brite Unaudited Balance Sheet and for
transactions in connection with the making and performance of this
Agreement, the issuance of Brite Common pursuant to the exercise of options
or warrants outstanding on the date of this Agreement, and transactions
expressly permitted by this Agreement, since the date of the Brite Balance
Sheet, neither Brite nor its Subsidiaries has agreed to and has not (i)
issued any stocks, bonds, notes, or other corporate securities; (ii)
incurred any obligation or liability (absolute or contingent) except in the
ordinary course of business; (iii) discharged or satisfied any lien or
encumbrance or paid any obligation or liability (absolute or contingent)
other than (A) current liabilities shown on the Brite Balance Sheet, (B)
current liabilities incurred since the date of the Brite Balance Sheet in
the ordinary course of business, and (C) obligations incurred and liens
granted under contracts entered into in the ordinary course of business;
(iv) declared or made any payment or dividend or distribution to its
stockholders as such or purchased or redeemed any of its capital stock; (v)
mortgaged, pledged or subjected to lien or any other encumbrance any of its
assets, tangible or intangible, except in the ordinary course of business;
(vi) sold or transferred any of its assets except in the ordinary course of
business; (vii) suffered any extraordinary losses or waived any right of
substantial value (except in the ordinary course of business); (viii)
entered into any transactions other than in the ordinary course of business;
or (ix) paid or committed itself to pay to or for the benefit of any of its
directors, officers, employees or sales representatives any compensation of
any kind other than wages, bonuses, salaries and sales commissions at rates
then in effect, other than as changed in accordance with customary salary
and wage administration practices.
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(h) The Brite Balance Sheet does not include among the assets of Brite
or its Subsidiaries any material amount of inventory which is obsolete or
not usable or saleable in the ordinary course of business, other than as
included in a general or specific obsolescence reserve.
(i) There is no litigation, action, suit, investigation, claim or
proceeding pending, or to the best knowledge of any director or officer of
Brite, threatened against or affecting, Brite or its Subsidiaries, or
involving any of their properties or assets, at law or in equity or before
any federal, state, municipal, local or other governmental authority or any
arbitration panel which, if adversely determined, could have a material and
adverse effect on Brite and its Subsidiaries, taken as an entirety. Each of
Brite and its Subsidiaries is, to the best knowledge of Brite's directors
and officers after reasonable investigation, in compliance with all, and has
received no notice of violation of any, laws, regulations and orders
applicable to its assets or to the operation of its business, including
laws, regulations and orders relating to health, safety and equal employment
opportunity of employees and environmental pollution, where failure to
comply could have a material and adverse effect on Brite and its
Subsidiaries, taken as an entirety. Neither Brite nor any of its
Subsidiaries is, to the best knowledge of any director or officer of Brite,
subject to or in default under any order, writ, injunction or decree of any
court or any federal, state, municipal, local or other governmental
authority or any arbitration panel.
(j) Under the heading "Contracts and Commitments of Brite" in the Brite
Disclosure Schedule is a full and complete list of (i) all outstanding
orders from customers of Brite as of a date not more than ten days prior to
the date of this Agreement, identifying in each case the amount of the order
and the customer, and (ii) subject to the dollar amount and time period
applicable to subsection (A) below, as at the date hereof in respect of
Brite and its Subsidiaries, each of the following:
(A) All contracts and agreements for the purchase of goods,
materials, equipment, supplies or capital assets involving more than
$100,000 per contract and not cancelable within 90 days;
(B) The contracts or agreements with the ten largest (measured by
dollar volume of sales) licensees, distributors, dealers or sales
representatives of Brite in each of 1993 and 1994; and
(C) All contracts and agreements related to trademarks, trade names
and registered copyrights. As used herein, the terms "contract" and
"agreement" mean and include every contract, agreement, commitment,
understanding and promise, whether written or oral.
(k) Any information contained in the Brite Disclosure Schedule, and any
other information furnished to the TSL Companies and the Shareholders by
Brite pursuant to the terms of this Agreement, shall not contain any untrue
statement of a material fact and shall not omit to state any material fact
required to be stated therein or necessary to make any statement therein, in
light of the circumstances under which such statements are made, not
misleading.
(l) Copies of any underlying documents incorporated in the Brite
Disclosure Schedule and furnished to the Shareholders at the request of the
Shareholders or otherwise are true and correct copies, and there are no
amendments or modifications thereto except as set forth in the schedules in
which such documents are incorporated.
(m) Brite has not taken and will not take any action that would cause
any TSL Company or any Shareholder to have any obligation or liability to
any person for a finder's or broker's fee.
(n) The execution of this Agreement by Brite and the performance of its
obligations hereunder (i) will not be in violation of, conflict with, or
constitute a default under, the articles of incorporation or bylaws of Brite
or its Subsidiaries, or any note, debt instrument, security agreement or
mortgage, or any other agreement or commitment to which Brite or its
Subsidiaries is a party or by which any of their assets or properties are
bound, (ii) will not result in the creation
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or imposition of any lien, encumbrance, equity, or restriction in favor of
any third person upon any of the assets or properties of Brite or its
Subsidiaries, and (iii) will not result in the violation of any judgment,
order, decree, law, statute, ordinance, rule or regulation applicable to
Brite, its Subsidiaries, or any of their properties.
(o) Brite and its Subsidiaries have in all respects performed, or are
now performing the obligations of, and are not in default (or by the lapse
of time and/or the giving of notice would not be in default) in respect of,
any note, debt instrument, security agreement or mortgage, or, to the best
knowledge of any director or officer of Brite, in respect of any other
agreement or commitment binding upon either Brite or its Subsidiaries,
except where such default would not have a material adverse effect on Brite
and its Subsidiaries, taken as an entirety. Each of the obligations shown on
the Brite Disclosure Schedule is a legal, binding, and enforceable
obligation by or against Brite or its Subsidiaries.
(p) Except for (i) requirements of the Exchange Act, (ii) the consent of
a majority of Brite's shareholders to the Mergers, (iii) the filing of
appropriate documents to effect the Mergers, and (iv) requirements of
federal and state securities laws, no consent, approval or authorization of,
or declaration, filing or registration with, any governmental or regulatory
authority, or any other person, is required to be made or obtained by Brite
in connection with the execution and delivery of this Agreement by Brite,
the performance by Brite of its obligations hereunder and the consummation
of the transactions contemplated hereby, other than consents, approvals,
authorizations, declarations, filings or registrations which the failure to
make or obtain, either individually or in the aggregate, would not have a
material adverse affect upon the Company and its Subsidiaries, taken as an
entirety.
(q) The execution, delivery and performance by Brite of this Agreement
and the consummation by it of the transaction contemplated hereby have been
duly authorized by all necessary corporate action on the part of Brite. This
Agreement has been duly executed and delivered by Brite and constitutes a
valid and binding obligation of Brite.
(r) (i) Under the heading "Brite Employee Benefit Plans" in the Brite
Disclosure Schedule is a list of all employee benefit plans (as defined in
Section 3(3) of ERISA, and all bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance, fringe
benefit and other similar employee benefit plans, programs or arrangements,
and any current or former employment or executive compensation or severance
agreements, written or otherwise, for the benefit of, or relating to, any
current employee of Brite or any trade or business (whether or not
incorporated) that is a member or that is under common control with Brite (a
"Brite ERISA Affiliate") (collectively, "Brite Employee Plans").
(ii) Except as noted on the Brite Disclosure Schedule, (A) none of the
Brite Employee Plans promises or provides retiree medical or other retiree
welfare benefits to any person except as required by applicable law; (B)
none of the Brite Employee Plans provides for the payment of separation,
severance, termination or similar-type benefits to any person or obligates
Brite to pay separation, severance, termination or similar-type benefits
solely as a result of any transaction contemplated by this Agreement, or as
a result of a "change in control" within the meaning of Section 280G of the
Code; (C) no Brite Employee Plan which is an employee pension benefit plan
within the meaning of Section (3)(2) OF ERISA has been completely or
partially terminated or been the subject of a reportable event within the
meaning of Section 4043 of ERISA and no proceeding by the PBGC to terminate
any such employee pension benefit plan has been instituted or threatened;
(D) Brite does not contribute to and has never contributed to or been
required to contribute to any multi-employer plan within the meaning of
Section 3(37) of ERISA or has any liability (including withdrawal liability)
under any multi-employer plan; and (E) no Brite Employee Plan is or within
the prior six years has been subject to, and Brite has not incurred, and
does not expect to incur, any liability under Title IV of ERISA or Section
412 of the Code.
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(iii) (A) All Brite Employee Plans are in compliance in all material
respects, in form and in operation, with the requirements prescribed by any
and all applicable statutes (including ERISA and the Code), orders, or
governmental rules and regulations currently in effect with respect thereto
(including all applicable requirements for notification to participants or
beneficiaries or the Department of Labor, the IRS or the Secretary of the
Treasury and the requirements of Section 4980B of the Code), and Brite has
performed all obligations required to be performed by it under, is not in
default under or in violation of, and has no knowledge of any default or
violation by any other party to, any of the Brite Employee Plans; and (B)
with respect to each Brite Employee Plan intended to qualify under Section
401(a) of the Code and each trust intended to qualify under Section 501(a)
of the Code, either a favorable determination letter with respect to each
such Brite Employee Plan and trust has been received from the IRS or there
is still remaining a period of time under applicable Treasury Regulations or
IRS pronouncements in which to apply for such a determination letter and to
make any amendments necessary to obtain a favorable determination.
(iv) None of the following now exists or has existed within the six year
period ending on the date hereof with respect to any Brite Employee Plan:
(1) any act or omission by Brite constituting a violation of Section 402,
403, 404 or 405 of ERISA; (2) any act or omission by Brite that constitutes
a violation of Sections 406 and 407 of ERISA and is not exempted by Section
408 of ERISA or that constitutes a violation of Section 4975(c) of the Code
and is not exempted by Section 4975(d) of the Code; (3) any act or omission
by Brite constituting a violation of Section 503, 510 or 511 of ERISA; or
(4) any act or omission by Brite that could give rise to liability under
Section 502 of ERISA.
(v) (A) Each Brite Employee Plan has been maintained in substantial
compliance with its terms, and all material contributions, premiums or other
payments due from Brite or any of its Subsidiaries to (or under) any such
Brite Employee Plan have been fully paid or adequately provided for on the
Brite Balance Sheet as of the date thereof; (B) there has been no amendment,
written interpretation or announcement (whether or not written) by Brite
with respect to, or change in employee participation or coverage under, any
Brite Employee Plan that would increase materially the expense of
maintaining such plans or arrangements, individually or in the aggregate,
above the level of expense incurred with respect thereto for the most
recently-ended fiscal year; (C) the market value of assets under each Plan
which is an employee pension benefit plan equals or exceeds the present
value of all vested and non-vested liabilities thereunder, determined in
accordance with PBGC methods, factors, and assumptions applicable to an
employee pension benefit plan terminating on the date for determination.
(vi) Brite has made available to the TSL Companies and the Shareholders
complete, accurate and current copies of all Brite Employee Plans and all
amendments, documents, correspondence and filings relating thereto,
including, but not limited to, any statements, filings, reports or returns
filed with any governmental agency with respect to the Brite Employee Plans
at any time within the three-year period ending on the date hereof.
ARTICLE VI
6.1 FURTHER COVENANTS OF THE TSL COMPANIES AND THE SHAREHOLDERS. Each of
the TSL Companies and the Shareholders covenants that, from the date of this
Agreement to the Effective Time:
(a) (I) Each TSL Company shall continue to conduct its business in the
ordinary and usual course and, without limiting the generality of the
foregoing, shall not, without the written consent of Brite (which shall not
be unreasonably withheld, delayed or conditioned): (i) dispose or contract
to dispose of any property or other assets, voluntarily incur any absolute
or contingent debt obligation or engage in any activity or transaction
except, in each case, in the ordinary course of business; (ii) borrow any
money, except in the ordinary and usual course of business under currently
existing lines of credit; (iii) enter into any lease or contract for the
purchase or sale of
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real estate or of any interest therein; (iv) encumber any property or other
assets; (v) grant any option, right or warrant to purchase shares of its
capital stock; (vi) declare or pay any dividend or make any other payment to
Shareholders; provided, however, that each TSL Company shall be entitled to
pay to the Shareholders as additional compensation on the Closing Date an
amount in the aggregate equal to the undistributed profits of such TSL
Company, if any, prior to giving effect to such payment, through the date of
closing, as reflected on the books and records of such TSL Company in
accordance with past practices; (vii) purchase or redeem any shares, notes
or other securities or make any other distribution to stockholders; (viii)
in-crease the rate of remuneration of any of its directors, officers,
employees or other representatives, or agree to do so; (ix) adopt any new,
or amend any existing, employee benefit plan; (x) form, or cause to be
formed, any subsidiary; (xi) issue, sell, distribute or dispose of any
shares, notes or other securities of the TSL Company; (xii) make any
commitments for capital improvements or materially alter standing
commitments for capital improvements except as set forth in the Disclosure
Schedule under the heading "Contracts and Commitments of the TSL Company";
(xiii) fail to keep its properties insured to the same extent as they are
represented to be insured in Section 4.1(b)(xvi) at the date hereof; or
(xiv) commit itself to do any of the foregoing. In connection with the
payment of additional compensation pursuant to clause (vi) immediately
above, each such TSL Company shall withhold from such payment any taxes
required by law to be so withheld.
(II) If, after giving effect to the payments permitted under clause (vi)
immediately above, the consolidated cash balance of the TSL Companies is
less than $750,000 or the consolidated working capital of the TSL Companies
is less than $2,400,000, then the Shareholders shall be required to loan, or
cause to be loaned, to Brite on the Closing Date such an amount as is
necessary to increase the consolidated cash balance of the TSL Companies to
not less than $750,000 and increase the working capital of the TSL Companies
to not less than $2,400,000 (the "Loans"); provided, however, that the
amount of such Loans shall not exceed the amounts paid to the Shareholders
under clause (a)(I)(vi), net of all federal, state and local taxes paid with
respect thereto. The Loans shall be general unsubordinated debt obligations
of Brite, consistent with past practices of the TSL Companies, repayable by
Brite to the Shareholders on April 1, 1996, at which time all amounts
outstanding under the Loans shall be due and payable; provided, however, if
based upon the monthly balance sheet of the TSL Companies (as an operating
division of Brite), to be prepared by Brite on and as of the first day of
each month after the Effective Time in accordance with generally accepted
accounting principles on an accrual basis, the TSL Companies (as an
operating division of Brite) have a cash balance of at least $750,000 and
working capital of at least $2,400,000, then Brite shall be required to
prepay the Loans to the extent that working capital exceeds $2,400,000, such
prepayment to be made within five days of the date of the balance sheet.
Absent a default by Brite for failure to repay the Loans as required by this
Agreement, the Loans shall bear no interest, except to the extent of any tax
liability of the Shareholders which may arise as a result of interest income
imputable on the Loans. Upon the occurrence of a default by Brite for
failing to repay the Loans as required by this Agreement, the Loans shall
bear interest at the rate of two percent per annum in excess of the Prime
Rate, as reported in the Wall Street Journal. The interest rate shall
increase or decrease by an amount equal to each increase or decrease in the
Prime Rate, effective on the first day of the month after any change in the
Prime Rate is reported in the Wall Street Journal based on the Prime Rate in
effect on the last day of the month in which any such change occurs. All
such interest accrued thereafter and the principal amount of the Loans shall
become immediately due and payable to the Shareholders.
(b) During normal business hours, provided there is no unreasonable
interference with the conduct of each TSL Company's business, each TSL
Company shall permit Brite (and its auditors, counsel and other
representatives) to examine such TSL Company's non-privileged properties,
books, contracts, tax returns and other records, and shall furnish such
representatives with all such information concerning such affairs as they
may reasonably request.
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(c) Each TSL Company shall use its commercially reasonable efforts to
furnish or cause to be furnished to Brite, and such TSL Company shall
execute and deliver, or cause any of its respective shareholders, directors,
officers or employees in their individual capacities to execute and deliver,
such consents and other documents and take such action as Brite may
reasonably request to enable it to safeguard the good will, trade name,
trade secrets and other property rights of such TSL Company and to cause the
same to pass to Brite at the time the Mergers become effective.
(d) Each TSL Company shall use its commercially reasonable efforts and
cooperate reasonably with Brite in the preparation of the Merger Proxy
Statement to be delivered to the stockholders of Brite in connection with
the Brite Special Meeting of Stockholders at which Brite's stockholders
shall vote upon the Mergers (the "Brite Special Meeting") and to furnish to
Brite such data and information relating to itself as may be required for
inclusion therein. None of the information to be supplied by such TSL
Company for inclusion in the Merger Proxy Statement will, at the time the
Merger Proxy Statement is mailed to the stockholders of Brite and at the
time of the Brite Special Meeting, contain an untrue statement of material
fact or omit to state a material fact required to be stated therein or (i)
necessary in order to make the statements therein not misleading or (ii) at
the time of the Brite Special Meeting, necessary to correct any statement
and any earlier communication of which such TSL Company is aware with
respect to the solicitation of proxies. Each of the Shareholders agrees to
advise Brite promptly if, at any time prior to the Brite Special Meeting, he
becomes aware that any information contained in the Merger Proxy Statement
has become incorrect or incomplete in any material respect.
(e) Each TSL Company shall cause a special meeting of its Shareholders
to be duly called and held, or cause its Shareholders to execute written
consents, as soon as reasonably practical and in no event later than the
date on which the Brite Special Meeting is held, for the purpose of adopting
this Agreement and approving the transactions contemplated herein.
(f) Between the date of this Agreement and the Effective Time (or
earlier termination of this Agreement pursuant to Sections 13.2, 13.3 or
13.4 hereof), neither any TSL Company nor any Shareholder, officer,
employee, representative or agent shall, directly or indirectly, encourage,
solicit or initiate discussions or negotiations with any corporation,
partnership, person or other entity or group (other than Brite or an
officer, director, employee or other authorized representative or agent of
Brite) concerning any bid, merger or sale of the assets of any TSL Company
other than in the ordinary course of business, sale of shares of capital
stock of any TSL Company or similar transaction involving any TSL Company.
Promptly upon receiving any, or any information about any, inquiry, request
or proposal from or contact by any person with respect to any bid, merger,
sale or similar transaction, the TSL Company shall advise Brite of such
inquiry, request, proposal or contact and provide Brite all relevant
information with respect thereto.
6.2 FURTHER COVENANTS OF BRITE. From the date of this Agreement to the
Effective Time:
(a) Brite shall furnish the Shareholders (and their auditors, counsel
and other representatives) with all information reasonably requested by the
Shareholders (and their auditors, counsel and other representatives) and
shall permit the Shareholders (and their auditors, counsel and other
representatives) to contact Brite's auditors regarding the financial
statements, books and records of Brite. Brite shall instruct its auditors to
respond to all reasonable inquiries of the Shareholders (and their auditors,
counsel and other representatives).
(b) Brite shall cause the Merger Proxy Statement to be filed with the
SEC as soon as possible but no later than two (2) days following the
execution of this Agreement.
(c) Brite shall cause the Brite Special Meeting to be duly called and
held as soon as reasonably practicable, and in no event later than thirty
days following the date on which the SEC advises Brite that it has no
further comment on the Merger Proxy Statement, for the purpose of adopting
this Agreement and approving the transactions contemplated herein.
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(d) In connection with the Brite Special Meeting, (i) Brite shall mail
the Merger Proxy Statement to its stockholders, no later than two (2) days
after the SEC advises Brite that it has no further comments on the Merger
Proxy Statement (ii) the Brite Board of Directors shall recommend to Brite's
stockholders the approval of this Agreement, and (iii) the Brite Board of
Directors shall use their reasonable efforts to obtain such stockholders'
approval.
(e) Brite shall ensure that none of the information to be supplied by
Brite in the Merger Proxy Statement will, at the time the Merger Proxy
Statement is mailed to the stockholders of Brite and at the time of the
Brite Special Meeting, contain an untrue statement of material fact or omit
to state a material fact required to be stated therein or necessary in order
to make the statements therein not misleading.
(f) Brite shall take such steps as may be necessary to comply with the
securities and Blue Sky laws of all jurisdictions whose laws are applicable
to the issuance of Brite Common pursuant hereto.
(g) As soon as practicable following the Effective Time, Brite shall
execute and deliver Stock Option Agreements for an aggregate of 116,000
shares of Brite Common to certain management personnel of the TSL Companies
(other than the Shareholders) and on such terms and conditions as shall be
mutually agreed upon by Brite and the Shareholders.
(h) From and after the Effective Time, Brite shall maintain separate
books and records with respect to the operation of the TSL Companies as a
separate operating division of Brite and shall prepare on and as of the
first day of each month after the Effective Time a balance sheet on an
accrual basis for said TSL Companies in accordance with generally accepted
accounting principles, which balance sheet shall be used for purposes of
calculating the amount of the payment, if any, required to be paid by Brite
under Section 6.1(a)(II) hereof.
(i) From and after the date hereof through the Closing Date, Brite shall
deliver to the Shareholders copies of any and all documents, statements,
filings, reports and correspondence hereafter filed or submitted by Brite to
the Securities and Exchange Commission, including but not limited to such
filings or submissions by Brite pursuant to the Act, the Exchange Act, and
the rules and regulations promulgated thereunder.
ARTICLE VII
7.1 CONDITIONS TO THE OBLIGATIONS OF THE TSL COMPANIES AND THE
SHAREHOLDERS. The obligations of the TSL Companies and the Shareholders to
consummate the Mergers shall be subject to the following conditions:
(a) The representations and warranties of Brite set forth in Article V
shall be correct in all material respects both on the date of this Agreement
and immediately prior to the Effective Time as if made again at and as of
such time. Brite shall have performed in all material respects the
obligations which are required hereunder to be performed by it at or prior
to the Effective Time. Brite shall have delivered to the TSL Companies a
certificate of Brite, dated the Closing Date and signed by the President and
Chief Financial Officer of Brite, to the effect that (i) each of the
representations and warranties of Brite contained herein is true in all
material respects as of the Closing Date, with the same effect as though
made and delivered at and as of the Closing Date, and (ii) Brite has
performed in all material respects all obligations required by this
Agreement to be performed by it at or prior to the Effective Time.
(b) There shall not have occurred (i) any material adverse change since
the date of the Brite Balance Sheet in the business, properties, results of
operations, or financial condition of Brite, or (ii) any loss or damage to
any of the properties of, or assets of, Brite, which will materially affect
or impair its ability to conduct the business now being conducted by it
after the Mergers.
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(c) Triplett, Woolf & Garretson, LLP, counsel for Brite, shall have
furnished its opinion to the TSL Companies as at the Effective Time to the
effect that, except as disclosed in the Brite Disclosure Schedule:
(i) Brite is a corporation duly organized, validly existing and in
good standing under the laws of the State of Kansas, and has all
requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted, to enter into the
Agreement and the Certificates of Merger, to perform its obligations
thereunder and to consummate the transactions with respect to it
contemplated thereby.
(ii) The execution, delivery and performance by Brite of the
Agreement, and the consummation by it of the transactions contemplated
thereby, have been duly authorized by all necessary corporate action on
the part of Brite. The Agreement has been executed and delivered by Brite
and constitutes the valid and binding obligation of Brite enforceable in
accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating
to or affecting the enforcement of creditors' rights and equitable
considerations which may affect a court's exercise of its equitable
powers, including its power to order specific performance.
(iii) Neither the execution and delivery of the Agreement, nor the
performance of the terms and provisions thereof and consummation of the
transactions contemplated thereby, in each case by Brite, will (A)
conflict with or result in a default under any of the terms and
provisions of its Articles of Incorporation or Bylaws, or (B) violate the
provisions of any statute applicable to Brite or any of its properties or
assets and of which it has knowledge.
(iv) Brite is authorized to have outstanding 40,000,000 shares,
consisting of (A) 30,000,000 Common Shares, no par value, of which at the
date hereof 8,097,573 shares are issued and outstanding, and no shares
are treasury shares, and (B) 10,000,000 shares of Preferred Stock, no par
value, of which no shares are outstanding. All of the outstanding shares
of Brite Common are validly issued, fully paid and nonassessable, and the
shares of Brite Common to be issued in conversion of the outstanding
shares of Common Stock of the TSL Companies, as contemplated by the
Agreement, are duly authorized and will be, from and after the Effective
Time, validly issued, fully paid and nonassessable.
(v) To the best of its knowledge, Brite has no commitment or
obligation to issue or sell, whether pursuant to stock option agreements,
stock bonus agreements, warrants, conversion rights or otherwise, any
shares of its capital stock or other securities, except under the Brite
Stock Plans.
(vi) To the best of its knowledge, except as disclosed in the Brite
Disclosure Schedule under the heading "Litigation," there is no
litigation, action, suit, investigation, claim or proceeding pending or
threatened against or affecting Brite or involving any of its properties
or assets, at law or in equity or before any federal, state, municipal,
local or other governmental authority or any arbitration panel.
(vii) Upon the completion of the filings contemplated by Section 1.1
of the Agreement, the outstanding shares of Common Stock of the TSL
Companies will be converted into and become shares of Brite Common.
(viii) Each of the Mergers constitutes a tax-free reorganization within
the meaning of Section 368(a)(1) of the Code.
(ix) Upon the filing of the Certificates of Merger, the Mergers shall
be effective under the laws of the State of Kansas.
(d) The Employment Agreements between Brite and each of Alan C. Maltz,
Scott A. Maltz and Stephen B. Rockoff, the forms of which have been approved
and initialled for identification by the parties, shall have been executed
and delivered and be in full force and effect.
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(e) The average of the closing prices for Brite Common on the Nasdaq
Stock Market for the twenty trading days ending on the last trading day
prior to the Closing Date, as reported in the Wall Street Journal, shall not
be less than $12.00.
(f) The Shareholders and the TSL Companies shall have received such
other agreements, documents and instruments as they shall reasonably
request, and all legal matters shall be satisfactory to them and their
counsel.
ARTICLE VIII
8.1 CONDITIONS TO THE OBLIGATIONS OF BRITE. The obligations of Brite to
consummate the Mergers shall be subject to the following conditions:
(a) The representations, warranties, and covenants of the Shareholders
set forth in Article IV hereof shall be correct in all material respects
both on the date of this Agreement and immediately prior to the Effective
Time as if made again at and as of such time. The TSL Companies and the
Shareholders shall have performed all of the obligations which are required
hereunder to be performed by them at or prior to the Effective Time. Each
Shareholder shall have delivered to Brite a certificate, dated the Closing
Date and signed by such Shareholder, to the effect that (i) each of the
representations and warranties of such Shareholder contained herein is true
in all material respects as of the Closing Date, with the same effect as
though made and delivered at and as of the Closing Date, and (ii) such
Shareholder and each TSL Company in which he holds shares has performed in
all material respects all obligations required by this Agreement to be
performed by him or such TSL Companies at or prior to the Effective Time.
(b) There shall not have occurred (i) any material adverse change since
the date of the TSL Companies Balance Sheet in the business, properties,
results of operations, or financial condition of the TSL Companies, taken as
an entirety, or (ii) any loss or damage to any of the properties of, or
assets of, the TSL Companies, taken as an entirety, which will materially
affect or impair its ability to conduct the business now being conducted by
it after the Mergers.
(c) Kelley Drye & Warren, special counsel for the TSL Companies and the
Shareholders, shall have furnished its opinion to Brite as at the Effective
Time to the effect that, except as disclosed in the Disclosure Schedule:
(i) Each TSL Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey,
and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, to enter
into the Agreement and the Certificate of Merger, to perform its
obligations thereunder and to consummate the transactions with respect to
it contemplated thereby.
(ii) The execution, delivery and performance by each TSL Company of
the Agreement, and the consummation by it of the transactions
contemplated thereby, have been duly authorized by all necessary
corporate action on the part of each TSL Company. The Agreement has been
executed and delivered by each TSL Company and the Shareholders and
constitutes the valid and binding obligation of each TSL Company and the
Shareholders, enforceable in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency, reorganization, moratorium
or other laws relating to or affecting the enforcement of creditors'
rights and equitable considerations which may affect a court's exercise
of its equitable powers, including its power to order specific
performance.
(iii) Neither the execution and delivery of the Agreement, nor the
performance of the terms and provisions thereof and consummation of the
transactions contemplated thereby, in each case by any TSL Company, will
(A) conflict with or result in a default under any of the
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terms and provisions of its Articles of Incorporation or Bylaws, or (B)
violate the provisions of any statute, applicable to such TSL Company or
any of its properties or assets and of which it has knowledge.
(iv) Telecom Services Limited (U.S.), Inc. is authorized to have
outstanding 1,000 shares of common stock, of which, as of the date of
this Agreement, 200 shares are issued and outstanding. Telecom Services
Limited (West), Inc. is authorized to have outstanding 1,000 shares of
common stock, of which, as of the date of this Agreement, 100 shares are
issued and outstanding. TSL Software Services, Inc. is authorized to have
outstanding 2,500 shares of common stock, of which, as of the date of
this Agreement, 100 shares are issued and outstanding. TSL Management
Group, Inc. is authorized to have outstanding 2,500 shares of common
stock, of which, as of the date of this Agreement, 1000 shares are issued
and outstanding. All of the outstanding shares of common stock of the TSL
Companies are validly issued, fully paid and non-assessable.
(v) To the best of its knowledge, no TSL Company has any commitment
or obligation to issue or sell, whether pursuant to stock option
agreements, stock bonus agreements, warrants, conversion rights or
otherwise, any shares of its capital stock or other securities.
(vi) To the best of its knowledge, except as disclosed in the
Disclosure Schedule under the heading "Litigation", there is no
litigation, action, suit, investigation, claim or proceeding pending or
threatened against or affecting any TSL Company, or involving any of its
properties or assets, at law or in equity or before any federal, state,
municipal, local or other governmental authority or any arbitration
panel.
(vii) Upon the filing of the Certificates of Merger, the Mergers shall
be effective under the laws of the State of New Jersey.
(d) Brite shall have received an opinion, dated not more than five days
prior to the mailing of the Merger Proxy Statement, from its financial
advisor, Lazard Freres & Co., stating that, in the opinion of such financial
advisor, the terms of the Mergers are fair to the stockholders of Brite from
a financial point of view, and such opinion shall not have been withdrawn.
(e) Brite shall have received from Ernst & Young a letter dated not more
than five days prior to the Effective Time, to the effect (i) that with
respect to the TSL Companies, they are independent public accountants within
the meaning of the Exchange Act, (ii) that it is their opinion that the
financial statements of the TSL Companies contained in the Merger Proxy
Statement comply as to form in all material respects with the applicable
accounting requirements of Regulation 14A, (iii) that on the basis of
specified procedures (which do not constitute an examination in accordance
with generally accepted auditing standards), consisting of a reading of the
unaudited, interim financial statements of the TSL Companies subsequent to
the most recent audited financial statements, inquiries of officers of the
TSL Companies responsible for financial and accounting matters, and a
reading of minutes of meetings of stockholders and the Boards of Directors
of each of the TSL Companies, nothing has come to their attention which
would lead them to believe that, except as disclosed in the Disclosure
Schedule and in the Unaudited Balance Sheet, since the most recent audited
financial statements, to the date of such letter, there has been (A) any
increase or decrease in the outstanding capital stock, or any increase in
indebtedness for borrowed money, other than trade payables in the ordinary
course of business, or (B) any decrease in the net assets thereof, or
occurrence of any material contingent liability not required to be reflected
in the computation of net assets, and (iv) of such other accounting matters
as Brite may reasonably request.
(f) The Employment Agreements between Brite and each of Alan C. Maltz,
Scott A. Maltz and Stephen B. Rockoff shall have been executed and delivered
and be in full force and effect.
(g) Brite shall have received such other agreements, documents and
instruments as it shall have reasonably requested and all legal matters
shall be satisfactory to it and its counsel.
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ARTICLE IX
9.1 FURTHER CONDITIONS TO THE OBLIGATIONS OF THE TSL COMPANIES, THE
SHAREHOLDERS AND BRITE. The agreements by Brite, the TSL Companies and the
Shareholders to be performed by them shall be subject to the following
conditions:
(a) No provisions of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of a Merger or
materially impair the effective operation of the business of Brite after the
Effective Time.
(b) There shall not be any litigation, proceeding or governmental
investigation pending (whether or not both Brite and any TSL Company are
parties to such litigation, proceeding or investigation) seeking to (i)
restrain, prevent or rescind the transactions contemplated hereby or change
the terms thereof, or (ii) terminate this Agreement, which litigation,
proceeding or governmental investigation makes it inadvisable, in the
opinion of the Board of Directors of either Brite or a TSL Company, to
consummate the transactions contemplated hereby.
(c) The stockholders of Brite and each of the TSL Companies shall have
approved the Mergers contemplated by this Agreement by the requisite vote
and each of the parties shall have furnished the other (i) a certified copy
of the resolutions duly adopted by its Board of Directors, and (ii) a
certified copy of the resolutions duly adopted by its stockholders entitled
to vote thereon approving this Agreement.
(d) If any stockholder of Brite initiates steps necessary to perfect the
right under the dissenters' rights provision of Kansas law to receive cash
for shares of Brite Common, the number of shares with respect to which such
step may have been initiated shall not exceed a number equal to 5% of the
shares of Brite Common issued and outstanding immediately prior to the
Closing Date.
(e) All statutory requirements for the valid consummation by the parties
of the transactions contemplated by this Agreement shall have been fulfilled
and all authorizations, consents and approvals of federal, state and local
governmental agencies and authorities required to be obtained in order to
permit consummation of the transactions contemplated by this Agreement, and
to permit the business presently carried on by Brite and the TSL Companies
to continue unimpaired immediately following the Effective Time, shall have
been obtained.
(f) Arthur Andersen, LLP shall have furnished its opinion on the Closing
Date to the effect that accounting for each Merger as a pooling of
interests, rather than as a purchase, shall comply with generally accepted
accounting principles.
(g) No litigation, proceeding or government investigation, and no
judgment, injunction, order or decree to prevent the issuance of the Brite
Common in accordance with this Agreement shall have been instituted, shall
be pending or shall be in effect.
ARTICLE X
10.1 RESTRICTION ON SALE OF BRITE COMMON BY THE SHAREHOLDERS.
(a) The shares of Brite Common to be issued to the Shareholders pursuant
to this Agreement will be issued without registration under the Act, in
reliance upon an exemption from the registration requirements of the Act and
may not be offered, sold or transferred by the Shareholders unless (i) they
are registered under the Act, (ii) there is presented to Brite an opinion of
counsel reasonably satisfactory to Brite to the effect that such
registration is not necessary, or (iii) they are sold pursuant to, and in
compliance with, Rule 144 of the SEC.
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(b) Each of the certificates evidencing the Brite Common delivered
hereunder to the Shareholders will bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY
SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
IT TO THE EFFECT THAT REGISTRATION UNDER SAID ACT IS NOT REQUIRED, OR
UNLESS SOLD OR TRANSFERRED PURSUANT TO THE PROVISIONS OF RULE 144 OF
THE SECURITIES AND EXCHANGE COMMISSION."
10.2 REGISTRATION RIGHTS. Brite agrees that:
(a) If, at any time after the Effective Time, Brite shall receive from a
Shareholder (or his executor, personal representative or heirs) a written
request that Brite effect any registration under the Act with respect to all
or a part of the shares of Brite Common received by such Shareholder
hereunder (after giving effect to any stock split, stock dividend or
reorganization), Brite will (i) promptly give written notice of the proposed
registration to all other Shareholders (or their executors, personal
representatives or heirs); and (ii) as soon as practicable use its best
efforts to effect all such registrations through an underwritten public
offering (including, without limitation, the execution of an undertaking to
file post-effective amendments, appropriate qualifications under the
applicable Blue Sky or other state securities laws and appropriate
compliance with exemptive regulations issued under the Act and any other
governmental requirements or regulations) as may be so requested and as
would permit or facilitate the sale and distribution of such portion of the
Shareholder's shares of Brite Common (after giving effect to any stock
split, stock dividend or reorganization), as are specified in such request,
after six months from the Effective Time, together with all or such portion
of the shares of Brite Common of any Shareholder (or his executor, personal
representative or heirs) (after giving effect to any stock split, stock
dividend or reorganization) joining in such request as are specified in a
written request given within 5 days after receipt of such written notice
from Brite. In connection with any registration undertaken at the request of
one or more of the Shareholders (or their executors, personal
representatives or heirs), either Brite or any other stockholder of Brite,
with the consent of Brite, may include shares in the registration, provided
that the addition of any such shares shall not cause the number of shares
requested to be registered by the Shareholders to be reduced.
Notwithstanding the foregoing, however, Brite shall not be obligated to
take any action to effect such registration pursuant to this Section 10.2(a)
either (i) after Brite has effected one such registration pursuant to this
Section 10.2(a) and the Shareholders (or their executors, personal
representatives or heirs) (A) have either sold at least 30% in the aggregate
of the shares of Brite Common received by them at the Effective Time under
this Agreement (after giving effect to any stock split, stock dividend or
reorganization) or (B) have sold less than 30% in the aggregate of the
shares of Brite Common received by them at the Effective Time under this
Agreement (after giving effect to any stock split, stock dividend or
reorganization), and the failure to sell at least 30% of the shares received
under this Agreement (after giving effect to any stock split, stock dividend
or reorganization) is not a result of the Shareholders (or their executors,
personal representatives or heirs) having requested registration of such
lesser number, or of a voluntary withdrawal of shares from the registration
by the Shareholders (or their executors, personal representatives or heirs),
or (ii) if the number of shares with respect to which registration is
requested by all Shareholders (or their executors, personal representatives
or heirs) is less than ten percent of the number of shares of Brite Common
received by such Shareholders at the Effective Time hereunder (after giving
effect to any stock split, stock dividend or reorganization), (iii) after
two years shall have elapsed since the Effective Time, or (iv) after Brite
has effected two such registrations pursuant to this Section 10.2(a).
Furthermore, in no event shall Brite be
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required to take any action to effect registration of any shares of Brite
Common pursuant to this Section 10.2(a) which, when added to any other
shares registered pursuant to the provisions of this Section 10.2(a), exceed
forty percent in the aggregate of the shares of Brite Common received by the
Shareholders at the Effective Time under this Agreement (after giving effect
to any stock split, stock dividend or reorganization).
Subject to the foregoing, Brite shall file a registration statement
covering the shares of Brite Common so requested to be registered as soon as
practicable, but in any event within 45 days after receipt of the request or
requests of the Shareholders. However, if Brite shall furnish to such
Share-holders a certificate, signed by the President of Brite, stating that,
in the good faith judgment of its Board of Directors, it would be seriously
detrimental to Brite and its stockholders for such registration statement to
be filed on the date filing would be required due to the fact the disclosure
at such time of information contained in such registration statement would
be premature, and it is therefore essential to defer the filing of such
registration statement, Brite shall have an additional period of not more
than 30 days within which to file such registration statement.
If the Shareholders are entitled to a second registration under this
Section 10.2(a), such right may be exercised by any Shareholder at any time
after 90 days from the date on which the shares of Brite Common registered
under the first registration are sold.
(b) If, at any time commencing two (2) years after the Effective Time,
Brite proposes to register for its own benefit or for the benefit of
shareholders of Brite desiring to sell their shares of Brite Common
("Selling Shareholders") in a public offering, any of its securities under
the Act, other than (i) in connection with a merger, or (ii) in connection
with a registration under a provision of the Act (and the rules and
regulations promulgated thereunder) which prohibits the inclusion of the
Shareholders shares of Brite Common, Brite will give written notice by
registered mail, return receipt requested or by personal delivery, at least
thirty (30) days prior to the filing of each such registration statement, to
the Shareholders of its intention to do so. Upon the written request of a
Shareholder, within ten (10) days after receipt of any such notice, of his
desire to include shares of Brite Common then held by him in such proposed
registration statement, Brite shall afford such Shareholder the opportunity
to have registered under all such registration statements to be filed under
this Section 10.2(b) up to an aggregate of fifty (50%) percent of the shares
of Brite Common held by such Shareholder after the sale by such Shareholder
of shares of Brite Common under the registrations provided in Section
10.2(a) hereof.
(c) Notwithstanding Section 10.2(b), Brite shall have the right at any
time after it shall have given written notice by registered mail, return
receipt requested or by personal delivery, to the Shareholders (irrespective
of whether a written request for inclusion of any shares of Brite Common
shall have been made by any Shareholder) to elect not to file any such
proposed registration statement, or to withdraw the same after filing but
prior to the effective date thereof.
(d) If the managing underwriter of the public offering contemplated by
the registration statement referred to in Section 10.2(b) shall advise Brite
and all such Shareholders electing to participate in the registration that
the inclusion of all the shares of Brite Common originally to be included in
the registration on behalf of the Selling Shareholders and the Shareholders
creates a substantial risk that the price per share of Brite Common to be
derived from such registration will be materially and adversely affected,
the number of shares of Brite Common to be included in the public offering
on behalf of the Selling Shareholders and the Shareholders may be reduced to
the minimum extent such managing underwriter so advises Brite, the Selling
Shareholders and the Shareholders is necessary to avoid such affect, pro
rata among the Selling Shareholders and the Shareholders and any other
shares of Brite Common having the right to participate in such registration;
provided, however such reduction shall not apply to each Selling Shareholder
holding 100,000 shares or less of Brite Common, up to a maximum of 500,000
shares of Brite Common held by such Selling Shareholders. In the event the
managing underwriter elects to exercise any
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overallotment option it may have, the Shareholders shall have the further
right to participate in the registration to the extent of their pro rata
share of the overallotment, based upon the number of shares of Brite being
included in the registration by such Shareholders.
(e) If the Shareholders intend to distribute their shares of Brite
Common covered by a request for registration by means of an underwriting,
they shall so advise Brite as a part of their request made pursuant to
Section 10.2(a) and Brite shall include such information in the written
notice to the remaining Shareholders. In such event, Brite shall select an
underwriter with regard to the underwriting of the requested registration
and shall negotiate fees payable to such underwriter; provided, however that
the participating Shareholders shall have the right to approve the
underwriter and any fees which they are to bear in whole or in part, such
approval not to be unreasonably withheld. Brite and those Shareholders
proposing to distribute shares of Brite Common through such underwriting
shall enter into an underwriting agreement in customary form with the
underwriter selected for such underwriting. Except as provided in this
Section 10.2(e), if the underwriter advises the Shareholders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the registration
and underwriting shall be allocated among all Shareholders proportionate as
nearly as practicable to the number of shares of Brite Common acquired by
the Shareholders under this Agreement. If any Shareholder disapproves of the
terms of the underwriting, he may elect to withdraw therefrom by written
notice to Brite, the underwriter and the remaining Shareholders.
(f) The Shareholders shall pay their proportionate share (based on the
total number of shares of Brite Common being sold) of all expenses incurred
in connection with the first registration, qualification or compliance
effected pursuant to Section 10.2(a) hereof or pursuant to Section 10.2(b)
hereof, including without limitation, all registration, filing and
qualification fees, printing expenses, fees and disbursements of counsel for
Brite and expenses of any special audits incidental to or required by such
registration; provided that (i) Brite shall not be required to pay for any
portion of the expenses of any registration begun at the request of the
Shareholders and subsequently voluntarily withdrawn by the Shareholders, in
which case such expenses shall be borne by the Shareholders requesting the
withdrawal, and (ii) Brite shall not be required to pay fees of legal
counsel for the Shareholders. Underwriters' fees, discounts or commissions
shall be paid by the persons selling shares pursuant to the registration,
proportionate to the number of shares sold by each such seller.
(g) In the case of each registration, qualification or compliance
effected by Brite hereunder, Brite will keep each Shareholder participating
therein advised in writing as to the initiation of such registration,
qualification or compliance and as to the completion thereof. In connection
therewith, Brite will keep such registration, qualification or compliance
effective for a period of 180 days or until the Shareholders have completed
the distribution described in the registration statement relating thereto,
whichever first occurs, and shall furnish such number of prospectuses and
other documents incident thereto as the Shareholders from time-to-time may
reasonably request.
(h) Each Shareholder shall furnish to Brite such written information
regarding such Shareholder and the distribution proposed by such Shareholder
as Brite may request in writing and that shall be required in connection
with any registration referred to in this Section 10.2.
(i) If a Shareholder sells shares of Brite Common pursuant to a
registration as contemplated by this Section 10.2, Brite will indemnify and
hold harmless such Shareholder and each underwriter (as defined in the
Securities Act) and each person, if any, who controls such underwriter
within the meaning of the Securities Act, against losses, claims, damages,
or liabilities, joint or several, to which such Shareholder or underwriter
or controlling person may become subject under the Securities Act or
otherwise insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged
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untrue statement of any material fact contained in the registration
statement or any prospectus contained therein, or any amendment or
supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; and will
reimburse such Shareholder or underwriter or controlling person for any
legal or other expenses reasonably incurred by such Shareholder or
underwriter or controlling person in connection with investigating or
defending any such action or claim; provided, however, that Brite shall not
be liable in any such case to the extent, but only to the extent, that any
such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in the registration statement or any prospectus contained therein or
such amendment or supplement in reliance upon, and in conformity with,
written information furnished to Brite by such Shareholder expressly for use
therein.
(j) If a Shareholder sells shares of Brite Common pursuant to a
registration as contemplated by Section 10.2, such Shareholder will
indemnify and hold harmless Brite and its officers and directors and each
person, if any, who controls Brite within the meaning of the Securities Act
against any losses, claims, damages, or liabilities, joint or several, to
which Brite or such officers and directors or controlling persons may become
subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the registration statement or any prospectus
contained therein or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the registration statement or any prospectus
contained therein or such amendment or supplement in reliance upon and in
conformity with written information furnished to Brite by such Shareholder
expressly for use therein; and will reimburse Brite for any legal or other
expenses reasonably incurred by Brite or such officers, directors and
controlling persons in connection with investigating or defending any such
action or claim.
(k) If and whenever Brite is required by Article X of this Agreement to
use its best efforts to effect or cause the registration of any shares of
Brite Common under the Act, except as otherwise expressly provided, Brite
shall as expeditiously as possible:
(i) prepare and file with the SEC (in the case of a registration
pursuant to Section 10.2(a) hereof, such filing to be made within the
time period prescribed by Section 10.2(a) or in any event as soon
thereafter as possible) the requisite registration statement with respect
to such shares of Brite Common to be registered (including such audited
financial statements as may be required by the Act or the rules and
regulations promulgated thereunder, PROVIDED, that the Shareholders and
their affiliates shall render all reasonable assistance requested by
Brite in connection therewith), and use its best efforts to cause such
registration statement to become and remain effective;
(ii) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection
therewith as may be necessary to maintain the effectiveness of such
registration statement and to comply with the provisions of the Act with
respect to the disposition of all securities covered by such registration
statement until the earlier of such time as all of such securities have
been disposed of in accordance with the intended methods of disposition
by the seller or sellers thereof set forth in such registration statement
or the expiration of 180 days after such registration statement becomes
effective;
(iii) furnish to each Shareholder electing to include shares of Brite
Common covered by such registration statement and each underwriter, if
any, of the securities being sold by such
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Shareholders such number of copies of such registration statement and of
each such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus and supplements
thereto included in such registration statement (including each
preliminary prospectus and any summary prospectus), in conformity with
the requirements of the Act, and such other documents, as such
Shareholder or underwriter, if any, may reasonably request in order to
facilitate the public sale or other disposition of the shares owned by
such Shareholder;
(iv) use its best efforts to register or qualify all shares of Brite
Common covered by such registration statement under such other securities
laws or blue sky laws of such jurisdictions as any Shareholder or any
underwriter, if any, of the securities being sold by such Shareholder
shall reasonably request, to keep such registrations or qualifications in
effect for so long as the registration statement remains in effect and do
any and all other acts and things which may be necessary or advisable to
enable such Shareholder and underwriter, if any, to consummate the
disposition in such jurisdictions of such shares of Brite Common being
sold by such Shareholder, except that Brite shall not for any such
purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the
requirements of this clause (d) be obligated to be qualified;
(v) use its best efforts to cause all shares of Brite Common covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the selling Shareholders to consummate the disposition of such shares of
Brite Common;
(vi) notify each Shareholder selling shares of Brite Common covered by
such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Act, of Brite's becoming
aware that the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing, and promptly prepare and furnish to each
such Shareholder and each underwriter, if any, a reasonable number of
copies of a prospectus supplemented or amended so that, as thereafter
delivered to the purchasers of such shares of Brite Common, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the
circumstances then existing;
(vii) advise each Shareholder selling shares of Brite Common covered
by such registration statement, promptly after it receives notice
thereof, of the time when such registration statement, or any amendment
thereto, or any amendment to such registration statement has become
effective or any related prospectus or any supplement to such prospectus
or any amendment to such prospectus has been filed, of the issuance by
the SEC of any stop order or of any order preventing or suspending the
use of any related preliminary prospectus or prospectus, of the
suspension of the qualification of such shares of Brite Common for
offering or sale in any jurisdiction, of the initiation or threatening of
any proceeding for any such purpose, or of any request by the SEC for the
amending or supplementing of such registration statement or prospectus or
for additional information; and in the event of the issuance of any stop
order or of any order preventing or suspending the use of any such
preliminary prospectus or prospectus or suspending any such
qualification, to use promptly its best efforts to obtain withdrawal of
such order;
(viii) file promptly all documents required to be filed with the SEC
pursuant to Sections 13, 14 or 15(d) of the Exchange Act subsequent to
the time such registration statement becomes effective and during any
period when any related prospectus is required to be delivered;
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<PAGE>
(ix) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first day of Brite's first calendar quarter
after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Act;
(x) provide a transfer agent and registrar for all such shares of
Brite Common covered by such registration statement not later than the
effective date of such registration statement;
(xi) enter into such agreements, including without limitation
underwriting agreements, and take such other actions as Shareholders
shall reasonably request in order to expedite or facilitate the
disposition of such shares of Brite Common;
(xii) furnish to each Shareholder selling shares of Brite Common, if
such items are being otherwise furnished in connection with such
registration statement, a signed counterpart, addressed to such seller
(and the underwriters, if any), of
(A) an opinion of counsel for Brite, dated the effective date of
such registration statement (and, if such registration includes an
underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), reasonably satisfactory in
form and substance to such Shareholder (and the underwriters, if
any), and
(B) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing
under the underwriting agreement), signed by the independent public
accountants who have certified Brite's financial statements included
in such registration statement, covering substantially the same
matters with respect to such registration statement (and the
prospectus included therein) and, in the case of the accountants'
letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten public offerings of securities and, in
the case of the accountants' letter, such other financial matters, as
such Shareholder (or the underwriters, if any) may reasonably
request;
(xiii) give the Shareholders whose shares of Brite Common are
registered under such registration statement and their underwriters, if
any, and their respective counsel and accountants, the opportunity to
participate in the preparation of such registration statement, each
prospectus included therein or filed with the SEC, and each amendment
thereof or supplement thereto, and give each of them such access to its
books and records and such opportunities to discuss the business of Brite
with its officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the opinion
of the respective counsel of such holders and such underwriters, to
conduct a reasonable investigation within the meaning of the Act; and
(xiv) use its best efforts to list all shares of Brite Common covered
by such registration statement on the Nasdaq Stock Market and on each
securities exchange on which any of the securities of the same class as
the shares of Brite Common are then listed.
(l) If any such registration or comparable statement refers to any
holder by name or otherwise as the holder of any securities of Brite then
such holder shall have the right to require (i) the insertion therein of
language, in form and substance satisfactory to such holder, to the effect
that the holding by such holder of such securities is not to be construed as
a recommendation by such holder of the investment quality of Brite's
securities covered thereby and that such holding does not imply that such
holder will assist in meeting any future financial requirements of Brite, or
(ii) in the event that such reference to such holder by name or otherwise is
not
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<PAGE>
required by the Act or any similar federal statute then in force, the
deletion of the reference to such holder. Brite may require each Shareholder
selling shares of Brite Common as to which any registration is being
effected to furnish Brite such information regarding such Shareholder and
the distribution of such securities as Brite may from time to time
reasonably request in writing.
(m) If requested by the underwriters for any underwritten offering by
Shareholders pursuant to a registration requested under Section 10.2(a) of
this Agreement, Brite will enter into an underwriting agreement with such
underwriters for such offering, such agreement to contain such
representations and warranties by Brite and such other terms and provisions
as are customarily contained in agreements of that type, including without
limitation indemnities to the effect and to the extent provided in Section
10.2(i) of this Agreement. The Shareholders whose shares of Brite Common are
to be distributed by such underwriters shall be parties to such underwriting
agreement and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of,
Brite to and for the benefit of such underwriters shall also be made to and
for the benefit of such Shareholders and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of such Shareholders.
Such Shareholders shall not be required to make any representations or
warranties to or agreements with Brite or the underwriters other than
representations, warranties or agreements regarding such Shareholder and
such Shareholder's intended methods of distribution.
(n) Within the limitations prescribed by this paragraph (n), but not
otherwise, in addition to demand registration rights, Brite may grant to
subsequent investors in Brite rights of incidental registration (such as
those provided in Section 10.2(b) of this Agreement). Such incidental rights
may be granted with respect to (A) registrations actually requested by
Shareholders pursuant to Section 10.2(a), but only in respect of that
portion of any such registration as remains after inclusion of all shares of
Brite Common requested by Shareholders to be registered, and (B)
registrations initiated by Brite, but such rights shall be limited in all
cases to sharing pro-rata in the available portion of the registration in
question with Shareholders, such sharing to be based on the number of shares
of Brite Common held by the respective Shareholders and held by such other
investors, plus the number of shares of Brite Common into which other
securities held by the Shareholders and such other investors are convertible
or exercisable, which are entitled to registration rights.
(o) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in
Sections 10.2(i) or 10.2(j) of this Agreement, such indemnified party will,
if a claim in respect thereof is to be made against an indemnifying party,
give written notice to the latter of the commencement of such action;
PROVIDED, HOWEVER, that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its
obligations under Sections 10.2(i) or 10.2(j) of this Agreement, as the case
may be, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying
party shall be entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified, to the extent
that it may wish, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof (unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim or
the counsel chosen by such indemnifying party is not reasonably satisfactory
to such indemnified party) the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred
by the latter in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall consent to entry of any
judgment or enter into any settlement without the consent of the indemnified
party which
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does not include as an unconditional term thereof the giving by the claimant
or plaintiff to such indemnified party of a general release from all
liability, or a covenant not to sue, in respect of such claim or litigation.
No indemnified party shall consent to entry of any judgment or enter into
any settlement of any such action the defense of which has been assumed by
an indemnifying party without the consent of such indemnifying party, which
consent shall not be unreasonably withheld.
(p) Indemnification and contribution similar to that specified in
Sections 10.2(i) and 10.2(j) of this Agreement (with appropriate
modifications) shall be given by Brite and each Shareholder selling shares
of Brite Common with respect to any required registration or other
qualification of such shares of Brite Common under any federal or state law
or regulation of any governmental authority, other than the Act.
(q) The indemnification required by Sections 10.2(i) and 10.2(j) of this
Agreement shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(r) Brite covenants that it will timely file the reports required to be
filed by it under the Act or the Exchange Act (including but not limited to
the reports under Sections 13 and 15(d) of the Exchange Act referred to in
subparagraph (c) (l) of Rule 144 adopted by the SEC under the Act) and the
rules and regulations adopted by the SEC thereunder, and will take such
further action as any Shareholder may reasonably request, all to the extent
required from time to time to enable such Shareholder to sell shares of
Brite Common without registration under the Act within the limitation of the
exemptions provided by (i) Rule 144 under the Act, as such Rule may be
amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the SEC. Upon the request of any Shareholder, Brite will deliver
to such holder a written statement as to whether it has complied with such
requirements.
(s) In the event that shares of Brite Common are held by a nominee for a
beneficial owner thereof, the beneficial owner may, at its option be treated
as the holder of such shares of Brite Common for purposes of any request or
other action by any Shareholder pursuant to this Agreement (or any
determination of any number or percentage of shares constituting shares of
Brite Common held by any holder or holders of shares of Brite Common
contemplated by this Agreement).
ARTICLE XI
11.1 EXPENSES.
(a) In consideration of advisory services rendered to the TSL Companies in
connection with this Agreement and the consummation of the transactions
contemplated hereby, Ladenburg, Thalmann & Co. Inc. shall be paid a fee equal to
the value of 119,000 shares of Brite Common, such shares to be valued at the
average of the closing prices for Brite Common on the Nasdaq Stock Market for
the twenty trading days ending on the last trading day prior to the Closing
Date. Such fee shall be paid by Brite at the Effective Time by wire transfer,
pursuant to instructions to be provided by Ladenburg, Thalmann & Co. Inc.
(b) At the Effective Time, all costs and expenses of Brite, the TSL
Companies and the Shareholders incident to the negotiation and preparation of
this Agreement and consummation of the transactions contemplated hereby shall
become the responsibility of Brite including the fees and expenses of Ernst &
Young LLP in connection with the preparation of the TSL Companies' 1992, 1993
and 1994 audited financial statements, which costs and expenses are to be paid
by Brite after the Effective Time. If this Agreement shall be terminated
pursuant to the provisions of Article XIII hereof and such termination is not
attributable to a breach of this Agreement by any party, each party shall pay
all of
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its own costs and expenses incident to the negotiation and preparation of this
Agreement and to its performance of and compliance with all agreements and
conditions contained herein on its part to be performed or complied with,
including fees, expenses and disbursements of its counsel.
ARTICLE XII
12.1 INDEMNIFICATION.
(a) Each of the Shareholders (or their executors, personal representatives
or heirs) hereby agrees to indemnify Brite and to hold it harmless against any
and all losses, damages, costs and expenses incurred by Brite by reason of any
breach by him of the representations and warranties made in Section 4.1(a)
hereof.
(b) Subject to the terms and conditions of this Article XII, the
Shareholders (or their executors, personal representatives or heirs), severally
and not jointly, hereby agree to indemnify Brite and to hold it harmless against
and in respect of any and all losses, damages, costs and expenses incurred by
Brite by reason of any breach of any of the representations and warranties made
in Section 4.1(b) of this Agreement. Any such indemnification shall be only to
the extent that any such loss, damage, cost, expense or amount is paid by Brite
and is not recovered by Brite under any insurance policy of Brite or the TSL
Companies, or is not reserved against on the TSL Companies' Balance Sheet or
disclosed in the Disclosure Schedule. In determining the amount which is not
recovered as aforesaid, full allowance shall be made for any income tax benefit
to Brite.
(c) The aggregate liability of the Shareholders (or their executors,
personal representatives or heirs) pursuant to Section 12.1(b) hereof shall be,
calculated at the time a request for indemnification is made, not greater than
the lesser of (i) $20,000,000, and (ii) 33 1/3% of the sum of (x) the net
proceeds (after tax) received by the Shareholders (or their executors, personal
representatives or heirs) from the sale of shares of Brite Common received
hereunder, and (y) the market value of the remaining shares of Brite Common
received hereunder then held by the Shareholders (or their executors, personal
representatives or heirs), valued at the average of the closing prices for Brite
Common on the Nasdaq Stock Market for the twenty trading days ending on the last
trading day prior to the date of payment.
(d) The aggregate liability of each Shareholder (or his executor, personal
representative or heir) under Section 12.1(b) shall be limited to the product of
(i) the aggregate liability of the Shareholders (or their executors, personal
representatives or heirs) as set forth in Section 12.1(c), and (ii) a fraction,
the numerator of which is the total number of shares of Brite Common issued to
such Shareholder pursuant to Section 2.2 hereof, and the denominator of which is
3,331,000.
(e) The Shareholders (or their executors, personal representatives or heirs)
shall not be liable under Section 12.1(b) except to the extent, and only to the
extent, that the aggregate claims under Section 12.1(b) against them exceed
$300,000.
(f) As used in this Section 12.1, the term "Indemnifying Party" means the
party or parties obligated to provide indemnification pursuant to this Section
12.1, and the term "Indemnified Party" means the party or parties entitled to
such indemnification.
(i) As soon as practicable after obtaining knowledge , the Indemnified
Party shall give written notice to the Indemnifying Party of any matter,
including without limitation, the assertion of a claim or the commencement
of any suit, action or proceeding, with respect to which a claim for
indemnification may be asserted under this Agreement, stating the relevant
facts in reasonable detail; provided, however, that the failure by the
Indemnified Party to give such notice shall not prejudice the Indemnified
Party's right to indemnification except to the extent that such failure
results in actual prejudice to the Indemnifying Party.
(ii) In the event said indemnification claim is related to any suit,
action, or proceeding brought by any third party against the Indemnified
Party, the Indemnifying Party shall have the
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right to participate in and to assume the defense thereof, with counsel
reasonably satisfactory to such Indemnified Party and, after notice from the
Indemnifying Party to such Indemnified Party of the Indemnifying Party's
election to assume the defense thereof, the Indemnifying Party shall not be
liable to such Indemnified Party for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation. If an
Indemnifying Party elects to assume such defense and select such counsel,
then the Indemnified Party shall have the right to employ its own counsel
but, in any such case, the fees and expenses of such counsel shall be at the
expense of such Indemnified Party. The Indemnified Party shall not settle or
compromise any such suit, action, or proceeding without the prior written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld, delayed or conditioned, unless such settlement or compromise
contains a general, unconditional release of Indemnified Party.
(iii) In any case in which the Indemnified Party does not consent to a
bona fide settlement offer regarding a claim, suit, action or proceeding,
which offer the Indemnifying Party has recommended to the Indemnified Party
in writing, then the right to indemnification of the Indemnified Party shall
be limited to the amount of such cash settlement so recommended and to the
value of any settlement, other than a cash settlement, so recommended,
unless the settlement so recommended would not result in a release of the
Indemnified Party from any and all liability related to such claim, suit,
action or proceeding, or would result in any restriction on the rights of
the Indemnified Party.
(g) The liability of the Shareholders under this section 12.1 shall
terminate:
(i) on the date of issuance of the opinion of Brite's independent
auditors pertaining to the first audited financial statements containing the
combined statements of operations of Brite and the TSL Companies with
respect to all claims based on those items contained within the scope of
such audit; or
(ii) on the first anniversary of the Effective Time with respect to all
other claims;
except with respect to any claim or claims pending before a court of competent
jurisdiction or duly constituted arbitral body.
(h) The liability of any Shareholder under this Article XII shall be paid
promptly in shares of Brite Common valued at the closing price for such shares
at the Effective Time; provided, however if the Shareholder does not own
sufficient shares of Brite Common so to satisfy such Shareholder's liability,
then in either a combination of shares of Brite Common, valued as aforesaid, and
cash, or entirely in cash if no shares of Brite Common are owned, the amount of
cash to be equal to the remaining number of shares due, as determined by the
method discussed above, multiplied by the average price per share received by
the Shareholder from the sale of shares of Brite Common received hereunder,
subsequent to the Effective Time.
ARTICLE XIII
13.1 FURTHER ASSURANCES. Neither Brite, any TSL Company nor any
Shareholder shall voluntarily undertake any course of action inconsistent with
satisfaction of the requirements applicable to them set forth in Articles VII,
VIII, and IX hereof, and each of Brite, each TSL Company and each Shareholder
shall promptly do all such acts and take all such measures as may be appropriate
to enable them to perform as early as practicable the obligations herein
provided to be performed by them.
13.2 TERMINATION BY THE TSL COMPANIES AND THE SHAREHOLDERS. In the event
that the conditions to obligations of the TSL Companies and the Shareholders set
forth in Articles VII and IX shall not have been satisfied or waived by October
31, 1995, then the TSL Companies and the Shareholders
32
<PAGE>
may, at their option, at any time thereafter, terminate this Agreement by action
of the Board of Directors of Telecom Services Limited (U.S.), Inc. The
termination shall become effective upon the giving of written notice of
termination to Brite pursuant to the provisions of Article XIV.
13.3 TERMINATION BY BRITE. In the event that the conditions to Brite's
obligations set forth in Articles VIII and IX shall not have been satisfied or
waived by October 31, 1995, then Brite may, at its option, at any time
thereafter terminate this Agreement by action of its Board of Directors. The
termination shall become effective upon the giving of written notice of
termination to the TSL Companies and the Shareholders pursuant to the provisions
of Article XIV.
13.4 TERMINATION BY MUTUAL AGREEMENT. This Agreement may be terminated and
the Mergers abandoned by appropriate mutual action taken by the directors of
each of Brite and each of the TSL Companies at any time prior to the Effective
Time.
13.5 WAIVERS. Any of the terms or conditions of this Agreement may be
waived at any time by either of Brite or any TSL Company which is, or the
stockholders of which are, entitled to the benefit thereof by action of the
directors of such party, and the party making such waiver shall have given
written notice with respect thereto to the other party pursuant to the
provisions of Article XIV.
13.6 AMENDMENTS. This Agreement may be amended or modified, in whole or in
part, by an agreement in writing executed in the same manner as this Agreement;
provided, such amendment or modification is executed in accordance with the laws
of Kansas and New Jersey governing the rights of shareholders upon a merger and
any modification which would adversely affect the rights of shareholders of the
TSL Companies or Brite is approved by the respective Boards of Directors and
approved by an appropriate vote of the shareholders of the TSL Companies and
Brite.
13.7 CONFIDENTIALITY. Prior to the Effective Time and after any
termination of this Agreement, each Shareholder, Brite and each TSL Company (the
"Recipient") will hold, and will use its best efforts to cause its officers,
directors, employees, accountants, counsel, consultants, advisors and agents to
hold, in confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law, all Confidential Information concerning
the other (the "Provider") and its Subsidiaries (if any) furnished to the
Recipient in connection with the transactions contemplated by this Agreement.
The term "Confidential Information" shall mean all information, written or oral,
provided by the Provider, or its officers, directors, employees,
representatives, or agents, to the Recipient or its officers, directors,
employees, representatives, or agents, except to the extent that such
information can be shown to have been (i) previously known on a non-confidential
basis by the Recipient, (ii) in the public domain through no fault of the
Recipient, (iii) later lawfully acquired by the Recipient from sources other
than the Provider, or (iv) independently developed by the Recipient without use,
directly or indirectly, of any Confidential Information of the Provider;
provided that the Recipient may disclose such information to its officers,
directors, employees, accountants, counsel, consultants, advisors and agents in
connection with the transactions contemplated by this Agreement, so long as such
persons are informed by the Recipient of the confidential nature of such
information and are directed by the Recipient to treat such information
confidentially. The Recipient's obligation to hold any such information in
confidence shall be satisfied if it exercises the same care with respect to such
information as it would take to preserve the confidentiality of its own similar
information. If this Agreement is terminated, the Recipient will, and will use
its best efforts to cause its officers, directors, employees, accountants,
counsel, consultants, advisors and agents to, destroy or deliver to the
Provider, upon request, all documents and other materials, and all copies
thereof, obtained by the Recipient or on its behalf from the Provider in
connection with this Agreement that are subject to such confidence.
13.8 EFFECT OF TERMINATION. If for any reason, other than a breach by the
other party, this Agreement ceases to be binding upon Brite, the TSL Companies
or the Shareholders, whether because of abandonment or termination as provided
herein or otherwise, it shall thenceforth be void and no party shall have any
obligation as to expenses incurred by the other parties incident to the
transactions provided for herein, or otherwise.
33
<PAGE>
ARTICLE XIV
14.1 NOTICES. Any notice or other communication required or permitted to
be given hereunder shall be deemed to have been given if personally delivered,
or two (2) days after mailing by certified or registered mail, return receipt
requested, first class postage prepaid, or upon receipt as evidenced by the
sender's machine-generated confirmation if transmitted by facsimile (provided
that such facsimile transmission is confirmed by mail in the manner previously
described), in every case addressed as follows:
(a) If to Brite:
Brite Voice Systems, Inc.
7309 East 21st Street North
Wichita, Kansas 67206
Attn: Stanley G. Brannan, Chairman
Telephone: (316) 652-6500
Telefax: (316) 652-6800
with a copy to:
Thomas P. Garretson, Esq.
Triplett, Woolf & Garretson, LLP
151 North Main Street, Suite 800
Wichita, Kansas 67202
Telephone: (316) 265-5700
Telefax: (316) 265-6165
(b) If to the TSL Companies or the Shareholders:
Telecom Services Limited (U.S.), Inc.
50 Broad Street, 20th Floor
New York, NY 10004
Attn: Alan C. Maltz, President
Telephone: (212) 248-2000
Telefax: (212) 248-4500
with a copy to:
Merrill B. Stone, Esq.
Kelley Drye & Warren
101 Park Avenue
New York, NY 10178
Telephone: (212) 808-7800
Telefax: (212) 808-7898
or at such address or addresses as the party addressed may from time to time
designate in writing.
ARTICLE XV
15.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Notwithstanding any rule
of law or provision of this Agreement to the contrary, the representations and
warranties of the Shareholders contained herein shall survive the Closing Date
for the periods provided in Section 12.1 hereof.
15.2 RIGHTS OF PARTIES. Except as otherwise specifically provided herein,
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
Brite, the TSL Companies and their respective stockholders, any rights or
remedies under or by reason of this Agreement.
34
<PAGE>
15.3 COMPLETE AGREEMENT. This Agreement, together with the schedules and
Exhibits hereto, embodies all of the representations, warranties, covenants and
agreements of the parties in relation to the subject matter hereof and no
representations, warranties, covenants, understandings or agreements, oral or
otherwise, in relation thereto, exist between the parties except as herein
expressly set forth.
15.4 GOVERNING LAW. Except to the extent that the Mergers are governed by
the internal corporation laws of a state other than Kansas, this Agreement shall
be governed and construed in accordance with the laws of the State of Kansas.
15.5 HEADINGS. The headings of the sections and subsections of this
Agreement are for convenience of reference only and do not constitute a part of
this Agreement and shall be given no effect in construing the terms of this
Agreement.
15.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and all such counterparts
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, Brite and the TSL Companies, by their duly authorized
officers and the Shareholders have executed this Agreement as of the date first
above written.
BRITE VOICE SYSTEMS, INC.
/s/ STANLEY G. BRANNAN
--------------------------------------
Stanley G. Brannan, PRESIDENT
ATTEST:
/s/ GLENN A. ETHERINGTON
--------------------------------------
Glenn A. Etherington, SECRETARY
TELECOM SERVICES LIMITED (U.S.), INC.
/s/ ALAN C. MALTZ
--------------------------------------
Alan C. Maltz, PRESIDENT
ATTEST:
/s/ STEPHEN B. ROCKOFF
--------------------------------------
Stephen B. Rockoff, SECRETARY
TELECOM SERVICES LIMITED (WEST), INC.
/s/ SCOTT A. MALTZ
--------------------------------------
Scott A. Maltz, PRESIDENT
ATTEST:
/s/ STEPHEN B. ROCKOFF
--------------------------------------
Stephen B. Rockoff, SECRETARY
35
<PAGE>
TSL SOFTWARE SERVICES, INC.
/s/ ALAN C. MALTZ
--------------------------------------
Alan C. Maltz, PRESIDENT
ATTEST:
/s/ STEPHEN B. ROCKOFF
--------------------------------------
Stephen B. Rockoff, SECRETARY
TSL MANAGEMENT GROUP, INC.
/s/ ALAN C. MALTZ
--------------------------------------
Alan C. Maltz, PRESIDENT
ATTEST:
/s/ STEPHEN B. ROCKOFF________________
Stephen B. Rockoff, SECRETARY
SHAREHOLDERS:
/s/ ALAN C. MALTZ
--------------------------------------
Alan C. Maltz
/s/ SCOTT A. MALTZ
--------------------------------------
Scott A. Maltz
/s/ STEPHEN B. ROCKOFF
--------------------------------------
Stephen B. Rockoff
/s/ ALAN C. MALTZ
--------------------------------------
Alan C. Maltz, as custodian for Sari
Maltz
/s/ ALAN C. MALTZ
--------------------------------------
Alan C. Maltz, as custodian for Lori
Maltz
36
<PAGE>
EXHIBIT A
CERTIFICATE OF MERGER
OF
TELECOM SERVICES LIMITED (U.S.), INC.
AND
TELECOM SERVICES LIMITED (WEST), INC.
AND
TSL SOFTWARE SERVICES, INC.
AND
TSL MANAGEMENT GROUP, INC.
INTO
BRITE VOICE SYSTEMS, INC.
PURSUANT TO K.S.A. 17-6702
We, the undersigned, being the President and Secretary of Brite Voice
Systems, Inc., hereby certify:
1. Merger. An Agreement and Plan of Reorganization and Merger dated as
of May 24, 1995 has been entered into by and among Brite Voice Systems,
Inc., a Kansas corporation, Telecom Services Limited (U.S.), Inc., a New
Jersey corporation, Telecom Services Limited (West), Inc., a New Jersey
corporation, TSL Software Services, Inc., a New Jersey corporation, and TSL
Management Group, Inc., a New Jersey corporation.
2. Authorization. The Agreement and Plan of Reorganization and Merger
has been approved, adopted, certified, executed and acknowledged by each of
the constituent corporations in accordance with K.S.A. 17-6702(c).
3. Surviving Corporation. The name of the surviving corporation is
Brite Voice Systems, Inc.
4. Articles of Incorporation. The Articles of Incorporation of Brite
Voice Systems, Inc., as currently in effect, shall continue to be the
Articles of Incorporation of Brite Voice Systems, Inc., as the surviving
corporation.
5. Agreement on File. The executed Agreement and Plan of
Reorganization and Merger is on file at the principal office of Brite Voice
Systems, Inc., 7309 East 21st Street North, Wichita, Kansas 67206.
6. Copies. A copy of the Agreement and Plan of Reorganization and
Merger will be furnished by Brite Voice Systems, Inc., on request and
without cost, to any stockholder of any of the constituent corporations.
7. Authorized Capital Stock of Merged Corporations. The authorized
capital stock of Telecom Services Limited (U.S.), Inc. consists of 1,000
shares of common stock, no par value. The authorized capital stock of
Telecom Services Limited (West), Inc. consists of 1,000 shares of common
stock, no par value. The authorized capital stock of TSL Software Services,
Inc. consists of 2,500 shares of common stock, no par value. The authorized
capital stock of TSL Management Group, Inc. consists of 2,500 shares of
common stock, no par value.
8. Effective Time. The merger described herein shall be effective as
of the filing of this Certificate of Merger with the Secretary of State of
Kansas.
A-1
<PAGE>
IN WITNESS WHEREOF, this Certificate of Merger has been executed and
acknowledged this day of July, 1995.
BRITE VOICE SYSTEMS, INC.
By: __________________________________
Stanley G. Brannan, PRESIDENT
ATTEST:
By: __________________________________
Glenn A. Etherington, SECRETARY
<TABLE>
<S> <C> <C>
STATE OF KANSAS
COUNTY OF SEDGWICK ss:
</TABLE>
BE IT REMEMBERED, that on this day of July, 1995, before me a Notary
Public in and for the County and State aforesaid, personally appeared Stanley G.
Brannan, President, and Glenn A. Etherington, Secretary, of Brite Voice Systems,
Inc., a Kansas corporation, personally known to me to be such officers and the
same persons who executed, as such officers, the above and foregoing instrument
in writing on behalf of said corporation and such persons duly acknowledged the
execution of the same to be the act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year
last above written.
______________________________________
NOTARY PUBLIC
My commission expires:
______________________________________
A-2
<PAGE>
CERTIFICATE OF MERGER
OF EACH OF
TELECOM SERVICES LIMITED (U.S.), INC.
AND
TELECOM SERVICES LIMITED (WEST), INC.
AND
TSL SOFTWARE SERVICES, INC.
AND
TSL MANAGEMENT GROUP, INC.
INTO
BRITE VOICE SYSTEMS, INC.
TO: THE SECRETARY OF STATE
STATE OF NEW JERSEY
PURSUANT TO THE PROVISIONS OF SECTIONS 14A:10-4.1 AND 14A:10-7 OF THE NEW
JERSEY BUSINESS CORPORATION ACT, THE UNDERSIGNED CORPORATIONS HEREBY EXECUTE THE
FOLLOWING CERTIFICATE OF MERGER.
1. Each of Telecom Services Limited (U.S.), Inc., Telecom Services Limited
(West), Inc., TSL Software Services, Inc. and TSL Management Group, Inc., each a
corporation organized and existing under the laws of the State of New Jersey,
shall be merged into Brite Voice Systems, Inc., a corporation organized and
existing under the laws of the State of Kansas which is hereinafter designated
as the surviving corporation.
2. The laws of the State of Kansas, the State under which Brite Voice
Systems, Inc. is organized, permit such mergers, and the applicable provisions
of the laws of said jurisdiction have been, or upon compliance with filing and
recording requirements will have been, complied with.
3. The name of the surviving corporation shall be Brite Voice Systems,
Inc., and it shall be governed by the laws of the State of Kansas.
4. The address of the surviving corporation's registered office in the
State of New Jersey is Brite Voice Systems, Inc., Telecom Services Limited
Division, 1259 Route 46, Building 1, Parsippany, New Jersey, and the name of its
registered agent at such address is Alan C. Maltz.
5. The Agreement and Plan of Reorganization and Merger annexed hereto and
made a part hereof as Exhibit A was approved by the shareholders of each of
Telecom Services Limited (U.S.), Inc., Telecom Services Limited (West), Inc.,
TSL Software Services, Inc. and TSL Management Group, Inc. in the manner
prescribed by Sections 14A:10-1, 14A:10-3 and 14A:10-7 of the New Jersey
Business Corporations Act and was approved by the stockholders of Brite Voice
Systems, Inc. in the manner prescribed by the laws of the State of Kansas.
6. As to each corporation whose shareholders are entitled to vote, the
number of shares entitled to vote, and the number and designation of the shares
of any class or series entitled to vote as a class, are as follows:
<TABLE>
<CAPTION>
TOTAL NUMBER OF SHARES
NAME OF CORPORATION ENTITLED TO VOTE
-------------------------------------------------------------------------------- ----------------------
<S> <C>
Telecom Services Limited (U.S.), Inc............................................ 200
Telecom Services Limited (West), Inc............................................ 100
TSL Software Services, Inc...................................................... 100
TSL Management Group, Inc....................................................... 1,000
Brite Voice Systems, Inc........................................................ 8,097,573
</TABLE>
A-3
<PAGE>
7. As to each corporation whose shareholders are entitled to vote, the
number of shares voted for and against the Agreement and Plan of Reorganization
and Merger, respectively, and the number of shares of any class entitled to vote
as a class that voted for and against the Agreement and Plan of Reorganization
and Merger, respectively, are as follows:
<TABLE>
<CAPTION>
TOTAL SHARES TOTAL SHARES
NAME OF CORPORATION VOTED FOR VOTED AGAINST
--------------------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
Telecom Services Limited (U.S.), Inc....................................... 200 -0-
Telecom Services Limited (West), Inc....................................... 100 -0-
TSL Software Services, Inc................................................. 100 -0-
TSL Management Group, Inc.................................................. 1,000 -0-
Brite Voice Services, Inc.................................................. [ ] [ ]
</TABLE>
8. Brite Voice Services, Inc., the surviving corporation to this merger,
hereby agrees that, if it is to transact business in the State of New Jersey, it
shall comply with the provisions of the New Jersey Business Corporation Act with
respect to foreign corporations, and whether or not it is to transact business
in New Jersey, it agrees that:
(a) It may be served with process in the State of New Jersey in any
proceeding for the enforcement of any obligation of any corporation
organized under the laws of the State of New Jersey or any foreign
corporation, previously amenable to suit in New Jersey, which is a party to
the mergers, and in any proceeding for the enforcement of the rights of a
dissenting shareholder of any such corporation organized under the laws of
the State of New Jersey against the surviving corporation;
(b) The Secretary of State of the State of New Jersey shall be and
hereby is irrevocably appointed as the agent of the surviving corporation to
accept service of process in any such proceeding, and the post office
address to which the service of process in any such proceeding shall be
mailed is Brite Voice Systems, Inc., 7309 East 21st Street North, Wichita,
Kansas 67206, Attention: Stanley G. Brannan, Chairman; and
(c) The surviving corporation will promptly pay the dissenting
shareholders of any corporation organized under the laws of the State of New
Jersey which is a party to the mergers the amount, if any, to which they
shall be entitled under the provisions of the New Jersey Business
Corporation Act with respect to the rights of dissenting shareholders.
IN WITNESS WHEREOF, each of the undersigned corporations has caused this
Certificate of Merger to be executed in its name by its respective officers as
of the day of July, 1995.
TELECOM SERVICES LIMITED (U.S.), INC.
By: __________________________________
Alan C. Maltz, PRESIDENT
TELECOM SERVICES LIMITED (WEST), INC.
By: __________________________________
Alan C. Maltz, VICE PRESIDENT
TSL SOFTWARE SERVICES, INC.
By: __________________________________
Alan C. Maltz, PRESIDENT
TSL MANAGEMENT GROUP, INC.
By: __________________________________
Alan C. Maltz, PRESIDENT
A-4
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
SHARES OF BRITE
SHARES OF COMMON TO BE
COMPANY RECEIVED IN
COMPANY SHAREHOLDER STOCK HELD EXCHANGE
-------------------------------------------- ----------------------- ------------- -------------------
<S> <C> <C> <C>
Telecom Services Limited (U.S.), Inc. Alan C. Maltz 160 800,000
Stephen B. Rockoff 40 200,000
Telecom Services Limited (West), Inc. Scott A. Maltz 53 771,296
Alan C. Maltz 47 683,979
TSL Software Services, Inc. Alan C. Maltz 80 620,580
Stephen B. Rockoff 20 155,145
TSL Management Group, Inc. Lori Maltz 400 40,000
Sari Maltz 400 40,000
Stephen B. Rockoff 200 20,000
</TABLE>
B-1
<PAGE>
ANNEX B
FAIRNESS OPINION OF LAZARD FRERES & CO.
[TO BE FILED BY AMENDMENT]
<PAGE>
ANNEX C
KANSAS DISSENTERS' RIGHTS STATUTE
17-6712 PAYMENT FOR "STOCK" OF "STOCKHOLDER" OBJECTING TO MERGER OF
CONSOLIDATION; "STOCKHOLDER," "STOCK" AND "SHARE" DEFINED; NOTICE TO OBJECTING
STOCKHOLDERS; DEMAND FOR PAYMENT; APPRAISAL AND DETERMINATION OF VALUE BY
DISTRICT COURT, WHEN; TAXATION OF COSTS; RIGHTS OF OBJECTING STOCKHOLDERS;
STATUS OF STOCK; SECTION INAPPLICABLE TO CERTAIN SHARES OF STOCK.
(a) When used in this section, the word "stockholders" means a holder of
record of stock in a stock corporation and also a member of record of a
non-stock 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 non-stock corporation.
(b) The corporation surviving or resulting from any merger or consolidation,
within ten (10) days after the effective date of the merger or consolidation,
shall notify each stockholder of any corporation of this state so merging or
consolidating who objected thereto in writing an whose shares either were not
entitled to vote or were not voted in favor of the merger or consolidation, and
who filed such written objection with the corporation before the taking of the
vote on the merger or consolidation, that the merger or consolidation has become
effective. If any such stockholder, within twenty (20) days after the date of
mailing of the notice, shall demand in writing, from the corporation surviving
or resulting from the merger or consolidation, payment of the value of his
stock, the surviving or resulting corporation shall pay to him, within thirty
(30) days after the expiration of the period of twenty (20) days, the value of
his stock on the effective date of the merger or consolidation, exclusive of any
element of value arising from the expectation or accomplishment of the merger or
consolidation.
(c) If during a period of thirty (30) days following the period of twenty
(20) days provided for in subsection (b) of this section, the corporation and
any such stockholder fail to agree upon the value of such stock, any such
stockholder, or the corporation surviving or resulting from the merger or
consolidation, may demand a determination of the value of the stock of all such
stockholders by an appraiser or appraisers to be appointed by the district
court, by filing a petition with the court within four (4) months after the
expiration of said thirty-day period.
(d) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the corporation, which shall file with the clerk of
such court, within ten (10) days after such service, a duly verified list
containing the names and addresses of all stockholders who have demanded payment
for their shares and with whom agreement as to the value of their shares have
not been reached by the corporation. If the petition shall be filed by the
corporation, the petition shall be accompanied by such duly verified list. The
clerk of the court shall give notice of the time and place fixed for the hearing
of such petition by registered or certified mail to the corporation and to the
stockholders shown upon the list at the addresses therein stated, and notice
shall also be given by publishing a notice at least once, at least one week
before the day of the hearing, in a newspaper of general circulation in the
county in which the court is located. The court may direct such additional
publication of notice as it deems advisable. The forms of the notices by mail
and by publication shall be approved by the court.
(e) After the hearing on such petition the court shall determine the
stockholders who have complied with the provisions of this section and become
entitled to the valuation of and payment for their shares, and shall appoint an
appraiser or appraisers to determine such value. Any such appraiser may examine
any of the books and records of the corporation or corporations the stock of
which he is charged with the duty of valuing, and he shall make a determination
of the value of the shares upon such investigation as to him seems proper. The
appraiser or appraisers shall also afford a reasonable opportunity to the
parties interested to submit to him pertinent evidence on the value of the
shares. The appraiser or appraisers, also, shall have the powers and authority
conferred upon masters by K.S.A. 60-253.
<PAGE>
(f) The appraiser or appraisers shall determine the value of the stock of
the stockholders adjudged by the court to be entitled to payment therefor and
shall file a report respecting such value in the office of the clerk of the
court, and notice of the filing of such report shall be given by the clerk of
the court to the parties in interest. Such report shall be subject to exceptions
to be heard before the court both upon the law and facts. The court by its
decree shall determine the value of the stock of the stockholders entitled to
payment therefor and shall direct the payment of such value, together with
interest, if any, as hereinafter provided, to the stockholders entitled thereto
by the surviving or resulting corporation. Upon payment of the judgment by the
surviving or resulting corporation, the clerk of the district court shall
surrender to said corporation the certificates of shares of stock held by the
clerk pursuant to subsection (g). The decree may be enforced as other judgments
of the district court may be enforced, whether such surviving or resulting
corporation be a corporation of this state or of any other state.
(g) At the time of appointing the appraiser or appraisers, the court shall
require the stockholders who demanded payment for their shares to submit their
certificates of stock to the clerk of the court, to be held by said clerk
pending the appraisal proceedings. If any stockholder fails to comply with such
direction, the court shall dismiss the proceedings as to such stockholder.
(h) The cost of any such appraisal, including a reasonable fee to and the
reasonable expenses of the appraiser, but exclusive of fees of counsel or of
experts retained by any party, shall be determined by the court and taxed upon
the parties to such appraisal or any of them as appears to be equitable, except
that the cost of giving the notice by publication and by registered mail
hereinabove provided for shall be paid by the corporation. The court, on
application of any party in interest, shall determine the amount of interest, if
any, to be paid upon the value of the stock of the stockholders entitled
thereto.
Any stockholder who has demanded payment of his stock as herein provided
shall not thereafter be entitled to vote such stock for any purpose or be
entitled to the payment of dividends or other distribution 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, unless the
appointment of an appraiser or appraisers shall not be applied for within the
time herein provided, or the proceedings be dismissed as to such stockholder, or
unless such stockholder with the written approval of the corporation shall
deliver to the corporation a written withdrawal of his objections to and an
acceptance of the merger or consolidation, in any of which cases the right of
such stockholder to payment for his stock shall cease.
(j) The shares of the surviving or resulting corporation into 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.
(k) This section shall not apply to the shares of any class or series of a
class of stock, which, at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of stockholders at
which the agreement of merger or consolidation is to be acted on, were either
(1) registered on a national securities exchange, or (2) held of record by not
less than two thousand (2,000) stockholders, unless the articles of
incorporation of the corporation issuing such stock shall otherwise provide; nor
shall this section apply to any of the 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 K.S.A. 17-6701. This subsection shall not be applicable to the
holders of a class or series of a class of stock of a constituent corporation if
under the terms of a merger of [sic] consolidation pursuant to K.S.A. 17-6701 or
17-6702 such holders are required to accept for such stock anything except (i)
stock or stock and cash in lieu of fractional shares of the corporation
surviving or resulting from such merger or consolidation, or (ii) stock or stock
and cash in lieu of fractional shares of any other corporation, which at the
record date fixed to determine the stockholders entitled to receive notice of
and to vote at the meeting of stockholders at which the agreement of merger or
consolidation is to be acted on, were either registered on a national securities
exchange or held of record by not less than two thousand (2,000) stockholders,
or (iii) a combination of stock or stock and cash in lieu of fractional shares
as set forth in paragraph (i) and (ii) of this subsection.
2
<PAGE>
PROXY
BRITE VOICE SYSTEMS, INC. This Proxy is solicited
7309 East 21st Street North on behalf of the
Wichita, Kansas 67208 Board of Directors
The undersigned hereby appoints Stanley G. Brannan and Glenn A. Etherington as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all shares of Common Stock
of Brite Voice Systems, Inc. as held of record by the undersigned on June 13,
1995 at the Special Meeting of Stockholders to be held on July 21, 1995, or any
adjournment thereof.
1. PROPOSAL TO APPROVE AND ADOPT THE AGREEMENT AND PLAN OF REORGANIZATION AND
MERGER (the "Merger Agreement") dated as of May 23, 1995 between Brite
Voice Systems, Inc. ("Brite") and Telecom Services Limited (U.S.), Inc.,
Telecom Services Limited (West), Inc., TSL Software Services, Inc. and TSL
Management Group, Inc. (collectively "TSL Companies") and Alan C. Maltz,
Scott A. Maltz, Stephen B. Rockoff, and Alan C. Maltz, as Custodian for
Sara Maltz and Lori Maltz, to approve the merger of each of the TSL
Companies with and into Brite pursuant to the Merger Agreement (the
"Mergers") and to approve the issuance of the shares of Brite Common Stock
in the Mergers.
_____ FOR _____ AGAINST _____ ABSTAIN
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted FOR Proposal 1.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, give full title as such. If a corporation,
sign in full corporate name by president or other authorized officer. If a
partnership, sign in partnership name by authorized person.
Dated______________________, 1995.
__________________________________
Signature
__________________________________
Signature if held jointly
Please mark, date, sign and return the proxy card
promptly using the enclosed envelope.
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[LOGO]
FOR IMMEDIATE RELEASE
CONTACT: GLENN ETHERINGTON (316) 652-6500
CAROLYN RUSSELL (316) 652-6731
BRITE ANNOUNCES AGREEMENT TO ACQUIRE TELECOM
SERVICES LIMITED
WICHITA, Kan., May 24, 1995 -- Brite Voice Systems, Inc. (NASDAQ: BVSI)
today announced that it has entered into an agreement to acquire by merger
four affiliated telecommunications services companies, Telecom Services
Limited (U.S.) Inc., Telecom Services Limited (West) Inc., TSL Software
Services Inc., and TSL Management Group Inc. (collectively, "TSL"). The
principal TSL offices are located in New York, New Jersey and California.
The mergers will involve the issuance of 3,331,000 shares of Brite common
stock for all of TSL. Brite presently has approximately 8,100,000 shares
outstanding. The mergers will be tax-free reorganizations and are subject to
approval by Brite's stockholders. The transaction will be accounted for as a
pooling of interests, and is expected to be completed in late July.
"We are extremely pleased to announce this proposed acquisition,"
said Brite President and CEO, Stan Brannan. "TSL's strengths support our
strategy to expand our telecommunications services. We believe there are
significant synergies between the companies. The TSL customer base, like
many of Brite's current customers, consists of very large consumers of
telecommunications services. Our goal is to cross-sell TSL and Brite
products and services to our combined customer base. This is a
non-dilutive acquisition that will increase our managed services revenues
and operating margins."
The acquisition of TSL will result in a company that, on a pro forma basis
for fiscal 1994, would have had combined revenues of approximately $80
million, versus reported Brite revenues of $66 million, and operating income
of $13.6 million, versus reported operating income of $6.7 million.
<PAGE>
On a pro forma basis, earnings per share in 1994 would have been
$.81 compared to the $.68 reported by Brite on a stand-alone basis.
For the first quarter ended March 31, 1995, pro forma combined revenues
would have increased to $22.8 million from the reported $19 million, while
combined earnings per share would have been $.23 versus $.20 Brite reported
on a stand-alone basis.
The pro forma information is presented for illustrative purposes only, and
is not necessarily indicative of the operating results that would have been
achieved had the transaction been in effect as of the beginning of each
period, and should not be construed as being representative of future
operations.
After the transaction is completed, the management team of the TSL
division of Brite will own approximately 29 percent of the outstanding Brite
stock. The shares issued in the mergers will be unregistered shares, a
portion of which may be registered and sold six months after the closing,
upon the request of the TSL shareholders.
"Brite is a leader in telecommunications systems and services, with
a track record of rapid growth," said TSL President, Alan Maltz. "We
felt TSL could achieve faster growth, expand more quickly to new markets,
and participate in substantial international opportunities as a division
of Brite. Brite's track record of successful acquisitions was also
important in our decision to become part of Brite. We look forward to
becoming a major contributor to Brite's future success."
TSL has primary offices in New York City; Parsippany, N.J.; and San
Francisco. TSL provides outsourced telecommunications management for large
companies, including banks, financial institutions, brokerage firms,
government organizations, universities and other large users of
telecommunications services. TSL also provides computerized systems for
managing, monitoring, allocating and controlling telecommunications expenses,
manages vendor relationships and verifies the accuracy of billing statements
from telecommunications vendors and service providers. TSL currently employs
77 people. Brite worldwide employment currently stands at 450.
<PAGE>
Brite designs and markets communications systems which allow businesses,
government agencies, and other entities to provide interactive voice, fax,
video and on-line information to callers. Most of Brite's installed systems
provide interactive voice processing for callers using touch-tone telephones
or voice-activated commands. Brite sells systems and services worldwide and
customers include telephone companies, long-distance carriers, large banks,
universities, utilities, financial institutions, cable companies, television
shopping channels, shipping companies, newspapers and yellow page publishers.
Brite also provides managed services for customers which allow them to
outsource these services to Brite on a turn-key basis. Brite is also the
largest provider of information content for newspapers and yellow page
publishers for interactive information and shopping services.
