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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[ X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1995 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from_______________to_______________
Commission File Number 0-17920
BRITE VOICE SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
KANSAS 48-0986248
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
7309 E. 21ST STREET NORTH
WICHITA, KANSAS 67206
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Registrant's telephone number, including area code: (316) 652-6500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
(Title of class)
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [ X ] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K: [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, as of February 16, 1996, was $96,217,613, based upon the last
reported sales price on such date. For purposes of this disclosure, shares of
common stock beneficially owned by executive officers and directors of the
Registrant have been excluded because such persons may be deemed to be
affiliates. This determination is not necessarily conclusive.
On February 16, 1996, there were 11,495,075 shares of the Registrant's
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders scheduled to be held May 14, 1996 are incorporated by reference
into Part III of this report. The Proxy Statement is expected to be filed with
the Commission not later than April 5, 1996.
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PART I
ITEM 1. BUSINESS
GENERAL
Brite Voice Systems, Inc. (the "Company") designs, integrates, assembles,
markets and supports voice processing systems and services which incorporate
voice response, voice recognition, voice/facsimile messaging, audiotex and
interactive computer applications into customized market solutions. The Company
also offers a broad array of telecommunications management services.
Voice processing systems allow callers to use a telephone to leave or
retrieve messages, obtain information stored in a computer database, or input
and retrieve information from a host computer. A caller who accesses a voice
processing system is typically greeted by a message identifying the owner or
principal sponsor of the system, and is then requested to select options from a
menu of choices. Most callers using touch-tone telephones input responses by
pushing the keys on their telephone key pad. Many of the Company's systems,
such as voice activated dialers, allow input of information using spoken
commands.
Typical applications for the Company's systems allow callers to obtain
personalized account balances for bank, credit card, or mutual fund accounts,
order products or product literature for delivery by mail or by facsimile, pay
bills, enroll for college courses, apply for credit cards, and receive stock
quotes or other personalized information. The enhanced level of service
available through the Company's systems enables the Company's customers to
reduce the costs associated with the provision of similar services using live-
agent call centers. The Company's audiotex systems allow callers to use the
telephone to access a wide variety of computer-stored information, such as
sports scores, weather, stock quotes, business news, classified ads or other
similar information. Newspapers and Yellow Pages publishers generate revenue
through the sales of sponsorships to these categories of information.
The Company provides a wide range of services to support its customers'
voice response activities. In addition to traditional maintenance services, the
Company employs a staff of writers and broadcasters who record information for
playback on customers' systems, and a staff of telephone operators who process
and create personal ads for newspaper customers, provide back office support
such as advertiser and system management for Yellow Pages publishers, and assist
customers in modifying voice response content for use in Internet or other on-
line applications.
Incorporated in Kansas in 1984, the Company initially concentrated its
efforts on the provision of audiotex systems, primarily to newspaper publishers,
which used the systems to establish themselves as leading information providers
in their respective markets. In May 1991, the Company, through its newly-formed
subsidiary, Brite Voice Systems Group, Limited ("BVSGL"), acquired substantially
all of the assets of the Voice Systems Group of Ferranti Business
Communications, Ltd. BVSGL assembles and distributes voice messaging systems
which are sold as customer premise equipment for use behind a private branch
exchange and as public telephone network equipment. BVSGL is responsible for
the Company's European business and maintains design and production facilities
in Manchester, England and sales and support offices in Cambridge, England;
Germany; Switzerland and Italy.
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In July 1993, the Company merged with one of its leading competitors,
Perception Technology Corporation ("Perception"). Perception's experience as a
provider of interactive voice response systems significantly broadened the
Company's participation in the voice response industry. In addition, the
Company believes that the combined audiotex experience of the two companies
established the Company as the leading provider of audiotex systems and
information services to the newspaper and Yellow Pages publishing industries.
In March 1995, the Company acquired Touch-Talk, Incorporated ("Touch-
Talk"), based in Dallas, Texas (see Note 2 to the accompanying Consolidated
Financial Statements). Prior to the merger, Touch-Talk had been the largest
provider of customized application software solutions used by the Company in
providing interactive voice response applications. In addition, the Company had
licensed from Touch-Talk certain application software development tools for
sublicense to customers. The acquisition of Touch-Talk broadened the Company's
capabilities in providing turnkey voice response applications to customers
seeking a single vendor for all of their voice response requirements.
In August 1995, the Company acquired Telecom Services Limited (U.S.), Inc.,
Telecom Services Limited (West), Inc., TSL Software Services, Inc., and TSL
Management Group, Inc., (collectively the "TSL Companies", or "TSL"), which were
affiliated by common ownership (see Note 2 to the accompanying Consolidated
Financial Statements). The TSL Companies offer a broad array of services and
products which assist clients in managing various aspects of their
telecommunications functions, including controlling and reducing expenses,
developing management reports and applications, selecting service and equipment
vendors, designing and implementing telecommunications systems, and managing
day-to-day operations.
The Company believes that the mergers described above have provided
significant additions and enhancements to its product and services businesses,
and expects to continue to evaluate prospects for future acquisitions or
other corporate development activities to supplement its internal technology
and product development activities. In addition, the Company regularly
evaluates all of its product and services offerings for profitability and
growth potential, and redesigns, redirects or eliminates those products or
services which fail to demonstrate profitability or significant growth
potential.
THE COMPANY'S SYSTEMS
HARDWARE PLATFORMS
The Company's voice processing systems employ a variety of hardware
platforms. Each system consists of a central processing unit, a high capacity
hard disk drive, random access memory for vocabulary and speech storage, and
telecommunications modules. Various operating systems (primarily QNX-Trade
Mark-, UNIX-Trade Mark-, OS/2 and proprietary systems), and a library of
software programs which interpret and respond to touch-tone inputs and voice
commands from callers, form the basis of the Company's systems.
AUDIOTEX SYSTEMS. The Company's audiotex systems are based on its BVS
2000, BVS 5000 and VoicePrint voice processing units ("VPUs"), which consist, in
part, of a distributed multi-processor system architecture primarily using Intel
80486 microprocessors or Sun Sparc processors, an integrated high speed, local
area network, and a real-time, multi-tasking operating system such as UNIX.
Analog telephony interfaces and digital interfaces supporting T1 and E1 are
available. Through the use of local area network and wide area network
technologies, a large number of systems may be dispersed geographically, but
managed centrally, thus providing significant savings to a customer by reducing
the staffing required to manage a distributed network of VPUs.
A typical audiotex system will include high performance, high capacity hard
disk drives providing significant amounts of speech storage capability. This
large speech storage capacity is required for an audiotex system because there
is typically no host computer involved, and all speech storage must be
maintained within the
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system. Using voice processing cards, which will accommodate up to 30 telephone
lines each, a VPU can be configured to answer up to 60 simultaneous telephone
calls. The voice card digitizes, compresses and recreates the recorded
information to sound like the original recording. The voice card also handles
all telephone network interactions, including processing touch-tone inputs from
users of the system. Numerous VPUs may be networked, creating a system capable
of answering thousands of simultaneous telephone calls.
IVR SYSTEMS. The Company's interactive voice response ("IVR") systems are
used as front-end peripherals to a wide variety of computer systems to provide
direct access to central computer databases. In contrast with audiotex systems,
which broadcast the same information to each caller, IVR systems allow callers
to retrieve or change account-specific information. IVR systems are designed for
very high call volume applications which generally require little speech storage
within the system.
The Company's IVR systems are configured around the Company's BT-III,
Interact and BT-IV voice processors (each referred to as a BT voice processor).
A BT voice processor provides touch-tone caller access to the application
processor or host computer. The BT voice processor interfaces directly with a
minicomputer or microcomputer; however, to interface with a main frame computer
a communication controller is required. The Company's VOCOM systems provide
this communication feature.
The Company's VOCOM systems are designed to operate on a stand-alone basis
or to provide customer applications requiring remote data entry/data access to a
mainframe host computer. Each VOCOM system combines a BT voice processor with
an application processor to perform many data processing tasks internally,
reducing the load on the mainframe host computer. The application processor can
perform many functions, such as statistical logging or data verification, in
which case the host computer is accessed merely as a database resource. VOCOM
systems also include dial-up modems for remote diagnostic and maintenance
support. There are three members in the VOCOM product family, each of which is
distinguished by the application processor that is used as part of the system.
The VOCOM V is based on a VAX-Trade Mark-, the VOCOM 40 is based on a PC
compatible machine, and the VOCOM 6000 is based on an RS6000-Trade Mark-, all
running under their respective UNIX operating systems.
The Company has developed a voice recognition server to provide state-of-
the-art voice recognition compatibility to customers having older BT voice
processors. The voice recognition server is based on Dialogic and Voice Control
Systems' technology and provides up to 96 channels of discrete and continuous
voice recognition per system.
VOICE MESSAGING SYSTEMS. Voice messaging systems allow users to store,
send and receive information over the telephone. In addition to voice
messaging, the systems provide call answering, call routing, dictation and
automated attendant features.
The Company's Voice Services Director ("VSD") platform offers a wide range
of value-added services for public telephone network operators. The VSD provides
voice messaging, FAX, audiotex, debit card, and network announcement
applications, and is the platform on which the Company's European Intelligent
Network applications are based. The VSD can support up to five million mailboxes
in an integrated system. The VSD provides an integrated administration system,
using state-of-the-art graphic user interface operator terminals across a
geographically distributed VSD network implementation. The VSD is based on the
BVS 5000 hardware platform using
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Dialogic telephony interfaces and supports channel associated signaling ("CAS"),
integrated digital services networks ("ISDN"), and CCITT SS7 signaling in both
fixed and mobile networks. The VSD control and administration functions are
implemented under UNIX using a standard relational database for enhanced
flexibility. VSD uses RAID disk architecture for high capacity, fault-tolerant
message storage.
The Company's customer premise voice messaging products, the VM1000 and
VM2000, support integrated voice and fax mail, auto attendant, directory and
voice forms services. The VM1000 and VM2000 use industry standard PC
technology, including 80486 microprocessors and high capacity hard drives.
These systems are capable of answering up to 24 simultaneous phone calls.
APPLICATION SOFTWARE
The Company has written application programs to create turnkey solutions
targeted for specific industries. For example, CityLine-Trade Mark-, a system
sold to daily newspapers, is a combination of equipment and an audio network
which offers a wide variety of information free to the caller, including stock
quotes, sports scores, business news, weather and public opinion polling.
Newspapers offering CityLine generate revenues by selling advertising
sponsorships on their systems. Voice Directories-Trade Mark-, sometimes
called "talking yellow pages", is a similar product designed for Yellow Pages
publishers and telephone companies.
VoiceSelect-Trade Mark- is a voice activated system for cellular telephones
which allows a cellular telephone user to access telephone numbers using spoken
commands rather than the keys on the cellular telephone. The use of voice
activated dialing permits drivers to keep their hands on the wheel and eyes on
the road, promoting safety and convenience of use. VoiceSelect is marketed to
cellular providers around the world.
Application programs designed for use with IVR systems are often written
in cooperation with a series of independent software vendors ("ISVs"). These
ISVs typically have specialized skills, which allow the Company to
economically obtain specialized, industry-specific programming. Many
application software packages can be used to create products targeted for
specific vertical markets. Examples include higher education, where the
Company's systems enable university and college students to register for
courses 24 hours a day via touch-tone phones; the financial services market
where the Company's systems allow callers to perform a wide range of banking
transactions by phone 24 hours a day; and utility companies, where the
Company's systems provide automated customer service functions such as power
outage reporting, billing inquiries and meter reading. The Company's
acquisition of Touch-Talk in March 1995 broadened its base of software
programming expertise; however, the Company continues to utilize ISVs in
areas where Touch-Talk does not have significant experience.
Many of the Company's systems are being installed in advanced intelligent
network applications around the world. These applications have been integrated
with open-programmable switches such as the Summa Four VCO80 with its integrated
SS7 options. The Company provides switch control software which controls call
routing and integrates the Company's software applications with the switching
platform.
SERVICES
The Company offers a wide range of services in conjunction with its voice
processing systems. These services are typically available on either an annual
or quarterly basis and generally complement or support the Company's voice
processing systems.
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As a result of the TSL Merger, the Company also provides a variety of
telecommunications management services.
MANAGED SERVICES
As a complement to its system sales, the Company provides certain voice
processing services on a managed service basis. In a typical managed service
relationship, the Company provides all necessary equipment and personnel,
allowing the customer to avoid both the front-end cost of purchasing equipment,
and the continuing cost of having operational personnel on staff. Charges for
these services may be based on fixed rates per month, per call or per minute, or
may consist of a share of the revenue or profits generated by the service. The
Company provides both inbound and outbound telemarketing functions for customers
in conjunction with these services. The Company generally provides managed
services in niche markets where the customer does not have the expertise on
staff, has a desire to outsource the voice processing function, or where the
Company can provide significant added value to the customer. As of December 31,
1995, there were 59 people employed in this capacity.
The Company's TELERENT-Registered Trademark- service provides readers of
apartment rental guides access to information concerning rental properties in
the local area. Callers to the system may receive more detailed information
about an apartment or complex than can be conveyed in a printed ad. Callers can
direct connect to the leasing agent, leave messages, or receive a fax of a floor
plan or contract. The Company receives a monthly fee for each listing sold in
the rental guide.
In conjunction with audiotex systems placed in a Yellow Pages publisher's
market, the Company writes, produces and manages information scripts ("CONSUMER
TIPS-Trade Mark-") included as the opening position in the Yellow Pages top 200
advertising categories. These Consumer Tips typically include four to five
topics of interest to shoppers who call these advertising categories. The
Yellow Pages publisher sells sponsorships to these Consumer Tips, and the
Company produces the information and maintains contact with the advertisers
throughout the year to provide feedback on the success of the sponsorship and
helps update the advertisers' messages for seasonal specials and other changes
that cannot be made to printed advertisements. Current customers include Bell
South, NYNEX, U.S. West, Southwestern Bell, GTE Directories, Rochester Telephone
and a number of independent directory publishers.
CARSELECT-Trade Mark- allows customers shopping for automobiles to enter a
range of search criteria, such as make, model year, and maximum miles driven,
through a touch-tone phone. CarSelect then locates the available vehicles that
match the buyer's needs and either plays an audio message or delivers a fax
describing the features of each vehicle. A caller may enter his telephone
number, and, if any new listings are placed on the system that meet the caller's
criteria, the system will automatically place a call to the caller, informing
him of the new listing. CarSelect is marketed to daily newspapers which sell
"parking places" on the system to automobile dealers. The Company generally
receives a fee for each listing a newspaper places on the system.
The Company has offered its newspaper customers two "personal ads"
services, 900 VOICE PERSONALS, and PERSON-TO-PERSON, each of which is an
extension of the traditional "personal ads" published in newspapers. Using the
900 Voice Personals service, responders to advertisements call a 900 telephone
number and leave a message in a voice mail box. Each call to the 900 number
costs the caller approximately $2.00 per minute, which is collected by the
caller's long distance carrier and shared with the Company. Advertisers
generally may retrieve messages left for them without charge,
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but must pay the same $2.00 per minute to respond to a message. This method of
responding to ads is more immediate than traditional methods, and has provided a
significant source of new revenue to newspapers which have implemented the
service. The Company provides customer support, layout services and promotional
materials. The newspaper prints the ads that are placed and receives a share of
the revenues generated from advertisers and responders.
In 1992, the Company licensed certain software implementing patented
technology enabling it to offer the Person-to-Person product. Call volumes were
below expectations, primarily due to the complexity of the product. Due to
financial guarantees made to certain customers, call center staffing
requirements and overhead costs, the Company was unable to achieve profitability
using this product. As a result, the Company has discontinued marketing
Person-to-Person to new customers, and has allowed its exclusive license to the
product to lapse (see Note 3 to the Consolidated Financial Statements).
In 1995, the Company began providing INTERNET services to its media
customers. Because Brite is currently an information provider, via audio and
facsimile to newspapers and Yellow Pages publishers, the conversion to an on-
line format is relatively simple, and the Company believes its existing
relationships provide a competitive advantage over other companies offering
similar services to Brite's customer base. Specifically, Brite provides
application hosting, application and home page development, software order
processing, help desk services and information content for local web site
applications. During 1996, the Company intends to expand its Internet offerings
to other industries within its customer base.
TELECOMMUNICATIONS MANAGEMENT SERVICES
Through its August 1995 acquisition of the TSL Companies, the Company
provides a broad range of telecommunications management services. As of
December 31, 1995, 66 people were employed in this area.
BILLING VERIFICATION SERVICES. The Company's billing verification service
consists of auditing telephone rates, tariffs, taxes, surcharges and other
charges billed by voice and data telecommunications carriers and vendors. The
Company (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, generally producing ongoing savings to the Company's clients.
MANAGEMENT SOFTWARE APPLICATIONS AND SERVICES. The Company 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 measure 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 the
Company's New Jersey data center, or on a licensed basis with ongoing services
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 Company's 24 hour toll fraud
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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 produce management reports; 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.
The Company's call accounting service collects call information from
PBX systems, Centrex services and carrier activity tapes, and is
regularly updated for new discount programs. This information is stored in a
central database computer at the Company's Parsippany, New Jersey facility.
Sophisticated remote polling devices record the data, which, include
originating line numbers, authorization numbers, dates and duration
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 the Company'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 the
software products described above.
The Company'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 the Company's software services and
products and the client's hardware and operating systems; and (iii) enhancements
and modifications to the Company'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.
TECHNICAL CONSULTING. Technical consulting consists of designing,
engineering, procuring and implementing telecommunications services, networks,
systems and equipment. The Company provides clients with both technical and
engineering expertise, drawing upon the experience of the Company'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, 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,
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averaging approximately 12 months, and often require follow-up maintenance work
or other complementary products and services.
OPERATIONS MANAGEMENT. Operations management services have developed as an
outgrowth of the Company's other telecommunications management 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 the Company an opportunity to
provide additional software services to clients.
SERVICE CONTRACT AND REPAIR
The Company's systems are generally sold with limited warranties which
range from 90 days to one year. All systems contain built-in modems, allowing
Company personnel to perform diagnostic procedures and many software upgrades
and enhancements remotely. Customers may contract for extended warranty
coverage under any of several plans.
The Company maintains a customer service department consisting of a help
desk function, a field service organization and a training department. The help
desk function is staffed by professionals with specialized skills in hardware
diagnostics, software support and applications programming, who respond to
customer questions regarding software warranty claims and assist customers in
developing and debugging application programs.
A geographically dispersed field service staff is responsible for system
installation and on-site hardware maintenance, including warranty claims. To
date, warranty claims have not been significant.
The training department provides beginning and advanced training sessions
for both customers and employees on topics such as product orientation, system
operation and programming and advanced software and technical development.
As of December 31, 1995, there were 72 people providing customer support.
ELECTRONIC INFORMATION SERVICES
The Company creates, produces and broadcasts electronic information
services, which it provides to purchasers of its audiotex systems, primarily
newspapers, Yellow Pages publishers and telephone companies. These services
provide pre-packaged content for the Company's systems and relieve the purchaser
of the responsibility for creating and loading information on the system. The
Company's staff of 28 writers, editors and broadcasters produces audio
information under many broad categories, such as news, weather and sports, and
under many specialized categories such as gardening tips, horoscopes and soap
opera updates. The Company produces over 3,000 categories of information, of
which over 1,800 are updated on a daily basis. Subscribers to the Company's
information services receive category updates by satellite transmission, some of
which occur as often as every 15 minutes. Newspapers or Yellow Pages publishers
which subscribe to the service are licensed to receive the network on an annual
basis. The publisher generally provides the information to callers without
charge, and generates revenue by selling advertising sponsorships to the various
categories. Much of the information available in audio form is also available
by facsimile, or in an on-line format.
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In addition to its audio networks, the Company writes and produces "library
programs" in both audio and facsimile formats, which are installed on systems
sold to hospitals, real estate brokerage firms and other customers for specific
applications. These library programs are updated periodically and billed on an
annual basis.
SALES AND MARKETING
DOMESTIC SALES
The markets for audiotex and IVR systems include organizations having a
need to service large volumes of telephone callers seeking information about
specific topics. The markets for voice messaging systems include organizations
wishing to streamline internal and external communications, reduce interruptions
and provide enhanced customer service. The markets for the Company's
telecommunications management and managed services include almost any public or
private entity which is a substantial user of voice and/or data
telecommunications.
The Company sells its systems and services domestically primarily through a
direct sales force, with individual personnel being responsible for either a
specific industry, territory or product line. There are 32 direct sales
personnel, 11 of whom are located in the Company's Wichita, Kansas headquarters.
The remainder are located throughout the United States, including the Company's
offices in Canton, Massachusetts; Dallas, Texas; New York City; Parsippany, New
Jersey; and San Francisco, California.
The Company also markets its systems through companies offering integrated
systems for sale to end users, using the Company's hardware platforms. These
companies include Amarex Technology, Inc., Digital Data Voice Systems,
Electronic Data Systems, Southwestern Bell Telecom, Systems and Computer
Technology Corporation, Tandem Computers, and Vicorp Interactive Systems.
INTERNATIONAL SALES
International revenues were $26,121,000, $15,679,000, and $10,422,000 in
1995, 1994 and 1993, respectively, and amounted to 27%, 20% and 18% of revenues
for such periods. The majority of international revenues are derived from the
sale of voice messaging systems which are currently sold exclusively in
international markets.
Sales outside the United States are made through a number of sources.
Sales into Europe are made by the Company's subsidiaries: BVSGL (Manchester and
Cambridge, England), Brite Voice Systems Group, GmbH (Wiesbaden, Germany), BVS
S.p.A. (Rome, Italy), and BVS A.G. (Zurich, Switzerland). Sales into Canada and
South America are made by the Company's U.S.-based sales force, and sales into
other areas of the world are made through a combination of the Company's U.S.-
based sales force, distributors and local agents. The Company has employees
based in Dubai, United Arab Emirates who are responsible for sales to the Middle
East and Africa, and during 1995, the Company opened offices in Singapore and
Johannesburg, South Africa to support sales made in those regions.
The Company's European subsidiaries market systems to two distinct
sectors of the voice messaging market throughout Europe. The VM1000 and
VM2000 are targeted to corporate users providing voice messaging as an
enhancement to the PBX, while the VSD is marketed to public telephone network
service and large volume business applications. The subsidiaries market
systems through a staff of 14 direct sales
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persons, and through prominent PBX manufacturers such as Philips,
Ericsson, Telenorma and S.E.L.
During 1995, BVSGL rapidly expanded its installed base of VSD systems, the
first of which was installed during the fourth quarter of 1994. In addition to
significant expansion of the system purchased by Cellnet (an affiliate of
British Telecom Cellular Radio), BVSGL also delivered VSD systems into Spain,
Hong Kong, Africa, and the Middle East.
The Company's subsidiaries are also responsible for marketing and
supporting the Company's audiotex, IVR and voice dialing systems throughout
Europe. During 1995, the Company increased its staff to 14 direct sales persons
to begin marketing these systems. The Company believes that the European market
is behind the U.S. in terms of market penetration of audiotex and IVR systems
and that significant future growth is possible. Much of the Company's effort in
1996 will be focused on shifting the emphasis in this marketplace from the
small, PBX-based voice messaging systems to audiotex and IVR applications.
During 1995, 64% of the sales by the Company's European subsidiaries were
concentrated in five customers. The loss of any of these customers could have a
material impact on the Company's international revenues and results of
operations.
The Company sells its audiotex, IVR and voice dialing systems throughout
the rest of the world through its direct sales force, independent sales agents
and value-added resellers ("VARs"). Where possible, the Company uses the
services of agents and VARs in foreign markets because of their familiarity with
local markets and their knowledge of, and abilities to work within, local
governmental regulations. VARs typically purchase the Company's hardware and
license the operating software. In some instances, VARs provide additional
software programming or information packages to complete the systems. Agents
used by the Company typically receive a commission on sales made into their
territories.
The Company faces a number of risks in conducting its international
business that do not affect its domestic business, including greater
concentration of business with fewer customers, longer payment cycles, greater
difficulty in accounts receivable collection, and difficulty in staffing and
managing foreign subsidiary operations. Installation of the Company's products
outside the United States requires that the Company conform to local telephone
and electrical regulations. The Company has traditionally relied on its
suppliers to obtain the necessary registration in order for the Company to
install products within an individual country. There can be no assurance that
these factors will not have an adverse impact on the Company's future
international sales or operating results in the future. See Note 12 to the
Consolidated Financial Statements contained herein for additional information
with respect to foreign and domestic sales and assets.
RESEARCH AND ENGINEERING
The voice processing industry is subject to rapid technological change,
including continuing improvements in hardware and software performance. In
order to maintain its competitive position, the Company must continually
release new products and develop enhancements and new features for its
existing products on a timely basis. There can be no assurance that the
Company will be successful in developing and marketing, on a timely basis,
product modifications or enhancements or new products that respond to
technological advances by others, or that such new or enhanced products or
features will adequately and competitively address the needs of the
marketplace. Because of the increasing complexity of the Company's products,
these efforts can be expected to continue to increase in technical
difficulty. Moreover, the Company must manage product transitions
successfully, since announcements or introductions, or the perception that
such events are likely to occur, by either the Company or its competitors
could adversely affect sales of existing Company products.
-10-
<PAGE>
The Company performs rigorous testing prior to releasing its
products. Nevertheless, products as complex as the Company's often
contain undetected errors or "bugs" when first released, which are
discovered only after the product has been used by many different customers
and in varying applications. Although the Company's current products have
not experienced bugs that have had a significant financial or operating
impact on the Company, there can be no assurance that such problems will
not occur in the future.
Research and product engineering activities are conducted by the Company's
staff of 91 engineers, located in Wichita, Kansas; Canton, Massachusetts;
Dallas, Texas; Parsippany, New Jersey; and Manchester, England. During 1995,
1994 and 1993, the Company spent approximately $8,520,000, $6,436,000 and
$5,863,000, respectively, on research and engineering. As a percentage of
revenues, these amounts represent 8.8%, 8.1% and 10.4%, respectively. The
Company expects that to be successful, it will be required to continue to
increase its level of research and engineering expenditures in absolute terms,
and that such increases may also increase as a percentage of sales.
MANUFACTURING
The Company's manufacturing operations consist primarily of assembly of
components, burn-in, testing and quality assurance functions, which are
performed at both its Canton, Massachusetts and Manchester, England facilities.
Limited assembly work is performed at the Company's office in Wiesbaden, Germany
The Company is unable to expand its current manufacturing space in Manchester to
accommodate additional increases in sales, and is investigating alternatives,
including the rental of additional space and the manufacture of products for
shipment to European customers by the Canton facility.
Manufacturing in Canton is performed on only one shift, and the Company
devotes less than 25% of its Canton facilities to manufacturing; therefore, the
Company believes its production facilities are adequate for U.S. operations for
the foreseeable future, and that production of products for European customers
could be undertaken if necessary. If, however, the Company could not meet
demand for additional products, revenues and operating results could be
adversely affected.
For product standardization, quality control, and volume purchasing
efficiencies, the Company has elected to purchase certain components from sole
suppliers. Although the Company historically has been able to obtain supplies
of these components in a timely manner, the interruption in supply of any of
these components could have an adverse impact on the Company's revenues and
operating results. While the Company believes that other suppliers could
provide required components in the event of an interruption in supply, a change
in suppliers could cause a delay in manufacturing and a possible loss of sales,
which would adversely affect operating results.
BVSGL has a supply agreement with one customer until 2002, which requires
BVSGL to provide spare parts, or equivalent functional modules, for certain
systems it no longer markets. In November 1993, Ferranti International, the
company which provided the hardware for these systems, entered receivership.
While the supply of spare parts for these systems has not been interrupted, in
the event that the Ferranti subsidiary is no longer operated as a going concern,
BVSGL may be unable to fulfill its obligation to its customer for spare parts.
The Company currently believes it could provide functional equivalents to these
parts.
-11-
<PAGE>
BACKLOG
The Company maintains an inventory of component parts which generally
enables it to assemble, test and ship complete systems within two weeks of
receipt of an order. The short lead time prior to shipment of systems generally
results in a minimal backlog of systems orders. As of December 31, 1995, the
Company and its subsidiaries had a systems backlog of $11,578,000, compared to
$8,087,000 as of December 31, 1994 and $4,873,000 as of December 31, 1993. All
of the backlog at December 31, 1995 is scheduled to be shipped in 1996. There
can be no assurance that any such orders will not be canceled or re-scheduled.
Because of the possibility of customer changes in delivery schedules or
cancellation of orders, the Company's backlog as of any particular date may not
be indicative of actual revenues for any future period.
COMPETITION
The market for voice processing systems is highly competitive and includes
numerous suppliers of hardware and software of varying specifications. The
Company's competition in general purpose voice response systems includes
Intervoice, Syntellect, Periphonics and other voice processing system
manufacturers. In addition, the Company competes with larger companies, such as
IBM, AT&T and Digital, for whom voice response is a small portion of their
overall business. The Company also faces competition for its audiotex and
European voice messaging systems from voice mail providers, such as Octel,
Comverse Technology and Boston Technology. Because there are no significant
technological barriers to entry into these markets, many small companies also
offer competing products. In addition, as the Company's markets continue to
grow, increasing numbers of applications will be introduced by existing and new
competition.
The Company believes that the principal factors affecting competition in
the market for voice processing systems are ease of use, flexibility,
reliability, overall technical performance, price and customer service, and that
the Company competes favorably as to these factors.
The market for telecommunications management services such as those
provided by the Company is extremely fragmented, and competitors range from
small start-up companies who compete on a local basis, to large, nationally-
known firms such as AT&T, Electronic Data Systems and IBM. The Company competes
with the small local companies on the basis of its well recognized client base,
general reputation, credibility with telecommunications vendors and proven
methodology. The Company believes these factors enable it to compete effectively
against these competitors.
Large firms such as AT&T, Electronic Data Systems, and IBM often attempt to
capture an organization's entire telecommunications-related activities. The
Company, 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 with these companies.
The Company expects that additional competition will develop, and such
competition may include large companies with substantially greater financial,
marketing and technical resources than those available to the Company. Such
competition could adversely affect the revenues and operating results of the
Company.
-12-
<PAGE>
SOFTWARE PROTECTION, SERVICE MARKS AND PATENTS
The Company regards its software as proprietary and has implemented
measures of both a legal and practical nature to ensure that the software
retains that status. The Company derives considerable practical protection for
its software by licensing only the object code to customers and keeping the
source code confidential. In addition, by licensing the software rather than
transferring title, the Company in most cases has been able to incorporate
restrictions in licensing agreements which impose limitations on disclosure and
transferability of the software. No determination has yet been made, however, as
to the legal or practical enforceability of these restrictions or the extent of
customer liability for violations.
Like many other companies in the industry, the Company does not have patent
protection for its software. However, protection against unauthorized copying of
the source and object code portions of the software is sought through reliance
upon copyright laws. Despite these protections, competitors may be able to copy
aspects of the Company's products or to obtain information which the Company
regards as trade secret.
The Company has periodically received, and may receive in the future,
communications from third parties asserting patent rights or copyrights on
certain of the Company's products and product features. The Company believes
that its products and other proprietary rights do not infringe the proprietary
rights of third parties. There can be no assurance, however, that third parties
will not assert infringement claims against the Company in the future, or that
any such claims will not require the Company to enter into license arrangements
or result in protracted and costly litigation, regardless of the merits of such
claims. There also can be no assurance that the Company will be able to obtain
licenses to disputed third party technology or that such licenses, if available,
would be available on commercially reasonable terms.
The Company has registered with the United States Patent and Trademark
Office trademarks on CityLine, TeleCare, Cellular Information Network, Voice
Directories, Real Estate Hotline, TeleRent, TeleSchool, BriteFax, Perception,
Fraud-Chek, and Brite & Design.
EXECUTIVE OFFICERS
The executive officers of the Company, their ages and the period during
which each has served in his present office are as follows:
Stanley G. Brannan (46) is the Company's founder and has been its
President, Chief Executive Officer and Chairman of the Board since inception.
Prior to founding the Company, Mr. Brannan founded Mycro-Tek, Inc., a company
specializing in the manufacture of microprocessor-based products used in
electronic newsroom systems and television character generators. When Mycro-
Tek, Inc. was acquired by Allied Corporation in 1980, Mr. Brannan was employed
by Allied and eventually became president of the company's Merganthaler USA
Division.
Alan C. Maltz (45) was elected Executive Vice President of the Company and
a Director in August 1995, immediately following the merger of TSL with the
Company. Mr. Maltz co-founded each of the TSL Companies. Prior to the founding
of 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
-13-
<PAGE>
Company, Mr. Maltz was employed as a project engineer by Western Union and New
York Telephone Company.
Scott A. Maltz (38) was elected Vice President and Director of the Company
in August 1995, immediately following the merger of TSL with the Company. Mr.
Maltz was a co-founder of TSL (West) in 1989 and served as its President until
the merger. Prior to joining TSL, Mr. Maltz was employed by Bain & Company, a
management consulting firm where he consulted with clients in the
telecommunications, financial services and personal computer industries.
Leon A. Ferber (53) was elected Executive Vice President of the Company in
August 1993, immediately following the merger of Perception with the Company.
Prior to the merger, Mr. Ferber founded and served in a number of management
positions with Perception since 1968, most recently as President and Chief
Executive Officer from April 1990 to July 1993.
Donald R. Walsh (59) joined the Company as Executive Vice President in
August 1990. From 1987 to August 1990, he served as President of the
Information Services subsidiary of Philadelphia Suburban Corporation. Prior to
1987, he was employed by IBM, where he held several management positions,
primarily relating to sales and marketing.
David F. Hemmings (49) was appointed Executive Vice President of Brite in
September 1993. Mr. Hemmings served as Senior Vice President of Boston
Technology, Inc., a worldwide voice mail systems supplier, from 1991 until
joining the Company in 1993, and prior to that was President of International
Systems Integration, Inc. from 1985 to 1991. International Systems Integration
was a business consulting firm responsible for, among other things, assisting
Sprint in winning the Federal Telecommunications Systems contract from the
federal government.
Glenn A. Etherington (41) has served as Chief Financial Officer of the
Company since August 1988. He was Treasurer from August 1988 until August 1993,
and has been Secretary since August 1993. From April 1984 until joining the
Company, he served in various capacities including Vice President of Finance,
Controller and Treasurer of American City Business Journals, Inc., a publisher
of weekly business newspapers. Mr. Etherington is a certified public
accountant.
The Company's executive officers are elected by, and serve at the
discretion of, the Board of Directors.
EMPLOYEES
As of December 31, 1995, the Company and its subsidiaries had 633
employees, of which 582 were full-time employees. Of the full-time employees,
there were 449 located in the United States, 105 in England, 11 in Germany,
four in Italy, five in Switzerland, two in Dubai, United Arab Emirates, four
in Singapore and two in Johannesburg, South Africa. Of the full-time
employees, 141 were engaged in sales and marketing, 304 were engaged in
production, operations or customer support, 91 were engaged in research and
engineering, and 46 were engaged in providing administrative services.
The Company has never had a work stoppage, no employees are represented by
a labor organization and the Company considers its employee relations to be
good.
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<PAGE>
ITEM 2. PROPERTIES
The Company maintains principal facilities in Wichita, Kansas; Canton,
Massachusetts; Dallas, Texas; New York, New York; Parsippany, New Jersey; and
San Francisco, California. The Company owns its headquarters building in
Wichita, Kansas, which contains 40,000 square feet and houses its principal
corporate offices, research and engineering and information services facilities.
The Company also leases 31,250 square feet of office space in Wichita in which
it operates its call center in support of its managed service activities. The
lease expires in June 1997, and may be renewed for two additional one-year
terms. The Company's building in Canton, Massachusetts, a suburb of Boston,
contains 42,600 square feet and houses executive offices, research and
engineering and manufacturing facilities. The term of the Company's lease
expires in March 1998. The Company leases 17,340 square feet of office space in
Carrollton, Texas to conduct engineering and product development activities.
The lease expires in September 1997. The Company leases 4,500 square feet of
office space in New York, New York, which serves as the primary base of
operations for East Coast telecommunications management services. The lease
expires in February 2000. The Company occupies approximately 5,900 square feet
in Parsippany, New Jersey, which contains certain data processing operations.
This lease expires in November 2002. The Company also leases 1,548 square feet
in San Francisco, California, which houses the Company's West Coast
telecommunications management services operations. This lease expires in
September 1996.
BVSGL leases approximately 10,000 square feet of office space in
Manchester, England, containing administrative offices, engineering and
manufacturing facilities and the sales and marketing departments of BVSGL. The
lease expires in 1996, and may be renewed, at the option of the Company, for an
additional five year period. The Company also leases 10,200 square feet for the
Cambridge, England administrative office. This lease expires in September 2001.
Brite Voice Systems Group, GmbH leases approximately 3,200 square feet of
office space in Wiesbaden, Germany. This facility houses administrative and
sales staff, and expires in October 1996.
BVS SpA leases approximately 700 square feet of office space for its
administrative and sales staff in Rome, Italy. This lease expires in March
2001.
BVS AG leases approximately 2,500 square feet of office space for its
administrative and sales staff in Glattbrugg, Switzerland, which lease expires
in September 1999.
The Company maintains regional sales and support offices in Cleveland,
Ohio; Grandville, Michigan; Rolling Meadows, Illinois; Temecula, California; and
Woodstock, Georgia. These facilities are generally subject to short-term leases
of one year or less.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to claims and litigation from time to time arising
in the normal operation of its business. Management believes that the ultimate
resolution of any pending claim will not result in any material loss to the
Company.
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<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No information is required in response to this Item, as no matter was
submitted to a vote of the registrant's security holders during the fourth
quarter of the fiscal year covered by this report.
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<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded on the Nasdaq Stock Market under the
symbol BVSI. Prices per share reflected in the following table represent the
range of high and low sales prices reported by the Nasdaq Stock Market for the
quarters indicated.
<TABLE>
<CAPTION>
High Low
---- ---
1995
<S> <C> <C>
March 31. . . . . . . . . . . . . . . . . . . $ 21.88 $ 15.25
June 30 . . . . . . . . . . . . . . . . . . . 21.00 15.88
September 30. . . . . . . . . . . . . . . . . 24.50 18.25
December 31 . . . . . . . . . . . . . . . . . 18.50 12.00
1994
March 31. . . . . . . . . . . . . . . . . . . $ 15.75 $ 9.63
June 30 . . . . . . . . . . . . . . . . . . . 13.63 7.63
September 30. . . . . . . . . . . . . . . . . 14.13 9.38
December 31 . . . . . . . . . . . . . . . . . 19.75 12.25
</TABLE>
Since becoming a public company in 1989, the Company has not paid cash
dividends on its common stock, and does not plan to pay cash dividends to its
stockholders in the near future. The Company is not bound by any contractual
terms that prohibit or restrict the payment of dividends; however, the Company
presently intends to retain its earnings to finance future growth of its
business.
As of February 16, 1996, the Company had 453 stockholders of record,
excluding individual participants in security position listings.
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table contains certain selected financial data which
should be read in conjunction with the Company's financial statements and
notes thereto and with Management's Discussion and Analysis of Financial
Condition and Results of Operations. The selected financial data as of and
for the years ended December 31, 1995, 1994 and 1993 have been derived from
the financial statements of the Company audited by Arthur Andersen LLP,
independent certified public accountants. The selected financial data as of
and for the years ended December 31, 1992 and 1991 have been restated by the
Company to reflect the TSL merger, and are derived from the financial
statements of the Company audited by Baird, Kurtz & Dobson, independent
certified public accountants, and the financial statements of the TSL
Companies. The balance sheets as of December 31, 1994 and 1993 and the
income statements for each of the three years in the period ended December
31, 1994 of the TSL Companies have been audited by Ernst & Young LLP,
independent certified public accountants. The balance sheets as of December
31, 1992 and 1991 and the income statement for the year ended December 31,
1991 of the TSL Companies from which the selected financial data is derived
are unaudited.
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------------------
1995 1994 1993 1992 1991
--------- ---------- --------- --------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues . . . . . . . . . . . . . . . . . $ 97,078 $ 79,940 $ 56,412 $ 42,265 $ 41,846
Operating income (loss). . . . . . . . . . 5,708 6,005 (1,606) (3,951) 2,017
Net income (loss). . . . . . . . . . . . . 3,950 4,425 (1,303) (2,423) 2,339
Net income (loss) per share. . . . . . . . .33 .38 (.12) (.22) .21
Weighted average shares used in
computation. . . . . . . . . . . . . . . 11,922 11,526 11,068 10,865 11,031
BALANCE SHEET DATA:
Working capital. . . . . . . . . . . . . . $ 26,934 $ 23,772 $ 20,918 $ 22,522 $ 25,483
Total assets . . . . . . . . . . . . . . . 58,832 51,888 41,328 39,745 43,043
Long term debt . . . . . . . . . . . . . . -- -- 1,040 1,055 1,255
Stockholders' equity . . . . . . . . . . . 40,446 35,547 29,655 30,669 33,551
</TABLE>
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BASIS OF PRESENTATION
Effective August 9, 1995, the TSL Companies were merged into the Company in
a transaction accounted for as a pooling of interests (see Note 2 to the
Consolidated Financial Statements). TSL provides a broad array of services and
products which assist clients in managing various aspects of their
telecommunications requirements. The acquisition resulted in the issuance of
3,331,000 shares of Brite's Common Stock in exchange for all of the outstanding
common stock of the TSL Companies. As of the date of acquisition, total
liabilities of the TSL Companies exceeded total assets by approximately
$283,000. The financial information presented herein has been restated to
include the accounts and operations of the TSL Companies for all periods.
On March 31, 1995, the Company issued 150,000 shares of its common
stock for all of the outstanding common stock of Touch-Talk, Inc.
(the "Touch-Talk Merger"), and Touch-Talk was merged into the Company. The
Touch-Talk Merger has been accounted for as a pooling of interests. The net
assets of Touch-Talk, Inc. were $560,000 at March 31, 1995. The effect of
this pooling is immaterial to the operations of the Company and, accordingly,
prior years' financial statements have not been restated.
RESULTS OF OPERATIONS
1995 COMPARED TO 1994. Total revenues increased $17,138,000 to
$97,078,000, or 21.4%, compared to the same period in 1994, primarily as a
result of sales of systems to new customers, equipment and software upgrades and
expansions to existing customers, and increased volume of service revenues,
resulting from the addition of new customers.
Domestic system sales, consisting of general purpose voice response systems
and electronic publishing systems, decreased slightly to $28,443,000, from
$28,663,000 in 1994, due to a decline in demand for the Company's electronic
publishing systems.
General purpose voice response system sales increased $3,001,000 to
$23,998,000, or 14.3%, primarily due to expansion of business from existing
customers, the addition of new customers through the replacement of first
generation voice response equipment of other voice processing vendors, and
expansion of the Company's product line to include more custom modification to
its hardware platforms.
Electronic publishing system sales decreased $3,221,000 to $4,445,000,
or 42.0%. The Company attributes this decrease to continued saturation of the
market for this type of system. The Company believes it holds a significant
majority of the market share for audiotex systems sold to newspapers and Yellow
Pages publishers. Many of the Company's customers have slowed their deployment
of audiotex systems in the last year, as interest in on-line systems and
services have decreased demand for audiotex systems. The Company believes that
sales of these systems in future periods will become increasingly more difficult
to obtain in the domestic market.
International system sales increased $9,791,000 to $24,254,000, or 67.7%,
primarily due to sales of the Voice Services Director ("VSD"), a voice
messaging product sold to cellular network providers around the world. In
1995, the Company significantly expanded its customer base outside the United
Kingdom, placing systems in Hong Kong, the Middle East and certain countries in
Africa. The Company believes the international markets are behind the United
States markets in terms of acceptance of voice response technology, and that
prospects for growth in these markets will exceed those in the United States
during the next several years.
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<PAGE>
The Company's system sales are dependent upon continued orders by existing
customers, orders from new customers, and development of new products. There
can be no assurance that the Company will be able to increase or maintain its
market share in the future or to sustain recent growth rates.
Service revenues increased $7,567,000 to $44,381,000, or 20.6%. Managed
service revenues, consisting of telecommunications management services, Consumer
Tips, Person-to-Person and 900 Voice Personals, increased 22.2%, from
$22,973,000 to $28,071,000 due primarily to an expanding customer base for
Consumer Tips and an increase in revenues from telecommunications management
services. Service contract and repair revenues increased 26.7%, from $8,730,000
to $11,065,000, due to the Company's continuing emphasis on expanding its base
of customers who subscribe to quarterly or annual maintenance contracts.
Information services and other service revenues increased 2.6%, from $5,111,000
to $5,245,000, due primarily to the introduction of new audio products.
Cost of system sales increased $3,651,000 to $22,809,000, or 19.1%, while
decreasing as a percentage of system sales from 44.4% to 43.3%. The increase in
actual costs was due to an increase in the number of systems shipped by both the
Company's foreign subsidiaries and the United States-based sales force to
international customers. The decrease as a percentage of system sales is a
result of an increase in software licenses and applications sold as part of the
Company's voice response systems. Software revenues typically provide larger
margins than those associated with hardware. Although the Company experienced
an increase in system margins during 1995, on a long-term basis the Company
expects system margins to decline due to the highly competitive nature of the
industry.
Cost of sales of service increased $2,906,000 to $22,249,000, or 15.0%,
while decreasing as a percentage of service revenues from 52.5% to 50.1%. The
increase in actual costs was due to an increase in variable costs, such as
telephone transmission costs and revenue sharing payments to customers,
associated with increased managed service revenues. The decrease as a
percentage of revenues was due to an increase in service contract and repair
revenues, as well as an increase in revenues from telecommunications management
services as a percentage of the total product mix, which typically have higher
margins than other components of service revenues.
Research and engineering expenses increased $2,084,000 to $8,520,000, or
32.4%, due to the addition of research engineers to support the Company's
continued commitment to product development. As a percentage of revenue, these
expenses increased to 8.8% of total revenue in 1995, compared to 8.1% in 1994.
The Company believes that it must continue to increase spending on research and
engineering activities in absolute terms in order to continue to remain
competitive in the voice response market. Such expenses could increase as a
percentage of revenues as well.
Selling, general and administrative expenses increased $7,153,000 to
$29,162,000, or 32.5%, primarily due to the expansion of the Company's
international sales and marketing efforts. As a percentage of total revenues,
selling, general and administrative expenses increased from 27.5% to 30.0%.
During 1995, the Company opened an office in Cambridge, England, as well as
Johannesburg, South Africa and Singapore. In addition, significant staff was
added during the year to support new sales opportunities in both the domestic
and international markets. The Company anticipates that these expenses as a
percentage of revenues will begin to decline as the additional staff begins
generating revenues.
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<PAGE>
S corporation distributions represent payments made to the former TSL
Companies' stockholders, which are approximately equal to the tax basis earnings
of the TSL Companies. Under the terms of the merger agreement, the TSL
Companies were allowed to distribute estimated tax basis income through the
closing date of the TSL Merger. These distributions decreased $2,686,000 to
$4,303,000, or 38.4%, because they represented the profits for approximately
seven months in 1995 compared to a full year in 1994. These payments will not
recur in future periods.
In connection with the acquisition of the TSL Companies, the Company
recorded a non-recurring charge of $4,327,000. This charge consisted of
$3,509,000 for expenses incurred that are specific to the TSL Merger, primarily
fees to financial advisors, attorneys and accountants, and costs of integrating
the operations of the TSL Companies. Also included was a charge of $818,000,
reflecting the write-off of prepaid royalties and certain equipment associated
with the Company's Person-to-Person product.
Other income decreased by $135,000 to $452,000, or 23.0%. Interest income,
the largest component of other income, decreased from $556,000 to $265,000, or
52.3%, primarily due to a lower average balance of funds invested. Interest
expense decreased from $121,000 to $18,000, or 85.1%, due to the repayment of
the Company's long-term debt at the end of 1994.
The effective income tax rate for 1995 was 35.9%, compared to 32.9% during
1994. The variance from the United States statutory rate in 1995 was due
primarily to the non-deductibility of a majority of the merger costs incurred in
the acquisition of the TSL Companies, partially offset by the utilization of net
operating loss and credit carryforwards acquired through the Company's 1993
merger with Perception, and a reduction in the Company's deferred tax valuation
allowance.
1994 COMPARED TO 1993. Total revenues increased $23,528,000 to
$79,940,000, or 41.7%, compared to the same period in 1993, and consisted of
revenue increases in all areas of the Company's business.
Domestic system sales, consisting of general purpose voice response systems
and electronic publishing systems, increased 28.8%, from $22,255,000 to
$28,663,000. General purpose voice response system sales increased from
$15,742,000 to $20,997,000, or 33.4%, primarily due to sales of VoiceSelect, the
product introduced during 1993 used by cellular telephone companies to provide
"hands-free" dialing to cellular subscribers. Electronic publishing system
sales increased from $6,513,000 to $7,666,000, or 17.7%, due primarily to system
sales to regional Bell operating companies for deployment of the Company's
Talking Yellow Pages and Consumer Tips applications.
International system sales increased 46.6%, from $9,864,000 to $14,463,000,
primarily due to increased sales by the Company's foreign subsidiaries into
European markets, and the commencement of sales of VoiceSelect systems to
customers outside the U.S. and Europe.
Service revenues increased $12,521,000 to $36,814,000, or 51.5%, due
primarily to increased managed services revenues. Managed services revenues,
consisting of revenues from telecommunications management services, Consumer
Tips, Person-to-Person and 900 Voice Personals, increased 75.3%, from
$13,103,000 to $22,973,000, due to an expanding customer base and a larger
number of end users. Service contract and repair revenues increased 35.4%, from
$6,448,000 to $8,730,000, due to the Company's emphasis on expanding its base of
customers who subscribe to quarterly or annual maintenance contracts.
Information services and
-21-
<PAGE>
other service revenues increased from $4,742,000 to $5,111,000, or 7.8%, due to
an increase in the Company's customer base.
Cost of system sales increased $4,481,000 to $19,158,000, or 30.5%, while
decreasing as a percentage of system sales from 45.7% to 44.4%. The increase in
actual costs was due to an increase in the number of systems shipped, while the
decrease as a percentage of system sales was due to the efficiencies gained as a
result of the consolidation of manufacturing operations associated with the
merger of the Company and Perception in 1993, and a larger base over which to
spread fixed manufacturing overhead costs.
Cost of sales of service revenues increased $7,356,000 to $19,343,000, or
61.4%, and increased as a percentage of service revenues from 49.3% to 52.5%.
The increase in actual costs was due to an increase in variable costs, such as
telephone transmission costs and revenue sharing payments to customers,
associated with increased managed services revenues. The increase as a
percentage of service revenues was due to the lower margins associated with
managed services compared to service contract and repair revenue and information
services.
Research and engineering expenses increased $573,000 to $6,436,000, or
9.8%, primarily due to an increase in staff.Selling, general and administrative
expenses increased $3,410,000 to $22,009,000, or 18.3%, due primarily to the
addition of staff necessary for the delivery and support of the Company's
increased sales. As a percentage of total revenues, operating expenses decreased
from 43.4% to 35.6%, due to a larger revenue base over which to spread the fixed
costs of sales and support.
S corporation distributions represent payments made to the former TSL
Companies' stockholders, which are approximately equal to the tax basis earnings
of the TSL Companies. These distributions increased from $2,292,000 to
$6,989,000 due to additional tax basis earnings available for distribution by
the TSL Companies.
Other income increased by $176,000 to $587,000, or 42.8%, due primarily to
a gain on the sale of fixed assets. Interest income, the primary component of
other income, remained relatively constant as higher yields on funds invested
were offset by the lower average balance of funds invested during the period.
The provision for income taxes was 32.9% in 1994. The variance in the
effective income tax rate from the United States statutory rate in 1994 was due
principally to the utilization of net operating loss and credit carryforwards
acquired through the merger with Perception, and a reduction in the deferred tax
valuation reserve, partially offset by higher tax rates in the United Kingdom
and Germany.
CERTAIN TRENDS AND UNCERTAINTIES
The Company has historically operated with very little backlog. There are
no long-term supply agreements with customers, and as a result, revenues in any
quarter are dependent upon orders that are received and shipped during that
quarter. Further, a large percentage of any quarter's system shipments are
recorded in the last month of the quarter. Consequently, quarterly revenues and
operating results will depend on the volume and timing of new orders received
during a quarter, which are difficult to predict. Failure to receive adequate
amounts of new orders could adversely affect revenues and operating results, and
such shortfalls may not be known until very late in any quarter.
-22-
<PAGE>
For quality control, ease of development, and purchasing efficiencies, the
Company has elected to purchase certain components from one supplier. Although
the Company has been able to obtain supplies of these components in a timely
manner, the interruption in supply of any of these components could have an
adverse impact on the Company's revenues and operating results. While the
Company believes that other suppliers could provide required components in the
event of an interruption in supply, a change in suppliers could cause a delay in
manufacturing and a possible loss of sales, which would adversely affect
operating results.
The market for the Company's stock is highly volatile. Any variance in
operating results from analysts' expectations, or changes in estimated results
by industry analysts could have an adverse effect on the trading price of the
Company's common stock in a given period. Furthermore, in recent years the
market prices of securities of many high technology companies have experienced
extreme fluctuations, in many cases for reasons unrelated to the operating
performance of the specific companies. These broad market fluctuations may
adversely affect the market price of the Company's stock.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1995, the Company had a current ratio of 2.5 to 1, and
working capital of $26,934,000, compared to a current ratio of 2.5 to 1 and
working capital of $23,772,000 at December 31, 1994. Cash and cash equivalents
were $3,405,000 at December 31, 1995 compared to total cash and temporary
investments of $10,977,000 at December 31, 1994.
The decline in cash and equivalents during 1995 was primarily the result of
the non-recurring acquisition costs of the TSL Merger of approximately
$3,500,000, capital expenditures of $5,600,000, and increases in accounts
receivable and inventory.
Accounts receivable increased by over $9,000,000 from 1994, principally due
to an increase in international sales during the year, which typically have
longer payment cycles and greater difficulty in accounts receivable collection.
Inventory increased by approximately $2,200,000, primarily due to the stocking
of additional components in anticipation of sales increases in future quarters.
The Company believes the increase in each of these areas to be in line with the
business growth experienced in 1995 and the backlog of orders at the end of the
year.
The increases in accounts receivable and inventory were funded through
increases in accounts payable and other accrued expenses, and the liquidation of
temporary investments. The Company believes that receivables and inventory will
increase at rates proportional to revenue increases.
The Company maintains a $5,000,000 line of credit that is used from time to
time to fund short-term cash requirements. There were no borrowings outstanding
under this line as of December 31, 1995.
The Company regularly invests excess funds in short-term securities, such
as bankers' acceptances, government obligations and variable rate demand notes,
having maturities up to one year. Management believes that restricting
investments to these types of securities maximizes financial flexibility and
minimizes exposure to interest rate and market risks. The Company utilizes
these investments as a source of liquidity, to the extent that cash requirements
exceed short-term cash receipts.
-23-
<PAGE>
The Company expects to invest approximately $6,000,000 in capital
expenditures during 1996, but it has no significant capital commitments. The
Company believes that working capital on hand, funds provided from future
operations, and its current line of credit will be sufficient to fund the
Company's capital requirement for at least the next year.
INFLATION
Inflation has not had a material impact on the Company's results of
operations. Because of the competitive nature of the computer industry, the
costs of parts used in the Company's products have remained relatively stable.
However, should inflation rise to higher levels, the Company believes that such
inflationary costs would be passed on to customers by both the Company and its
competition.
-24-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
----
Report of Independent Public Accountants . . . . . . . . . . . . . . . . 26
Consolidated Balance Sheets as of December 31, 1995 and 1994 . . . . . . 27
Consolidated Statements of Operations for the Years Ended
December 31, 1995, 1994 and 1993. . . . . . . . . . . . . . . . . . . 29
Consolidated Statements of Changes in Stockholders' Equity for the
Years Ended December 31, 1995, 1994 and 1993. . . . . . . . . . . . . 30
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993. . . . . . . . . . . . . . . . . . . 31
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . 32
Supplemental Schedules:
Schedule II -- Valuation and Qualifying Accounts . . . . . . . . . . . . 42
Note: Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is included in
the Financial Statements or notes thereto.
-25-
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
Brite Voice Systems, Inc.
Wichita, Kansas
We have audited the accompanying consolidated balance sheets of Brite Voice
Systems, Inc., (a Kansas corporation) and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. 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 did not audit the financial statements of
the TSL Companies, companies acquired during 1995 in a transaction accounted for
as a pooling of interests, as discussed in Note 2. Such statements are included
in the consolidated financial statements of the Company and reflect total assets
and total revenues of 7 percent and 17 percent in 1994, respectively, and 20
percent of total revenues in 1993, of the consolidated totals. These statements
were audited by other auditors whose report has been furnished to us and our
opinion, insofar as it relates to amounts included for the TSL Companies, is
based solely upon the report of the other auditors.
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 of 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 and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion based on our audit and the report of other auditors, the
financial statements referred to above present fairly in all material respects,
the financial position of Brite Voice Systems, Inc. and subsidiaries as of
December 31, 1995 and 1994, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Kansas City, Missouri,
February 2, 1996
-26-
<PAGE>
BRITE VOICE SYSTEMS, INC.
-------------------
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents. . . . . . . . . . . . . . $ 3,405 $ 5,776
Temporary investments (at cost which
approximates market)(Note 1) . . . . . . . . . . . -- 5,201
Accounts receivable, less allowance for
doubtful accounts: 1995 - $481; 1994 - $844. . . . 28,690 18,846
Inventories (Note 4) . . . . . . . . . . . . . . . . 10,510 8,263
Prepaid expenses and other . . . . . . . . . . . . . 2,715 1,889
--------- ---------
Total Current Assets . . . . . . . . . . . . . . 45,320 39,975
--------- ---------
PROPERTY AND EQUIPMENT
Land and building. . . . . . . . . . . . . . . . . . 3,074 3,074
Furniture and equipment. . . . . . . . . . . . . . . 19,978 15,161
--------- ---------
23,052 18,235
Less accumulated depreciation. . . . . . . . . . . . (11,476) (8,906)
--------- ---------
11,576 9,329
--------- ---------
OTHER ASSETS (Note 3). . . . . . . . . . . . . . . . . 1,936 2,584
--------- ---------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . $ 58,832 $ 51,888
--------- ---------
--------- ---------
</TABLE>
See Notes to Financial Statements
-27-
<PAGE>
BRITE VOICE SYSTEMS, INC.
-------------------
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . $ 9,503 $ 6,492
Accrued salaries and wages . . . . . . . . 1,726 1,941
Other accrued expenses . . . . . . . . . . 1,785 2,926
Deferred revenue . . . . . . . . . . . . . 1,364 1,287
Customer deposits. . . . . . . . . . . . . 1,565 775
Advances from affiliates (Note 7). . . . . 551 2,782
Income taxes payable . . . . . . . . . . . 1,892 --
-------- --------
Total Current Liabilities. . . . . . . . 18,386 16,203
-------- --------
DEFERRED INCOME TAXES (Note 6) . . . . . . . -- 138
-------- --------
COMMITMENTS AND CONTINGENCIES (Notes
5 and 10). . . . . . . . . . . . . . . . . -- --
STOCKHOLDERS' EQUITY (Note 8)
Preferred stock, no par value; authorized
10,000,000 shares; none outstanding. . . -- --
Common stock, no par value; authorized
30,000,000 shares; outstanding 1995 -
11,489,325 shares; 1994 - 11,254,798 shares 34,377 33,404
Retained earnings. . . . . . . . . . . . . 6,383 2,358
Foreign currency translation adjustment. . (314) (215)
-------- --------
Total Stockholders' Equity . . . . . . . 40,446 35,547
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY . . . . . . . . . $ 58,832 $ 51,888
-------- --------
-------- --------
</TABLE>
See Notes to Financial Statements
-28-
<PAGE>
BRITE VOICE SYSTEMS, INC.
-------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
REVENUES
System sales . . . . . . . . . . . . . . . . . . . . $ 52,697 $ 43,126 $ 32,119
Service revenues . . . . . . . . . . . . . . . . . . 44,381 36,814 24,293
--------- --------- ---------
97,078 79,940 56,412
--------- --------- ---------
COSTS AND EXPENSES
Cost of sales:
System . . . . . . . . . . . . . . . . . . . . . . 22,809 19,158 14,677
Service. . . . . . . . . . . . . . . . . . . . . . 22,249 19,343 11,987
Research and engineering . . . . . . . . . . . . . . 8,520 6,436 5,863
Selling, general and administrative. . . . . . . . . 29,162 22,009 18,599
S corporation distributions (Note 2) . . . . . . . . 4,303 6,989 2,292
Merger and other costs (Notes 2 and 3) . . . . . . . 4,327 -- 4,600
--------- --------- ---------
91,370 73,935 58,018
--------- --------- ---------
INCOME (LOSS) FROM OPERATIONS. . . . . . . . . . . . . 5,708 6,005 (1,606)
--------- --------- ---------
OTHER INCOME (EXPENSE)
Interest income. . . . . . . . . . . . . . . . . . . 265 556 463
Interest expense . . . . . . . . . . . . . . . . . . (18) (121) (124)
Other. . . . . . . . . . . . . . . . . . . . . . . . 205 152 72
--------- --------- ---------
452 587 411
--------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES. . . . . . . . . . . 6,160 6,592 (1,195)
INCOME TAX PROVISION (Note 6). . . . . . . . . . . . . 2,210 2,167 108
--------- --------- ---------
NET INCOME (LOSS). . . . . . . . . . . . . . . . . . . $ 3,950 $ 4,425 $ (1,303)
--------- --------- ---------
--------- --------- ---------
EARNINGS (LOSS) PER SHARE. . . . . . . . . . . . . . . $ 0.33 $ 0.38 $ (0.12)
--------- --------- ---------
--------- --------- ---------
</TABLE>
See Notes to Financial Statements
-29-
<PAGE>
BRITE VOICE SYSTEMS, INC.
-------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
Retained Foreign
Earnings Currency
Common Treasury (Accumulated Translation
Stock Stock Deficit) Adjustment Total
-------- ------- -------- ------- -------
<S> <C> <C> <C> <C> C
Balance, December 31, 1992 . . . . . . . . . 34,509 (2,810) (672) (357) 30,670
Net loss . . . . . . . . . . . . . . . . . -- -- (1,303) -- (1,303)
Retirement of treasury stock . . . . . . . (2,810) 2,810 -- -- -0-
Adjustments to conform
fiscal year of acquired
corporation. . . . . . . . . . . . . . . 21 -- (92) -- (71)
Sale of common stock . . . . . . . . . . . 442 -- -- -- 442
Non-qualified stock option
compensation . . . . . . . . . . . . . . 4 -- -- -- 4
Foreign currency
translation adjustment . . . . . . . . . -- -- -- (87) (87)
-------- ------- -------- ------- -------
Balance, December 31, 1993 . . . . . . . . . 32,166 -0- (2,067) (444) 29,655
Net income . . . . . . . . . . . . . . . . -- -- 4,425 -- 4,425
Sale of common stock . . . . . . . . . . . 847 -- -- -- 847
Non-qualified stock option
compensation . . . . . . . . . . . . . . 6 -- -- -- 6
Tax benefit of stock option
transactions . . . . . . . . . . . . . . 385 -- -- -- 385
Foreign currency
translation adjustment . . . . . . . . . -- -- -- 229 229
-------- ------- -------- ------- -------
Balance, December 31, 1994 . . . . . . . . . 33,404 -0- 2,358 (215) 35,547
Issuance of shares for
pooling transaction (Note 2) . . . . . . 1 -- 75 -- 76
Net income . . . . . . . . . . . . . . . . -- -- 3,950 -- 3,950
Sale of common stock . . . . . . . . . . . 733 -- -- -- 733
Non-qualified stock option
compensation . . . . . . . . . . . . . . 5 -- -- -- 5
Tax benefit of stock option
transactions . . . . . . . . . . . . . . 234 -- -- -- 234
Foreign currency
translation adjustment . . . . . . . . . -- -- -- (99) (99)
-------- ------- -------- ------- -------
Balance, December 31, 1995 . . . . . . . . . $ 34,377 $ -0- $ 6,383 $ (314) $ 40,446
-------- ------- -------- ------- -------
-------- ------- -------- ------- -------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-30-
<PAGE>
BRITE VOICE SYSTEMS, INC.
-------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss). . . . . . . . . . . . . . . . $ 3,951 $ 4,425 $ (1,303)
Adjustment to conform fiscal year of
acquired corporation . . . . . . . . . . . . . -- -- (209)
Items not requiring (providing) cash:
Depreciation and amortization. . . . . . . . . 3,677 2,705 1,974
(Gain) loss on disposition of assets . . . . . -- (109) 263
Non-qualified stock option compensation. . . . 5 6 4
Changes in:
Accounts receivable. . . . . . . . . . . . . . (9,006) (4,640) (4,680)
Inventories. . . . . . . . . . . . . . . . . . (2,231) (1,693) (923)
Accounts payable and accrued expenses. . . . . 1,955 3,087 2,898
Other current assets and liabilities . . . . . 1,131 756 1,066
-------- -------- --------
Net cash provided by (used in)
operating activities . . . . . . . . . . . (518) 4,537 (910)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment, net. . . . . (5,600) (3,886) (2,219)
Proceeds from maturity of temporary investments. 8,580 15,067 11,205
Purchase of temporary investments. . . . . . . . (3,379) (14,651) (7,051)
Proceeds from sale of property . . . . . . . . . -- 228 --
Increase (decrease) in other assets. . . . . . . 29 (458) (899)
Net cash received from business acquisitions . . 44 -- --
-------- -------- --------
Net cash provided by (used in)
investing activities . . . . . . . . . . . (326) (3,700) 1,036
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock . . . . . . . . . . . . 436 147 21
Exercise of stock options. . . . . . . . . . . . 297 700 422
Proceeds from shareholder loans. . . . . . . . . 2,267 2,712 1,621
Principal payments on debt . . . . . . . . . . . (4,428) (2,473) (1,559)
-------- -------- --------
Net cash provided by (used in)
financing activities . . . . . . . . . . . (1,428) 1,086 505
-------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH. . . . . . (99) 229 --
-------- -------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . . . . (2,371) 2,152 631
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR. . . . . . . . . . . . . . . . 5,776 3,624 2,993
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR . . . . . . $ 3,405 $ 5,776 $ 3,624
-------- -------- --------
-------- -------- --------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-31-
<PAGE>
BRITE VOICE SYSTEMS, INC.
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS AND PRINCIPLES OF CONSOLIDATION. The Company designs,
integrates, assembles, markets and supports 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 also offers a broad array of telecommunications
consulting services.
These markets are characterized by rapid technological change, and the
Company is subject to many risks associated with this rapid change, including
obsolescence of its products and services, warranty charges and estimates of
costs required to complete certain projects after shipment of a system. In
addition, the Company has elected to purchase certain components from sole
suppliers. Although there are a limited number of manufacturers of these
particular components, management believes that the other suppliers could
provide similar products on comparable terms. A change in suppliers, however,
could cause a delay in manufacturing and a possible loss of sales, which would
affect operating results adversely.
The financial statements include various estimates, including estimated
reserves for obsolete inventory, uncollectible accounts, warranty reserves and
costs to complete certain projects. These estimates have been established by
management using historical operations data. There can be no assurance that
these estimates will not change as additional information becomes available.
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant inter-company accounts and transactions
have been eliminated in consolidation.
INVENTORIES. Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method and includes the cost of
materials, direct labor and manufacturing overhead. Provision is made for
obsolete or slow moving items where appropriate.
PROPERTY AND EQUIPMENT. Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which range from three to 10 years for furniture and
equipment to 35 years for buildings and improvements.
RESEARCH AND ENGINEERING. Costs associated with internal development of new
products or enhancements of existing products are expensed as incurred because
the marketability of such products is not determinable until substantially all
the costs are incurred.
REVENUE RECOGNITION. Revenues from the sale of systems generally are
recognized upon shipment. Software revenue is recognized in accordance with the
American Institute of Certified Public Accountants Statement 91-1, Software
Revenue Recognition. Revenues from maintenance and consulting services, and
audio information contracts for installed systems are recognized ratably over
the service
-32-
<PAGE>
BRITE VOICE SYSTEMS, INC.
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
period. Revenues from service bureau operations and consulting services are
recognized when the services are provided. Revenues from billing verification
services are recognized when claim proceeds are received from the telephone
company.
CREDIT RISK. The Company extends unsecured credit to customers throughout
the United States and in certain foreign countries.
INCOME TAXES. Deferred tax liabilities and assets are recognized for the
future tax consequences of events that have been recognized in the financial
statements or tax returns. (See Note 6)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT. Financial statements of the
Company's foreign subsidiaries have been translated into U.S. dollars at current
and average exchange rates. Resulting translation adjustments are recorded as a
separate component of stockholders' equity. Any transaction gains or losses are
included in the Consolidated Statements of Operations.
EARNINGS PER SHARE. Earnings per share amounts are computed using the
weighted average number of shares outstanding of 11,922,000, 11,526,000 and
11,068,000, for the years ended December 31, 1995, 1994 and 1993, respectively.
All options are considered to be common stock equivalents but are only included
in the weighted average to the extent that they are dilutive.
NEW ACCOUNTING PRONOUNCEMENTS. The Financial Accounting Standards Board
has issued SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and
for Long-lived Assets to be Disposed of". This standard provides a framework
for evaluating the realizability of the Company's investments in long-lived
assets. At this time, the Company does not anticipate that adoption of the
standard, which is required in 1996, will have a material impact on its results
of operations or financial position. The Financial Accounting Standards Board
also issued SFAS No. 123, "Accounting for Stock Based Compensation". Adoption
of this standard is required in 1996. Under the new standard, the Company must
either change its method of computing the compensation expense associated with
the issuance of stock options or make pro forma disclosures based on the new
computation method. At this time, the Company anticipates adopting the standard
by making the pro forma disclosures.
TEMPORARY INVESTMENTS. The Company is required to classify debt and equity
securities into specific categories and present them in the financial statements
under the guidelines established for each category. At December 31, 1994, all
investments in debt securities were classified as held-to-maturity because the
Company had the positive intent and ability to hold the securities to maturity.
The securities had short-term maturities, were presented at amortized cost, and
had an aggregate fair value which approximated cost.
-33-
<PAGE>
BRITE VOICE SYSTEMS, INC.
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 2: ACQUISITIONS
Effective August 9, 1995, the Company issued 3,331,000 shares of its
common stock for all of the outstanding common stock 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" or "TSL") and the TSL Companies were merged into the Company
(the "TSL Merger"). The TSL Merger has been accounted for as a pooling of
interests and, accordingly, the Company's consolidated financial statements
have been restated for all periods prior to the acquisition to include the
results of operations, financial position and cash flows of the TSL Companies.
Revenues and net income (loss) prior to the combination are as follows
(in thousands):
<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended
August 8, 1995 December 31, 1994 December 31, 1993
(Unaudited)
------------------------ ----------------------- -----------------------
Net Net Net
Income Income Income
Revenues (Loss) Revenues (Loss) Revenues (Loss)
--------- --------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Brite Voice Systems, Inc.. . . . . . . . . . $ 41,041 $ 2,104 $ 66,304 $ 5,569 $ 46,857 $ (1,963)
TSL. . . . . . . . . . . . . . . . . . . . . 9,242 (91) 13,636 (1,144) 9,555 660
--------- --------- ---------- -------- ---------- ---------
$ 50,283 $ 2,013 $ 79,940 $ 4,425 $ 56,412 $(1,303)
--------- --------- ---------- -------- ---------- ----------
--------- --------- ---------- -------- ---------- ----------
</TABLE>
Prior to the TSL Merger, the TSL Companies elected to be taxed as S
corporations under the Internal Revenue Code. This election eliminates
federal income taxes at the corporate level, as a result of which the TSL
Companies' profits were included in the income tax returns of their
stockholders for all periods through the date of the TSL Merger.
Accordingly, the TSL Companies distributed the majority of their taxable
earnings in the form of additional compensation to officers and shareholders.
Distributions in excess of the salary and bonus amounts contracted for in
the employment agreements entered into between the Company and certain of the
TSL Stockholders, were $4,303,000, $6,989,000 and $2,292,000 for the period
ended August 8, 1995 and the years ended December 31, 1994 and 1993,
respectively. No adjustments have been made to the provision for income
taxes, to reflect the impact had the TSL Companies been subject to federal
income taxes as the adjustment is immaterial.
Merger expenses of $3,509,000 were charged to expense during 1995. These
expenses represent brokerage, legal and other professional fees associated with
the consummation of the TSL Merger.
On March 31, 1995, the Company issued 150,000 shares of its common stock
for all of the outstanding common stock of Touch-Talk, Inc. (the "Touch-Talk
Merger"), and Touch-Talk was merged into the Company. The Touch-Talk Merger has
been accounted for as a pooling of interests. The net assets of Touch-Talk,
Inc. were $560,000 at March 31, 1995. The effect of this pooling is immaterial
to the operations of the Company and, accordingly, prior years' financial
statements have not been restated.
-34-
<PAGE>
BRITE VOICE SYSTEMS, INC.
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 3: OTHER ASSETS
Other Assets consist of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994
--------- --------
<S> <C> <C>
Prepaid royalties $ -- $ 1,250
Goodwill and other 2,472 1,966
--------- --------
2,472 3,216
Accumulated amortization (536) (632)
--------- --------
$ 1,936 $ 2,584
--------- --------
--------- --------
</TABLE>
In September 1992, the Company licensed certain patented technology
for the provision of electronic classified services, and advanced $1,250,000 in
nonrefundable royalties. The royalties were being amortized over a five year
period. In September 1995, due to continued unprofitability of the product, the
Company wrote off $818,000, representing the balance of the prepaid royalties
and the net book value of certain equipment related to the project. This charge
is included in Merger and other costs in the accompanying Statements of
Operations.
Goodwill and other intangible assets are being amortized using the
straight-line method over the estimated useful lives of the assets or the
specific contract term, which range from three to 10 years. Amortization
expense, including the amortization of prepaid royalties, was $619,000 in 1995
and $434,000 in 1994.
NOTE 4: INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994
--------- --------
<S> <C> <C>
Purchased parts $ 3,044 $ 2,677
Work in progress 4,146 2,383
Finished goods 3,320 3,203
--------- --------
$ 10,510 $ 8,263
--------- --------
--------- --------
</TABLE>
-35-
<PAGE>
BRITE VOICE SYSTEMS, INC.
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 5: LEASES
The Company leases office space under noncancelable agreements
expiring at various times through 2002. Future minimum rental payments under
these operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1996 . . . . . . . . . . . . . . . . . . $ 1,306
1997 . . . . . . . . . . . . . . . . . . 927
1998 . . . . . . . . . . . . . . . . . . 457
1999 . . . . . . . . . . . . . . . . . . 376
2000 . . . . . . . . . . . . . . . . . . 282
Thereafter . . . . . . . . . . . . . . . 320
--------
$ 3,668
--------
--------
</TABLE>
Rent expense under the above agreements was $1,023,000, $807,000 and
$700,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
NOTE 6: INCOME TAXES
The income tax provision includes the following (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
-------- -------- ---------
<S> <C> <C> <C>
Taxes currently payable:
Federal. . . . . . . . . . . . . $ 1,804 $ 1,918 $ (90)
State. . . . . . . . . . . . . . 355 150 --
Foreign. . . . . . . . . . . . . 651 449 198
Deferred taxes . . . . . . . . . (600) (350) --
$ 2,210 $ 2,167 $ 108
-------- -------- --------
-------- -------- --------
</TABLE>
United States income taxes have not been provided on the cumulative
undistributed earnings of the Company's foreign subsidiaries for $3,076,000 at
December 31, 1995. It is intended that these earnings will be permanently
invested in operations outside the United States.
-36-
<PAGE>
BRITE VOICE SYSTEMS, INC.
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
A reconciliation of income tax expense at the statutory rate to income tax
expense at the Company's effective rate, is as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Tax expense (benefit) at the statutory rate. . . . . . $ 2,095 $ 2,886 $ (583)
Effect of foreign tax rates. . . . . . . . . . . . . . 8 28 78
Losses providing no current benefit. . . . . . . . . . -- 49 775
Increase (decrease) in taxes resulting from:
Disqualifying dispositions . . . . . . . . . . . . -- -- (280)
Merger costs . . . . . . . . . . . . . . . . . . . 1,130 -- 104
State income taxes, net of federal benefit . . . . 234 197 --
Foreign sales corporation benefit. . . . . . . . . (54) (112) (21)
Utilization of net operating loss carryforward . . (321) (456) --
Utilization of credit carryforwards. . . . . . . . (278) (276) --
Reduction of valuation allowance . . . . . . . . . (600) (350) --
Other permanent differences. . . . . . . . . . . . (4) 201 35
-------- -------- -------
$ 2,210 $ 2,167 $ 108
-------- -------- -------
-------- -------- -------
</TABLE>
Deferred taxes are determined based on the estimated future tax effect of
differences between the financial statement and tax bases of assets and
liabilities given the provisions of the enacted tax laws. Deferred taxes
consist of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Current deferred taxes
Gross assets . . . . . . . . . . . . $ 662 $ 488
Gross liabilities. . . . . . . . . . -- --
------- -------
$ 662 $ 488
------- -------
------- -------
Noncurrent deferred taxes
Gross assets . . . . . . . . . . . . $ 728 $ 164
Gross liabilities. . . . . . . . . . (403) (302)
------- -------
$ 325 $ (138)
------- -------
------- -------
</TABLE>
-37-
<PAGE>
BRITE VOICE SYSTEMS, INC.
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
The tax effect of significant temporary differences representing
deferred tax assets and liabilities is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Federal regular tax operating loss, research and
development credit, investment tax credit and
alternative minimum tax credit carryforwards . . . . . . . . . $ 1,293 $ 1,688
Merger costs . . . . . . . . . . . . . . . . . . . . . . . . . . -- 96
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . (403) (302)
Inventory obsolescence reserve . . . . . . . . . . . . . . . . . 362 223
Allowance for doubtful accounts. . . . . . . . . . . . . . . . . 154 266
Accrued vacation pay . . . . . . . . . . . . . . . . . . . . . . 276 241
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 318
-------- --------
. . . . . . . . . . . . . . . . . . . . . . . . $ 1,999 $ 2,530
Valuation allowance. . . . . . . . . . . . . . . . . . . . . . . (1,049) (2,180)
-------- --------
Net deferred taxes . . . . . . . . . . . . . . . . . . . . . . . $ 950 $ 350
-------- --------
-------- --------
</TABLE>
A valuation allowance is provided to the extent realization of the deferred
tax assets are dependent on taxable income (exclusive of reversing temporary
differences) in future years. A net deferred tax asset was recognized in the
current year to the extent existing non-deductible temporary differences could
be carried back to reduce current-year income tax.
At December 31, 1995, the Company has loss and credit carryforwards
available for tax purposes as follows (dollars in thousands):
<TABLE>
<CAPTION>
Expiration
Amount Date
--------- ----------
<S> <C> <C>
Federal regular tax carryforwards acquired through
business combinations:
Operating losses . . . . . . . . . . . . . . $ 1,568 2008
Research and development credits . . . . . . 380 2008
Investment tax credits . . . . . . . . . . . 60 2008
Federal regular tax carryforwards:
Capital loss . . . . . . . . . . . . . . . . $ 98 2007
</TABLE>
-38-
<PAGE>
BRITE VOICE SYSTEMS, INC.
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 7: ADVANCES FROM AFFILIATES
Prior to the TSL Merger, the TSL Companies financed working capital needs
through the use of non-interest bearing loans made by the TSL stockholders.
Upon consummation of the TSL Merger, the TSL stockholders loaned $2,267,000 to
the Company. The loans bear no interest and are to be repaid monthly based upon
future cash flow, as required by the Merger Agreement. Any unpaid amounts
become due and payable on April 1, 1996. The balance due was $551,000 at
December 31, 1995.
NOTE 8: STOCKHOLDERS' EQUITY
STOCK PURCHASE PLAN. In March 1994, the Board of Directors approved the
Brite Voice Systems 1994 Employee Stock Purchase Plan (the "Plan"). The Plan
was approved and adopted at the Annual Meeting of Stockholders held on May 10,
1994. Under the Plan, up to 200,000 shares of common stock of the Company may
be sold to employees. Eligible employees may authorize payroll deductions of up
to 10 percent of their compensation to purchase shares at the lower of 85
percent of the fair market value of the common stock as of the date of grant
(first day of an offering period) or the last day of the six-month offering
period. The semi-annual offerings commenced on July 1, 1994 and will terminate
on July 1, 1999. No employee may purchase shares under the Plan, in any one
year, having a fair market value on the offering date of more than $25,000, nor
may an employee purchase more than 500 shares in any offering period. During
1995, 32,890 shares were purchased at prices ranging from $11.79 to $14.98. On
December 31, 1995 there were 151,203 shares reserved for issuance under the
Plan.
STOCK OPTIONS. In March 1994, the Board of Directors approved the Brite
Voice Systems 1994 Stock Option Plan (the "1994 Option Plan") which was also
approved and adopted at the Annual Meeting of Stockholders on May 10, 1994. A
maximum of 1,000,000 shares of common stock may be issued under the 1994 Option
Plan. Options are granted by the Board of Directors at prices not less than
fair market value as of the date of the grant, generally have a four-year
vesting period and expire 10 years after the date of grant. At December 31,
1995, a total of 470,150 shares were available for future grants under the 1994
Option Plan.
The Company's 1984 Incentive Stock Option Plan terminated on December 31,
1994, except as to unexercised options remaining outstanding.
-39-
<PAGE>
BRITE VOICE SYSTEMS, INC.
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Information regarding outstanding qualified stock options is as follows:
<TABLE>
<CAPTION>
Shares Price
--------- ---------------
<S> <C> <C>
Outstanding at December 31, 1992 . . . . . . . . 802,044 1.25 - 13.75
Granted - 1993 . . . . . . . . . . . . . . . . 418,000 6.625 - 9.625
Exercised - 1993 . . . . . . . . . . . . . . . (202,654) 1.25 - 6.375
Cancelled - 1993 . . . . . . . . . . . . . . . (67,037) 1.25 - 12.50
---------
Outstanding at December 31, 1993 . . . . . . . . 950,353 1.25 - 13.75
Granted - 1994 . . . . . . . . . . . . . . . . 105,500 10.125 - 16.50
Exercised - 1994 . . . . . . . . . . . . . . . (213,249) 1.25 - 12.50
Cancelled - 1994 . . . . . . . . . . . . . . . (78,425) 1.25 - 13.75
---------
Outstanding at December 31, 1994 . . . . . . . . 764,179 1.25 - 16.50
Granted - 1995 . . . . . . . . . . . . . . . . 434,350 16.125 - 20.00
Exercised - 1995 . . . . . . . . . . . . . . . (46,637) 1.25 - 11.00
Cancelled - 1995 . . . . . . . . . . . . . . . (37,000) 1.25 - 18.625
---------
Outstanding at December 31, 1995 . . . . . . . . 1,114,892 1.25 - 20.00
---------
---------
Exercisable at December 31, 1995 . . . . . . . . 368,668 1.25 - 16.50
</TABLE>
The Company has also granted non-qualified stock options that generally
vest over a four-year period. Information regarding these non-qualified
options is as follows:
<TABLE>
<CAPTION>
Shares Price
------- --------------
<S> <C> <C>
Outstanding at December 31, 1992 . . . . . 30,000 2.25
Granted - 1993 . . . . . . . . . . . . . 100,000 5.875
Exercised - 1993 . . . . . . . . . . . . (10,049) 2.25
-------
Outstanding at December 31, 1993 . . . . . 119,951 2.25 - 5.875
Granted - 1994 . . . . . . . . . . . . . 25,000 15.875
Exercised - 1994 . . . . . . . . . . . . (5,250) 2.25
-------
Outstanding at December 31, 1994 . . . . . 139,701 2.25 - 15.875
Exercised- 1995. . . . . . . . . . . . . (5,000) 2.25
-------
Outstanding at December 31, 1995 . . . . . 134,701 2.25 - 15.875
-------
-------
Exercisable at December 31, 1995 . . . . . 59,701 2.25 - 5.875
</TABLE>
The Company has a Non-Employee Director Stock Option Plan which provides
for the granting of options to purchase up to 60,000 shares of common stock.
Options under this plan are to be granted at prices not less than fair market
value as of the date of the grant, and have a four-year vesting period. At
December 31, 1995, there were options granted to purchase 40,000 shares of
common stock at prices ranging from $5.00 to $8.75 per share. At December 31,
1995, 20,000 shares were exercisable. Also outstanding are 4,000 shares at
$10.125 per share, assumed from a previously acquired corporation, all of which
were exercisable at December 31, 1995.
-40-
<PAGE>
BRITE VOICE SYSTEMS, INC.
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 9: EMPLOYEE BENEFIT PLANS
The Company sponsors defined contribution retirement plans which cover
substantially all of its employees in the United States and the United Kingdom.
Company contributions to the United Kingdom plan are based on the employee's
age, while contributions to the United States plan are a percentage of employee
contributions at rates determined by the Board of Directors of the Company.
Company contributions to these plans were $493,000, $428,000 and $339,000 for
the years ended December 31, 1995, 1994 and 1993, respectively.
NOTE 10: LEGAL PROCEEDINGS
The Company is subject to claims and litigation from time to time arising
in the normal operation of its business. Management believes that the ultimate
resolution of any pending claim will not result in any material loss to the
Company.
NOTE 11: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
(In thousands)
<S> <C> <C> <C>
Interest paid. . . . . . . . . . . . . . . . $ 316 $ 127 $ 126
Income taxes paid (refunds received) . . . . 1,196 1,276 (435)
</TABLE>
NOTE 12: FINANCIAL INFORMATION RELATING TO FOREIGN AND DOMESTIC OPERATIONS AND
EXPORT SALES
Operations for the years ended December 31, 1995, 1994 and 1993 are as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Sales to unaffiliated customers:
United States. . . . . . . . . . . . . . . $ 76,028 $ 67,088 $ 48,527
Europe . . . . . . . . . . . . . . . . . . 21,050 12,852 7,885
--------- ---------- ---------
Total. . . . . . . . . . . . . . . . . . $ 97,078 $ 79,940 $ 56,412
--------- ---------- ---------
--------- ---------- ---------
Operating profit (loss):
United States. . . . . . . . . . . . . . . $ 3,465 $ 4,818 $ (2,026)
Europe . . . . . . . . . . . . . . . . . . 2,243 1,187 420
--------- ---------- ---------
Total. . . . . . . . . . . . . . . . . . $ 5,708 $ 6,005 $ (1,606)
--------- ---------- ---------
--------- ---------- ---------
Identifiable assets:
United States. . . . . . . . . . . . . . . $ 50,610 $ 47,541 $ 38,941
Europe . . . . . . . . . . . . . . . . . . 14,966 8,862 5,616
Adjustments/eliminations . . . . . . . . . (6,744) (4,515) (3,229)
--------- ---------- ---------
Total. . . . . . . . . . . . . . . . . . $ 58,832 $ 51,888 $ 41,328
--------- ---------- ---------
--------- ---------- ---------
Export sales from United States, primarily to
the Pacific Rim, Africa and Canada . . . . $ 5,071 $ 2,827 $ 2,537
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
-41-
<PAGE>
BRITE VOICE SYSTEMS, INC.
-------------------
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Balance at Charged to Balance
beginning costs and at end of
Description of period expense Deductions period
- ----------- ---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1995 . . . $ 844 $ 317 $ 680 $ 481
Year ended December 31, 1994 . . . $ 453 $ 548 $ 157 $ 844
Year ended December 31, 1993 . . . $ 252 $ 300 $ 99 $ 453
</TABLE>
<TABLE>
<CAPTION>
Balance at Charged to Balance
beginning costs and at end of
Description of period expense Deductions period
- ----------- ---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Allowance for obsolete inventory:
Year ended December 31, 1995 . . . $ 666 635 $ 232 $ 1,069
Year ended December 31, 1994 . . . $ 639 $ 393 $ 366 $ 666
Year ended December 31, 1993 . . . $ 408 $ 273 $ 42 $ 639
</TABLE>
-42-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
-43-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The information concerning Directors of the Company required by Item 401 of
Regulation S-K will be contained in the Company's 1996 Proxy Statement under the
heading "Election of Directors", and is incorporated herein by reference.
EXECUTIVE OFFICERS
The information concerning executive officers of the Company required by
this Item is set forth in Item 1 hereof under the heading "Executive Officers".
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 402 of Regulation S-K will be contained in
the Company's 1996 Proxy Statement under the headings "Compensation of Directors
and Executive Officers", "Compensation Committee Interlocks and Insider
Participation", "Report of Compensation Committee on Executive Compensation" and
"Company Performance", and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 403 of Regulation S-K will be contained in
the Company's 1996 Proxy Statement under the heading "Common Stock Ownership",
and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 404 of Regulation S-K will be contained in
the Company's 1996 Proxy Statement under the heading "Compensation Committee
Interlocks and Insider Participation", and is incorporated herein by reference.
-44-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements. The financial statements, notes and
independent auditors' reports described in Item 8, to which
reference is hereby made.
(2) Financial Statement Schedules. The financial statement schedules
described in Item 8, to which reference is hereby made.
(3) Exhibits. The following exhibits:
Exhibit No. Description
- ----------- ------------
2.1 Agreement and Plan of Reorganization and Merger dated May 24,
1995 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 (incorporated by
reference to Annex A to the Company's definitive proxy statement
dated July 17, 1995).
2.2 Agreement and Plan of Reorganization and Merger dated March 31,
1995 by and among Brite Voice Systems, Inc., Touch-Talk
Incorporated, Michael D. Heinrich and Laurence Potter, III.
3.1 Restated Articles of Incorporation of the Registrant
(incorporated by reference to the Exhibit filed with Registrant's
Registration Statement on Form S-1, No. 33-29750).
3.2 Bylaws of the Registrant (incorporated by reference to the
Exhibit filed with Registrant's Registration Statement on Form
S-1, No. 33-29750).
10.1 Registrant's 1984 Incentive Stock Option Plan, as amended
(incorporated by reference to the Exhibit filed with Registrant's
Annual Report on Form 10-K for the year ended December 31, 1991).
10.2 1993 Amendments to the Registrant's 1984 Incentive Stock Option
Plan (incorporated by reference to the Exhibit filed with
Registrant's Annual Report filed on Form 10-K for the year ended
December 31, 1993).
10.3 Aircraft Lease Agreement between the Registrant and Brannan
Leasing, Inc. dated November 10, 1992 (incorporated by reference
to the Exhibit filed with the Registrant's Annual Report on Form
10-K for the year ended December 31, 1992).
-45-
<PAGE>
10.4 Registrant's 1990 Non-Employee Director Stock Option Plan dated
February 6, 1990 (incorporated by reference to the Exhibit filed
with Registrant's Annual Report on Form 10-K for the year ended
December 31, 1989).
10.5 Agreement between the Registrant and The Telephone Connection,
Inc. dated July 16, 1992 (incorporated by reference to the
Exhibit filed with the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992). Confidential treatment
has been granted with respect to a portion of the Exhibit.
10.6 June 1, 1994 Amendment to Agreement between the Registrant and
The Telephone Connection, Inc. (incorporated by reference to the
Exhibit filed with the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994). Confidential treatment
has been granted with respect to a portion of the Exhibit.
10.7 Lease covering the Company's call center facility at 9229 E. 37th
N., Wichita, Kansas, dated April 22, 1994 (incorporated by
reference to the Exhibit filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994).
10.8 December 22, 1994 Amendment to Lease covering the Company's call
center facility (incorporated by reference to the Exhibit filed
with the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994).
10.9 Employment Agreement between the Registrant and David F. Hemmings
dated September 8, 1993 (incorporated by reference to the Exhibit
filed with the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993).
10.10 Non-Statutory Stock Option Agreement between the Registrant and
David F. Hemmings dated September 8, 1993 (incorporated by
reference to the Exhibit filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994).
Confidential treatment has been granted with respect to a portion
of the Exhibit.
10.11 Lease covering the Company's facility at 40 Shawmut Road, Canton,
Massachusetts, dated March 15, 1993 (incorporated by reference to
the Exhibit filed with the Registrant's Annual Report on Form
10-K for the year ended December 31, 1993).
10.12 Registrant's 1994 Stock Option Plan (incorporated by reference to
the Exhibit filed with the Registrant's Annual Report on Form
10-K for the year ended December 31, 1994).
10.13 Registrant's 1994 Employee Stock Purchase Plan (incorporated by
reference to the Exhibit filed with the Registrant's Registration
Statement on Form S-8, No. 33-80478).
-46-
<PAGE>
10.14 Stock Purchase Agreement between the Registrant and Perry E.
Esping dated March 28, 1990 (incorporated by reference to the
Exhibit filed with the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1990).
10.15 Employment agreement dated August 9, 1995, between the Registrant
and Stephen B. Rockoff.
10.16 Employment agreement dated August 9, 1995, between the Registrant
and Scott A. Maltz.
10.17 Employment agreement dated August 9, 1995, between the Registrant
and Alan C. Maltz.
10.18 Employment agreement dated March 31, 1995, between the Registrant
and Laurence W. Potter, III.
10.19 Employment agreement dated March 31, 1995, between the Registrant
and Michael D. Heinrich.
22.1 Subsidiaries of Brite.
23.1 Consent of Arthur Andersen LLP.
99.1 Opinion of Ernst & Young LLP.
(b) Reports on Form 8-K.
The Registrant did not file any reports on Form 8-K during the
last quarter of the period covered by this report.
-47-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
BRITE VOICE SYSTEMS, INC.
Dated: February 22, 1996 By: /s/ Stanley G. Brannan
------------------------------
Stanley G. Brannan
Chief Executive Officer
/s/ Glenn A. Etherington
------------------------------
Glenn A. Etherington
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the capacities and
on the dates indicated:
Signature Title Date
- -------------------------- -------------------------- ------------------
/s/ Stanley G. Brannan President, Chief Executive 2/22/96
- -------------------------- -------------------
Stanley G. Brannan Officer and Director
/s/ Perry E. Esping Director 2/22/96
- -------------------------- -------------------
Perry E. Esping
/s/ C. MacKay Ganson, Jr. Director 2/22/96
- -------------------------- -------------------
C. MacKay Ganson, Jr.
/s/ David S. Gergacz Director 2/22/96
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David S. Gergacz
/s/ John F. Kelsey, III Director 2/22/96
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John F. Kelsey, III
/s/ Alan C. Maltz Director 2/22/96
- -------------------------- -------------------
Alan C. Maltz
/s/ Scott A. Maltz Director 2/22/96
- -------------------------- -------------------
Scott A. Maltz
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INDEX TO EXHIBITS
Exhibit No. Description
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2.1 Agreement and Plan of Reorganization and Merger dated May 24,
1995 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 (incorporated by
reference to Annex A to the Company's definitive proxy statement
dated July 17, 1995).
2.2 Agreement and Plan of Reorganization and Merger dated March 31,
1995 by and among Brite Voice Systems, Inc., Touch-Talk
Incorporated, Michael D. Heinrich and Laurence Potter, III.
3.1 Restated Articles of Incorporation of the Registrant
(incorporated by reference to the Exhibit filed with Registrant's
Registration Statement on Form S-1, No. 33-29750).
3.2 Bylaws of the Registrant (incorporated by reference to the
Exhibit filed with Registrant's Registration Statement on Form
S-1, No. 33-29750).
10.1 Registrant's 1984 Incentive Stock Option Plan, as amended
(incorporated by reference to the Exhibit filed with Registrant's
Annual Report on Form 10-K for the year ended December 31, 1991).
10.2 1993 Amendments to the Registrant's 1984 Incentive Stock Option
Plan (incorporated by reference to the Exhibit filed with
Registrant's Annual Report filed on Form 10-K for the year ended
December 31, 1993).
10.3 Aircraft Lease Agreement between the Registrant and Brannan
Leasing, Inc. dated November 10, 1992 (incorporated by reference
to the Exhibit filed with the Registrant's Annual Report on Form
10-K for the year ended December 31, 1992).
10.4 Registrant's 1990 Non-Employee Director Stock Option Plan dated
February 6, 1990 (incorporated by reference to the Exhibit filed
with Registrant's Annual Report on Form 10-K for the year ended
December 31, 1989).
10.5 Agreement between the Registrant and The Telephone Connection,
Inc. dated July 16, 1992 (incorporated by reference to the
Exhibit filed with the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992). Confidential treatment
has been granted with respect to a portion of the Exhibit.
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<PAGE>
10.6 June 1, 1994 Amendment to Agreement between the Registrant and
The Telephone Connection, Inc. (incorporated by reference to the
Exhibit filed with the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994). Confidential treatment
has been granted with respect to a portion of the Exhibit.
10.7 Lease covering the Company's call center facility at 9229 E. 37th
N., Wichita, Kansas, dated April 22, 1994 (incorporated by
reference to the Exhibit filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994).
10.8 December 22, 1994 Amendment to Lease covering the Company's call
center facility (incorporated by reference to the Exhibit filed
with the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994).
10.9 Employment Agreement between the Registrant and David F. Hemmings
dated September 8, 1993 (incorporated by reference to the Exhibit
filed with the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993).
10.10 Non-Statutory Stock Option Agreement between the Registrant and
David F. Hemmings dated September 8, 1993 (incorporated by
reference to the Exhibit filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994).
Confidential treatment has been granted with respect to a portion
of the Exhibit.
10.11 Lease covering the Company's facility at 40 Shawmut Road, Canton,
Massachusetts, dated March 15, 1993 (incorporated by reference to
the Exhibit filed with the Registrant's Annual Report on Form
10-K for the year ended December 31, 1993).
10.12 Registrant's 1994 Stock Option Plan (incorporated by reference to
the Exhibit filed with the Registrant's Annual Report on Form
10-K for the year ended December 31, 1994).
10.13 Registrant's 1994 Employee Stock Purchase Plan (incorporated by
reference to the Exhibit filed with the Registrant's Registration
Statement on Form S-8, No. 33-80478).
10.14 Stock Purchase Agreement between the Registrant and Perry E.
Esping dated March 28, 1990 (incorporated by reference to the
Exhibit filed with the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1990).
10.15 Employment agreement dated August 9, 1995, between the Registrant
and Stephen B. Rockoff.
10.16 Employment agreement dated August 9, 1995, between the Registrant
and Scott A. Maltz.
10.17 Employment agreement dated August 9, 1995, between the Registrant
and Alan C. Maltz.
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10.18 Employment agreement dated March 31, 1995, between the Registrant
and Laurence W. Potter, III.
10.19 Employment agreement dated March 31, 1995, between the Registrant
and Michael D. Heinrich.
22.1 Subsidiaries of Brite.
23.1 Consent of Arthur Andersen LLP.
99.1 Opinion of Ernst & Young LLP.
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Exhibit 2.2
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER, is entered into this
31st day of March, 1995 (this "Agreement"), by and among BRITE VOICE SYSTEMS,
INC., 7309 East 21st Street North, Wichita, Kansas 67206, a Kansas corporation
("Brite"); TOUCH-TALK, INCORPORATED, 1325 Capital Parkway, Suite 109,
Carrollton, Texas 75006, a Texas corporation ("Touch-Talk"); and Michael D.
Heinrich and Laurence W. Potter, III (each individually a "Shareholder" and
collectively the "Shareholders").
R E C I T A L S
A. The Shareholders are the owners of all of the issued and outstanding
shares of capital stock of Touch-Talk.
B. Brite, Touch-Talk, and the Shareholders deem it advisable and for
their mutual benefit that Touch-Talk be merged into Brite upon the terms and
conditions hereinafter set forth (such transaction being hereinafter called the
"Merger"); and
C. The transaction 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, Brite,
Touch-Talk and the Shareholders have agreed, and do hereby agree, as follows:
ARTICLE I
1.1 THE MERGER. In accordance with the provisions of this Agreement,
the Kansas General Corporation Code and the Texas Business Corporation Act,
Touch-Talk shall be merged with and into Brite. The closing of the Merger
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 Merger 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
closing being referred to herein as the "Closing Date"). Immediately after
the satisfaction or waiver of all of the conditions specified in Articles
VII, VIII and IX of this Agreement, Brite and Touch-Talk shall execute the
Certificate of Merger, in the form set forth as Exhibit A hereto, and the
parties shall also execute any other documents or certificates as may be
required by
<PAGE>
the laws of Kansas and Texas to effectuate the filing thereof, and on the
Closing Date shall cause the same to be filed in the offices of the Secretary
of State of Kansas and the Secretary of State of Texas. As used in this
Agreement, the term "Effective Time" means the time at which such filings are
made.
1.2 BOARD OF DIRECTORS APPROVAL AND RECOMMENDATION. Each of Brite and
Touch-Talk represents that its Board of Directors has (i) unanimously determined
that this Agreement and the transactions contemplated hereby, including the
Merger, are fair to and in the best interest of each such company's
stockholders, and (ii) unanimously approved this Agreement and the transactions
contemplated hereby, including the Merger.
1.3 TOUCH-TALK SHAREHOLDERS APPROVAL. The Shareholders, being the holders
of all of the outstanding Touch-Talk common shares ("Touch-Talk Common"), shall
promptly take all such actions as are necessary under Texas law to approve and
adopt this Agreement.
ARTICLE II
2.1 DEFINITIONS.
(a) "Brite Common" shall mean the common stock, no par value, of
Brite.
(b) "Principal Shareholder" shall mean Michael D. Heinrich.
(c) "Proportionate Share" shall mean, with respect to each of the
Shareholders, the percentage set opposite such individual's name on the
signature page hereof.
2.2 CONVERSION. At the Effective Time, each share of Touch-Talk Common
then outstanding shall thereupon and without more be converted into 300 shares
of Brite Common with the number of shares of Brite Common to be received by each
Shareholder to be his Proportionate Share of the aggregate number of shares to
be delivered by Brite under this Agreement.
2.3 EFFECT OF CONVERSION. At the Effective Time, the holders of
certificates for shares of Touch-Talk Common shall cease to have any rights as
stockholders of Touch-Talk and their sole rights shall pertain to the shares of
Brite Common into which their shares of Touch-Talk Common shall have been
converted by the Merger. After the Effective Time, each Shareholder of a
certificate or certificates for shares of Touch-Talk Common, upon surrender of
the same duly transmitted to UMB Bank, National Association, Kansas City,
Missouri, shall be entitled to receive, in exchange therefor, a certificate or
certificates representing the shares of
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<PAGE>
Brite Common into which such Shareholder's shares of Touch-Talk Common shall
have been converted by the Merger. Pending such surrender and exchange, such
Shareholder's certificate or certificates for shares of Touch-Talk Common
shall be deemed to evidence the full number of shares of Brite Common into
which such shares of Touch-Talk Common shall have been converted by the
Merger.
ARTICLE III
3.1 EFFECT OF THE MERGER. At the Effective Time, the effect shall be as
provided by the applicable provisions of the laws of Kansas. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time, the
separate existence of Touch-Talk 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
Touch-Talk, and subject to all the restrictions, disabilities and duties of each
of Brite and Touch-Talk; all property, real, personal and mixed, and all debts
due to either of Brite or Touch-Talk, on whatever account, shall be vested in
Brite; all obligations of or due from each of Brite and Touch-Talk 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 Touch-Talk shall not revert or in any way be impaired by
reason of the Merger.
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.
3.4 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties hereto
that the Merger (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 consider or be
advised that any further deeds, assignments or assurances in law or any other
things necessary, desirable or proper to vest, perfect or confirm, of record or
otherwise, in Brite, the title to any property or rights of Touch-Talk acquired
or to be acquired by reason of, or as a result of the Merger, Brite
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and Touch-Talk agree that the proper directors and officers of Touch-Talk
last in office shall and will execute and deliver all such proper deeds,
assignments and assurances in law and do all things necessary, 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 Touch-Talk 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 Touch-Talk Common which appears opposite his
name on the signature page hereof 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 Merger.
(ii) He has received and carefully read the SEC Filings and has
reviewed the same with the accountants for Touch-Talk and the
Shareholders, Grant Thornton, and the attorneys for Touch-Talk and the
Shareholders, Hazleton, Laner & Batson, and Stinson, Mag & Fizzell
(such accountants and attorneys being herein collectively referred to
as the "Representatives"), and the Representatives have counseled with
the Shareholder with respect to all aspects of the Merger and have
assisted the Shareholder in negotiating the terms of this Agreement
and the Employment Agreement, the Confidentiality and Noncompete
Agreement, and the Stock Option Agreement proposed to be entered into
between the Shareholder and Brite (except that the Representatives
have not advised the Shareholder with respect to the fairness, from a
financial point of view, of the consideration being received by him in
the Merger.
(iii) He has been given the unrestricted opportunity to ask
questions of Brite and has received satisfactory answers concerning
the terms and conditions of the Merger and to obtain such additional
information which Brite possesses or can acquire without unreasonable
effort or expense that is necessary to verify the
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<PAGE>
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 is material to his or a reasonable investor's decision to enter
into this Agreement, and he is capable of evaluating the fairness and
adequacy of the consideration to be received by him hereunder, and
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 (the "Act") in reliance upon the
exemption for nonpublic offerings provided by Section 4(2) of the Act,
and that the representations and warranties provided by him in this
Agreement are being furnished in order to allow Brite to verify that
the issuance to him of the shares of Brite Common in connection with
the Merger 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
Merger.
(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 Merger, which will give effect to the restrictive
legend set forth in Section 10.1(b) hereof.
(ix) In entering into this Agreement, he has relied only on the
information set forth in the SEC Filings and, without limiting the
generality of the foregoing, he has not relied on any written or oral
communication prepared by any officer, employee, or agent of Brite
which is in any way inconsistent with the information set forth in
said SEC Filings.
(x) Each Shareholder covenants that, within five days following
the execution of this Agreement, he shall take all such actions as are
necessary under Texas law to approve and adopt this Agreement.
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(b) The Principal Shareholder represents, warrants, and covenants
that, except as disclosed in the disclosure schedule (the "Touch-Talk
Disclosure Schedule"), heretofore delivered to Brite and initialed or
signed for identification by the President of Touch-Talk, which Disclosure
Schedule shall, for each item disclosed, identify specifically the
representation, warranty or covenant to which it relates:
(i) Touch-Talk is a corporation duly organized, validly existing
and in good standing under the laws of Texas. Touch-Talk has an
authorized capital of 1,000 shares of Touch-Talk Common, of which, as
of the date of this Agreement, 500 shares are issued and outstanding.
All of the outstanding shares of Touch-Talk Common are validly issued,
fully paid and nonassessable.
(ii) Touch-Talk 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.
(iii) Touch-Talk 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 Touch-Talk
Disclosure Schedule under "Touch-Talk Foreign Qualifications", being
all jurisdictions where the failure to so qualify might have a
material and adverse affect on Touch-Talk.
(iv) Touch-Talk does not own 50% or more of the effective voting
power or a 50% or greater equity interest in any entity.
(v) The balance sheet as of December 31, 1994 (the "Touch-Talk
Balance Sheet"), and the income statement of Touch-Talk for the twelve
month period ended December 31, 1994, present fairly, on a tax basis,
the financial position of Touch-Talk at December 31, 1994, and the
results of its operations for the twelve months then ended. Touch-
Talk has no liabilities, whether absolute, accrued, contingent or
otherwise, other than (1) liabilities adequately provided for in the
Touch-Talk Balance Sheet, (2) liabilities incurred in the ordinary
course of business since the Touch-Talk Balance Sheet, and (3)
liabilities disclosed in the Touch-Talk Disclosure Schedule.
(vi) Since the date of the Touch-Talk Balance Sheet, Touch-Talk
has conducted its business only in the ordinary and usual course, and
there has been no materi-
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al adverse change in the condition, financial or other, of
Touch-Talk and, to the best of his knowledge, 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.
(vii) Since the date of the Touch-Talk Balance Sheet, the
business, properties and assets of Touch-Talk have not been materially
and adversely affected in any way as the result of any strike, fire,
explosion, earthquake, disaster, accident, or other similar event or
casualty.
(viii) Except for property acquired or disposed of in the
ordinary course of business since the date of the Touch-Talk Balance
Sheet and property subject to lease agreements, the Touch-Talk Balance
Sheet reflects substantially all of the assets and property used by
Touch-Talk in its business, and Touch-Talk has good and marketable
title, free and clear of any lien, claim, encumbrance, restriction,
charge or equity, to substantially all property used by it in its
business. All of the properties used by Touch-Talk in its business
are in satisfactory operating condition except for maintenance and
repairs necessary in the ordinary course of operations.
(ix) Except for transactions in connection with the making and
performing of this Agreement and transactions expressly permitted by
this Agreement, since the date of the Touch-Talk Balance Sheet, Touch-
Talk has not 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 Touch-Talk Balance Sheet, (B)
current liabilities incurred since the date of the Touch-Talk 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 its assets except in the ordinary course of business; (vii)
suffered any extraordinary losses or waived any right of substantial
value; (viii)
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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 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 Touch-Talk Balance Sheet does not include among the
assets of Touch-Talk 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
Touch-Talk 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 return of
Touch-Talk is currently being examined by the Internal Revenue
Service; and (iii) the Touch-Talk Balance Sheet includes materially
adequate provision for all taxes, assessments, fees and charges for
all periods through the date thereof.
(xii) There is no litigation, action, suit, investigation, claim
or proceeding pending, or to the best knowledge of the Principal
Shareholder, threatened against or affecting Touch-Talk, 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. Touch-Talk is, to the best knowledge of the
Principal Shareholder 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 Touch-Talk. Touch-Talk is not, to the best
knowledge of the Principal Shareholder, 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 of Touch-
Talk" in the Touch-Talk Disclosure Schedule is a full and complete
list of (i) all outstanding orders from customers of Touch-Talk as of
a date not
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more than five 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 (1) below, as at the date hereof, in respect of Touch-Talk,
each executory contract or agreement including, without limiting the
generality of the foregoing:
(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 secured exceeds $5,000;
(3) All management or employee contracts or collective
bargaining agreements;
(4) All notes, loan agreements, guarantees and other
evidences of indebtedness of Touch-Talk together with evidences
of all forms of security given by Touch-Talk 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 Touch-Talk in each of fiscal
years 1993 and 1994;
(6) All contracts or agreements with employees, directors,
officers, consultants or Shareholders;
(7) All patent licenses and contracts and agreements
related thereto;
(8) All contracts and agreements related to trade secrets;
(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.
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(xiv) Under the heading "Owned and Leased Real Estate of Touch-
Talk" in the Touch-Talk Disclosure Schedule is a full and complete
list of all real properties owned or leased by Touch-Talk.
(xv) Under the heading "Patents and Trademarks of Touch-Talk" in
the Touch-Talk Disclosure Schedule is a full and complete list, as of
the date hereof, of (i) all patents owned, or patent applications
filed by, Touch-Talk and (ii) all trademarks, trade names and
copyrights owned or used by Touch-Talk. Touch-Talk owns or possesses
substantially adequate licenses or other rights to use all patents,
trademarks, trade names, trade secrets and copyrights used in its
business, and the same are sufficient to conduct its business
substantially as now conducted. All patents, patent applications,
trade secrets and rights to inventions owned or held by any officer,
director or employee of Touch-Talk relating to its business in any
manner, and to which Touch-Talk is entitled, have been, or at the
Effective Time will have been, duly and effectively transferred to
Touch-Talk or to Brite; and, to the best knowledge of the Principal
Shareholder, the operations of Touch-Talk do not infringe, and no one
has asserted to Touch-Talk that such operations do infringe, the
patents, trademarks, trade secrets, copyrights, or other rights of
anyone.
(xvi) Under the heading "Insurance Policies of Touch-Talk" in
the Touch-Talk Disclosure Schedule is a list of each of Touch-Talk'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. Touch-Talk has not
within the past three years received any notice of cancellation of any
insurance agreement.
(xvii) Any information contained in the Touch-Talk Disclosure
Schedule, and any other information furnished to Brite by Touch-Talk
at any time prior to the Effective Time, shall not contain any untrue
statement of a material fact and, taken together, 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
Touch-Talk Disclosure Schedule and furnished by Touch-Talk at the
request of Brite or otherwise are true and correct copies, and there
are no amendments or modifications thereto except as set forth
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in the schedules in which such documents are incorporated.
(xix) Touch-Talk has not incurred, nor will it incur, any
liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
(xx) The execution of this Agreement by Touch-Talk 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 Touch-Talk, or any note, debt instrument,
security agreement or mortgage, or any other agreement or commitment
to which Touch-Talk is a party or by which any of its assets or
properties are bound, (ii) 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 Touch-
Talk, and (iii) will not result in the violation of any judgment,
order, decree, law, statute, ordinance, rule or regulation applicable
to Touch-Talk or any of its properties.
(xxi) Touch-Talk 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 Principal Shareholder, in respect of
any other agreement or commitment binding upon Touch-Talk. Each of
the obligations shown on the Touch-Talk Disclosure Schedule is a
legal, binding, and enforceable obligation of Touch-Talk.
(xxii) Except for the filing of appropriate documents to effect
the Merger, 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 Touch-Talk
in connection with the execution and delivery of this Agreement by
Touch-Talk, the performance by Touch-Talk 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
Touch-Talk.
(xxiii) No Shareholder (nor any ancestor, sibling, descendant or
spouse of any of such persons, or any
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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 that furnished or sold, or furnishes
or sells, services or products that Touch-Talk furnishes or sells,
or proposes to furnish or sell, or (ii) any interest in any entity
that purchases from or sells or furnishes to, Touch-Talk, any goods
or services.
(xxiv) The execution, delivery and performance by Touch-Talk 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 Touch-Talk. This Agreement has been
duly executed and delivered by Touch-Talk and constitutes a valid and
binding obligation of Touch-Talk.
(xxv) (1) Under the heading "Employee Benefit Plans" in the
Touch-Talk 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
or former employment or executive compensation or
severance agreements, written or otherwise, for
the benefit of, or relating to, any current or
former employee of Touch-Talk or any trade or
business (whether or not incorporated) that is a
member or that is under common control with Touch-
Talk (an "ERISA Affiliate") (collectively,
"Employee Plans").
(2) (a) Each Touch-Talk Employee Plan has been
maintained in substantial compliance with its
terms, and all material contributions, premiums or
other payments due from Touch-Talk to (or under)
any such Touch-Talk Employee Plan have been fully
paid or adequately provided for on the Touch-Talk
Balance Sheet as of the date thereof; (b) there
has been no amendment, written interpretation or
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announcement (whether or not written) by Touch-
Talk with respect to or change in employee
participation or coverage under, any Touch-Talk
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 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.
(xxvi) Touch-Talk has made available to Brite complete, accurate
and current copies of all Touch-Talk 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 Touch-Talk
Employee Plans at any time within the three-year period
ending on the date hereof.
(xxvii) Each Shareholder has received from Brite copies of the SEC
Filings and has been given the opportunity to ask
questions of, and receive answers from, Brite, concerning
the terms and conditions of this Agreement and the Merger
and to obtain any additional information, to the extent
either available to Brite or obtainable without
unreasonable effort or expense, that is necessary to
verify the accuracy of the information contained in the
SEC Filings.
ARTICLE V
5.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF BRITE. Brite represents,
warrants and covenants that, except as set forth in the disclosure schedule (the
"Brite Disclosure Schedule") heretofore delivered to Touch-Talk and initialed or
signed for
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identification by the President of Brite, which Brite 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 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, 7,939,523 shares are issued and outstanding,
and no shares are treasury shares; 1,010,155 shares are subject to
outstanding stock options granted to Brite's employees or directors, 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) 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.
(c) Brite has delivered to each of the Shareholders copies of its
Annual Report to Stockholders for the year ended December 31, 1993,
together with copies of its report on Form 10-K for such year and its proxy
statement relating to its annual meeting of stockholders, which was held on
May 10, 1994, as well as all other reports filed with the Securities and
Exchange Commission (the "SEC") since January 1, 1994 (hereinafter
collectively referred to as the "SEC Filings"). The audited consolidated
balance sheet of Brite as at December 31, 1993, and the audited
consolidated statements of income, stockholders' equity, and cash flows of
Brite for the year ended December 31, 1993, including the related notes
(the audited consolidated balance sheet being herein referred to as the
"Brite Balance Sheet") and the unaudited consolidated balance sheet (the
"Unaudited Balance Sheet") of Brite as at September 30, 1994, and the
unaudited consolidated statements of income, stockholders' equity, and cash
flows of Brite for the nine months ended September 30, 1993, 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 Unaudited Balance Sheet and the unaudited consolidated statements of
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income, stockholders' equity, and cash flows for the nine-month period
ended September 30, 1994). The SEC Filings complied with the requirements
of the Securities Exchange Act of 1934 (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,
1994, no event has occurred which was required to be reported on Form 8-K
and which was not so reported.
(d) Except as otherwise disclosed in the unaudited balance sheet of
Brite as at September 30, 1994, 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.
(e) Brite has not incurred, nor will it incur, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
(f) 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 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.
(g) Except for (i) the filing of appropriate documents to effect the
Merger, and (ii) 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
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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 a whole.
(h) 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.
ARTICLE VI
6.1 FURTHER COVENANTS OF THE PRINCIPAL SHAREHOLDER. The Principal
Shareholder covenants that, from the date of this Agreement to the Effective
Time:
(a) Touch-Talk 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: (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;
(vii) purchase or redeem any shares, notes or other securities or make any
other distribution to stockholders; (viii) 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 Touch-Talk; (xii) make any commitments for capital
improvements or materially alter standing commitments for capital
improvements except as set forth in the Touch-Talk Disclosure Schedule
under the heading "Contracts and Commitments of Touch-Talk"; (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.
(b) During normal business hours, Touch-Talk shall permit Brite (and
its auditors, counsel and other representa-
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tives) to examine Touch-Talk's 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.
(c) Touch-Talk shall use its commercially reasonable efforts to
furnish or cause to be furnished to Brite, and Touch-Talk shall execute and
deliver, or cause any of its respective stockholders, 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 Touch-Talk and to cause the same to pass to
Brite at the time the merger becomes effective.
(d) Between the date of this Agreement and the Effective Time (or
earlier termination of this Agreement pursuant to Sections 10.2, 10.3 or
10.4 hereof), neither any Shareholder, nor any of its officers, employees,
representatives or agents 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 Touch-Talk other than in the
ordinary course of business, sale of shares of capital stock of Touch-Talk
or similar transaction involving Touch-Talk. 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,
Touch-Talk shall advise Brite of such inquiry, request, proposal or contact
and provide Brite all relevant information thereabout.
ARTICLE VII
7.1 CONDITIONS TO THE OBLIGATIONS OF TOUCH-TALK AND THE SHAREHOLDERS.
The agreements by Touch-Talk and the Shareholders to be performed by them 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, subject to any transactions which may have taken place
after the date of this Agreement and contemplated or permitted by this
Agreement. Brite shall have performed the obligations which are required
hereunder to be performed by it at or prior to the Effective Time. Brite
shall have delivered to
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Touch-Talk a certificate of Brite, dated the Closing Date and signed by
the President 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 all obligations
and complied with all covenants required by this Agreement to be performed
and complied with by it prior to the Closing Date.
(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 Merger.
(c) Triplett, Woolf & Garretson, LLP, counsel for Brite, shall have
furnished its opinion to Touch-Talk 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 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 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
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Bylaws, (B) cause a default, or give rise to any right of termination,
cancellation or acceleration, under any of the terms, conditions or
provisions of any note, bond, lease, mortgage, indenture, license or
other instrument or agreement known to it by which Brite or any of
its properties or assets are or may be bound, or (C) violate the
provisions of any law, statute, rule or regulation, or of any order,
writ, judgment, injunction or decree, 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 (1) 7,939,523 shares are issued and outstanding, and
no shares are treasury shares, (2) 1,010,155 shares are subject to
outstanding stock options, (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 Touch-Talk Common, as
contemplated by the Agreement, are duly authorized and will be, from
and after the Effective Time, validly issued, fully paid and
nonassessable.
(v) Upon the completion of the filings contemplated by Section
1.1 of the Agreement, the outstanding shares of Touch-Talk Common will
be converted into and become shares of Brite Common.
(vi) The Merger constitutes a tax-free reorganization within the
meaning of Section 368(a)(1) of the Code.
(vii) Upon the filing of the Certificate of Merger, the Merger
shall be effective under the laws of the State of Kansas.
(d) The Employment Agreements between Brite and each of Michael D.
Heinrich and Laurence W. Potter, III shall have been executed and delivered
and be in full force and effect.
ARTICLE VIII
8.1 CONDITIONS TO THE OBLIGATIONS OF BRITE. The agreements by Brite to be
performed by it shall be subject to the following conditions:
(a) The representations, warranties, and covenants of the Principal
Shareholder set forth in Article IV hereof, and
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the Shareholders in Section 4.1(a) 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, subject to any
transactions which may have taken place after the date of this Agreement
and contemplated or permitted by this Agreement. Touch-Talk shall have
performed all of the obligations which are required hereunder to be
performed by it at or prior to the Effective Time. The Principal
Shareholder shall have delivered to Brite a certificate, dated the Closing
Date and signed by the Principal 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) the
Principal Shareholder has performed all obligations and complied with all
covenants required by this Agreement to be performed and complied with by
him prior to the Closing Date.
(b) There shall not have occurred (i) any material adverse change
since the date of the Touch-Talk Balance Sheet in the business, properties,
results of operations, or financial condition of Touch-Talk, or (ii) any
loss or damage to any of the properties of, or assets of, Touch-Talk, which
will materially affect or impair its ability to conduct the business now
being conducted by it after the Merger.
(c) Hazleton, Laner and Batson, counsel for Touch-Talk and the
Shareholders, shall have furnished its opinion to Brite as at the Effective
Time to the effect that, except as disclosed in the Touch-Talk Disclosure
Schedule:
(i) Touch-Talk 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 Touch-Talk 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 Touch-Talk. The Agreement has been
executed and delivered by Touch-Talk and the Shareholders and
constitutes the valid and binding obligation of Touch-Talk 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
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court's exercise of its equitable powers, including its power to order
specific performance.
(iii) Neither the execution and delivery of this Agreement, nor
the performance of the terms and provisions thereof and consummation
of the transactions contemplated thereby, in each case by Touch-Talk,
will (A) conflict with or result in a default under any of the terms
and provisions of its Articles of Incorporation or Bylaws, (B) cause a
default, or give rise to any right of termination, cancellation or
acceleration, under any of the terms, conditions or provisions of any
note, bond, lease, mortgage, indenture, license or other instrument or
agreement known to it, or (C) violate the provisions of any law,
statute, rule or regulation, or of any order, writ, judgment,
injunction or decree, applicable to Touch-Talk or any of its
properties or assets and of which it has knowledge.
(iv) Touch-Talk is authorized to have outstanding 1,000 shares
of Touch-Talk Common, of which, as of the date of this Agreement, 500
shares are issued and outstanding. All of the outstanding shares of
Touch-Talk Common are validly issued, fully paid and nonassessable.
(v) To the best of its knowledge, Touch-Talk 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.
(vi) To the best of its knowledge, except as disclosed in the
Touch-Talk Disclosure Schedule under the heading "Litigation of Touch-
Talk", there is no litigation, action, suit, investigation, claim or
proceeding pending or threatened against or affecting Touch-Talk, 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.
(d) The Employment Agreements and the Confidentiality and Noncompete
Agreements between Brite and each of Michael D. Heinrich and Laurence W.
Potter, III shall have been executed and delivered and be in full force and
effect.
ARTICLE IX
9.1 FURTHER CONDITIONS TO THE OBLIGATIONS OF TOUCH-TALK, THE SHAREHOLDERS
AND BRITE. The agreements by Brite, Touch-Talk and
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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
the 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 Touch-Talk 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 Touch-Talk to consummate the transactions
contemplated hereby.
(c) The Shareholders of Touch-Talk shall have approved the Merger
contemplated by this Agreement by the requisite vote and Touch-Talk shall
have furnished Brite (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 Shareholders entitled to vote thereon approving this
Agreement. Brite shall have furnished Touch-Talk a certified copy of the
resolutions duly adopted by its Board of Directors.
(d) 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
Touch-Talk to continue unimpaired immediately following the Effective Time,
shall have been obtained.
(e) No stop order or other proceeding to prevent the issuance of the
Brite Common 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
Securities Act, in reliance upon
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an exemption from such registration provided in the Securities Act and
may not be offered, sold or transferred by the Shareholders unless (i)
they are registered under the Securities Act, (ii) there is presented
to Brite an opinion of counsel 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.
(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 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. It is understood that the present intention of
the Shareholders to hold the shares of Brite Common for investment may change
and that one or more of the Shareholders may elect at some future date to
dispose of a portion thereof. To facilitate any such disposition, Brite agrees
that:
(a) If, at any time within one year after the Effective Time, Brite
proposes to register under the Securities Act (on a form on which inclusion
of common stock of Brite to be sold by stockholders of Brite generally is
permissible) any common stock of Brite (a "registration"), Brite will give
the Shareholders at least 30 days prior written notice of the proposed
filing of its registration statement and will, if requested in writing by
any of the Shareholders within 30 days after such notice, use its best
efforts to include in its registration statement on form S-3 or such other
comparable form as may be prescribed by the SEC for the registration of
securities to be offered on a delayed or continuous basis the shares of
Brite Common of the Shareholders; provided, however, that Brite shall not
be obligated to register pursuant to all such registration statements more
than forty percent in the aggregate of the shares of Brite Common received
under this Agreement by the Shareholders. No Shareholder may include in
such registration statement more than forty percent of the shares of Brite
Common which such Shareholder shall have received pursuant to this
Agreement. If Brite receives a request to register more than the above
mentioned forty percent of the shares then issued hereunder, the
registration rights will be allocated among such Shareholders in
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proportion to the respective number of shares issued to such Shareholders
under this Agreement.
(b) If, at any time after one year from the Effective Time, Brite
shall receive from a Shareholder a written request that Brite effect any
registration with respect to all or a part of the shares of Brite Common
received by such Shareholder hereunder, Brite will:
(i) promptly give written notice of the proposed registration
to all other Shareholders; and
(ii) as soon as practicable use its best efforts to effect all
such registrations (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 Securities 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 as are specified in such request, together with all or
such portion of the shares of Brite Common of any Shareholder joining
in such request as are specified in a written request given within 15
days after receipt of such written notice from Brite.
Notwithstanding the foregoing, however, Brite shall not be obligated to
take any action to effect such registration pursuant to this Section
10.2(b) either (i) after Brite has effected one such registration pursuant
to this Section 10.2(b) and such registration has been declared effective,
or (ii) if the number of shares with respect to which registration is
requested by all Shareholders is less than twenty-five percent of the
number of shares of Brite Common received by such Shareholders hereunder.
Furthermore, in no event shall Brite be required to take any action to
effect registration of any shares of Brite Common which, when added to
shares registered pursuant to the provisions of Section 10.2(a) hereof,
exceed forty percent in the aggregate of the shares of Brite Common
received under this Agreement.
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 Shareholders 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
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the date filing would be required 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 such registration statement.
The registration rights described in this Section 10.2 shall expire two
years after the Effective Time. In addition, the registration rights described
under Section 10.2(b) shall expire after having once been exercised by any
Shareholder, regardless of whether or not all Shareholders elect to participate
in such registration and regardless of whether or not all Shareholders elect to
include the maximum shares permissible under any such registration. The
registration rights under Section 10.2(b) shall also expire if written notice is
given by Brite pursuant to Section 10.2(a) that it intends to register
securities and such registration is completed by Brite, regardless of whether or
not any Shareholder elects to include his shares of Brite Common in such
registration. All expenses incurred in connection with any registration,
qualification or compliance pursuant to this Section 10.2 shall be borne by
Brite; provided, however, Brite shall not be required to pay fees of legal
counsel of Shareholders, or underwriter's fees, discounts or commissions
relating to shares of Brite Common registered by such Shareholders. 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.
(c) No Shareholder shall have any rights pursuant to Section 10.2
hereof if, in the opinion of counsel for Brite, he may at such time sell
such shares without the necessity of registration thereof under the
Securities Act.
(d) If a Shareholder sells shares of Brite Common pursuant to a
registration as contemplated by 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 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
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<PAGE>
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 Touch-Talk or
such Shareholder expressly for use therein.
(e) 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.
ARTICLE XI
11.1 INDEMNIFICATION.
(a) Each of the Shareholders 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.
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<PAGE>
(b) The Principal Shareholder hereby agrees to indemnify Brite and to
hold it harmless against and in respect of (i) 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,
and (ii) all amounts paid by Brite with respect to any third-party claims
against Brite (other than those listed in the Touch-Talk Disclosure
Schedule) resulting from the conduct of Touch-Talk's business prior to the
Effective Time. 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 Touch-Talk, or is
not reserved against on the Touch-Talk Balance Sheet or disclosed in the
Touch-Talk 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 Principal Shareholder hereby agrees to indemnify Brite and to
hold it harmless against and in respect of any and all tax liability,
interest and penalty incurred and all such amounts paid by Brite by reason
of any state or federal income tax audit of Touch-Talk for the tax years
ending December 31, 1994 and any prior years. Any such indemnification
shall be only to the extent that any such tax liability, interest or
penalty is paid by Brite and shall be net of any income tax refunds or
income tax benefit relating to Touch-Talk obtained by Brite for the tax
years ending December 31, 1994 and any prior years. Any such tax
liability, interest or penalty that arises out of adjustments made by Glenn
Etherington to the December 31, 1994 Touch-Talk Ballance Sheet and income
statement shall not be covered by the indemnity in this Section 11.1(c).
The Principal Shareholder shall not be liable under this Section 11.1(c)
except to the extent, and only to the extent, that the claims against him
exceed $25,000.
(d) The aggregate liability of the Principal Shareholder pursuant to
this Section 11.1 shall be not greater than the amount determined by
multiplying the total number of shares of Brite Common issued to the
Principal Shareholder pursuant to Section 2.2 by the closing price of Brite
common stock reported by The Wall Street Journal on the Closing Date.
(e) The aggregate liability of each Shareholder hereunder shall be
limited to the sum of the total number of shares of Brite Common issued to
such Shareholder pursuant to Section 2.2 multiplied by the closing price of
Brite common stock on the Closing Date reported by the Wall Street Journal.
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<PAGE>
(f) The Principal Shareholder shall not be liable under Section
11.1(b) except to the extent, and only to the extent, that the aggregate
claims against him exceed $25,000.
(g) As used in this Section 11.1, the term "Indemnifying Party" means
the party or parties obligated to provide indemnification pursuant to this
Section 11.1 and Sections 10.2(d) and (e), 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 right to
participate in and to assume the defense thereof, with counsel
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.
(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
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<PAGE>
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.
(h) (1) The liability of the Shareholders under Section 4.1(b)(xi)
hereof shall terminate upon the earlier of:
(i) the expiration of all applicable statutes of limitation
(including any extensions or waivers thereof) with respect to U. S.
Federal income tax returns and state and local corporate tax returns
of Touch-Talk for all periods up to an including the Closing Date
hereunder, or
(ii) the date on which audits of all such returns by the
appropriate examining authorities have been concluded and any
additional taxes determined to be due as a result of such audits have
been paid.
(2) The liability of the Shareholders under this Section 11.1
with respect to any other claim for which indemnification is provided
hereunder shall terminate on the second anniversary of the Closing
Date, except with respect to any specific claims pending before a
court of competent jurisdiction or duly constituted arbitral body.
(i) The liability of any Shareholder hereunder shall be paid promptly
in cash and/or Brite common stock valued at the closing price reported in
The Wall Street Journal on the last trading date prior to the date of
payment.
ARTICLE XII
12.1 FURTHER ASSURANCES. Neither Brite, Touch-Talk nor the Shareholders
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, Touch-Talk and the Shareholders 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.
12.2 TERMINATION BY TOUCH-TALK AND THE SHAREHOLDERS. In the event that
the conditions to obligations of Touch-Talk and the Shareholders set forth in
Articles VII and IX shall not have been satisfied or waived by April 1, 1995,
then Touch-Talk and the
- 29 -
<PAGE>
Shareholders may, at their option, at any time thereafter terminate this
Agreement by action of Touch-Talk's directors. The termination shall become
effective upon the giving of written notice of termination to Brite pursuant
to the provisions of Article XIII.
12.3 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 April 1, 1995, then Brite may, at its option, at any time thereafter
terminate this Agreement by action of its directors. The termination shall
become effective upon the giving of written notice of termination to Touch-Talk
and the Shareholders pursuant to the provisions of Article XIII.
12.4 TERMINATION BY MUTUAL AGREEMENT. This Agreement may be terminated
and the Merger abandoned by appropriate mutual action taken by the directors of
each of Brite and Touch-Talk at any time prior to the Effective Time.
12.5 WAIVERS. Any of the terms or conditions of this Agreement may be
waived at any time by either of Brite or Touch-Talk 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 XI.
12.6 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.
12.7 CONFIDENTIALITY. Prior to the Effective Time and after any
termination of this Agreement, each of Brite and Touch-Talk (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 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 connec-
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<PAGE>
tion 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.
12.8 EFFECT OF TERMINATION. If for any reason this Agreement ceases to be
binding upon Brite, Touch-Talk 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.
12.9 EXPENSES. In the event that this Agreement shall be terminated
pursuant to this Article XII and such termination is not attributable to a
breach of this Agreement by either party, all further obligations of the parties
under this Agreement (except for the confidentiality covenants set forth in
Section 12.7) shall terminate without further liability and each party will pay
all costs and expenses incident to its 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; provided, however,
that if any such termination is by mutual agreement or by Touch-Talk and the
Shareholders under Section 12.2, Brite shall reimburse Touch-Talk's legal and
accounting fees incurred in connection with this Agreement in an amount not to
exceed $25,000.
ARTICLE XIII
13.1 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.
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<PAGE>
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 Touch-Talk:
Touch-Talk, Incorporated
1325 Capital Parkway, Suite 109
Carrollton, Texas 75006
Attn: Michael D. Heinrich
Telephone: (214) 323-3003
Telefax: (214) 323-3010
with a copy to:
Pat Shepard, Esq.
Hazleton, Laner & Batson
4739 Belleview, Suite 200
Kansas City, Missouri 64112
Telephone: (816) 753-5678
Telefax: (816) 753-6208
(c) If to the Shareholders:
Michael D. Heinrich
Laurence W. Potter, III
1325 Capital Parkway, Suite 109
Carrollton, Texas 75006
Telephone: (214) 323-3003
Telefax: (214) 323-3010
with a copy to:
Pat Shepard, Esq.
Hazleton, Laner & Batson
4739 Belleview, Suite 200
Kansas City, Missouri 64112
Telephone: (816) 753-5678
Telefax: (816) 743-6208
or at such address or addresses as the party addressed may from time to time
designate in writing.
ARTICLE XIV
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<PAGE>
14.1 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 10.1 hereof.
14.2 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 and Touch-Talk and their respective stockholders, any rights or remedies
under or by reason of this Agreement.
14.3 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.
14.4 GOVERNING LAW. Except to the extent that the Merger is 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.
14.5 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.
14.6 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, Touch-Talk, and the Shareholders have caused
this Agreement to be executed by their duly authorized officers pursuant to
action by their respective directors, all as of the date first above written.
BRITE VOICE SYSTEMS, INC.
By: Stanley G. Brannan
--------------------------------------------
Stanley G. Brannan, President
ATTEST:
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<PAGE>
Glenn A. Etherington
-----------------------------------------------
Glenn A. Etherington, Secretary
TOUCH-TALK, INCORPORATED
By:Michael D. Heinrich
--------------------------------------------
Michael D. Heinrich, President
ATTEST:
Carolyn M. Heinrich
-----------------------------------------------
Carolyn M. Heinrich, Secretary
SHAREHOLDERS
Percentage
Number of Shares of Shares
---------------- -----------
Michael D. Heinrich 450 90%
- -------------------------
Michael D. Heinrich
Laurence W. Potter, III 50 10%
- -------------------------
Laurence W. Potter, III
- 34 -
<PAGE>
ACKNOWLEDGMENTS
STATE OF KANSAS )
) ss:
COUNTY OF SEDGWICK )
BE IT REMEMBERED, that on this 31st day of March, 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.
Cindy Kelso
------------------------------------------
NOTARY PUBLIC
My appointment expires:
2-18-99
- ----------------------
STATE OF Kansas )
) ss:
COUNTY OF Sedgwick )
BE IT REMEMBERED, that on this 31st day of March, 1995, before me a Notary
Public in and for the County and State aforesaid, personally appeared Michael D.
Heinrich, President, and Carolyn M. Heinrich, Secretary, of Touch-Talk,
Incorporated, a Texas 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.
Cindy Kelso
------------------------------------------
NOTARY PUBLIC
My appointment expires:
2-18-99
- -------------------------
- 35 -
<PAGE>
STATE OF KANSAS )
) ss:
COUNTY OF SEDGWICK )
Before me, the undersigned, a Notary Public within and for said County and
State, on this 31st day of March, 1995, came Michael D. Heinrich, personally
known to me to be the same person who executed the within instrument of writing,
and such person duly acknowledged the execution of the same.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year last above written.
Cindy Kelso
-----------------------------------------------
NOTARY PUBLIC
My appointment expires:
2-18-99
- -------------------------
STATE OF KANSAS )
) ss:
COUNTY OF SEDGWICK )
Before me, the undersigned, a Notary Public within and for said County and
State, on this 31st day of March, 1995, came Laurence W. Potter, III, personally
known to me to be the same person who executed the within instrument of writing,
and such person duly acknowledged the execution of the same.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year last above written.
Cindy Kelso
-----------------------------------------------
NOTARY PUBLIC
My appointment expires:
2-18-99
- -------------------------
<PAGE>
Exhibit 10.15
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), is made and entered into effective
this 9th day of August, 1995, by and between STEPHEN B. ROCKOFF ("Employee") and
BRITE VOICE SYSTEMS, INC., a Kansas corporation ("Brite").
WHEREAS, pursuant to an Agreement and Plan of Reorganization and Merger
dated May 24, 1995 (the "Merger Agreement"), Telecom Services Limited (U.S.),
Inc., Telecom Services Limited (West), Inc., TSL Software Services, Inc. and TSL
Management Group, Inc. (the "TSL Companies") have been merged into Brite (the
"Mergers");
WHEREAS, Employee was an executive officer and substantial shareholder of
the TSL Companies;
WHEREAS, Brite desires to engage Employee to perform services for Brite and
Employee desires to perform such services on the terms and conditions set forth
herein;
WHEREAS, Brite and each of the TSL Companies has, through the expenditure
of substantial amounts of effort and money, developed or acquired certain
confidential information and trade secrets which have become of great value in
amassing its customers, establishing its good will, and maintaining its
operations, and each such company has at all times kept its confidential
information and trade secrets confidential, and such information and secrets
have given such company a decided competitive advantage over others engaged in
the same type of business; and
WHEREAS, the parties desire to preserve and protect for Brite the good
will, trade secrets, confidential information, and other intangible assets of
Brite and each of the TSL Companies.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the
covenants and obligations herein contained, the parties agree as follows:
1. EMPLOYMENT. Brite hereby employs Employee on a full-time basis to
serve as Vice President of Brite in Brite's TSL operating division ("TSL") and
to perform such acts and duties and furnish such services to Brite as Brite,
consistent with Employee's position as Vice President, shall, from time to time,
reasonably direct, and Employee shall report directly to the Executive Vice
President of Brite's TSL operating division. Employee shall use his best and
diligent efforts on a full-time basis to promote the best interests of Brite.
Employee shall be required to perform his duties hereunder principally in the
New York City/Northern New
<PAGE>
Jersey metropolitan area and shall not be required to relocate from such
metropolitan area.
2. COMPENSATION AND BENEFITS.
2.1 SALARY. From the Effective Date of this Agreement through
December 31, 1995, Employee shall be compensated at an annual rate of
$175,000, payable in accordance with Brite's customary payroll policies in
effect at the time of payment ("Base Pay"). Base Pay shall be increased to
an annual rate of $179,375 as of January 1, 1996 and shall be further
increased to an annual rate of $188,343.75, as of January 1, 1997.
2.2 INCENTIVE COMPENSATION.
(a) Employee shall receive annual bonus compensation pursuant to the
terms of this Section 2.2. For the period from the date of this Agreement
to December 31, 1995, Employee will receive an incentive bonus at an
annualized rate of $65,000 ("Base Bonus") if TSL meets a mutually agreed
upon financial performance target for the subject fiscal year established
during the annual budget preparation of Brite for such subject 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 TSL 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 shall be
increased to $66,625 as of January 1, 1996 for the year ending December 31,
1996 and shall be further increased to $69,956.25 as of January 1, 1997 for
the year ending December 31, 1997.
(b) Each month during the period from the date of this Agreement
through the later of (i) December 31, 1996, and (ii) the last day of the
sixteenth month after the date of this Agreement, Employee shall be paid a
non-refundable advance in an amount equal to 1/12th of the Base Bonus for
the year in progress. Such payments shall be made on the second payroll
date of each month commencing with the first month following the execution
of this Agreement. Each such advance under this clause (b) shall be
non-refundable to Brite, regardless of TSL's financial performance during
each such year.
(c) Payments of any additional annual bonus compensation due Employee
under this Section 2.2 beyond amounts paid under Section 2.2(b) shall be
made by April 10 of each year with respect to the bonus compensation due
Employee for the immediately preceding fiscal year of Brite.
- 2 -
<PAGE>
2.3 VACATION. Employee shall be entitled to at least three weeks of
paid vacation per calendar year, to be utilized pursuant to the reasonable
policies established and/or modified by Brite from time to time.
2.4 OTHER BENEFITS. Employee will be entitled to a car allowance of
$600 per month and to participate in Brite's standard benefits provided to
other employees of similar responsibility with Brite as established and/or
modified by Brite from time to time, including, but not limited to, life
insurance, health insurance, and dental insurance.
2.5 BUSINESS EXPENSES. Pursuant to Brite's customary policies in
force at the time of payment, Employee shall be promptly reimbursed,
against presentation of vouchers or receipts therefor, for all reasonable
expenses properly incurred by him on Brite's behalf in the performance of
his duties hereunder.
3. TERM AND CANCELLATION.
3.1 TERM. The Employment Period shall commence on the date hereof
and shall continue until December 31, 1997, unless earlier terminated
pursuant to Section 3.2 below (the "Employment Period").
3.2 TERMINATION.
(a) The employment of Employee and the obligations of Brite under
this Agreement may be terminated by Brite at any time for "Cause".
Termination for Cause shall mean termination only for one or more of the
following reasons: (i) misappropriation of corporate funds; (ii)
conviction of a felony, any crime involving theft or dishonesty, or
conviction of a misdemeanor involving moral turpitude; (iii) willful
failure by Employee to devote substantially his full business time to
Brite; (iv) willful violation of reasonable directions of the Board of
Directors which are consistent with Employee's duties hereunder; (v) death
of Employee; (vi) Employee's inability substantially to carry out his
obligations hereunder for a period of 120 consecutive days or for a period
of 180 days during any period of 270 consecutive days by reason of a
Disability (as hereinafter defined); or (vii) material breach by Employee
of a provision of either Section 4 or Section 5 hereof. For purposes of
this Agreement, "Disability" shall mean the physical, emotional or mental
illness or incapacity of the Employee, such that in the judgment of a
physician (in the case of a physical illness) or a psychiatrist or
psychologist (in the case of a mental or emotional illness), who shall be
chosen by the Employee and be reasonably satisfactory to Brite, the
Employee shall be unable to perform his duties as Vice President, as
contemplated by this Agreement.
- 3 -
<PAGE>
If Brite elects to terminate the employment of Employee for Cause, it
shall do so by giving at least five business days written notice thereof to
Employee, which notice shall set forth the effective date of termination;
provided, however, that termination of employment shall be deemed to have
occurred automatically on the date of death of Employee. If Brite seeks to
terminate the employment of Employee for Cause, based upon the occurrence
of any of the events described in clause (iii), (iv) or (vii) above, the
written notice of termination shall state the acts or omissions on the part
of Employee which constitute Cause pursuant to clause (iii), (iv) or (vii)
above, in order to give Employee a reasonable opportunity to correct such
acts or omissions within 14 days following the giving of such notice, and
if such acts or omissions are corrected within such period of time, then
the notice of termination shall not become effective. If Brite at any time
terminates this Agreement for Cause, Employee shall not be entitled to any
compensation or incidental benefits from Brite, except for such amount of
his salary, incidental benefits and non-refundable advance due to Employee
under Section 2.2 hereof, that are due and payable to him hereunder on the
date of termination.
(b) Employee shall have the option to terminate this Agreement, upon
30 days written notice to Brite, if Brite materially breaches this
Agreement, including, without limitation, Brite makes a material change in
the duties and responsibilities of Employee inconsistent with Employee's
position as Vice President and his duties and responsibilities hereunder,
including a relocation of Employee from the New York City/Northern New
Jersey metropolitan area, changes in conditions of employment which are in
the aggregate material, or Brite's material failure to support TSL's
business.
If Employee's employment is terminated pursuant to this subparagraph
(b), Employee shall be entitled to receive, as severance, Employee's Base
Pay and Base Bonus as would otherwise have been paid through December 31,
1997 had Employee remained employed by Brite through December 31, 1997 and
TSL achieved its financial performance targets established pursuant to
Section 2.2(a), such severance to be paid in installments in the same
manner as Employee's compensation has theretofore been required to have
been paid, at the regular pay periods of Brite, less legally required
payroll deductions. For purposes of the restrictive covenants set forth in
Section 5 hereof only, Employee's employment with Brite shall be deemed to
be continuing throughout the period during which Brite makes the severance
installment payments contemplated by this subparagraph (b). In addition to
the severance payments provided for herein, Brite shall pay to Employee the
non-refundable advance due to Employee under Section 2.2 hereof, if any,
calculated through the end of the last full month of
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<PAGE>
employment completed as of the date of termination and the incidental
benefits that are due and payable to him hereunder on the date of
termination of his employment.
(c) All obligations of Employee under Sections 4 and 5 hereof shall
continue, in accordance with their terms, in spite of any termination of
this Agreement.
4. CONFIDENTIAL INFORMATION.
4.1 ACKNOWLEDGEMENT. Employee acknowledges that:
(a) Brite's products and services are highly specialized items;
(b) the identity and particular needs of Brite's customers are not
generally known in the industries of which Brite's businesses are a part;
(c) documents and information regarding Brite's methods of
production, sales, pricing, costs, and the identity and specialized
requirements of Brite's customers, are highly confidential and constitute
trade secrets; and
(d) Brite has a legitimate need to protect the confidentiality of
Confidential Information (as hereinafter defined).
4.2 DEFINITION OF CONFIDENTIAL INFORMATION. For purposes of this
Agreement, the term "Confidential Information" shall be defined as follows:
Information of Brite related to the conduct by Brite of its
business not otherwise publicly disclosed or publicly available
(whether or not discovered or developed by Employee) and known by
Employee as a consequence of Employee's employment with Brite.
Without limiting the generality of the foregoing, such
proprietary information shall include information not generally
known in the industry or related industries, which concerns (a)
customer lists of Brite; (b) computer programs and facilities of
Brite; (c) the identity of specialized consultants and
contractors and Confidential Information developed by them for
Brite; (d) operating and other cost data, including information
regarding salaries and benefits of employees of Brite; (e) cost
and pricing data of Brite; (f) acquisition, expansion,
marketing, financial and other business plans of Brite; (g) Brite
manuals, files, records, memoranda, plans, drawings and designs,
specifications and computer programs and records, whether or not
legended or otherwise
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<PAGE>
identified as Confidential Information; and (h) all information which
is a "trade secret" of Brite as defined in the Uniform Trade Secrets
Act as adopted in Kansas at K.S.A. 60-3320.
Notwithstanding the foregoing, Confidential Information shall not
include information which Employee can demonstrate, or Brite agrees, (a) is
previously known on a non-confidential basis by the Employee or that later
becomes published or otherwise generally known in the industry without
breach of this Agreement by Employee; (b) is in the public domain through
no fault of the Employee; (c) is later lawfully acquired by Employee from
sources other than Brite; or (d) is, at the time of its disclosure to
Employee, known to Employee independently of any previously disclosed
Confidential Information.
4.3 NONDISCLOSURE OF CONFIDENTIAL INFORMATION. During Employee's
employment with Brite, Employee will have access to and become familiar
with Confidential Information of Brite. Employee acknowledges that such
Confidential Information is owned and shall continue to be owned solely by
Brite. During the term of Employee's employment with Brite and after
termination of such employment, Employee shall not use or divulge
Confidential Information to any person or entity other than Brite, or
persons expressly designated by Brite or as otherwise would be necessary to
disclose in the ordinary course of his employment with, and in furtherance
of, the business of Brite. Notwithstanding the foregoing, Employee may
disclose Confidential Information if and to the extent he is compelled to
do so by judicial or administrative process, or by other requirements of
law.
4.4 RETURN OF DOCUMENTS. Upon termination of Employee's employment
with Brite, all procedural manuals, guides, specifications, plans,
drawings, designs, records, lists, notebooks, diskettes, customer lists,
pricing documentation and similar documentation which is or contains
Confidential Information, including all copies thereof, in the possession
or control of Employee, whether prepared by Employee or others, shall be
forthwith, upon request by Brite, delivered by Employee to Brite.
5. RESTRICTIVE COVENANTS.
5.1 NONCOMPETITION. Employee covenants and agrees that:
(a) During Employee's employment with Brite, whether during the
Employment Period or thereafter, and following the date of termination of
Employee's employment with Brite if such termination was other than
pursuant to Section 3.2(b) hereof, for a period of three years and, if
Employee has been
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<PAGE>
an employee of Brite for less than a full year at the time of termination
of employment, a number of days equal to the difference between 365 and the
number of days elapsed from the date of this Agreement to the termination
date, Employee shall not in any manner compete with Brite with respect to
any line of business conducted by Brite during Employee's employment with
Brite ("Prohibited Business").
(b) If Employee's employment with Brite is terminated pursuant to
Section 3.2(b) above, Employee shall not in any manner compete with Brite
with respect to a Prohibited Business throughout the period during which
Brite pays Employee the severance payments provided for in Section 3.2(b)
hereof. In addition, Brite shall have the option of extending such period
of noncompetition to the fourth anniversary of the date of this Agreement,
provided, however, such agreement of Employee so not to compete is
conditioned on Brite's payment in monthly installments, and shall be
effective only for so long as Brite makes such payments, on an annualized
basis of an amount equal to the product of (I) such employee's Base Pay
plus his Base Bonus (both as in effect on December 31, 1997, as if Employee
had remained employed by Brite through such date and TSL achieved its
financial performance targets established pursuant to Section 2.2(a),
multiplied by (II) a fraction (i) the numerator of which is the difference
between $20,000,000 and the aggregate net proceeds received by Employee,
Scott A. Maltz, and Alan C. Maltz from sales of Brite's stock (after
deducting all taxes, fees and expenses incurred in connection with such
sales) from the closing of the Mergers to December 31, 1997, and (ii) the
denominator of which is $20,000,000.
(c) The foregoing covenants shall prevent Employee, directly or
indirectly, on Employee's own behalf or as an employee, officer, agent,
director, partner, consultant, lender, or advisor, during the period
covered by this Section 5, from forming, owning, joining, controlling,
financing, or otherwise participating in the ownership or management of, or
being otherwise affiliated with, any person or entity engaged in a
Prohibited Business during the period covered by this Section 5. During
the period covered by this Section 5, Employee shall not permit any person
or entity (other than Brite) of which Employee is a shareholder or partner
or in which Employee has an ownership interest, to engage in a Prohibited
Business. Notwithstanding any other provision herein, the parties agree
that Employee may, during the period covered by this Section 5, invest
Employee's personal, private assets as a passive investor in not more than
one percent of the total outstanding shares of any publicly traded company
engaged in a Prohibited Business, so long as Employee does not participate
in the management or operations of the affairs of such company.
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<PAGE>
5.2 SOLICITATION OF EMPLOYEES. During the period in which the
noncompetition provision set forth in Section 5.1(a) or 5.1(b) shall be in
effect, Employee shall not, without the prior written approval of the
Chairman of the Board of Directors of Brite, directly or indirectly
solicit, any person who presently is, or at any time during the Employment
Period shall be an employee of Brite (other than secretarial and other
personnel whose duties are ministerial in nature), to become employed by
any other person, firm, or corporation in any business which is a
Prohibited Business.
5.3 SOLICITATION OF CUSTOMERS. During a four-year period following
termination of Employee's employment with Brite, regardless of the basis
for such termination, Employee shall not directly or indirectly, on behalf
of himself or any other person or entity, solicit any person, corporation,
firm, or other entity who is or was a customer of Brite during the period
of five years prior to the termination of Employee's employment for
purposes of obtaining business which would constitute a Prohibited
Business.
5.4 REASONABLENESS OF RESTRICTIONS, REFORMATION, AND SEVERABILITY.
(a) Employee has carefully read and considered the provisions of this
Section 5 and, having done so, agrees that the restrictions set forth
herein, including, but not limited to, the time period of the restriction
and the scope of the restriction, are fair and reasonable and are
reasonably required for the protection of the interests of Brite.
(b) In the event that, notwithstanding the foregoing, any part of the
covenants set forth in this Section 5 shall be held to be invalid or
unenforceable, the remaining parts thereof shall nevertheless continue to
be valid and enforceable as though the invalid or unenforceable parts had
not been included therein. In the event that any provision of this Section
5 relating to the time period and/or scope of restrictions shall be
declared by a court of competent jurisdiction to exceed the maximum time
period, scope or geographical area as such court deems reasonable and
enforceable, said time period, scope and/or geographical areas of
restrictions shall be deemed to become and thereafter be the maximum time
period, scope and/or geographical area which such court deems reasonable
and enforceable.
(c) Any provision of this Agreement otherwise prohibited by or
unenforceable under any applicable law or public policy in any jurisdiction
which cannot be reformed in accordance with the provisions herein, shall,
as to such jurisdiction, be ineffective without affecting any other
provision of this Agreement, or shall be deemed to be severed or otherwise
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<PAGE>
modified to conform with such law or public policy; and the remaining
provisions of this Agreement shall remain in force, provided that the
purpose of this Agreement can be effected. To the full extent, however,
that the provisions of such applicable law or public policy may be waived,
this Agreement shall be deemed to be a waiver thereof. The parties hereto
understand and agree that all the covenants set forth herein are and shall
be separately enforceable, each to the full extent permitted by applicable
law.
6. REMEDIES. It is agreed that Brite would be irreparably damaged by
reason of any violation of the provisions of this Agreement, and that any remedy
at law for a breach of the provisions of this Agreement would be inadequate.
Therefore, Brite shall be entitled to seek injunctive or other equitable relief
in a court of competent jurisdiction against Employee, Employee's agents,
employees, affiliates, partners, or other associates, for any breach or
threatened breach of this Agreement, without the necessity of proving actual
monetary loss. It is expressly understood that the remedy described in this
Section 6 shall not be the exclusive remedy of Brite for any breach of this
Agreement, and Brite shall be entitled to seek such other relief or remedy at
law or in equity to which it may be entitled as a consequence of any breach of
this Agreement.
7. CONSENT AND WAIVER BY THIRD PARTIES. Employee hereby represents and
warrants that he has obtained all necessary waivers and/or consents from third
parties so as to enable him to accept employment with Brite on the terms and
conditions set forth herein and to execute and perform this Agreement without
being in conflict with any other agreement, obligation or understanding with any
such third party.
8. BRITE SUBSIDIARIES. For purposes of this Agreement, "Brite" means
Brite Voice Systems, Inc. and its subsidiaries.
9. ENTIRE AGREEMENT. This Agreement contains the entire understanding of
the parties in respect of its subject matter and supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
This Agreement supersedes all employment agreements of any type between Employee
and the TSL Companies.
10. AMENDMENT; WAIVER. This Agreement may not be amended, supplemented,
canceled or discharged except by written instrument executed by the party
affected thereby. No failure to exercise, and no delay in exercising, any
right, power or privilege hereunder shall operate as a waiver thereof. No
waiver of any breach of any provision of this Agreement shall be deemed to be a
waiver of any preceding or succeeding breach of the same or any other provision.
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<PAGE>
11. BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of any successor of Brite by
reorganization, merger or consolidation, or any assignee of all or substantially
all of Brite's business and properties. Employee's rights or obligations under
this Agreement may not be assigned by Employee, except that Employee's right to
any payments to be received hereunder shall pass to Employee's executor,
administrator or personal representative.
12. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
13. GOVERNING LAW; INTERPRETATION. This Agreement shall be construed in
accordance with, and governed for all purposes by, the laws and public policy of
the State of Kansas applicable to contracts executed and to be wholly performed
within such State.
14. ATTORNEY'S FEES. Should Brite or Employee bring an action in any
Court of competent jurisdiction to enforce any of the provisions hereof, and
prevail on any aspect of such action, then such prevailing party shall be
awarded the reasonable attorney's fees incurred by reason of such action.
15. FURTHER ASSURANCES. Each of the parties agrees to execute,
acknowledge, deliver and perform, and/or cause to be executed, acknowledged,
delivered and performed, at any time and/or from time to time, as the case may
be, all such further acts, documents, transfers, conveyances, and/or assurances
as may be necessary and/or proper to carry out the provisions and/or intent of
this Agreement.
IN WITNESS WHEREOF, this Employment Agreement has been entered into as of
the date first set forth above.
BRITE VOICE SYSTEMS, INC.
By DONALD R. WALSH
------------------------------------
Donald R. Walsh,
Executive Vice President
Stephen B. Rockoff
---------------------------------------
STEPHEN B. ROCKOFF
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Exhibit 10.16
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), is made and entered into effective
this 9th day of August, 1995, by and between SCOTT A. MALTZ ("Employee") and
BRITE VOICE SYSTEMS, INC., a Kansas corporation ("Brite").
WHEREAS, pursuant to an Agreement and Plan of Reorganization and Merger
dated May 24, 1995 (the "Merger Agreement"), Telecom Services Limited (U.S.),
Inc., Telecom Services Limited (West), Inc., TSL Software Services, Inc. and TSL
Management Group, Inc. (the "TSL Companies") have been merged into Brite (the
"Mergers");
WHEREAS, Employee was an executive officer and substantial shareholder of
the TSL Companies;
WHEREAS, Brite desires to engage Employee to perform services for Brite and
Employee desires to perform such services on the terms and conditions set forth
herein;
WHEREAS, Brite and each of the TSL Companies has, through the expenditure
of substantial amounts of effort and money, developed or acquired certain
confidential information and trade secrets which have become of great value in
amassing its customers, establishing its good will, and maintaining its
operations, and each such company has at all times kept its confidential
information and trade secrets confidential, and such information and secrets
have given such company a decided competitive advantage over others engaged in
the same type of business; and
WHEREAS, the parties desire to preserve and protect for Brite the good
will, trade secrets, confidential information, and other intangible assets of
Brite and each of the TSL Companies.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the
covenants and obligations herein contained, the parties agree as follows:
1. EMPLOYMENT. Brite hereby employs Employee on a full-time basis to
serve as Vice President of Brite in Brite's TSL operating division ("TSL") and
to perform such acts and duties and furnish such services to Brite as Brite,
consistent with Employee's position as Vice President, shall, from time to time,
reasonably direct, and Employee shall report directly to the Executive Vice
President of Brite's TSL operating division. Employee shall use his best and
diligent efforts on a full-time basis to promote the best interests of Brite.
Employee shall be required to perform his
<PAGE>
duties hereunder principally in the San Francisco metropolitan area and shall
not be required to relocate from such metropolitan area.
2. COMPENSATION AND BENEFITS.
2.1 SALARY. From the Effective Date of this Agreement through
December 31, 1995, Employee shall be compensated at an annual rate of
$175,000, payable in accordance with Brite's customary payroll policies in
effect at the time of payment ("Base Pay"). Base Pay shall be increased to
an annual rate of $179,375 as of January 1, 1996 and shall be further
increased to an annual rate of $188,343.75, as of January 1, 1997.
2.2 INCENTIVE COMPENSATION.
(a) Employee shall receive annual bonus compensation pursuant to the
terms of this Section 2.2. For the period from the date of this Agreement
to December 31, 1995, Employee will receive an incentive bonus at an
annualized rate of $65,000 ("Base Bonus") if TSL meets a mutually agreed
upon financial performance target for the subject fiscal year established
during the annual budget preparation of Brite for such subject 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 TSL 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 shall be
increased to $66,625 as of January 1, 1996 for the year ending December 31,
1996 and shall be further increased to $69,956.25 as of January 1, 1997 for
the year ending December 31, 1997.
(b) Each month during the period from the date of this Agreement
through the later of (i) December 31, 1996, and (ii) the last day of the
sixteenth month after the date of this Agreement, Employee shall be paid a
non-refundable advance in an amount equal to 1/12th of the Base Bonus for
the year in progress. Such payments shall be made on the second payroll
date of each month commencing with the first month following the execution
of this Agreement. Each such advance under this clause (b) shall be
non-refundable to Brite, regardless of TSL's financial performance during
each such year.
(c) Payments of any additional annual bonus compensation due Employee
under this Section 2.2 beyond amounts paid under Section 2.2(b) shall be
made by April 10 of each year with respect to the bonus compensation due
Employee for the immediately preceding fiscal year of Brite.
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2.3 VACATION. Employee shall be entitled to at least three weeks of
paid vacation per calendar year, to be utilized pursuant to the reasonable
policies established and/or modified by Brite from time to time.
2.4 OTHER BENEFITS. Employee will be entitled to a car allowance of
$600 per month and to participate in Brite's standard benefits provided to
other employees of similar responsibility with Brite as established and/or
modified by Brite from time to time, including, but not limited to, life
insurance, health insurance, and dental insurance.
2.5 BUSINESS EXPENSES. Pursuant to Brite's customary policies in
force at the time of payment, Employee shall be promptly reimbursed,
against presentation of vouchers or receipts therefor, for all reasonable
expenses properly incurred by him on Brite's behalf in the performance of
his duties hereunder.
3. TERM AND CANCELLATION.
3.1 TERM. The Employment Period shall commence on the date hereof
and shall continue until December 31, 1997, unless earlier terminated
pursuant to Section 3.2 below (the "Employment Period").
3.2 TERMINATION.
(a) The employment of Employee and the obligations of Brite under
this Agreement may be terminated by Brite at any time for "Cause".
Termination for Cause shall mean termination only for one or more of the
following reasons: (i) misappropriation of corporate funds; (ii)
conviction of a felony, any crime involving theft or dishonesty, or
conviction of a misdemeanor involving moral turpitude; (iii) willful
failure by Employee to devote substantially his full business time to
Brite; (iv) willful violation of reasonable directions of the Board of
Directors which are consistent with Employee's duties hereunder; (v) death
of Employee; (vi) Employee's inability substantially to carry out his
obligations hereunder for a period of 120 consecutive days or for a period
of 180 days during any period of 270 consecutive days by reason of a
Disability (as hereinafter defined); or (vii) material breach by Employee
of a provision of either Section 4 or Section 5 hereof. For purposes of
this Agreement, "Disability" shall mean the physical, emotional or mental
illness or incapacity of the Employee, such that in the judgment of a
physician (in the case of a physical illness) or a psychiatrist or
psychologist (in the case of a mental or emotional illness), who shall be
chosen by the Employee and be reasonably satisfactory to Brite, the
Employee shall be unable to perform his duties as Vice President, as
contemplated by this Agreement.
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<PAGE>
If Brite elects to terminate the employment of Employee for Cause, it
shall do so by giving at least five business days written notice thereof to
Employee, which notice shall set forth the effective date of termination;
provided, however, that termination of employment shall be deemed to have
occurred automatically on the date of death of Employee. If Brite seeks to
terminate the employment of Employee for Cause, based upon the occurrence
of any of the events described in clause (iii), (iv) or (vii) above, the
written notice of termination shall state the acts or omissions on the part
of Employee which constitute Cause pursuant to clause (iii), (iv) or (vii)
above, in order to give Employee a reasonable opportunity to correct such
acts or omissions within 14 days following the giving of such notice, and
if such acts or omissions are corrected within such period of time, then
the notice of termination shall not become effective. If Brite at any time
terminates this Agreement for Cause, Employee shall not be entitled to any
compensation or incidental benefits from Brite, except for such amount of
his salary, incidental benefits and non-refundable advance due to Employee
under Section 2.2 hereof, that are due and payable to him hereunder on the
date of termination.
(b) Employee shall have the option to terminate this Agreement, upon
30 days written notice to Brite, if Brite materially breaches this
Agreement, including, without limitation, Brite makes a material change in
the duties and responsibilities of Employee inconsistent with Employee's
position as Vice President and his duties and responsibilities hereunder,
including a relocation of Employee from the San Francisco metropolitan
area, changes in conditions of employment which are in the aggregate
material, or Brite's material failure to support TSL's business.
If Employee's employment is terminated pursuant to this subparagraph
(b), Employee shall be entitled to receive, as severance, Employee's Base
Pay and Base Bonus as would otherwise have been paid through December 31,
1997 had Employee remained employed by Brite through December 31, 1997 and
TSL achieved its financial performance targets established pursuant to
Section 2.2(a), such severance to be paid in installments in the same
manner as Employee's compensation has theretofore been required to have
been paid, at the regular pay periods of Brite, less legally required
payroll deductions. For purposes of the restrictive covenants set forth in
Section 5 hereof only, Employee's employment with Brite shall be deemed to
be continuing throughout the period during which Brite makes the severance
installment payments contemplated by this subparagraph (b). In addition to
the severance payments provided for herein, Brite shall pay to Employee the
non-refundable advance due to Employee under Section 2.2 hereof, if any,
calculated through the end of the last full month of
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<PAGE>
employment completed as of the date of termination and the incidental
benefits that are due and payable to him hereunder on the date of
termination of his employment.
(c) All obligations of Employee under Sections 4 and 5 hereof shall
continue, in accordance with their terms, in spite of any termination of
this Agreement.
4. CONFIDENTIAL INFORMATION.
4.1 ACKNOWLEDGEMENT. Employee acknowledges that:
(a) Brite's products and services are highly specialized items;
(b) the identity and particular needs of Brite's customers are not
generally known in the industries of which Brite's businesses are a part;
(c) documents and information regarding Brite's methods of
production, sales, pricing, costs, and the identity and specialized
requirements of Brite's customers, are highly confidential and constitute
trade secrets; and
(d) Brite has a legitimate need to protect the confidentiality of
Confidential Information (as hereinafter defined).
4.2 DEFINITION OF CONFIDENTIAL INFORMATION. For purposes of this
Agreement, the term "Confidential Information" shall be defined as follows:
Information of Brite related to the conduct by Brite of its
business not otherwise publicly disclosed or publicly available
(whether or not discovered or developed by Employee) and known by
Employee as a consequence of Employee's employment with Brite.
Without limiting the generality of the foregoing, such
proprietary information shall include information not generally
known in the industry or related industries, which concerns (a)
customer lists of Brite; (b) computer programs and facilities of
Brite; (c) the identity of specialized consultants and
contractors and Confidential Information developed by them for
Brite; (d) operating and other cost data, including information
regarding salaries and benefits of employees of Brite; (e) cost
and pricing data of Brite; (f) acquisition, expansion,
marketing, financial and other business plans of Brite; (g) Brite
manuals, files, records, memoranda, plans, drawings and designs,
specifications and computer programs and records, whether or not
legended or otherwise
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<PAGE>
identified as Confidential Information; and (h) all information which
is a "trade secret" of Brite as defined in the Uniform Trade Secrets
Act as adopted in Kansas at K.S.A. 60-3320.
Notwithstanding the foregoing, Confidential Information shall not
include information which Employee can demonstrate, or Brite agrees, (a) is
previously known on a non-confidential basis by the Employee or that later
becomes published or otherwise generally known in the industry without
breach of this Agreement by Employee; (b) is in the public domain through
no fault of the Employee; (c) is later lawfully acquired by Employee from
sources other than Brite; or (d) is, at the time of its disclosure to
Employee, known to Employee independently of any previously disclosed
Confidential Information.
4.3 NONDISCLOSURE OF CONFIDENTIAL INFORMATION. During Employee's
employment with Brite, Employee will have access to and become familiar
with Confidential Information of Brite. Employee acknowledges that such
Confidential Information is owned and shall continue to be owned solely by
Brite. During the term of Employee's employment with Brite and after
termination of such employment, Employee shall not use or divulge
Confidential Information to any person or entity other than Brite, or
persons expressly designated by Brite or as otherwise would be necessary to
disclose in the ordinary course of his employment with, and in furtherance
of, the business of Brite. Notwithstanding the foregoing, Employee may
disclose Confidential Information if and to the extent he is compelled to
do so by judicial or administrative process, or by other requirements of
law.
4.4 RETURN OF DOCUMENTS. Upon termination of Employee's employment
with Brite, all procedural manuals, guides, specifications, plans,
drawings, designs, records, lists, notebooks, diskettes, customer lists,
pricing documentation and similar documentation which is or contains
Confidential Information, including all copies thereof, in the possession
or control of Employee, whether prepared by Employee or others, shall be
forthwith, upon request by Brite, delivered by Employee to Brite.
5. RESTRICTIVE COVENANTS.
5.1 NONCOMPETITION. Employee covenants and agrees that:
(a) During Employee's employment with Brite, whether during the
Employment Period or thereafter, and following the date of termination of
Employee's employment with Brite if such termination was other than
pursuant to Section 3.2(b) hereof, for a period of three years and, if
Employee has been
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<PAGE>
an employee of Brite for less than a full year at the time of termination
of employment, a number of days equal to the difference between 365 and the
number of days elapsed from the date of this Agreement to the termination
date, Employee shall not in any manner compete with Brite with respect to
any line of business conducted by Brite during Employee's employment with
Brite ("Prohibited Business").
(b) If Employee's employment with Brite is terminated pursuant to
Section 3.2(b) above, Employee shall not in any manner compete with Brite
with respect to a Prohibited Business throughout the period during which
Brite pays Employee the severance payments provided for in Section 3.2(b)
hereof. In addition, Brite shall have the option of extending such period
of noncompetition to the fourth anniversary of the date of this Agreement,
provided, however, such agreement of Employee so not to compete is
conditioned on Brite's payment in monthly installments, and shall be
effective only for so long as Brite makes such payments, on an annualized
basis of an amount equal to the product of (I) such employee's Base Pay
plus his Base Bonus (both as in effect on December 31, 1997, as if Employee
had remained employed by Brite through such date and TSL achieved its
financial performance targets established pursuant to Section 2.2(a),
multiplied by (II) a fraction (i) the numerator of which is the difference
between $20,000,000 and the aggregate net proceeds received by Employee,
Alan C. Maltz, and Stephen B. Rockoff from sales of Brite's stock (after
deducting all taxes, fees and expenses incurred in connection with such
sales) from the closing of the Mergers to December 31, 1997, and (ii) the
denominator of which is $20,000,000.
(c) The foregoing covenants shall prevent Employee, directly or
indirectly, on Employee's own behalf or as an employee, officer, agent,
director, partner, consultant, lender, or advisor, during the period
covered by this Section 5, from forming, owning, joining, controlling,
financing, or otherwise participating in the ownership or management of, or
being otherwise affiliated with, any person or entity engaged in a
Prohibited Business during the period covered by this Section 5. During
the period covered by this Section 5, Employee shall not permit any person
or entity (other than Brite) of which Employee is a shareholder or partner
or in which Employee has an ownership interest, to engage in a Prohibited
Business. Notwithstanding any other provision herein, the parties agree
that Employee may, during the period covered by this Section 5, invest
Employee's personal, private assets as a passive investor in not more than
one percent of the total outstanding shares of any publicly traded company
engaged in a Prohibited Business, so long as Employee does not participate
in the management or operations of the affairs of such company.
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<PAGE>
5.2 SOLICITATION OF EMPLOYEES. During the period in which the
noncompetition provision set forth in Section 5.1(a) or 5.1(b) shall be in
effect, Employee shall not, without the prior written approval of the
Chairman of the Board of Directors of Brite, directly or indirectly
solicit, any person who presently is, or at any time during the Employment
Period shall be an employee of Brite (other than secretarial and other
personnel whose duties are ministerial in nature), to become employed by
any other person, firm, or corporation in any business which is a
Prohibited Business.
5.3 SOLICITATION OF CUSTOMERS. During a four-year period following
termination of Employee's employment with Brite, regardless of the basis
for such termination, Employee shall not directly or indirectly, on behalf
of himself or any other person or entity, solicit any person, corporation,
firm, or other entity who is or was a customer of Brite during the period
of five years prior to the termination of Employee's employment for
purposes of obtaining business which would constitute a Prohibited
Business.
5.4 REASONABLENESS OF RESTRICTIONS, REFORMATION, AND SEVERABILITY.
(a) Employee has carefully read and considered the provisions of this
Section 5 and, having done so, agrees that the restrictions set forth
herein, including, but not limited to, the time period of the restriction
and the scope of the restriction, are fair and reasonable and are
reasonably required for the protection of the interests of Brite.
(b) In the event that, notwithstanding the foregoing, any part of the
covenants set forth in this Section 5 shall be held to be invalid or
unenforceable, the remaining parts thereof shall nevertheless continue to
be valid and enforceable as though the invalid or unenforceable parts had
not been included therein. In the event that any provision of this Section
5 relating to the time period and/or scope of restrictions shall be
declared by a court of competent jurisdiction to exceed the maximum time
period, scope or geographical area as such court deems reasonable and
enforceable, said time period, scope and/or geographical areas of
restrictions shall be deemed to become and thereafter be the maximum time
period, scope and/or geographical area which such court deems reasonable
and enforceable.
(c) Any provision of this Agreement otherwise prohibited by or
unenforceable under any applicable law or public policy in any jurisdiction
which cannot be reformed in accordance with the provisions herein, shall,
as to such jurisdiction, be ineffective without affecting any other
provision of this Agreement, or shall be deemed to be severed or otherwise
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<PAGE>
modified to conform with such law or public policy; and the remaining
provisions of this Agreement shall remain in force, provided that the
purpose of this Agreement can be effected. To the full extent, however,
that the provisions of such applicable law or public policy may be waived,
this Agreement shall be deemed to be a waiver thereof. The parties hereto
understand and agree that all the covenants set forth herein are and shall
be separately enforceable, each to the full extent permitted by applicable
law.
6. REMEDIES. It is agreed that Brite would be irreparably damaged by
reason of any violation of the provisions of this Agreement, and that any remedy
at law for a breach of the provisions of this Agreement would be inadequate.
Therefore, Brite shall be entitled to seek injunctive or other equitable relief
in a court of competent jurisdiction against Employee, Employee's agents,
employees, affiliates, partners, or other associates, for any breach or
threatened breach of this Agreement, without the necessity of proving actual
monetary loss. It is expressly understood that the remedy described in this
Section 6 shall not be the exclusive remedy of Brite for any breach of this
Agreement, and Brite shall be entitled to seek such other relief or remedy at
law or in equity to which it may be entitled as a consequence of any breach of
this Agreement.
7. CONSENT AND WAIVER BY THIRD PARTIES. Employee hereby represents and
warrants that he has obtained all necessary waivers and/or consents from third
parties so as to enable him to accept employment with Brite on the terms and
conditions set forth herein and to execute and perform this Agreement without
being in conflict with any other agreement, obligation or understanding with any
such third party.
8. BRITE SUBSIDIARIES. For purposes of this Agreement, "Brite" means
Brite Voice Systems, Inc. and its subsidiaries.
9. ENTIRE AGREEMENT. This Agreement contains the entire understanding of
the parties in respect of its subject matter and supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
This Agreement supersedes all employment agreements of any type between Employee
and the TSL Companies.
10. AMENDMENT; WAIVER. This Agreement may not be amended, supplemented,
canceled or discharged except by written instrument executed by the party
affected thereby. No failure to exercise, and no delay in exercising, any
right, power or privilege hereunder shall operate as a waiver thereof. No
waiver of any breach of any provision of this Agreement shall be deemed to be a
waiver of any preceding or succeeding breach of the same or any other provision.
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<PAGE>
11. BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of any successor of Brite by
reorganization, merger or consolidation, or any assignee of all or substantially
all of Brite's business and properties. Employee's rights or obligations under
this Agreement may not be assigned by Employee, except that Employee's right to
any payments to be received hereunder shall pass to Employee's executor,
administrator or personal representative.
12. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
13. GOVERNING LAW; INTERPRETATION. This Agreement shall be construed in
accordance with, and governed for all purposes by, the laws and public policy of
the State of Kansas applicable to contracts executed and to be wholly performed
within such State.
14. ATTORNEY'S FEES. Should Brite or Employee bring an action in any
Court of competent jurisdiction to enforce any of the provisions hereof, and
prevail on any aspect of such action, then such prevailing party shall be
awarded the reasonable attorney's fees incurred by reason of such action.
15. FURTHER ASSURANCES. Each of the parties agrees to execute,
acknowledge, deliver and perform, and/or cause to be executed, acknowledged,
delivered and performed, at any time and/or from time to time, as the case may
be, all such further acts, documents, transfers, conveyances, and/or assurances
as may be necessary and/or proper to carry out the provisions and/or intent of
this Agreement.
IN WITNESS WHEREOF, this Employment Agreement has been entered into as of
the date first set forth above.
BRITE VOICE SYSTEMS, INC.
By DONALD R. WALSH
---------------------------------------
Donald R. Walsh,
Executive Vice President
Scott A. Maltz
---------------------------------------
SCOTT A. MALTZ
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Exhibit 10.17
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), is made and entered into effective
this 9th day of August, 1995, by and between ALAN C. MALTZ ("Employee") and
BRITE VOICE SYSTEMS, INC., a Kansas corporation ("Brite").
WHEREAS, pursuant to an Agreement and Plan of Reorganization and Merger
dated May 24, 1995 (the "Merger Agreement"), Telecom Services Limited (U.S.),
Inc., Telecom Services Limited (West), Inc., TSL Software Services, Inc. and TSL
Management Group, Inc. (the "TSL Companies") have been merged into Brite (the
"Mergers");
WHEREAS, Employee was an executive officer and substantial shareholder of
the TSL Companies;
WHEREAS, Brite desires to engage Employee to perform services for Brite and
Employee desires to perform such services on the terms and conditions set forth
herein;
WHEREAS, Brite and each of the TSL Companies has, through the expenditure
of substantial amounts of effort and money, developed or acquired certain
confidential information and trade secrets which have become of great value in
amassing its customers, establishing its good will, and maintaining its
operations, and each such company has at all times kept its confidential
information and trade secrets confidential, and such information and secrets
have given such company a decided competitive advantage over others engaged in
the same type of business; and
WHEREAS, the parties desire to preserve and protect for Brite the good
will, trade secrets, confidential information, and other intangible assets of
Brite and each of the TSL Companies.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the
covenants and obligations herein contained, the parties agree as follows:
1. EMPLOYMENT. Brite hereby employs Employee on a full-time basis to
serve as Executive Vice President of Brite in charge of Brite's TSL operating
division ("TSL") and to perform such acts and duties and furnish such services
to Brite as Brite, consistent with Employee's position as Executive Vice
President, shall, from time to time, reasonably direct and Employee shall report
directly to the Chief Executive Officer of Brite. Employee shall use his best
and diligent efforts on a full-time basis to promote the best interests of
Brite. Employee shall be required to perform his duties hereunder principally
in the New York City/Northern New
<PAGE>
Jersey metropolitan area and shall not be required to relocate from such
metropolitan area.
2. COMPENSATION AND BENEFITS.
2.1 SALARY. From the Effective Date of this Agreement through
December 31, 1995, Employee shall be compensated at an annual rate of
$200,000, payable in accordance with Brite's customary payroll policies in
effect at the time of payment ("Base Pay"). Base Pay shall be increased to
an annual rate of $205,000 as of January 1, 1996 and shall be further
increased to an annual rate of $215,250 as of January 1, 1997.
2.2 INCENTIVE COMPENSATION.
(a) Employee shall receive annual bonus compensation pursuant to the
terms of this Section 2.2. For the period from the date of this Agreement
to December 31, 1995, Employee will receive an incentive bonus at an
annualized rate of $85,000 ("Base Bonus") if TSL meets a mutually agreed
upon financial performance target for the subject fiscal year established
during the annual budget preparation of Brite for such subject 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 TSL 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 shall be
increased to $87,125 as of January 1, 1996 for the year ending December 31,
1996 and shall be further increased to $91,481.25 as of January 1, 1997 for
the year ending December 31, 1997.
(b) Each month during the period from the date of this Agreement
through the later of (i) December 31, 1996, and (ii) the last day of the
sixteenth month after the date of this Agreement, Employee shall be paid a
non-refundable advance in an amount equal to 1/12th of the Base Bonus for
the year in progress. Such payments shall be made on the second payroll
date of each month commencing with the first month following the execution
of this Agreement. Each such advance under this clause (b) shall be
non-refundable to Brite, regardless of TSL's financial performance during
each such year.
(c) Payments of any additional annual bonus compensation due Employee
under this Section 2.2 beyond amounts paid under Section 2.2(b) shall be
made by April 10 of each year with respect to the bonus compensation due
Employee for the immediately preceding fiscal year of Brite.
2.3 VACATION. Employee shall be entitled to at least three weeks of
paid vacation per calendar year, to be utilized
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<PAGE>
pursuant to the reasonable policies established and/or modified by Brite
from time to time.
2.4 OTHER BENEFITS. Employee will be entitled to a car allowance of
$600 per month and to participate in Brite's standard benefits provided to
other employees of similar responsibility with Brite as established and/or
modified by Brite from time to time, including, but not limited to, life
insurance, health insurance, and dental insurance.
2.5 BUSINESS EXPENSES. Pursuant to Brite's customary policies in
force at the time of payment, Employee shall be promptly reimbursed,
against presentation of vouchers or receipts therefor, for all reasonable
expenses properly incurred by him on Brite's behalf in the performance of
his duties hereunder.
3. TERM AND CANCELLATION.
3.1 TERM. The Employment Period shall commence on the date hereof
and shall continue until December 31, 1997, unless earlier terminated
pursuant to Section 3.2 below (the "Employment Period").
3.2 TERMINATION.
(a) The employment of Employee and the obligations of Brite under
this Agreement may be terminated by Brite at any time for "Cause".
Termination for Cause shall mean termination only for one or more of the
following reasons: (i) misappropriation of corporate funds; (ii)
conviction of a felony, any crime involving theft or dishonesty, or
conviction of a misdemeanor involving moral turpitude; (iii) willful
failure by Employee to devote substantially his full business time to
Brite; (iv) willful violation of reasonable directions of the Board of
Directors which are consistent with Employee's duties hereunder; (v) death
of Employee; (vi) Employee's inability substantially to carry out his
obligations hereunder for a period of 120 consecutive days or for a period
of 180 days during any period of 270 consecutive days by reason of a
Disability (as hereinafter defined); or (vii) material breach by Employee
of a provision of either Section 4 or Section 5 hereof. For purposes of
this Agreement, "Disability" shall mean the physical, emotional or mental
illness or incapacity of the Employee, such that in the judgment of a
physician (in the case of a physical illness) or a psychiatrist or
psychologist (in the case of a mental or emotional illness), who shall be
chosen by the Employee and be reasonably satisfactory to Brite, the
Employee shall be unable to perform his duties as Executive Vice President,
as contemplated by this Agreement.
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<PAGE>
If Brite elects to terminate the employment of Employee for Cause, it
shall do so by giving at least five business days written notice thereof to
Employee, which notice shall set forth the effective date of termination;
provided, however, that termination of employment shall be deemed to have
occurred automatically on the date of death of Employee. If Brite seeks to
terminate the employment of Employee for Cause, based upon the occurrence
of any of the events described in clause (iii), (iv) or (vii) above, the
written notice of termination shall state the acts or omissions on the part
of Employee which constitute Cause pursuant to clause (iii), (iv) or (vii)
above, in order to give Employee a reasonable opportunity to correct such
acts or omissions within 14 days following the giving of such notice, and
if such acts or omissions are corrected within such period of time, then
the notice of termination shall not become effective. If Brite at any time
terminates this Agreement for Cause, Employee shall not be entitled to any
compensation or incidental benefits from Brite, except for such amount of
his salary, incidental benefits and non-refundable advance due to Employee
under Section 2.2 hereof, that are due and payable to him hereunder on the
date of termination.
(b) Employee shall have the option to terminate this Agreement, upon
30 days written notice to Brite, if Brite materially breaches this
Agreement, including, without limitation, Brite makes a material change in
the duties and responsibilities of Employee inconsistent with Employee's
position as Executive Vice President and his duties and responsibilities
hereunder, including a relocation of Employee from the New York
City/Northern New Jersey metropolitan area, changes in conditions of
employment which are in the aggregate material, or Brite's material failure
to support TSL's business.
If Employee's employment is terminated pursuant to this subparagraph
(b), Employee shall be entitled to receive, as severance, Employee's Base
Pay and Base Bonus as would otherwise have been paid through December 31,
1997 had Employee remained employed by Brite through December 31, 1997 and
TSL achieved its financial performance targets established pursuant to
Section 2.2(a), such severance to be paid in installments in the same
manner as Employee's compensation has theretofore been required to have
been paid, at the regular pay periods of Brite, less legally required
payroll deductions. For purposes of the restrictive covenants set forth in
Section 5 hereof only, Employee's employment with Brite shall be deemed to
be continuing throughout the period during which Brite makes the severance
installment payments contemplated by this subparagraph (b). In addition to
the severance payments provided for herein, Brite shall pay to Employee the
non-refundable advance due to Employee under Section 2.2 hereof,
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<PAGE>
if any, calculated through the end of the last full month of employment
completed as of the date of termination and the incidental benefits that
are due and payable to him hereunder on the date of termination of his
employment.
(c) All obligations of Employee under Sections 4 and 5 hereof shall
continue, in accordance with their terms, in spite of any termination of
this Agreement.
4. CONFIDENTIAL INFORMATION.
4.1 ACKNOWLEDGEMENT. Employee acknowledges that:
(a) Brite's products and services are highly specialized items;
(b) the identity and particular needs of Brite's customers are not
generally known in the industries of which Brite's businesses are a part;
(c) documents and information regarding Brite's methods of
production, sales, pricing, costs, and the identity and specialized
requirements of Brite's customers, are highly confidential and constitute
trade secrets; and
(d) Brite has a legitimate need to protect the confidentiality of
Confidential Information (as hereinafter defined).
4.2 DEFINITION OF CONFIDENTIAL INFORMATION. For purposes of this
Agreement, the term "Confidential Information" shall be defined as follows:
Information of Brite related to the conduct by Brite of its
business not otherwise publicly disclosed or publicly available
(whether or not discovered or developed by Employee) and known by
Employee as a consequence of Employee's employment with Brite.
Without limiting the generality of the foregoing, such
proprietary information shall include information not generally
known in the industry or related industries, which concerns (a)
customer lists of Brite; (b) computer programs and facilities of
Brite; (c) the identity of specialized consultants and
contractors and Confidential Information developed by them for
Brite; (d) operating and other cost data, including information
regarding salaries and benefits of employees of Brite; (e) cost
and pricing data of Brite; (f) acquisition, expansion,
marketing, financial and other business plans of Brite; (g) Brite
manuals, files, records, memoranda, plans, drawings and designs,
specifications and computer programs and
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<PAGE>
records, whether or not legended or otherwise identified as
Confidential Information; and (h) all information which is a "trade
secret" of Brite as defined in the Uniform Trade Secrets Act as
adopted in Kansas at K.S.A. 60-3320.
Notwithstanding the foregoing, Confidential Information shall not
include information which Employee can demonstrate, or Brite agrees, (a) is
previously known on a non-confidential basis by the Employee or that later
becomes published or otherwise generally known in the industry without
breach of this Agreement by Employee; (b) is in the public domain through
no fault of the Employee; (c) is later lawfully acquired by Employee from
sources other than Brite; or (d) is, at the time of its disclosure to
Employee, known to Employee independently of any previously disclosed
Confidential Information.
4.3 NONDISCLOSURE OF CONFIDENTIAL INFORMATION. During Employee's
employment with Brite, Employee will have access to and become familiar
with Confidential Information of Brite. Employee acknowledges that such
Confidential Information is owned and shall continue to be owned solely by
Brite. During the term of Employee's employment with Brite and after
termination of such employment, Employee shall not use or divulge
Confidential Information to any person or entity other than Brite, or
persons expressly designated by Brite or as otherwise would be necessary to
disclose in the ordinary course of his employment with, and in furtherance
of, the business of Brite. Notwithstanding the foregoing, Employee may
disclose Confidential Information if and to the extent he is compelled to
do so by judicial or administrative process, or by other requirements of
law.
4.4 RETURN OF DOCUMENTS. Upon termination of Employee's employment
with Brite, all procedural manuals, guides, specifications, plans,
drawings, designs, records, lists, notebooks, diskettes, customer lists,
pricing documentation and similar documentation which is or contains
Confidential Information, including all copies thereof, in the possession
or control of Employee, whether prepared by Employee or others, shall be
forthwith, upon request by Brite, delivered by Employee to Brite.
5. RESTRICTIVE COVENANTS.
5.1 NONCOMPETITION. Employee covenants and agrees that:
(a) During Employee's employment with Brite, whether during the
Employment Period or thereafter, and following the date of termination of
Employee's employment with Brite if such termination was other than
pursuant to Section 3.2(b)
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<PAGE>
hereof, for a period of three years and, if Employee has been an employee
of Brite for less than a full year at the time of termination of
employment, a number of days equal to the difference between 365 and the
number of days elapsed from the date of this Agreement to the termination
date, Employee shall not in any manner compete with Brite with respect to
any line of business conducted by Brite during Employee's employment with
Brite ("Prohibited Business").
(b) If Employee's employment with Brite is terminated pursuant to
Section 3.2(b) above, Employee shall not in any manner compete with Brite
with respect to a Prohibited Business throughout the period during which
Brite pays Employee the severance payments provided for in Section 3.2(b)
hereof. In addition, Brite shall have the option of extending such period
of noncompetition to the fourth anniversary of the date of this Agreement,
provided, however, such agreement of Employee so not to compete is
conditioned on Brite's payment in monthly installments, and shall be
effective only for so long as Brite makes such payments, on an annualized
basis of an amount equal to the product of (I) such employee's Base Pay
plus his Base Bonus (both as in effect on December 31, 1997, as if Employee
had remained employed by Brite through such date and TSL achieved its
financial performance targets established pursuant to Section 2.2(a),
multiplied by (II) a fraction (i) the numerator of which is the difference
between $20,000,000 and the aggregate net proceeds received by Employee,
Scott Maltz, and Stephen Rockoff from sales of Brite's stock (after
deducting all taxes, fees and expenses incurred in connection with such
sales) from the closing of the Mergers to December 31, 1997, and (ii) the
denominator of which is $20,000,000.
(c) The foregoing covenants shall prevent Employee, directly or
indirectly, on Employee's own behalf or as an employee, officer, agent,
director, partner, consultant, lender, or advisor, during the period
covered by this Section 5, from forming, owning, joining, controlling,
financing, or otherwise participating in the ownership or management of, or
being otherwise affiliated with, any person or entity engaged in a
Prohibited Business during the period covered by this Section 5. During
the period covered by this Section 5, Employee shall not permit any person
or entity (other than Brite) of which Employee is a shareholder or partner
or in which Employee has an ownership interest, to engage in a Prohibited
Business. Notwithstanding any other provision herein, the parties agree
that Employee may, during the period covered by this Section 5, invest
Employee's personal, private assets as a passive investor in not more than
one percent of the total outstanding shares of any publicly traded company
engaged in a Prohibited Business, so long as Employee does not
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<PAGE>
participate in the management or operations of the affairs of such company.
5.2 SOLICITATION OF EMPLOYEES. During the period in which the
noncompetition provision set forth in Section 5.1(a) or 5.1(b) shall be in
effect, Employee shall not, without the prior written approval of the
Chairman of the Board of Directors of Brite, directly or indirectly
solicit, any person who presently is, or at any time during the Employment
Period shall be an employee of Brite (other than secretarial and other
personnel whose duties are ministerial in nature), to become employed by
any other person, firm, or corporation in any business which is a
Prohibited Business.
5.3 SOLICITATION OF CUSTOMERS. During a four-year period following
termination of Employee's employment with Brite, regardless of the basis
for such termination, Employee shall not directly or indirectly, on behalf
of himself or any other person or entity, solicit any person, corporation,
firm, or other entity who is or was a customer of Brite during the period
of five years prior to the termination of Employee's employment for
purposes of obtaining business which would constitute a Prohibited
Business.
5.4 REASONABLENESS OF RESTRICTIONS, REFORMATION, AND SEVERABILITY.
(a) Employee has carefully read and considered the provisions of this
Section 5 and, having done so, agrees that the restrictions set forth
herein, including, but not limited to, the time period of the restriction
and the scope of the restriction, are fair and reasonable and are
reasonably required for the protection of the interests of Brite.
(b) In the event that, notwithstanding the foregoing, any part of the
covenants set forth in this Section 5 shall be held to be invalid or
unenforceable, the remaining parts thereof shall nevertheless continue to
be valid and enforceable as though the invalid or unenforceable parts had
not been included therein. In the event that any provision of this Section
5 relating to the time period and/or scope of restrictions shall be
declared by a court of competent jurisdiction to exceed the maximum time
period, scope or geographical area as such court deems reasonable and
enforceable, said time period, scope and/or geographical areas of
restrictions shall be deemed to become and thereafter be the maximum time
period, scope and/or geographical area which such court deems reasonable
and enforceable.
(c) Any provision of this Agreement otherwise prohibited by or
unenforceable under any applicable law or public policy in any jurisdiction
which cannot be reformed in accordance
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<PAGE>
with the provisions herein, shall, as to such jurisdiction, be ineffective
without affecting any other provision of this Agreement, or shall be deemed
to be severed or otherwise modified to conform with such law or public
policy; and the remaining provisions of this Agreement shall remain in
force, provided that the purpose of this Agreement can be effected. To the
full extent, however, that the provisions of such applicable law or public
policy may be waived, this Agreement shall be deemed to be a waiver
thereof. The parties hereto understand and agree that all the covenants
set forth herein are and shall be separately enforceable, each to the full
extent permitted by applicable law.
6. REMEDIES. It is agreed that Brite would be irreparably damaged by
reason of any violation of the provisions of this Agreement, and that any remedy
at law for a breach of the provisions of this Agreement would be inadequate.
Therefore, Brite shall be entitled to seek injunctive or other equitable relief
in a court of competent jurisdiction against Employee, Employee's agents,
employees, affiliates, partners, or other associates, for any breach or
threatened breach of this Agreement, without the necessity of proving actual
monetary loss. It is expressly understood that the remedy described in this
Section 6 shall not be the exclusive remedy of Brite for any breach of this
Agreement, and Brite shall be entitled to seek such other relief or remedy at
law or in equity to which it may be entitled as a consequence of any breach of
this Agreement.
7. CONSENT AND WAIVER BY THIRD PARTIES. Employee hereby represents and
warrants that he has obtained all necessary waivers and/or consents from third
parties so as to enable him to accept employment with Brite on the terms and
conditions set forth herein and to execute and perform this Agreement without
being in conflict with any other agreement, obligation or understanding with any
such third party.
8. BRITE SUBSIDIARIES. For purposes of this Agreement, "Brite" means
Brite Voice Systems, Inc. and its subsidiaries.
9. ENTIRE AGREEMENT. This Agreement contains the entire understanding of
the parties in respect of its subject matter and supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
This Agreement supersedes all employment agreements of any type between Employee
and the TSL Companies.
10. AMENDMENT; WAIVER. This Agreement may not be amended, supplemented,
canceled or discharged except by written instrument executed by the party
affected thereby. No failure to exercise, and no delay in exercising, any
right, power or privilege hereunder shall operate as a waiver thereof. No
waiver of any breach of any
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<PAGE>
provision of this Agreement shall be deemed to be a waiver of any preceding or
succeeding breach of the same or any other provision.
11. BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of any successor of Brite by
reorganization, merger or consolidation, or any assignee of all or substantially
all of Brite's business and properties. Employee's rights or obligations under
this Agreement may not be assigned by Employee, except that Employee's right to
any payments to be received hereunder shall pass to Employee's executor,
administrator or personal representative.
12. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
13. GOVERNING LAW; INTERPRETATION. This Agreement shall be construed in
accordance with, and governed for all purposes by, the laws and public policy of
the State of Kansas applicable to contracts executed and to be wholly performed
within such State.
14. ATTORNEY'S FEES. Should Brite or Employee bring an action in any
Court of competent jurisdiction to enforce any of the provisions hereof, and
prevail on any aspect of such action, then such prevailing party shall be
awarded the reasonable attorney's fees incurred by reason of such action.
15. FURTHER ASSURANCES. Each of the parties agrees to execute,
acknowledge, deliver and perform, and/or cause to be executed, acknowledged,
delivered and performed, at any time and/or from time to time, as the case may
be, all such further acts, documents, transfers, conveyances, and/or assurances
as may be necessary and/or proper to carry out the provisions and/or intent of
this Agreement.
IN WITNESS WHEREOF, this Employment Agreement has been entered into as of
the date first set forth above.
BRITE VOICE SYSTEMS, INC.
By DONALD R. WALSH
-------------------------------------
Donald R. Walsh,
Executive Vice President
Alan C. Maltz
----------------------------------------
ALAN C. MALTZ
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Exhibit 10.18
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), is made and entered into effective
this 31st day of March, 1995, by and between LAURENCE W. POTTER, III
("Employee") and BRITE VOICE SYSTEMS, INC. ("Brite").
WHEREAS, Brite desires to engage Employee to perform services for Brite and
Employee desires to perform such services on the terms and conditions set forth
herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the
covenants and obligations herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. Brite hereby employs Employee on a full-time basis to
perform such acts and duties and furnish such services to Brite as Brite shall,
from time to time, direct. Employee shall use his best and most diligent
efforts on a full time, exclusive basis to promote the best interests of Brite.
2. COMPENSATION AND BENEFITS.
2.1 SALARY. Employee's initial annual salary shall be $60,000,
payable pursuant to Brite's customary payroll policies in force at the time
of payment (but in no event less frequently than monthly), less required
payroll deductions. Employee's base salary will be reviewed annually by
Brite; provided, however, that in no event shall Employee's salary be
reduced below $60,000 per year during the term of this Agreement.
2.2 BONUS. Employee shall be entitled to participate in Brite's
incentive compensation program for employees of similar responsibility,
which is expected to provide a bonus of $20,000, if the targeted perfor-
mance is attained. The targeted performance is set in the Touch Talk FBU
budget, a copy of which shall be provided to Employee.
2.3 VACATION. Employee shall be entitled to three weeks of paid
vacation per calendar year, to be utilized pursuant to the policies
established and/or modified by Brite from time to time.
2.4 OTHER BENEFITS. Employee will be entitled to participate in
Brite's standard benefits provided to other employees of similar responsi-
bility with Brite as established and/or modified by Brite from time to
time, including, but not limited to, life insurance, health insurance, and
dental insurance.
<PAGE>
2.5 BUSINESS EXPENSES. Pursuant to Brite's customary policies in
force at the time of payment, Employee shall be promptly reimbursed,
against presentation of vouchers or receipts therefor, for all approved
expenses properly incurred by him on Brite's behalf in the performance of
his duties hereunder.
3. TERM AND CANCELLATION.
3.1 TERM. The employment period shall commence on the date hereof
and shall continue for a period of two years thereafter, unless earlier
terminated pursuant to paragraph 3.2 below.
3.2 CANCELLATION.
(a) The employment of Employee and the obligations of Brite under
this Agreement may be terminated by Brite at any time for "Cause" (as
hereinafter defined). Termination for Cause shall mean termination for any
one or more of the following reasons: (i) misappropriation of corporate
funds; (ii) conviction of a felony, any crime involving theft or dishon-
esty, or conviction of a misdemeanor involving moral turpitude; (iii)
willful failure by Employee to devote substantially his full business time
to Brite; (iv) voluntary termination of employment by Employee; (v) willful
violation of reasonable directions of the Board of Directors which are
consistent with Employee's duties hereunder; (vi) material breach by
Employee of the Confidentiality and Noncompete Agreement between the
parties, the form of which is attached hereto as Exhibit B (the "Confiden-
tiality Agreement"); or (vii) material falsity in any material representa-
tion made by Employee in or the breach by Employee of any material covenant
or agreement under the Agreement and Plan of Reorganization and Merger of
even date herewith. If Brite seeks to terminate the employment of Employee
for Cause, as described in (iii), (v), (vi), or (vii) above, Brite must
first give written notice of the acts or omissions on the part of Employee
which constitute Cause, in order to give Employee a reasonable opportunity
to correct such acts or omissions within fifteen (15) days following the
giving of such notice, and if such acts or omissions are corrected within
such period of time, then Brite may not terminate this Agreement for such
Cause. If Brite at any time terminates this Agreement for Cause, Employee
shall not be entitled to any compensation or incidental benefits from
Brite, except his salary and incidental benefits (but in no event any
bonus) that are earned as of the date of termination. If Brite elects to
terminate this Agreement for Cause, it shall do so by giving written notice
thereof to Employee which notice shall set forth the effective date of
termination. All obligations of Employee under the Confidentiality
Agreement shall continue in spite of such termination.
- 2 -
<PAGE>
(b) The employment of Employee pursuant to this Agreement may be
terminated by Brite upon either the death of Employee, or in the event of
Employee's inability to substantially carry out his obligations hereunder
for a period of 90 days during any period of 180 days because of psycholog-
ical, emotional or physical reasons ("Disability"). Upon termination for
Employee's death or Disability, the unpaid portion of his salary to the
date of such termination shall be promptly paid to Employee or his heirs by
Brite.
(c) The employment of Employee pursuant to this Agreement may be
terminated by Brite other than for Cause, as provided in subparagraph (a)
above, or "Disability", as provided in subparagraph (b) above. If Brite
terminates Employee other than for Cause or for Disability, Employee shall
be solely entitled to receive, as severance, Employee's salary for the
remainder of the two year term of this Agreement as set forth in paragraph
3.1 above, at the regular usual pay periods of Brite, less required payroll
deductions. Employee shall not be entitled to nor earn any bonus after the
date of such termination. For purposes of the Restrictive Covenant in the
Confidentiality Agreement, Employee's employment with Brite shall be deemed
to be continuing throughout the period Brite makes salary payments contem-
plated by this subparagraph.
(d) If Brite terminates Employee as provided in subparagraph (b)
above or as provided in subparagraph (c) above, then Brite shall pay to
Employee his monthly Bonus calculated through the end of the last full
month of employment completed through the date of termination. This Bonus
shall be calculated according to Brite's normal policy.
4. CONFIDENTIALITY AND NONCOMPETITION. In consideration of Employee's
employment, and in consideration of being granted certain stock options, as set
forth in an Incentive Stock Option Agreement of even date herewith, Employee
agrees to enter into and abide by the Confidentiality Agreement.
5. CONSENT AND WAIVER BY THIRD PARTIES. Employee hereby represents and
warrants that he has obtained all necessary waivers and/or consents from third
parties so as to enable him to accept employment with Brite on the terms and
conditions set forth herein and execute and perform this Agreement without being
in conflict with any other agreement, obligation or understanding with any such
third party.
6. ENTIRE AGREEMENT. This Agreement contains the entire understanding of
the parties in respect of its subject matter and supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
7. AMENDMENT; WAIVER. This Agreement may not be amended, supplemented,
canceled or discharged except by written instrument executed by the party
affected thereby. No failure to exercise,
- 3 -
<PAGE>
and no delay in exercising, any right, power or privilege hereunder shall
operate as a waiver thereof. No waiver of any breach of any provision of this
Agreement shall be deemed to be a waiver of any preceding or succeeding breach
of the same or any other provision.
8. BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of any successor of Brite by
reorganization, merger or consolidation, or any assignee of all or substantially
all of Brite's business and properties. Employee's rights or obligations under
this Agreement may not be assigned by Employee, except that Employee's right to
compensation to the earlier of date of death, disability or termination of
actual employment shall pass to Employee's executor, administrator or personal
representative.
9. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
10. GOVERNING LAW; INTERPRETATION. This Agreement shall be construed in
accordance with, and governed for all purposes by, the laws and public policy of
the State of Kansas applicable to contracts executed and to be wholly performed
within such State.
11. FURTHER ASSURANCES. Each of the parties agrees to execute, acknowl-
edge, deliver and perform, and/or cause to be executed, acknowledged, delivered
and performed, at any time and/or from time to time, as the case may be, all
such further acts, documents, transfers, conveyances, and/or assurances as may
be necessary and/or proper to carry out the provisions and/or intent of this
Agreement.
12. SEVERABILITY. If any one or more of the terms, provisions, covenants
or restrictions of this Agreement shall be determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
effective the date first above written.
BRITE VOICE SYSTEMS, INC.
By Stanley G. Brannan
----------------------------------------
Stanley G. Brannan, President
Laurence W. Potter, III
-------------------------------------------
LAURENCE W. POTTER, III
- 4 -
<PAGE>
Exhibit 10.19
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), is made and entered into effective
this 31st day of March, 1995, by and between MICHAEL D. HEINRICH ("Employee")
and BRITE VOICE SYSTEMS, INC. ("Brite").
WHEREAS, Brite desires to engage Employee to perform services for Brite and
Employee desires to perform such services on the terms and conditions set forth
herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the
covenants and obligations herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. Brite hereby employs Employee on a full-time basis to
perform such acts and duties and furnish such services to Brite as Brite shall,
from time to time, direct. During the term of this Agreement, Employee's
position and responsibilities with Brite shall be substantially as set forth in
the "Position Description" attached hereto as Exhibit A (the "Position Descrip-
tion"). Employee shall use his best and most diligent efforts on a full time,
exclusive basis to promote the best interests of Brite.
2. COMPENSATION AND BENEFITS.
2.1 SALARY. Employee's initial annual salary shall be $90,000,
payable pursuant to Brite's customary payroll policies in force at the time
of payment (but in no event less frequently than monthly), less required
payroll deductions. Employee's base salary will be reviewed annually by
Brite; provided, however, that in no event shall Employee's salary be
reduced below $90,000 per year during the term of this Agreement.
2.2 BONUS. Employee shall be entitled to participate in Brite's
incentive compensation program for employees of similar responsibility,
which is expected to provide a bonus of $40,000, if the targeted perfor-
mance is attained. The targeted performance is set in the Touch Talk FBU
budget, a copy of which shall be provided to Employee.
2.3 VACATION. Employee shall be entitled to three weeks of paid
vacation per calendar year, to be utilized pursuant to the policies
established and/or modified by Brite from time to time.
2.4 OTHER BENEFITS. Employee will be entitled to participate in
Brite's standard benefits provided to other employees of similar responsi-
bility with Brite as established and/or modified by Brite from time to
time, including, but not
<PAGE>
limited to, life insurance, health insurance, and dental insurance.
2.5 BUSINESS EXPENSES. Pursuant to Brite's customary policies in
force at the time of payment, Employee shall be promptly reimbursed,
against presentation of vouchers or receipts therefor, for all approved
expenses properly incurred by him on Brite's behalf in the performance of
his duties hereunder.
3. TERM AND CANCELLATION.
3.1 TERM. The employment period shall commence on the date hereof
and shall continue for a period of two years thereafter, unless earlier
terminated pursuant to paragraph 3.2 below.
3.2 CANCELLATION.
(a) The employment of Employee and the obligations of Brite under
this Agreement may be terminated by Brite at any time for "Cause" (as
hereinafter defined). Termination for Cause shall mean termination for any
one or more of the following reasons: (i) misappropriation of corporate
funds; (ii) conviction of a felony, any crime involving theft or dishon-
esty, or conviction of a misdemeanor involving moral turpitude; (iii)
willful failure by Employee to devote substantially his full business time
to Brite; (iv) voluntary termination of employment by Employee; (v) willful
violation of reasonable directions of the Board of Directors which are
consistent with Employee's duties hereunder; (vi) material breach by
Employee of the Confidentiality and Noncompete Agreement between the
parties, the form of which is attached hereto as Exhibit B (the "Confiden-
tiality Agreement"); or (vii) material falsity in any material representa-
tion made by Employee in or the breach by Employee of any material covenant
or agreement under the Agreement and Plan of Reorganization and Merger of
even date herewith. If Brite seeks to terminate the employment of Employee
for Cause, as described in (iii), (v), (vi), or (vii) above, Brite must
first give written notice of the acts or omissions on the part of Employee
which constitute Cause, in order to give Employee a reasonable opportunity
to correct such acts or omissions within fifteen (15) days following the
giving of such notice, and if such acts or omissions are corrected within
such period of time, then Brite may not terminate this Agreement for such
Cause. If Brite at any time terminates this Agreement for Cause, Employee
shall not be entitled to any compensation or incidental benefits from
Brite, except his salary and incidental benefits (but in no event any
bonus) that are earned as of the date of termination. If Brite elects to
terminate this Agreement for Cause, it shall do so by giving written notice
thereof to Employee which notice shall set forth the effective date of
termination. All obligations of Employee under the
- 2 -
<PAGE>
Confidentiality Agreement shall continue in spite of such termination.
- 3 -
<PAGE>
(b) The employment of Employee pursuant to this Agreement may be
terminated by Brite upon either the death of Employee, or in the event of
Employee's inability to substantially carry out his obligations hereunder
for a period of 90 days during any period of 180 days because of psycholog-
ical, emotional or physical reasons ("Disability"). Upon termination for
Employee's death or Disability, the unpaid portion of his salary to the
date of such termination shall be promptly paid to Employee or his heirs by
Brite.
(c) The employment of Employee pursuant to this Agreement may be
terminated by Brite other than for Cause, as provided in subparagraph (a)
above, or "Disability", as provided in subparagraph (b) above. If Brite
terminates Employee other than for Cause or for Disability, Employee shall
be solely entitled to receive, as severance, Employee's salary for the
remainder of the two year term of this Agreement as set forth in paragraph
3.1 above, at the regular usual pay periods of Brite, less required payroll
deductions. Employee shall not be entitled to nor earn any bonus after the
date of such termination. For purposes of the Restrictive Covenant in the
Confidentiality Agreement, Employee's employment with Brite shall be deemed
to be continuing throughout the period Brite makes salary payments contem-
plated by this subparagraph. If Brite makes a material change in the
duties and responsibilities of Employee as set forth in the Position
Description, and Employee elects to terminate his employment with Brite
because of such change, such termination shall be deemed to be a termina-
tion under this subparagraph (c).
(d) If Brite terminates Employee as provided in subparagraph (b)
above or as provided in subparagraph (c) above, then Brite shall pay to
Employee his monthly Bonus calculated through the end of the last full
month of employment completed through the date of termination. This Bonus
shall be calculated according to Brite's normal policy.
4. CONFIDENTIALITY AND NONCOMPETITION. In consideration of Employee's
employment, and in consideration of being granted certain stock options, as set
forth in an Incentive Stock Option Agreement of even date herewith, Employee
agrees to enter into and abide by the Confidentiality Agreement.
5. CONSENT AND WAIVER BY THIRD PARTIES. Employee hereby represents and
warrants that he has obtained all necessary waivers and/or consents from third
parties so as to enable him to accept employment with Brite on the terms and
conditions set forth herein and execute and perform this Agreement without being
in conflict with any other agreement, obligation or understanding with any such
third party.
6. ENTIRE AGREEMENT. This Agreement together with its exhibits, contain
the entire understanding of the parties in respect of its subject matter and
supersedes all prior agreements
- 4 -
<PAGE>
and understandings between the parties with respect to such subject matter.
7. AMENDMENT; WAIVER. This Agreement may not be amended, supplemented,
canceled or discharged except by written instrument executed by the party
affected thereby. No failure to exercise, and no delay in exercising, any
right, power or privilege hereunder shall operate as a waiver thereof. No
waiver of any breach of any provision of this Agreement shall be deemed to be a
waiver of any preceding or succeeding breach of the same or any other provision.
8. BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of any successor of Brite by
reorganization, merger or consolidation, or any assignee of all or substantially
all of Brite's business and properties. Employee's rights or obligations under
this Agreement may not be assigned by Employee, except that Employee's right to
compensation to the earlier of date of death, disability or termination of
actual employment shall pass to Employee's executor, administrator or personal
representative.
9. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
10. GOVERNING LAW; INTERPRETATION. This Agreement shall be construed in
accordance with, and governed for all purposes by, the laws and public policy of
the State of Kansas applicable to contracts executed and to be wholly performed
within such State.
11. FURTHER ASSURANCES. Each of the parties agrees to execute, acknowl-
edge, deliver and perform, and/or cause to be executed, acknowledged, delivered
and performed, at any time and/or from time to time, as the case may be, all
such further acts, documents, transfers, conveyances, and/or assurances as may
be necessary and/or proper to carry out the provisions and/or intent of this
Agreement.
12. SEVERABILITY. If any one or more of the terms, provisions, covenants
or restrictions of this Agreement shall be determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
- 5 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
effective the date first above written.
BRITE VOICE SYSTEMS, INC.
By Stanley G. Brannan
----------------------------------------
Stanley G. Brannan, President
Michael D. Heinrich
-------------------------------------------
MICHAEL D. HEINRICH
- 6 -
<PAGE>
January 6, 1995
DRAFT #2
To: Mike Heinrich TouchTalk
From: David Hemmings Brite Voice Systems
Re: Employment Clarification for 1995
TouchTalk FBU Role
This Focussed Business Unit (hereinafter "the FBU") will perform the
following business functions:
- Software, database, tools and interface development and positioning
within the CTI/IVR Systems sector strategy. The FBU will have its own
engineering resources in Dallas to develop products and services.
- Custom and generic application development as a part of the corporate
CTI/IVR team.
- Technical support services for TT3/Write-1 products. This FBU will
provide customer service for its special software and systems configura-
tions at end-customer locations.
- Sales support and training for its Brite's CTI/IVR systems end-
customers worldwide. This support may be required for existing TouchTalk
and Perception products, as well as other Brite products.
- Marketing and proposals support, as well as collateral content, to all
other Brite FBUs as requested. TouchTalk will contribute to CTI/IVR
systems proposals and target market development for both domestic and
international accounts on an as-needed basis. Coordination of project
management, for larger projects, with other Brite FBU's. Project manage-
ment may become a CTI/IVR sector-wide function with is shared by the
TouchTalk FBU.
- Business expansion strategy and tactics development for the TouchTalk
FBU, in coordination with the CTI/IVR corporate strategy. The TouchTalk
FBU will be a significant participant in the development and evolution of
the CTI/IVR corporate strategy.
EXHIBIT "A"
<PAGE>
Position Description
Vice President and General Manager of Brite Voice Systems, TouchTalk FBU,
reporting to Jerry Butler, Senior Vice President, CTI/IVR Systems sector.
Responsibilities include the following:
- - Create and manage the Focussed Business Unit (FBU) business plan and
strategies that ensures profitable growth, product development, and customer
satisfaction in its CTI/IVR business marketplace.
- - Manage the Profit and Loss of the FBU for its systems, software products,
applications and tools. Deliver FBU profitability and expense rates consistent
with the rest of the CTI/IVR business and with Brite as a corporation.
- - Direct the requirements studies and design phase activities for subsequent
development within the FBU. Consider the capabilities already available in
other Brite departments and outside suppliers in making decisions on development
plans and schedules. Develop a strategy to continue the increase of Dialogic
content in Brite's CTI/IVR sales. Work with the Perception Technology FBU to
build Brite's software content in its CTI/IVR business.
- - Support Brite's New Generation Product to meet corporate requirements - in
particular, the new CTI/IVR platform. Dialogic's SCSA architecture is the
preferred technology.
- - Provide significant contribution to the expansion of Brite's CTI/IVR
business markets, in coordination with other Brite senior managers, to develop
an integrated CTI/IVR corporate strategy which optimizes the return on invest-
ment from all Brite FBUs.
- - Coordinate the development plans of the FBU with other Brite businesses.
Provide control of the resulting developments within the FBU for new product
development, use, platform, and requirements.
- - Manage the following current first-line managers (direct reports):
Marketing Director, Applications Development & Support Manager, Technical
Services Director, and Product Development Manager.
- - Manage the Sales Support team, to provide CTI/IVR systems and product
knowledge and proposal capability to Brite Sales staffs, both domestically and
internationally. This team includes: Marketing, Proposals and Documentation.
- - Be responsible for the Brite facility in Dallas.
- - Develop a culture which also respects and benefits from Brite's European
and other International sales groups. Continue to provide CTI/IVR and
TT3/Write-1 training to other Brite sales and sales support groups.
- - Coordinate Sales Commission and FBU Revenue Split arrangements with the
Perception FBU and other Brite FBU's.
- - Prepare an integrated monthly report for your FBU, according to the
standard Brite format.
<PAGE>
BRITE VOICE SYSTEMS, INC.
SUBSIDIARIES
Brite Voice Systems Group, Limited
Crossford Court
Dane Road
Sale, Chesire M33 7BZ
ENGLAND
Brite Voice Systems Group, GmbH
Dotzheimer Strasse 168
6200 Wiesbaden
GERMANY
Brite Holding AG
c/o Societe Fiduciaire Visura SA
Rue St-Martin 9
CH-1002, Lausanne
SWITZERLAND
Brite Voice Systems AG
Kanalstrasse 29, Postfach
8152 Glattbrugg
SWITZERLAND
Brite Voice Systems S.p.A.
Via Flaminia 173
Roma 00196
ITALY
Brite Leasing, Inc.
7309 E. 21st Street North
Wichita, KS 67206
Brite Voice Systems Pte Ltd.
Odean Towers #03-01
331 North Bridge Road
Singapore 0718
Brite Voice Systems S.A. (Pty) Ltd.
5 Pagoda Crescent
Fourways Gardens
Fourways
Johannesburg
Republic of South Africa
<PAGE>
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 10-K, into the Company's previously filed
Registration Statements File No. 33-44609, No. 33-66812, No. 33-67310, No. 33-
67274, and No. 33-80478.
Kansas City, Missouri, /s/ Arthur Andersen LLP
February 22, 1996
<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 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 the related
combined statements of operations and retained earnings (deficit), and cash
flows for each of the two years in the period ended December 31, 1994 (not
presented separately herein). 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 the combined results of their operations and their cash flows for each of
the two years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
MetroPark, New Jersey
April 7, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 3,405
<SECURITIES> 0
<RECEIVABLES> 29,171
<ALLOWANCES> 481
<INVENTORY> 10,510
<CURRENT-ASSETS> 45,320
<PP&E> 23,052
<DEPRECIATION> 11,476
<TOTAL-ASSETS> 58,832
<CURRENT-LIABILITIES> 18,386
<BONDS> 0
0
0
<COMMON> 34,377
<OTHER-SE> 6,069
<TOTAL-LIABILITY-AND-EQUITY> 58,832
<SALES> 52,697
<TOTAL-REVENUES> 97,078
<CGS> 22,809
<TOTAL-COSTS> 91,370
<OTHER-EXPENSES> (452)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,160
<INCOME-TAX> 2,210
<INCOME-CONTINUING> 3,950
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,950
<EPS-PRIMARY> .33
<EPS-DILUTED> 0.00
</TABLE>
