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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, 1998
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
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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.)
250 INTERNATIONAL PARKWAY, STE. 300
LAKE MARY, FL 32746
(Address of principal executive offices)
Registrant's telephone number, including area code: (407) 357-1000
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. Yes /X/ 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: /X/
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, as of March 1, 1999 was $88,043,274, 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 March 1, 1999, there were 12,271,053 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 11, 1999 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 9, 1999.
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BRITE VOICE SYSTEMS, INC.
1998 FORM 10-K
TABLE OF CONTENTS
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Item 1. Business...................................................................... 1
Item 2. Properties.................................................................... 11
Item 3. Legal Proceedings............................................................. 11
Item 4. Submission of Matters to a Vote of Security Holders........................... 11
Item 5. Market for the Company's Common Equity and Related Stockholder Matters........ 12
Item 6. Selected Financial Data....................................................... 13
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................... 14
Item 7a. Quantitative and Qualitative Disclosures about Market Risk.................... 20
Item 8. Financial Statements and Supplementary Data................................... 21
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.................................................................... 45
Item 10. Directors and Executive Officers of the Registrant............................ 45
Item 11. Executive Compensation........................................................ 45
Item 12. Security Ownership of Certain Beneficial Owners and Management................ 45
Item 13. Certain Relationships and Related Transactions................................ 45
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............... 46
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PART I
ITEM 1. BUSINESS
GENERAL
Brite Voice Systems, Inc. (the "Company" or "Brite") designs, integrates,
assembles, markets and supports voice processing and call processing systems and
services which incorporate prepaid/postpaid applications, voice response, voice
recognition, voice/facsimile messaging, audiotex and interactive computer
applications into both standard products and customized market solutions.
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 keypad. Many of the Company's systems use
voice recognition to allow input of information using spoken commands.
Call processing systems allow a service provider to process and complete
subscribers' calls utilizing special features such as prepaid or calling card
billing, voice dialing, voice messaging, pager capabilities and short message
services. A call processing system may include certain voice processing
features.
The Company's products can be divided into two categories: those that
increase its customers' revenues through increased subscription or user fees,
and those that reduce customers' costs or improve the efficiency of services
provided to end-user customers. Examples of revenue enhancing products are
systems developed for wireless and wireline network operators who provide voice
activated dialing and prepaid calling services to their subscriber base, thereby
increasing network usage and revenues. Typical applications that reduce
customers' costs or improve efficiency allow callers to access 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 use of the Company's systems to respond to routine
requests for information reduces customers' direct labor costs, and allows live
agents to handle more complex questions and problems, thereby improving customer
service.
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 acquired substantially all
of the assets of the Voice Systems Group of Ferranti Business Communications,
Ltd. Through its subsidiaries, Brite Voice Systems Group, Limited, Brite Voice
Systems Group GmbH, Brite Voice Systems AG and Brite Voice Systems S.p.A.
(collectively "EMEA" or "Europe, the Middle East and Africa"), EMEA manufactures
and markets substantially all of the Company's products throughout these
regions. EMEA maintains design and production facilities in Manchester, England
and sales and support offices in Cambridge, England; France; Germany; Italy; the
Netherlands; South Africa; Switzerland and United Arab Emirates.
In July 1993, the Company acquired 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 processing industry.
In March 1995, the Company acquired Touch-Talk, Incorporated ("Touch-Talk"),
based in Dallas, Texas. 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. The acquisition of Touch-Talk
broadened the Company's capabilities in providing turnkey voice processing
applications to customers seeking a single vendor for all of their voice
processing requirements.
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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. The Company's TSL division offered 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.
On October 30, 1997, the Company consummated the sale of certain assets used
in its electronic publishing business to IT Network, Inc. for $35 million in
cash. The business sold consisted primarily of the Company's information
services business, the sale of audiotex advertising sponsorships to yellow pages
advertisers, and the management of such advertisers on behalf of yellow pages
publishers.
Effective December 1, 1998, the Company consummated the sale of the assets
of its TSL division to ProfitSource Corporation (subsequently named EPS
Solutions Corporation). The Company received $20 million in cash, and a
subordinated promissory note of EPS Solutions Corporation with a face value of
$5 million. The Company also received a warrant to purchase 5,000 shares of TSL
Services, Inc., which in certain circumstances may be converted to shares of EPS
Solutions Corporation.
The Company elected to sell these businesses because it believed that, while
profitable, the growth prospects of each business were limited. Further, the
Company was seeking to focus on fewer but larger market opportunities in the
voice processing industry. The Company was able to use the proceeds from each of
these transactions to retire all of its short-term debt and significantly
increase working capital and stockholders' equity.
The Company believes that the transactions described above have positioned
the Company as a leading supplier of enhanced telecommunications products and
interactive information systems. The Company expects to continue to evaluate
prospects for future acquisitions or other corporate development activities to
supplement its internal technology and product development. In addition, the
Company regularly evaluates all of its product and services offerings for
profitability and growth potential, and will continue to redesign, redirect or
eliminate those products or services which fail to demonstrate profitability or
significant growth potential.
THE COMPANY'S PRODUCTS
PLATFORMS
Brite believes that the wide variety of new applications and services being
sought by the telecommunications industry will cause a fundamental change in the
product architecture used to provide these services. This industry now generally
uses a topology consisting of a network with a series of attached products,
provided by different vendors, to provide the needed range of applications. The
Company believes that significant demand exists for a uniform architecture
consisting of a series of common components utilized for multiple applications.
This change will allow client companies to quickly offer new applications and
features on a common hardware architecture that can be expanded to add new
features and growth in capacity. In 1997, Brite focused on developing this
common architecture, known as BriteESP-TM-, and making its entire range of
applications available using "building block" components and a common high-level
applications language. A majority of the BriteESP development efforts were
completed in 1998. Upon completion, each product will have:
- A common set of front-end telecommunication network interfaces providing
switching and signaling for a variety of networks, such as SS7, ISDN and
in-band signaling.
- A common media-processing unit providing voice recording, playback and
recognition services to all applications.
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- A common applications processing unit running a variety of call processing
and applications software.
- An operations, administration, maintenance and provisioning environment
utilizing the Simple Network Management Protocol ("SNMP") standard,
allowing a single manager to manage the entire suite of Brite products,
and any other products that are SNMP compliant.
- An application creation environment using Write-1-Registered Trademark-,
Brite's fourth-generation language which allows easy, graphics-driven
application development.
- Integrated system administration, using state-of-the-art graphical user
interface operator terminals.
- A common relational database management environment.
APPLICATION CREATION ENVIRONMENT
Write-1 is a language developed by Brite for writing voice processing and
call processing applications, and performing host connectivity, that runs under
a range of UNIX operating systems. It also contains a library of interfaces to
third party development tools such as databases, host connections and Dialogic's
CT Connect product. The Company has an application software development
environment with a graphical user interface running under Windows NT. This
package is designed to meet a wide variety of programming needs, from creating
simple menu-based call flows to developing complex network-based applications.
It also isolates the programmer from the operating system and hardware platform,
thus making applications more portable and expandable.
Write-1 contains a range of features that enable customers to produce state
of the art applications. Examples of customer-developed applications include
consumer banking and financial transactions, and a large call center help desk
which includes automated display of pertinent caller information on the computer
screen of a customer service representative.
APPLICATIONS
Applications currently in use by many of the Company's customers are as
follows:
VOICE ACTIVATED DIALING. This application allows wireless carriers to
provide a cellular telephone user access to 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-Registered Trademark- and BriteTalk-TM-are marketed to cellular
providers around the world.
DEBIT/PREPAID CALLING. BriteDebit-Registered Trademark- applications
deliver the ability for telecommunications companies to provide services to
subscribers extending beyond traditional monthly billed service. This capability
allows wireless and wireline companies to provide service through the use of
credit cards, debit cards or prepaid services requiring no card. Unlike
traditional telephone company services where service usage measurements are
collected and bills are generated offline at the end of the billing cycle,
prepaid or debit services require that this billing function occur as part of
the call processing system and in "real time" to allow the user to always have
access to a current balance record. Further, the system must have the ability to
"tell" the user the balance in the account. This ability to perform not only
voice processing and call processing, but also call costing and customer account
adjustment, is a technical task similar to the functionality provided by
telecommunications switches and billing systems operating simultaneously and in
real-time.
BriteStar-TM-, developed during 1998, is a unique handset-based prepaid
solution, specifically for wireless providers. BriteStar uses powerful
encryption technology to store the user's credit within the handset itself, and
allows the handset to securely monitor the value of all calls made, so that the
user credit level is never exceeded. It allows network operators to launch a
prepaid service with a very short time to
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market, simple network integration, highly efficient use of network resources,
and high resistance to fraud. BriteStar also offers key subscriber benefits,
such as credit display on the handset, and is the first prepaid solution capable
of full international roaming. BriteStar was developed jointly with Telemac
Corporation and Philips Consumer Communications, combining Brite's expertise in
system delivery and network integration with Telemac's leadership in switch
independent handset-based prepaid wireless technology and Philips' expertise in
handset production.
VOICE MESSAGING. Voice messaging (or voice mail) allows users to store,
send and receive information over the telephone or Internet. In addition to
voice mail, the systems provide call answering, call routing, paging, short
message delivery, dictation and automated attendant features. The Company's
range of voice messaging services can be combined to offer a wide range of
value-added services for public telephone network operators.
ENHANCED CALLING CARD. BriteCall-TM-, developed in 1998, offers postpaid
and enhanced calling card capabilities, including voice activated dialing and
speed dialing. BriteCall is a robust, distributed and network grade product
integrating multiple services on the same platform.
INTERACTIVE VOICE RESPONSE ("IVR") APPLICATIONS. Designed for use with the
Company's IVR platforms, these applications are often customized, and can be
written by the Company, by the customer, or written in cooperation with a series
of independent software vendors ("ISVs"). 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.
SERVICES
The Company offers a wide range of services in conjunction with its voice
processing and call processing systems. These services are typically available
on either an annual or quarterly basis and generally complement or support the
Company's products. The Company also provides a variety of telecommunications
management services.
MANAGED SERVICES
As a complement to its system sales, the Company provides certain voice and
call processing services on a managed services basis. In a typical managed
service relationship, the Company provides all necessary equipment and
operational personnel, allowing the customer to avoid both the front-end cost of
purchasing equipment, and the continuing cost of adding personnel to staff a
function that is outside its expertise. 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'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.
The Company provides its prepaid calling application (BriteDebit and
BriteStar) to network operators on a managed service basis in addition to
offering a system purchase option. Under these arrangements, the Company
provides the hardware platform which carries traffic on the prepaid network,
rates calls and keeps track of individual subscriber balances, processes account
replenishment and provides customer
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support representatives to assist subscribers with problems. The Company's
platform can be easily expanded to meet increased demand and combines many
features in a manner that the Company believes are unmatched in the industry.
The advantage to the network provider is a completely bundled service, which
requires no front-end purchase of equipment, a fixed cost to provide the
service, and the avoidance of continuing costs of operational personnel on
staff.
SERVICE CONTRACT AND REPAIR
The Company's systems are generally sold with limited warranties, which
usually 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.
During 1998, the Company introduced a new program called "BriteCare-TM-",
which consists of a range of additional services. This program includes both
basic maintenance/warranty services and advanced professional services that can
assist the customer in business planning, source marketing, service planning and
deployment. The Company believes that BriteCare is an important differentiating
factor in reducing customers' risks and costs, or increasing their revenues.
SALES AND MARKETING
MARKETS SERVED
The Company's hardware systems are sold to two principal markets: the
business systems or commercial market and the network operator market.
The business systems market is broadly defined to include organizations that
service large volumes of telephone callers on a regular basis. These
organizations are generally seeking to streamline operations, improve efficiency
and reduce costs. The Company markets systems that fall into one of three
categories: audiotex, IVR, or computer telephony integration ("CTI"). Audiotex
systems typically broadcast the same information to each caller, while IVR
systems allow callers to access or change account-specific information. CTI
systems generally apply computer intelligence to telecommunications devices to
improve the efficiency of customer service representatives by providing
telephone access and control of computer functions, and computer access and
control of telephone functions. The Company markets its products primarily to
specific industries with needs that can be easily satisfied with highly
automated solutions. The Company has principally served the call center,
education, financial services, government, health care, publishing,
telecommunications and utility markets.
Network operators purchase and install the Company's systems in or near
their central switching offices and use the Company's systems to offer what are
known as "enhanced network" or "enhanced telecommunications services" to their
subscriber base. Subscribers have access to voice messaging, voice activated
dialing, prepaid calling and other services that produce additional revenue to
the operator.
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DOMESTIC SALES
Revenues within North America amounted to $75,673,000, $58,643,000 and
$55,077,000 in 1998, 1997 and 1996, respectively. 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. Direct sales personnel are located throughout the United
States, including the Company's offices in Canton, Massachusetts; Lake Mary,
Florida; and Wichita, Kansas. During 1998, 16% of consolidated revenues was
derived from AT&T Corp. for delivery of an enhanced telecommunications services
application.
The Company also markets its systems through companies offering integrated
systems or services for sale to end users using the Company's hardware
platforms. These companies include Amarex Technology, Digital Data Voice,
Intecom, Quotient Systems, Southwestern Bell Telecom and U.S. West
Communications Services.
INTERNATIONAL SALES
International revenues were $60,042,000, $44,730,000 and $39,089,000 in
1998, 1997 and 1996, respectively, and amounted to 44%, 43% and 42% of revenues
for such periods.
Sales outside the United States are made through a number of sources. Sales
into Europe are made by the Company's EMEA sales force. 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; Almelo, Netherlands; Paris, France; Buenos
Aires, Argentina and Singapore.
The Company's European subsidiaries market systems to the same sectors of
the voice processing market as addressed in the United States. A dedicated sales
staff targets corporate users for the sale of audiotex and interactive voice
response systems. The Company concentrates its efforts on five different
vertical markets: telecommunications, home shopping, travel and transport,
finance and utilities. The Company also relies on indirect distribution of its
systems through prominent call center switch manufacturers such as Bosch, BSW,
Ericsson and Siemens.
The Company also maintains a dedicated sales staff for the sale of systems
to network operators throughout Europe, the Middle East and Africa. The
principal products sold to these markets are voice messaging, voice activated
dialing and prepaid calling. Historically, the revenues from EMEA were dependent
upon a small number of customers. The Company has concentrated on expanding its
customer base to lessen its dependence on relatively few customers.
Nevertheless, during 1998, 69% of the sales by the Company's European
subsidiaries were concentrated in ten customers. In addition, one customer,
Cellnet, represented 11% of consolidated revenues in 1998, and 12% of
consolidated revenues for each of 1997 and 1996. 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 network products 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
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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. See Note 15 to the Consolidated Financial Statements contained herein
for additional information with respect to foreign and domestic sales and
assets.
SEGMENT INFORMATION AND FOREIGN AND DOMESTIC OPERATIONS
The information set forth in Notes 14 and 15 to the accompanying
consolidated financial statements is incorporated herein by reference.
RESEARCH AND ENGINEERING
The voice and call processing industries are 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.
Research and product engineering activities are conducted in Canton,
Massachusetts; Manchester, England; Lake Mary, Florida; and Wichita, Kansas.
During 1998, principal activities were the development of the common
architecture known as BriteESP; including the completion of BriteTalk, the
Company's new voice activated dialing product; BriteConnect, the Company's new
IVR product; and BriteStar, the Company's handset-based prepaid system, each of
which uses the BriteESP architecture. The Company completed the development of
BriteCall, a new enhanced credit card product. The Company also completed
additional enhancements to its voice messaging and prepaid calling applications.
During 1998, 1997 and 1996, the Company spent approximately $15,795,000,
$13,036,000 and $9,810,000, respectively, on research and engineering. As a
percentage of revenues, these amounts represent 11.6%, 12.6% 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
board-level and subsystem-level components, burn-in, testing and quality
assurance functions, which are performed at both its Canton, Massachusetts and
Manchester, England facilities.
Manufacturing is performed on only one shift, and the Company devotes less
than 25% in each of its Canton and Manchester facilities to manufacturing;
therefore, the Company believes its production facilities are adequate for the
foreseeable future.
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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.
BACKLOG
The Company maintains an inventory of component parts which generally
enables it to assemble, test and ship most 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, 1998, the Company had
a systems backlog of $36,200,000 compared to $39,900,000 as of December 31,
1997, and $17,900,000 as of December 31, 1996. All of the backlog at December
31, 1998 is scheduled to be shipped in 1999. There can be no assurance that any
such orders will not be canceled or rescheduled. 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.
Because of the short length of its contracts for many of its services, the
Company has not historically valued its backlog of service revenues.
COMPETITION
The markets for telecommunication enhanced services and business enterprise
systems are highly competitive and include numerous suppliers of hardware and
software of varying specifications. The Company's competition includes a number
of companies for whom voice and call processing systems are their primary
business, including Boston Communications Group, Comverse Technology, Edify,
InterVoice, Periphonics and Syntellect, and other manufacturers. The Company
also competes with larger companies, such as Compaq, IBM and Lucent
Technologies, for whom voice and call processing is a small portion of their
overall business. 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
these markets are ease of use flexibility, reliability, applications
integration, overall technical performance, price, customer service and the
availability of professional services that can help customers reduce cost and
time-to-market and increase revenues. The Company believes that it competes
favorably as to these factors.
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.
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.
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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. In certain instances,
the Company's customers have also received similar communications. 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. In addition, it is possible that one or more of
the Company's customers may encourage the Company to obtain licenses or
indemnify them against loss should a liability arise from the utilization of a
Company product which is determined to have infringed. 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 Brite & Design, VoiceSelect, TeleRent, TeleSchool,
BriteMail, Value Added Classifieds, BriteFax, BriteDebit, BriteConnect,
BriteStar, BriteTalk, BriteCare, BriteESP, M-Cubed, Perception, Write-1 and
Bringing People and Information Together.
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 (49), the Company's founder, served as President, Chief
Executive Officer and Chairman of the Board from the Company's inception until
resigning as President and Chief Executive Officer in December 1996. Mr. Brannan
subsequently resigned as Chairman of the Board in January 1998. In November
1998, Mr. Brannan resumed his role as Chairman, President and Chief Executive
Officer on an interim basis. 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.
Gerald V. Butler (58) has served as Senior Vice President of Worldwide
Operations since April 1997 and, as Executive Vice President of Engineering and
Worldwide Operations from May 1996 to April 1997. Mr. Butler joined the Company
in November 1994 as Senior Vice President at the Company's Canton, Massachusetts
facility. From 1992 until joining the Company in 1994, Mr. Butler operated
Business Basics, a project and data management consulting service. Mr. Butler
served as president of the systems integration business unit of
Prime/Computervision from 1988 to 1992, as president and chief executive officer
of Culler Scientific from 1984 to 1988, and as vice president of computer
special systems at Digital Equipment Corp. from 1979 to 1984.
Garrett Digman (50) became Vice President of Marketing in October 1997. In
November 1998, Mr. Digman was appointed to the additional position of General
Manager of the Enterprise Solutions Group. From May 1995 until joining Brite, he
served as president of Kinetic Technologies, a telecommunications consulting
firm specializing in development of the infrastructure for PCS deployment. From
1992 to 1995, Mr. Digman was general manager of North American operations for
GPT Video Systems.
9
<PAGE>
Glenn A. Etherington (44) 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.
Victoria C. Farris (42) has served as Vice President of Finance and
Treasurer since September 1995. From 1988 until 1995 she was general manager and
vice president-finance of Sun Publications in Overland Park, Kansas, a publisher
of community newspapers. From 1985 until 1988, she was controller of American
City Business Journals, a publisher of weekly business newspapers. Ms. Farris is
a certified public accountant.
Brian Klumpp (58) was named Senior Vice President of Human Resources for the
Company in March 1997. Prior to joining Brite, Mr. Klumpp served as chief
executive officer and chairman of AWPI, a high technology water purifying
company from December 1993 to 1997 and chief executive officer and chairman of
Pawnee Industries, a diversified manufacturer of plastics from 1988 to 1993.
Prior to Pawnee, Mr. Klumpp held a number of executive management positions in
the areas of human resources, sales, marketing and public affairs with the Dow
Chemical Company.
Ray S. Naeini (48) joined the Company in December 1995 as Vice President of
Advanced Technologies and has served as Vice President/General Manager of
Network Products. In November 1998, Mr. Naeini was appointed Executive Vice
President of Global Products. Mr. Naeini has 22 years of experience in the
telecommunications, voice processing and the computer industry, most recently
with Intellicall from 1991 to December 1995, and has held various senior
business executive and chief technology positions with Northern Telecom, Bell
Northern Research, Honeywell and Network Assess Corp.
Donald R. Walsh (62) joined the Company as Executive Vice President in
August 1990 and became Executive Vice President of Business Systems in January
1998. In November 1998, Mr. Walsh was appointed Executive Vice President of
Worldwide Sales. 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.
The Company's executive officers are elected by, and serve at the discretion
of, the Board of Directors.
EMPLOYEES
As of December 31, 1998, the Company and its subsidiaries had 679 employees,
of which 652 were full-time employees. Of the full-time employees, 365 were
located in the United States, and 287 were located in Europe, the Middle East,
Africa, Latin America or Singapore.
The Company believes that future growth is dependent in large part on its
ability to attract and retain key management, technical and sales personnel. 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.
10
<PAGE>
ITEM 2. PROPERTIES
The Company owns its building in Wichita, Kansas, which contains 40,000
square feet and houses its network products research and engineering staff.
Other facilities are leased by either the Company or, in foreign countries,
certain of its subsidiaries, as follows:
<TABLE>
<CAPTION>
LOCATION SQUARE FEET USE LEASE EXPIRES
- --------------------------------------- ----------- --------------------------------------- ------------------
<S> <C> <C> <C>
Lake Mary, Florida 31,083 corporate headquarters housing June 2002
administrative, sales and marketing
activities
Lake Mary, Florida 33,107 engineering and customer support May 2003
activities
Canton, Massachusetts 42,600 administrative, research and March 2003
engineering, and manufacturing
facilities
Manchester, England 27,400 administrative, engineering, December 2002
manufacturing facilities and customer
support
Manchester, England 21,000 sales, marketing, product development, June 2003
training and human resources
Cambridge, England 12,000 administrative offices and call center September 2011
activities
Wiesbaden, Germany 5,500 office space for administrative and September 2001
sales staff
Rome, Italy 700 office space for administrative and March 2001
sales staff
Glattbrugg, Switzerland 2,500 office space for administrative and September 1999
sales staff
Singapore 1,350 office space for administrative and May 2001
sales staff
</TABLE>
The Company maintains regional sales and support offices in Newington,
Connecticut; Framingham, Massachusetts; Allendale, Michigan; Gold River,
California; New Brighton, Minnesota; Woodstock, Georgia; and Carrollton, Plano
and Denton, Texas. 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.
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.
11
<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-Registered Trademark- under the symbol BVSI. Prices per share reflected
in the following table represents the range of high and low sales prices
reported by The Nasdaq Stock Market for the quarters indicated.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1998
March 31................................................................. $ 11.13 $ 7.63
June 30.................................................................. 14.00 8.81
September 30............................................................. 13.25 7.13
December 31.............................................................. 10.13 7.00
1997
March 31................................................................. $ 18.00 $ 10.50
June 30.................................................................. 10.88 6.75
September 30............................................................. 11.63 7.00
December 31.............................................................. 12.25 8.38
</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 March 1, 1999, the Company had 621 stockholders of record, excluding
individual participants in security position listings.
12
<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 have been derived from the financial
statements of the Company audited by Arthur Andersen LLP, independent certified
public accountants.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
---------- ---------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.............................................. $ 135,715 $ 103,373 $ 94,166 $ 81,287 $ 66,304
Operating income (loss)............................... 2,218 (10,737) 7,339 7,170 6,878
Net income (loss)
Continuing operations............................... 1,773 10,437 5,837 5,785 5,569
Discontinued operations............................. 11,344 1,245 2,718 (1,835) (1,144)
---------- ---------- --------- --------- ---------
Total............................................... $ 13,117 $ 11,682 $ 8,555 $ 3,950 $ 4,425
Diluted earnings (loss) per share
From continuing operations.......................... $ 0.15 $ 0.87 $ 0.48 $ 0.48 $ 0.48
Discontinued operations............................. 0.92 0.10 0.23 (0.15) (0.10)
---------- ---------- --------- --------- ---------
Total............................................... $ 1.07 $ 0.97 $ 0.71 $ 0.33 $ 0.38
Weighted average shares used in computation........... 12,310 12,068 12,127 11,925 11,526
BALANCE SHEET DATA:
Working capital....................................... $ 62,037 $ 52,879 $ 37,671 $ 26,934 $ 23,772
Total assets.......................................... 122,119 104,226 74,493 58,577 51,888
Long term debt........................................ -- -- -- -- --
Stockholders' equity.................................. 84,913 70,114 54,181 40,446 35,547
</TABLE>
The 1998 results include an after tax gain of $9,122,000 relating to the
sale of the Company's TSL division, which was consummated effective December 1,
1998. The operating results of this division, and the gain, have been
reclassified and reported in discontinued operations for each of the years
presented above. The 1998 results also include charges of $1,410,000 related to
the termination of certain executives. These charges are included in operating
income (loss).
The 1997 results include a pre-tax gain of $29,091,000 relating to the sale
of certain assets of the Company's electronic publishing business, which was
consummated on October 30, 1997. The operating results of this division and the
gain on the sale are included in net income from continuing operations. The 1997
results also include $10,980,000 in charges related to the restructuring of
operations and the relocation of the Company's headquarters to Lake Mary,
Florida. These charges are included in operating income (loss).
The 1995 results include costs associated with the acquisition of the TSL
division of $8,630,000, which are reported in discontinued operations.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
From time to time, information provided by the Company, statements made by
its employees or information included in its filings with the Securities and
Exchange Commission, including this Form 10-K report, may contain certain
"forward-looking" information, as that term is defined by the Private Securities
Litigation Reform Act of 1995 (the "Act"). The words "expects," "anticipates,"
"believes" and similar words generally signify a "forward-looking" statement.
These forward-looking statements are made pursuant to the safe harbor provisions
of the Act. The reader is cautioned that all forward-looking statements are
necessarily speculative and that there are certain risks and uncertainties that
could cause actual events or results to differ materially from those referred to
in such forward-looking statements. Such risks and uncertainties include those
inherent generally in the voice processing and call processing industries, such
as product demand, pricing, market acceptance, reliance on significant
customers, intellectual property rights, risks in product and technology
developments, and other risk factors detailed elsewhere in this report,
including the section below entitled "Certain Factors to be Considered". The
Company undertakes no obligation to publicly revise any forward-looking
statement due to changes in circumstances after the date of this report, or to
reflect the occurrence of unanticipated events.
BASIS OF PRESENTATION
On October 31, 1997, the Company consummated the sale of certain assets used
in its electronic publishing business to IT Network, Inc. for $35 million in
cash. The business sold consisted primarily of the Company's information
services business, the sale of audiotex advertising sponsorships to yellow pages
advertisers, and the management of such advertisers on behalf of yellow pages
publishers.
Effective December 1, 1998, the Company consummated the sale of the assets
of its TSL division to ProfitSource Corporation (subsequently named EPS
Solutions Corporation). The Company received $20 million in cash and a
subordinated promissory note of EPS Solutions Corporation with a face value of
$5 million. The Company also received a warrant to purchase 5,000 shares of TSL
Services, Inc., which in certain circumstances may be converted to shares of EPS
Solutions Corporation.
The consolidated statements of income include the results of the electronic
publishing division through the date of the sale. The TSL division has been
accounted for as a discontinued operation in the accompanying financial
statements for each of the three years ended December 31, 1998, 1997 and 1996.
RESULTS OF OPERATIONS
The Company derives revenue from the sale of voice processing and call
processing systems to domestic and international customers and the provision of
services related to the operation of these systems. The Company's systems
products can be divided into two categories: those that increase its customers'
revenues through increased subscription or user fees ("network systems"), and
those that reduce customers' costs or improve the efficiency of services
provided to end-user customers ("business systems").
Total revenues increased $32,342,000, or 31.3%, for the year ended December
31, 1998 and increased $9,207,000, or 9.8%, in 1997. Revenues of the Company's
electronic publishing division were $11,171,000 for the year ended December 31,
1997. The electronic publishing division was sold in October 1997, and no
revenues were recorded for this division during 1998. With revenues from this
division excluded from 1997 results, total revenues would have increased
$43,513,000, or 47.2%, for the year ended December 31, 1998.
14
<PAGE>
Systems revenues increased $28,640,000, or 41.3%, for the year ended
December 31, 1998 and $5,364,000, or 8.4%, in 1997, as shown in the following
table:
<TABLE>
<CAPTION>
SYSTEMS REVENUES % INCREASE
YEAR ENDED DECEMBER 31, (DECREASE)
------------------------------- --------------------
1998 1997 1996 1998 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Business systems............................................. $ 27,644 $ 22,948 $ 27,480 20.5% (16.5)%
Network systems.............................................. 70,340 46,396 36,500 51.6% 27.1%
--------- --------- ---------
Total........................................................ $ 97,984 $ 69,344 $ 63,980 41.3% 8.4%
--------- --------- ---------
--------- --------- ---------
</TABLE>
Business systems revenues increased $4,696,000, or 20.5%, for the year ended
December 31, 1998, primarily due to the sale of several large systems to new and
existing customers. Business systems revenues decreased $4,532,000, or 16.5%,
for the year ended December 31, 1997, due to delays in purchasing upgrades by
existing customers for the Company's IVR equipment, the discontinuation of sales
of small voice messaging systems during late 1996, and to a decline in sales of
the Company's audiotex systems. Network systems revenues increased $23,944,000,
or 51.6%, for the year ended December 31, 1998, and $9,896,000, or 27.1%, for
the year ended December 31, 1997. The increase in 1998 was due primarily to the
recognition of the major portion of the revenues from a large contract with AT&T
(the "AT&T Contract"), as well as several other large shipments to new and
existing customers.
Services revenues increased $3,702,000, or 10.9%, for the year ended
December 31, 1998, and $3,843,000, or 12.7%, for the year ended December 31,
1997. In 1997, services revenues included revenues of the electronic publishing
division, which was sold in October 1997. Revenues of this division are included
in managed services and information services. With revenues of this division
excluded from the 1997 results, services revenues would have increased
$14,873,000, or 65.1%. The breakdown of services revenues is shown in the
following table:
<TABLE>
<CAPTION>
SERVICES REVENUES % INCREASE
YEAR ENDED DECEMBER 31, (DECREASE)
------------------------------- --------------------
1998 1997 1996 1998 1997
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Managed services............................................. $ 20,333 $ 13,769 $ 11,058 47.7% 24.5%
Service contract and repair.................................. 17,398 15,343 13,407 13.4% 14.4%
Information services......................................... -- 4,917 5,721 -- (14.1)%
--------- --------- ---------
Total........................................................ $ 37,731 $ 34,029 $ 30,186 10.9% 12.7%
--------- --------- ---------
--------- --------- ---------
</TABLE>
Managed services revenues increased $6,564,000, or 47.7%, for the year ended
December 31, 1998, and increased $2,711,000, or 24.5%, for the year ended
December 31, 1997. The 1997 results included revenues of $6,254,000 that are
attributed to the electronic publishing division. Excluding these revenues from
1997, managed services revenues would have increased $12,818,000, or 170.6%, for
the year ended December 31, 1998. This increase was primarily due to the
commencement of contracts for the Company to provide prepaid calling services to
North American and European telecommunications providers.
Service contract and repair revenues increased $2,055,000, or 13.4%, for the
year ended December 31, 1998 and $1,936,000, or 14.4%, for the year ended
December 31, 1997. The increases in revenues are due primarily to an increase in
installation revenues for new systems and an increase in the installed base of
customers who subscribe to quarterly or annual maintenance contracts.
No information services revenue was recorded in 1998 due to the sale of the
electronic publishing division in October 1997. The decline in information
services revenue between 1996 and 1997 was due primarily to the presence of ten
months of activity during 1997 compared to a full year in 1996.
15
<PAGE>
Cost of systems sales increased $18,549,000, or 58.0%, for the year ended
December 31, 1998, and $4,278,000, or 15.4%, for the year ended December 31,
1997. As a percentage of systems sales, actual costs increased to 51.6% in 1998,
compared to 46.2% in 1997, and 43.3% in 1996. Actual costs increased due
primarily to an increase in the number of systems shipped by the Company,
including costs related to the AT&T Contract during 1998. The increases as a
percentage of revenues were due primarily to the lower margin recognized on the
AT&T Contract, and an increase in costs associated with the Company's European
operations. Systems sales in 1998 included a larger number of customized sales,
which have a higher cost of sales and lower margins.
Cost of services increased $4,973,000, or 28.3%, for the year ended December
31, 1998, and $836,000, or 5.0%, for the year ended December 31, 1997. As a
percentage of services revenues, these costs were 59.8% in 1998, compared to
51.7% in 1997, and 55.5% in 1996. The increases in actual costs and costs as a
percentage of revenue were due primarily to the commencement of contracts under
which the Company provides prepaid calling services on a managed services basis,
which are expected to generate lower gross margins than the Company's other
services businesses.
Research and engineering expenses increased $2,759,000, or 21.2%, for the
year ended December 31, 1998, and $3,226,000, or 32.9%, for the year ended
December 31, 1997. The increases in actual expenditures were due to an increase
in engineering personnel, including outside consultants, dedicated to designing
new products and enhancing existing products, including upgrading existing
products for Year 2000 compliance. As a percentage of revenues, these expenses
decreased to 11.6% in 1998, compared to 12.6% in 1997, but increased from 10.4%
in 1996. The Company typically targets its annual engineering expenditures based
upon annual revenue goals. Fluctuations in engineering expenditures as a
percentage of sales in a given year are generally due to fluctuations from
revenue goals, or variances from budgeted expenditures. The Company believes
that it must continue to increase spending on research and engineering
activities in absolute terms in order to remain competitive in the voice and
call processing market. Such expenses could continue to increase as a percentage
of revenues as well.
Selling, general and administrative expenses increased $2,676,000, or 6.6%,
for the year ended December 31, 1998, and $7,963,000, or 24.5%, for the year
ended December 31, 1997. The Company executed a restructuring program in June
1997, which resulted in an approximate 12% decrease in the number of employees
performing sales and marketing activities. Since the restructuring, the Company
has begun increasing the number of employees in the sales and marketing area
with a goal of increasing its costs at a rate slower than anticipated revenue
growth. As a percentage of revenues, these expenses decreased to 31.8% in 1998,
compared to 39.2% in 1997 and 34.6% in 1996. This decline as a percentage of
revenues was due to increased controls over expenditures, and a larger revenue
base over which to spread the fixed costs of operations.
The effective income tax rate for the year ended December 31, 1998 was
37.7%, compared to 42.4% in 1997, and 27.9% in 1996. The variance from the
United States statutory rate for 1998 and 1997 was due primarily to the
provision for state income taxes and utilization of certain credit
carryforwards. The variance from the expected combined statutory rate in 1996
was primarily due to a reduction of the Company's deferred tax valuation
allowance and utilization of certain net operating losses and credit
carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, the Company had a current ratio of 2.8 to 1 and
working capital of $62,037,000, compared to a current ratio of 2.6 to 1 and
working capital of $52,879,000 at December 31, 1997.
Cash flows from operating activities utilized net cash of $26,157,000 for
the year ended December 31, 1998, principally due to increased accounts
receivable and inventory. The increase in accounts receivable is due to an
increase in sales, and to a number of large contracts with payment terms which
extend beyond
16
<PAGE>
the dates on which revenue is recognized for financial reporting purposes.
Certain of these contracts require payment to begin in early 1999, and the
Company believes that accounts receivable will decline both in absolute terms
and in the number of days of sales outstanding. Inventory increased $7,890,000
during 1998, due principally to the purchase of parts required to fulfill a
large contract to be delivered in stages throughout the first quarter of 1999,
and a general increase in inventory carrying requirements due to expected
increases in system sales. The Company believes that the increase in inventory
is consistent with the increase in cost of sales during the period.
The Company's capital expenditures relating to continuing operations during
1998 were $9,466,000. These expenditures were primarily related to the Company's
expansion of its base of customers for which it provides managed services.
During 1998, the Company introduced BriteStar in the United Kingdom and expanded
its BriteDebit installations in the United States. In addition, the Company
purchased significant amounts of test and development equipment to expand and
enhance its development activities.
On October 30, 1997, the Company consummated the sale of certain assets used
in its electronic publishing business to IT Network, Inc. for $35 million in
cash. Effective December 1, 1998, the Company consummated the sale of the assets
of its TSL division to ProfitSource Corporation (subsequently named EPS
Solutions Corporation), for which the Company received $20 million in cash and a
subordinated note with a face value of $5 million. The Company was able to use
the cash proceeds from each of these transactions to retire all of its
short-term debt and significantly increase working capital and stockholders'
equity.
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 other market risks. The Company utilizes
these investments as sources of liquidity, to the extent that cash requirements
exceed short-term cash receipts.
The Company has maintained a line of credit that is used from time to time
to fund short-term cash requirements. In December 1998, this line of credit was
increased from $10 million to $25 million. There were no borrowings outstanding
under the line as of December 31, 1998.
The Company has no additional capital commitments, and believes that funds
on hand and the availability of its line of credit will provide sufficient
sources of funds to meet all capital requirements for at least the next twelve
months. The Company believes that it has adequate borrowing capacity to fund its
long-term objectives as well.
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.
CERTAIN FACTORS TO BE CONSIDERED
UNCERTAINTY OF REVENUES. The Company has no significant long-term supply
agreements with customers and, as a result, revenues in any quarter are
dependent upon orders that are received and shipped during the 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.
17
<PAGE>
INTERNATIONAL OPERATIONS. 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
registrations in order for the Company to install products within specific
countries. There can be no assurance that these factors will not have an adverse
impact on the Company's future international sales or operating results.
PRODUCT DEVELOPMENT. The voice processing and call processing industries
are 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 products.
DEPENDENCE ON CERTAIN PERSONNEL. The Company's success is largely dependent
upon its ability to attract and retain qualified employees, especially technical
employees and executives. There exists substantial competition for highly
qualified personnel and there can be no assurance that the Company will be
successful in hiring and retaining the required personnel.
ENHANCED NETWORK SERVICES CONTRACTS. The Company's enhanced network
services products are used by its customers to retain existing subscribers,
recruit new subscribers and increase the revenue generated by each subscriber.
As a result, failure of these customers to provide the services acquired from
the Company to its customers on a timely and uninterrupted basis could cause a
loss of revenue or erosion of customer base. The Company has entered into
contracts in the past, and anticipates entering into contracts in the future,
which provide for penalties in the event the Company fails to deliver products
in the time frame contracted for, fails to meet service availability
requirements, or causes a network outage. The Company has incurred penalties,
but has generally been able to negotiate with its customers to obtain reductions
or waivers of such penalties. There is no assurance that any of the Company's
customers will continue to waive or reduce such penalties, nor is there any
assurance that customers will not assert such penalties in the future. Because
the Company's customers are generally large telecommunications providers with
significant subscriber bases, the Company's failure to perform under its
contracts and the assertion of penalties could materially and adversely affect
the Company's operating results and financial condition.
In December 1997, the Company announced that it had entered into an
agreement to provide enhanced telecommunications products to AT&T Corp.
("AT&T"). The initial order under the agreement was for approximately $25
million, representing the largest single contract in the Company's history. The
Company has completed the software development, integration and testing phases
of the contract; however, the Company was late in delivering the product, and
believes it may have been subject to penalties relating to late delivery. In
March 1999, in conjunction with an additional order under the agreement, AT&T
waived its rights to assert any such penalties.
SOLE SOURCE OF SUPPLY. For quality control, ease of development and
purchasing efficiencies, the Company has elected to purchase 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
18
<PAGE>
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.
PROPRIETARY RIGHTS. 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. In certain
instances, the Company's customers have also received similar communications.
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. In addition, it is possible that one or
more of the Company's customers may encourage the Company to obtain licenses or
indemnify them against loss should a liability arise from the utilization of a
Company product which is determined to have infringed. 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.
VOLATILITY OF COMMON STOCK PRICE. 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
affect 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
common stock.
YEAR 2000 COMPLIANCE. In 1997, the Company began the process of identifying
and determining the appropriate resolution to all of the Company's issues
relating to the "Millennium Bug". These issues arise because of date sensitive
software programs which use two digits to define the applicable year, resulting
in interpretation of a date using "00" as the year 1900 rather than 2000. This
could result in miscalculations or a major system failure. The Company has
concluded that if no action is taken to avoid the consequences, its Year 2000
issues will have a material affect on the Company's results of operations and
financial condition.
Areas which require remediation are: 1) in-house systems and software
programs used to run the business; 2) products sold to the Company's customers;
and 3) systems and services provided by vendors.
The Company has reviewed its in-house systems for compliance and determined
that all systems will be affected. During 1998, the Company converted its
accounting, inventory, manufacturing control and human resources systems to a
new system in order to provide more efficient management information throughout
the Company. The conversion cost approximately $2 million and the new system is
warranted by the vendor to be Year 2000 compliant. Testing of this system is
currently in process to verify compliance. All remaining in-house computer
systems have been classified as mission critical and non-mission critical. The
Company has elected to focus on only the mission critical systems, including
operating systems and applications software. Studies are currently being
conducted to determine which mission critical systems are compliant and which
are not. The Company estimates that approximately half of its systems are
currently compliant, and believes that any remaining systems that have been
identified as mission critical will be compliant by the third quarter of 1999.
Non-compliant systems must be replaced or abandoned prior to the beginning of
2000. The Company estimates the cost of bringing the remaining systems into
compliance or replacing non-compliant systems to be approximately $1.5 million.
Each of the Company's products sold or licensed to customers must be
evaluated for Year 2000 compliance. The Company must determine which products
will be discontinued, and which products will
19
<PAGE>
be made compliant. The Company has completed an inventory of its products in the
field, and has established revision levels and dates by which each product will
be Year 2000 compliant. Each product must have an agreed upon test plan,
engineering plan, and a plan for notifying customers of product revisions and
phase-outs. The Company expects that all products to be updated for Year 2000
compliance will be completed before the end of the second quarter of 1999, and
the Company intends to charge for integration and installation of compliant
systems. The Company is unable to predict the eventual cost of achieving Year
2000 compliance. However, failure to complete plans for each product, or failure
to execute such plans, will have a material impact on the Company's sales, as it
will be unable to compete with companies which offer Year 2000 compliant
products.
The Company purchases components and services which must be evaluated for
Year 2000 compliance. The Company has divided its vendors into those who supply
critical services, manufacturing suppliers and manufacturing contractors. The
Company intends to obtain certification from each of its material vendors as to
its Year 2000 compliance. The Company believes that the costs to evaluate its
key vendors and obtain certification will not be material.
The Company has not developed contingency plans related to Year 2000
compliance. The Company believes that the steps being taken are adequate to
detect and correct all material Year 2000 issues related to systems sold to
customers, and all mission critical internal systems. The Company intends to
continue to test for Year 2000 compliance, and will handle exceptions on a
case-by-case basis.
Despite the Company's intent to complete the modifications necessary to be
Year 2000 compliant, there is a risk that the Company will be unable to complete
all tasks required in a timely manner, or that certain systems could be
overlooked. Should the required modifications not be made, or should they not be
completed in a timely manner, this issue could materially and adversely affect
the Company's operating results and financial condition. Furthermore, the
majority of the effort described above will be performed by the Company's
employees. During the period such employees are completing Year 2000
remediation, they will be unavailable to perform their normal tasks.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company transacts business in various foreign currencies. Accordingly,
the Company is subject to exposure from adverse movements in foreign currency
exchange rates. The Company generally mitigates this risk by transacting
business in the functional currency of each of its subsidiaries, thus creating a
natural hedge by paying expenses incurred in the local currency in which
revenues will be received.
The Company uses derivative financial instruments selectively to offset
exposure to market risks arising from changes in foreign exchange rates.
Derivative financial instruments currently utilized by the Company include
foreign currency forward contracts to hedge receivables denominated in a
currency other than the functional currency of the business.
As of December 31, 1998, the Company had entered into forward exchange
contracts to sell a notional amount of $12,304,000 in Japanese Yen for delivery
at various dates during the first six months of 1999. Changes in the market
value of these contracts are highly correlated with changes in the market value
of the underlying accounts receivable. Accordingly, the Company believes there
is no material risk to its financial position or results of operations in the
event of a material change in the relative value of the U.S. dollar against
foreign currencies.
The Company does not use derivative financial instruments for speculative
trading purposes, nor does it hedge its balance sheet exposure related to the
Company's investments in its foreign subsidiaries.
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Certified Public Accountants......................................................... 22
Consolidated Balance Sheets as of December 31, 1998 and 1997............................................... 23
Consolidated Statements of Income for the Years Ended December 31, 1998, 1997 and 1996..................... 24
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 1998, 1997 and 1996....... 25
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1998, 1997 and 1996....... 26
Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996................. 27
Notes to Consolidated Financial Statements................................................................. 28
Supplemental Schedules:
Schedule II--Valuation and Qualifying Accounts............................................................. 44
</TABLE>
- ------------------------
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.
21
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Brite Voice Systems, Inc.:
We have audited the accompanying consolidated balance sheets of Brite Voice
Systems, Inc. (a Kansas corporation) and subsidiaries as of December 31, 1998
and 1997, and the related consolidated statements of income, comprehensive
income, stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1998. These financial statements and the schedule
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Brite Voice Systems, Inc. and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the index to the financial
statements is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not a required part of the basic financial
statements. This information has been subjected to the auditing procedures
applied in our audit of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the financial statements
taken as a whole.
Arthur Andersen LLP
Orlando, Florida,
February 5, 1999
22
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
(IN THOUSANDS)
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................................................... $ 11,208 $ 26,979
Accounts receivable, less allowance for doubtful accounts: 1998--$1,761;
1997--$1,134.......................................................................... 57,559 32,760
Inventories (Note 4).................................................................... 21,676 13,788
Prepaid expenses and other (Note 7)..................................................... 6,967 8,593
Net current assets--discontinued operations (Note 2).................................... -- 3,038
---------- ----------
Total current assets.................................................................. 97,410 85,158
---------- ----------
PROPERTY AND EQUIPMENT
Land, building and improvements......................................................... 3,074 3,074
Furniture and equipment................................................................. 24,581 15,112
---------- ----------
27,655 18,186
Less accumulated depreciation........................................................... (10,480) (6,059)
---------- ----------
17,175 12,127
---------- ----------
NET PROPERTY AND EQUIPMENT--DISCONTINUED OPERATIONS (Note 2).............................. -- 1,103
---------- ----------
OTHER ASSETS (Note 3)..................................................................... 7,534 5,838
---------- ----------
TOTAL ASSETS.......................................................................... $ 122,119 $ 104,226
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable........................................................................ $ 13,916 $ 10,431
Accrued salaries and wages.............................................................. 2,791 2,414
Other accrued expenses.................................................................. 3,947 3,578
Deferred revenue (Note 2)............................................................... 3,648 3,093
Customer deposits....................................................................... 2,860 11,504
Income taxes payable.................................................................... 8,211 1,259
---------- ----------
Total current liabilities............................................................. 35,373 32,279
---------- ----------
LONG-TERM DEFERRED REVENUE (Note 2)....................................................... 1,833 1,833
COMMITMENTS AND CONTINGENCIES (Notes 7 and 12)............................................
STOCKHOLDERS' EQUITY (Note 9)
Preferred stock, no par value; authorized 10,000,000 shares; none outstanding........... -- --
Common stock, no par value; authorized 30,000,000 shares; issued and outstanding
1998--12,258,678 shares; 1997--12,032,280 shares...................................... 45,221 43,714
Retained earnings....................................................................... 39,737 26,620
Cumulative foreign currency translation adjustment...................................... (45) (220)
---------- ----------
Total stockholders' equity............................................................ 84,913 70,114
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......................................... $ 122,119 $ 104,226
---------- ----------
---------- ----------
</TABLE>
See Notes to Financial Statements
23
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ---------
<S> <C> <C> <C>
REVENUES
Systems...................................................................... $ 97,984 $ 69,344 $ 63,980
Services..................................................................... 37,731 34,029 30,186
---------- ---------- ---------
135,715 103,373 94,166
---------- ---------- ---------
COSTS AND EXPENSES
Cost of sales:
Systems.................................................................... 50,556 32,007 27,729
Services................................................................... 22,549 17,576 16,740
Research and engineering..................................................... 15,795 13,036 9,810
Selling, general and administrative.......................................... 43,187 40,511 32,548
Restructuring and other nonrecurring charges (Note 11)....................... 1,410 10,980 --
---------- ---------- ---------
133,497 114,110 86,827
---------- ---------- ---------
OPERATING INCOME (LOSS)........................................................ 2,218 (10,737) 7,339
---------- ---------- ---------
OTHER INCOME (EXPENSE)
Gain on sale of assets (Note 2).............................................. -- 29,091 --
Interest income.............................................................. 742 537 432
Interest expense............................................................. (204) (566) (80)
Other, net................................................................... 90 (198) (192)
---------- ---------- ---------
628 28,864 160
---------- ---------- ---------
INCOME BEFORE INCOME TAXES..................................................... 2,846 18,127 7,499
INCOME TAX PROVISION (Note 8).................................................. 1,073 7,690 1,662
---------- ---------- ---------
INCOME FROM CONTINUING OPERATIONS.............................................. 1,773 10,437 5,837
---------- ---------- ---------
DISCONTINUED OPERATIONS (Note 2)
Income from discontinued operations prior to disposal, net of income taxes... 2,222 1,245 2,718
Gain on disposal of discontinued operations, net of income taxes............. 9,122 -- --
---------- ---------- ---------
11,344 1,245 2,718
---------- ---------- ---------
NET INCOME..................................................................... $ 13,117 $ 11,682 $ 8,555
---------- ---------- ---------
---------- ---------- ---------
BASIC EARNINGS PER SHARE
Income from continuing operations............................................ $ 0.15 $ 0.88 $ 0.50
Discontinued operations...................................................... 0.93 0.10 0.23
---------- ---------- ---------
Net income................................................................... $ 1.08 $ 0.98 $ 0.73
---------- ---------- ---------
---------- ---------- ---------
DILUTED EARNINGS PER SHARE
Income from continuing operations............................................ $ 0.15 $ 0.87 $ 0.48
Discontinued operations...................................................... 0.92 0.10 0.23
---------- ---------- ---------
Net income................................................................... $ 1.07 $ 0.97 $ 0.71
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
See Notes to Financial Statements
24
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
NET INCOME........................................................................ $ 13,117 $ 11,682 $ 8,555
OTHER COMPREHENSIVE INCOME (EXPENSE)
Foreign currency translation.................................................... 175 (1,046) 1,140
--------- --------- ---------
COMPREHENSIVE INCOME.............................................................. $ 13,292 $ 10,636 $ 9,695
--------- --------- ---------
--------- --------- ---------
</TABLE>
See Notes to Financial Statements
25
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
CURRENCY
COMMON RETAINED TRANSLATION
STOCK EARNINGS ADJUSTMENT TOTAL
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Balance, December 31, 1995.......................................... $ 34,377 $ 6,383 $ (314) $ 40,446
Net income........................................................ -- 8,555 -- 8,555
Issuance of common stock.......................................... 3,970 -- -- 3,970
Tax benefit of stock option transactions.......................... 70 -- -- 70
Foreign currency translation adjustment........................... -- -- 1,140 1,140
--------- --------- ----------- ---------
Balance, December 31, 1996.......................................... 38,417 14,938 826 54,181
Net income........................................................ -- 11,682 -- 11,682
Issuance of common stock.......................................... 1,197 -- -- 1,197
Stock warrant..................................................... 4,042 -- -- 4,042
Tax benefit of stock option transactions.......................... 58 -- -- 58
Foreign currency translation adjustment........................... -- -- (1,046) (1,046)
--------- --------- ----------- ---------
Balance, December 31, 1997.......................................... 43,714 26,620 (220) 70,114
Net income........................................................ -- 13,117 -- 13,117
Issuance of common stock.......................................... 1,472 -- -- 1,472
Tax benefit of stock option transactions.......................... 35 -- -- 35
Foreign currency translation adjustment........................... -- -- 175 175
--------- --------- ----------- ---------
Balance, December 31, 1998.......................................... $ 45,221 $ 39,737 $ (45) $ 84,913
--------- --------- ----------- ---------
--------- --------- ----------- ---------
</TABLE>
See Notes to Financial Statements
26
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................................... $ 13,117 $ 11,682 $ 8,555
Items not requiring (providing) cash:
Depreciation and amortization............................................... 4,459 3,525 3,640
Income from discontinued operations......................................... (2,222) (1,245) (2,718)
Gain on disposition of discontinued operations.............................. (9,122) -- --
(Gain) loss on disposition of assets........................................ -- (29,568) 162
Discount recorded for warrant............................................... 1,870 -- --
Deferred taxes.............................................................. (1,131) (1,690) (738)
Changes in:
Accounts receivable......................................................... (24,768) (2,521) (4,789)
Inventories................................................................. (7,890) (2,341) (1,364)
Accounts payable and accrued expenses....................................... 4,523 5,775 1,001
Other current assets and liabilities........................................ (1,572) 3,678 1,955
---------- ---------- ---------
Net cash provided by (used in) continuing activities...................... (22,736) (12,705) 5,704
Net cash provided by (used in) discontinued operations.................... (3,421) 2,144 2,201
---------- ---------- ---------
Net cash provided by (used in) operating activities....................... (26,157) (10,561) 7,905
---------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment, net....................................... (9,466) (4,429) (5,358)
Capital expenditures of discontinued operations............................... (216) (285) (1,063)
Proceeds from sale of property................................................ -- 35,016 411
Proceeds from disposal of discontinued operations............................. 18,428 -- --
Increase (decrease) in other assets........................................... 66 (1,208) (500)
---------- ---------- ---------
Net cash provided by (used in) investing activities....................... 8,812 29,094 (6,510)
---------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock...................................................... 1,472 827 3,970
Principal payments on debt.................................................... -- -- (551)
---------- ---------- ---------
Net cash provided by financing activities................................. 1,472 827 3,419
---------- ---------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH......................................... 102 (465) (135)
---------- ---------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................................ (15,771) 18,895 4,679
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR.................................... 26,979 8,084 3,405
---------- ---------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR.......................................... $ 11,208 $ 26,979 $ 8,084
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
See Notes to Financial Statements
27
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS AND PRINCIPLES OF CONSOLIDATION
Brite Voice Systems, Inc. (the "Company" or "Brite") designs, integrates,
assembles, markets and supports voice processing and call processing systems and
services which incorporate prepaid/postpaid applications, voice response, voice
recognition, voice/facsimile messaging, audiotex and interactive computer
applications into both standard products and customized market solutions.
The consolidated financial statements include the accounts of Brite Voice
Systems, Inc., Brite Voice Systems Group, Ltd. and other immaterial wholly-owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Significant
estimates included in these financial statements include allowances for
uncollectible accounts and obsolete inventory, and warranty and other accrued
liabilities.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash investments with an original maturity
of three months or less.
DERIVATIVE FINANCIAL INSTRUMENTS AND FOREIGN CURRENCY TRANSACTIONS
The Company uses derivative financial instruments selectively to offset
exposure to market risks arising from changes in foreign exchange rates.
Derivative financial instruments currently utilized by the Company include
foreign currency forward contracts to hedge receivables denominated in a
currency other than the functional currency of the business. Gains and losses on
hedges of existing assets are included in the carrying amounts of those assets
and are ultimately recognized in income as part of those carrying amounts.
Effective for fiscal year 2000, the Company will be required to adopt
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This Statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities, and it requires that an entity
recognizes all derivatives as either assets or liabilities in the statement of
financial position and measures those instruments at fair value. Management does
not anticipate that the adoption of this statement will have a material affect
on its operations or financial position.
28
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 and 35 years for
buildings and improvements.
DEFERRED REVENUE
Deferred revenue includes noncompete and other agreements entered into as a
result of dispositions. The amounts are being amortized over the lives of the
agreements. (See Note 2.)
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
During fiscal 1998, the Company adopted Statement of Position ("SOP") 97-2,
"Software Revenue Recognition," as amended by SOP 98-4, "Deferral of the
Effective Date of a Provision of SOP 97-2, Software Revenue Recognition," with
respect to software revenue recognition. The adoption of this SOP did not have a
material impact on the Company's revenue recognition policies.
Revenue is recognized when a contract has been executed, the product has
been shipped, all significant contractual obligations have been satisfied,
uncertainty surrounding customer acceptance becomes insignificant and collection
of the related receivable is probable. When a contract requires significant
production, modification or custom software development revenue is recognized
using the percentage-of-completion method of contract accounting. This method
recognizes income as work on a contract progresses. Recognition of revenues and
profits generally is based on output measures. Revenues from maintenance
contracts for installed systems are recognized ratably over the service period.
Revenues from service bureau operations are recognized when the services are
provided.
The Company will be required to adopt SOP 98-9, "Modification of SOP 97-2,
Software Revenue Recognition, With Respect to Certain Transactions" in future
years. The Company does not anticipate that the adoption of this statement will
have a material affect on the Company's financial position or results of
operations.
29
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CREDIT RISK
The Company extends unsecured credit to customers throughout the United
States and in certain foreign countries.
INCOME TAXES
The Company accounts for income taxes using an asset and liability approach
which requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future tax
consequences, the Company considers all expected future events other than
enactments of changes in the tax law or rates. Changes in tax laws or rates will
be recognized in the years in which they occur. (See Note 8.)
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 accompanying
consolidated statements of income and consolidated statements of comprehensive
income.
OTHER NONRECURRING CHARGES
The Company accounts for costs incurred on business process reengineering
and information technology transformation in accordance with Emerging Issues
Task Force ("EITF") Issue No. 97-13, "Accounting for Costs Incurred in
Connection with a Consulting Contract or an Internal Project that Combines
Business Process Reengineering and Information Technology Transformation." EITF
Issue No. 97-13 requires that the costs of business process reengineering
activities be expensed as incurred.
The Company accounts for costs incurred for involuntary termination benefits
of employees in accordance with EITF 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity."
EARNINGS PER SHARE
The Company has adopted SFAS No. 128, "Earnings Per Share". Basic earnings
per share was calculated by dividing net income by the weighted average number
of common shares outstanding during the period. Diluted earnings per share was
calculated by dividing net income available to common stockholders after assumed
conversion of dilutive securities by the sum of the weighted average number of
common shares outstanding plus additional common shares that would have been
outstanding if potentially dilutive common shares had been issued.
30
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Following is a reconciliation of the weighted average shares used to compute
basic and diluted earnings per share (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1998 1997 1996
--------- --------- ---------
Basic weighted average shares outstanding........................ 12,162 11,865 11,717
Options.......................................................... 148 203 410
--------- --------- ---------
Diluted weighted average shares outstanding...................... 12,310 12,068 12,127
--------- --------- ---------
--------- --------- ---------
</TABLE>
Options to purchase approximately 939,000 shares and warrants to purchase
1,400,000 shares were outstanding as of December 31, 1998, but were not included
in the computation of diluted EPS because they are not dilutive.
ACCOUNTING FOR STOCK OPTIONS
The Company records compensation expense for stock options issued to
employees in accordance with APB No. 25. The Company has adopted the proforma
disclosure requirement provisions of SFAS No. 123. (See Note 9).
RECLASSIFICATIONS
Certain amounts in the 1997 and 1996 consolidated financial statements have
been reclassified to conform with the current year presentation.
NOTE 2: DISPOSITIONS AND DISCONTINUED OPERATIONS
Effective December 1, 1998, the Company consummated the sale of its TSL
division for $20,000,000 in cash and a subordinated note with a face value of
$5,000,000. This note has a three year maturity. The Company also received a
warrant to purchase 5,000 shares of the buyer. The Company has recorded the note
and warrant at their estimated fair value of $2,500,000 due to the business risk
associated with these instruments. The business sold included billing
verification, professional services and software services. The Company recorded
a gain on the sale of $9,122,000, net of taxes of $5,548,000. A noncompete
agreement was included in the sale in the amount of $1,500,000, and was recorded
as deferred revenue. This amount is being amortized over three years and
reflected in other income.
The TSL division is reported as a discontinued operation, and the
consolidated financial statements have been reclassified to segregate the net
assets and operating results of the business. The components of
31
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
NOTE 2: DISPOSITIONS AND DISCONTINUED OPERATIONS (CONTINUED)
the net current assets of discontinued operations included in the consolidated
balance sheet as of December 31, 1997, are as follows (in thousands):
<TABLE>
<CAPTION>
AMOUNT
---------
<S> <C>
Current assets:
Accounts receivable................................................................ $ 3,697
Prepaid expenses................................................................... 145
Less current liabilities:
Accounts payable................................................................... (121)
Accrued salaries and wages......................................................... (561)
Deferred revenue................................................................... (96)
Customer deposits.................................................................. (26)
---------
Net current assets--discontinued operations.......................................... $ 3,038
---------
---------
</TABLE>
Income from discontinued operations prior to disposal includes the following
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1998 1997 1996
--------- --------- ---------
Revenues..................................................... $ 17,727 $ 16,476 $ 16,243
Costs and expenses........................................... 14,020 14,323 11,883
--------- --------- ---------
Income before taxes.......................................... 3,707 2,153 4,360
Income tax provision......................................... 1,485 908 1,642
--------- --------- ---------
Net income................................................... $ 2,222 $ 1,245 $ 2,718
--------- --------- ---------
--------- --------- ---------
</TABLE>
On October 30, 1997, the Company consummated the sale of certain assets used
in its electronic publishing business to IT Network, Inc. for $35,000,000 in
cash. The business sold consisted primarily of the Company's information
services business, the sale of audiotex advertising sponsorships to yellow pages
advertisers, and the management of such advertisers on behalf of yellow pages
publishers. The Company recorded a gain on the sale of $29,091,000. An agreement
to provide certain services and not to compete was included in the sale.
Deferred revenue in the amount of $3,000,000, was recorded related to this
agreement. This deferred revenue is being amortized over the three-year term of
the agreement and reflected as service revenue. Amortization was $1,000,000 and
$167,000 in 1998 and 1997, respectively.
32
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
NOTE 3: OTHER ASSETS
Other assets consist of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Deferred tax asset (Note 8)................................................ $ 2,206 $ 961
Stock warrant (Note 9)..................................................... 2,204 4,042
Subordinated note and warrant (Note 2)..................................... 2,500 --
Deposits and other......................................................... 490 819
Goodwill................................................................... 343 322
--------- ---------
7,743 6,144
Accumulated amortization................................................... (209) (306)
--------- ---------
$ 7,534 $ 5,838
--------- ---------
--------- ---------
</TABLE>
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
was $40,000, $149,000 and $248,000 in 1998, 1997 and 1996, respectively.
NOTE 4: INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Purchased parts......................................................... $ 9,079 $ 5,417
Work in progress........................................................ 10,414 5,401
Finished goods.......................................................... 2,183 2,970
--------- ---------
$ 21,676 $ 13,788
--------- ---------
--------- ---------
</TABLE>
NOTE 5: LINE OF CREDIT
The Company maintains a $25,000,000 unsecured line of credit that is used
from time to time to fund short-term cash requirements. The promissory note
becomes due on November 30, 2001. Borrowings bear interest at 30 days LIBOR plus
75 basis points, with an unused commitment fee in the amount of one-tenth
percent of the difference between the maximum principal amount and the average
principal amount outstanding under the loan for the preceding calendar quarter.
There were no borrowings outstanding under the line as of December 31, 1998.
NOTE 6: FINANCIAL INSTRUMENTS
As of December 31, 1998, the Company had entered into forward exchange
contracts to sell a notional amount of $12,304,000 in Japanese Yen for delivery
at various dates during the first six months of 1999. Changes in the market
value of these contracts are highly correlated with changes in the market value
of the underlying accounts receivable. Therefore, the estimated fair value of
the foreign exchange contracts is approximately offset by the change in the fair
value of the underlying accounts receivable.
33
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 7: LEASES
The Company leases office space under noncancelable agreements expiring at
various times through 2006. Future minimum rental payments under these operating
leases are as follows (in thousands):
<TABLE>
<S> <C>
1999............................................................... $ 4,581
2000............................................................... 4,321
2001............................................................... 3,165
2002............................................................... 2,218
2003............................................................... 438
Thereafter......................................................... 46
---------
$ 14,769
---------
---------
</TABLE>
Rent expense recorded was approximately $4,311,000, $2,295,000 and
$1,544,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
NOTE 8: INCOME TAXES
The income tax provision includes the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Taxes currently payable:
Federal............................................................................ $ 1,649 $ 7,711 $ 1,472
State.............................................................................. 360 1,706 448
Foreign............................................................................ 195 (37) 791
Deferred taxes....................................................................... (1,131) (1,690) (1,049)
--------- --------- ---------
$ 1,073 $ 7,690 $ 1,662
--------- --------- ---------
--------- --------- ---------
</TABLE>
United States income taxes have not been provided on the cumulative
undistributed earnings of the Company's foreign subsidiaries of $4,088,000 at
December 31, 1998. It is intended that these earnings will be permanently
invested in operations outside the United States.
34
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 8: INCOME TAXES (CONTINUED)
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,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Tax expense at the statutory rate................................ $ 968 $ 6,344 $ 2,550
Effect of foreign tax rates...................................... 103 (84) 50
Increase (decrease) in taxes resulting from:
State income taxes, net of federal benefit..................... 110 1,297 273
Foreign sales corporation benefit.............................. (145) (25) (34)
Utilization of credit carryforwards............................ (30) 67 (48)
Reduction of valuation allowance............................... -- -- (1,049)
Other permanent differences.................................... 67 91 (80)
--------- --------- ---------
$ 1,073 $ 7,690 $ 1,662
--------- --------- ---------
--------- --------- ---------
</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. Current deferred taxes
are included in prepaid expenses and other. Noncurrent deferred taxes are
included in other assets. Deferred taxes consist of the following (in
thousands):
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Current deferred taxes
Gross assets............................................................. $ 2,239 $ 2,353
Gross liabilities........................................................ -- --
--------- ---------
$ 2,239 $ 2,353
--------- ---------
--------- ---------
Noncurrent deferred taxes
Gross assets............................................................. $ 2,206 $ 1,374
Gross liabilities........................................................ -- (413)
--------- ---------
$ 2,206 $ 961
--------- ---------
--------- ---------
</TABLE>
35
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 8: INCOME TAXES (CONTINUED)
The tax effect of significant temporary differences representing deferred
tax assets and liabilities is as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Depreciation............................................................... $ 94 $ (413)
Inventory obsolescence reserve............................................. 681 484
Allowance for doubtful accounts............................................ 446 415
Accrued vacation pay....................................................... 245 231
Restructuring and nonrecurring charge reserve.............................. 396 989
Covenants not to compete................................................... 1,263 1,121
TSL sale................................................................... 947 --
Other, net................................................................. 373 487
--------- ---------
Net deferred taxes......................................................... $ 4,445 $ 3,314
--------- ---------
--------- ---------
</TABLE>
NOTE 9: STOCKHOLDERS' EQUITY
The Company has four stock option plans: the 1984 Incentive Stock Option
Plan (the "1984 Option Plan"), the 1994 Stock Option Plan (the "1994 Option
Plan"), the 1990 Non-Employee Director Stock Option Plan (the "Director Stock
Option Plan"), and the 1994 Employee Stock Purchase Plan (the "Stock Purchase
Plan").
STOCK PURCHASE PLAN
In 1994, the Board of Directors and stockholders approved the Stock Purchase
Plan. Under the Stock Purchase Plan, as amended, up to 500,000 shares of common
stock 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. No
employee may purchase shares under the Stock Purchase 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 1998, 58,588 shares were purchased at the weighted average price of
$7.33. On December 31, 1998, there were 277,899 shares reserved for issuance
under the Stock Purchase Plan.
STOCK OPTIONS
In 1994, the Board of Directors and stockholders approved the 1994 Option
Plan. A maximum of 2,000,000 shares of common stock may be issued under the
Plan, as amended. Options are granted by the Board of Directors at prices not
less than fair market value as of the date of grant, generally vest ratably over
a four-year period and expire 10 years after the date of grant. At December 31,
1998, a total of 855,338 shares were available for future grants under the 1994
Option Plan. In addition, options covering 500,000 shares were granted to an
executive of the Company during 1996, of which 100,000 shares vested
36
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 9: STOCKHOLDERS' EQUITY (CONTINUED)
immediately, an additional 100,000 shares vested during 1997 and 300,000 shares
were cancelled during 1998. At December 31, 1998, options covering 200,000
shares were exercisable.
The 1984 Option Plan terminated on December 31, 1994, except as to
unexercised options remaining outstanding.
The Director Stock Option Plan provides for the grant of options to purchase
up to 150,000 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 vest
ratably over a three-year period. At December 31, 1998, there were options
granted to purchase 75,750 shares of common stock at prices ranging from $1.25
to $18.50 per share. At December 31, 1998, options covering 47,250 shares were
exercisable.
Information regarding all outstanding stock options is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------ ------------------------ ------------------------
WTD AVG WTD AVG WTD AVG
SHARES EX SHARES EX SHARES EX
(000S) PRICE (000S) PRICE (000S) PRICE
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year............. 2,200 $ 12 2,162 $ 13 1,249 $ 12
Granted.................................... 472 10 595 9 1,018 14
Exercised.................................. (195) 7 (91) 5 (67) 7
Cancelled.................................. (810) 12 (466) 14 (38) 13
----- ----- -----
Outstanding, end of year................... 1,667 12 2,200 12 2,162 13
----- ----- -----
----- ----- -----
Exercisable, end of year................... 811 13 965 12 913 10
----- ----- -----
----- ----- -----
</TABLE>
The Company accounts for the stock options under APB No. 25, under which no
compensation expense has been recognized. Had compensation expense for these
plans been determined consistent with FASB Statement No. 123, the Company's net
income and earnings per share would have been reduced to the following pro forma
amounts:
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------ ------------
<S> <C> <C> <C>
Net income........................................ $ 12,809,000 $ 9,837,000 $ 6,853,000
Basic earnings per share.......................... $ 1.05 $ 0.83 $ 0.58
Diluted earnings per share........................ $ 1.05 $ 0.83 $ 0.57
</TABLE>
The resulting pro forma compensation expense for 1998, 1997 and 1996 may not
be representative of that to be expected in future years.
37
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 9: STOCKHOLDERS' EQUITY (CONTINUED)
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Risk-free interest rate............................................................... 5.38% 6.39% 5.92%
Expected years until exercise......................................................... 6.27 5.30 7.90
Expected stock volatility............................................................. 66% 65% 65%
</TABLE>
The following table summarizes information about fixed stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------- ----------------------------
NUMBER WEIGHTED WEIGHTED NUMBER WEIGHTED
OUTSTANDING AVERAGE AVERAGE EXERCISABLE AVERAGE
AS OF REMAINING EXERCISE AS OF EXERCISE
RANGE OF EXERCISE PRICES 12/31/98 CONTRACTUAL LIFE PRICE 12/31/98 PRICE
- --------------------------------------- ------------- ----------------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$1.250- $9.000........................ 423,210 7.83 $ 7.76 137,528 $ 6.54
$9.625-$10.656........................ 499,030 7.40 $ 10.03 178,538 $ 9.63
$11.000-$14.875........................ 461,625 7.23 $ 13.21 276,084 $ 14.09
$15.750-$20.000........................ 282,905 6.49 $ 17.23 219,255 $ 16.81
------------- -------------
$1.250-$20.000........................ 1,666,770 7.31 $ 11.55 811,405 $ 12.56
------------- -------------
------------- -------------
</TABLE>
STOCK WARRANT
On December 12, 1997, the Company and AT&T Corp. ("AT&T") entered into a
Purchase Agreement pursuant to which AT&T will purchase from the Company certain
telecommunications products, software and services over a period of up to four
years. As partial consideration for the Agreement, AT&T acquired a warrant to
purchase up to 1,400,000 shares of the Company's common stock. One-third of the
warrant was immediately exercisable, an additional one-third became exercisable
on December 12, 1998 and the balance will become exercisable on December 12,
1999. Each tranche has a term of three years from the date it becomes
exercisable and has a strike price of $11.00 per share. The warrant was valued
at $4,042,000 using the Black-Scholes option pricing model. A corresponding
contra amount was recorded in other assets, and is being written off in the form
of a purchase discount as systems and equipment are delivered to AT&T. During
1998, $1,870,000 was amortized as a discount.
NOTE 10: 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 $1,088,000, $1,105,000 and $835,000
for the years ended December 31, 1998, 1997 and 1996, respectively.
38
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
NOTE 11: RESTRUCTURING AND OTHER NONRECURRING CHARGES
The Company recorded charges of $1,410,000 for the year ended December 31,
1998, related to the termination of certain executives. Of this amount, $364,000
had been paid by December 31, 1998.
The Company recorded charges of $10,980,000 for the year ended December 31,
1997, related to the restructuring of the Company's operations and the
relocation of its headquarters to Lake Mary, Florida. Included in the charge was
approximately $3,327,000 in asset impairments as a result of the Company's
decision to discontinue certain product lines and abandon certain assets, and
the reevaluation of the net realizable value of certain intangible assets. The
Company also recorded severance costs of approximately $1,614,000 relating to
the elimination of certain product lines, the closing of its Dallas, Texas
facility and the transfer of certain functions from its facilities in Wichita,
Kansas and Canton, Massachusetts to its new headquarters in Lake Mary.
Concurrent with the restructuring, the Company initiated a process reengineering
effort which led to the selection and commencement of implementation of certain
new management information systems for which the Company has recorded charges of
approximately $2,718,000. Additionally, costs consisting principally of moving
expenses, temporary labor and travel amounted to approximately $3,321,000 during
the year ended December 31, 1997.
NOTE 12: CONTINGENCIES
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 be material to the results of
operations or the financial position of the Company.
From time to time, the Company enters into contracts which provide for
liquidated damages. The failure of the Company to fulfill these contracts could
result in payments to customers or reductions of revenue, and such payments
could be material. Management believes that the ultimate resolution of potential
penalties in existing contracts as of December 31, 1998, will not be material to
the results of operations or the financial position of the Company.
NOTE 13: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest paid................................................... $ 204 $ 564 $ 80
Income taxes paid, net.......................................... 815 12,508 4,759
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Subordinated note and warrant received in connection with the
TSL sale (Note 2)............................................. $ 2,500 $ -- $ --
Tax benefit of stock option transactions........................ 35 58 70
Issuance of common stock........................................ -- 371 --
</TABLE>
39
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
NOTE 14: SEGMENT REPORTING
Historically, the Company had four reportable segments: network products,
business systems, customer support and Europe, Middle East, Africa. The network
products segment includes domestically-sold products and managed services that
increase the customers' revenues through increased subscription or user fees.
Business systems includes domestically sold products and managed services that
reduce customers' costs or improve the efficiency of services provided to
end-user customers. Customer support includes the provision of services to both
network products and business systems customers through maintenance contracts,
installation services, time and materials billing and training. Europe, Middle
East, Africa includes all of the Company's products and services in that
geographic area. The Company evaluated performance based on profit or loss from
operations before corporate overhead. Intersegment sales are eliminated for
evaluation purposes.
The Company's reportable segments offered different products and services.
They were managed separately because each required different marketing
strategies.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
BUSINESS SEGMENTS 1998 1997 1996
- --------------------------------------------------------------------- ---------- ---------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Revenues:
Network Products................................................... $ 52,402 $ 20,893 $ 13,650
Business Systems................................................... 30,094 35,782 40,907
Customer Support................................................... 12,469 9,080 8,895
Europe, Middle East, Africa........................................ 40,750 37,618 30,714
---------- ---------- ---------
$ 135,715 $ 103,373 $ 94,166
---------- ---------- ---------
---------- ---------- ---------
Contribution to Overhead:
Network Products................................................... $ 10,939 $ 1,805 $ (634)
Business Systems................................................... 13,080 8,448 12,509
Customer Support................................................... 5,930 2,987 3,239
Europe, Middle East, Africa........................................ (3,204) 183 9,248
---------- ---------- ---------
$ 26,745 $ 13,423 $ 24,362
---------- ---------- ---------
---------- ---------- ---------
Capital Expenditures:
Network Products................................................... $ 1,708 $ 778 $ 513
Business Systems................................................... 118 619 540
Customer Support................................................... 332 359 195
Europe, Middle East, Africa........................................ 4,063 1,485 2,856
Corporate.......................................................... 3,245 1,188 1,254
---------- ---------- ---------
$ 9,466 $ 4,429 $ 5,358
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
40
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
NOTE 14: SEGMENT REPORTING (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
BUSINESS SEGMENTS 1998 1997 1996
- --------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Depreciation Expense:
Network Products......................................................... $ 416 $ 586 $ 525
Business Systems......................................................... 180 876 962
Customer Support......................................................... 204 171 99
Europe, Middle East, Africa.............................................. 1,991 1,473 962
Corporate................................................................ 1,625 347 857
--------- --------- ---------
$ 4,416 $ 3,453 $ 3,405
--------- --------- ---------
--------- --------- ---------
</TABLE>
During 1998, the Company restructured its operations, resulting in global
product management. Under the new operating structure, the Europe, Middle East,
Africa segment is included in the product business segments:
<TABLE>
<CAPTION>
BUSINESS SEGMENTS 1998
- ---------------------------------------------------------------------------------------- --------------
<S> <C>
(IN THOUSANDS)
Revenues:
Network Products...................................................................... $ 83,401
Business Systems...................................................................... 34,916
Customer Support...................................................................... 17,398
--------------
$ 135,715
--------------
--------------
Contribution to Overhead:
Network Products...................................................................... $ 11,533
Business Systems...................................................................... 8,353
Customer Support...................................................................... 6,859
--------------
$ 26,745
--------------
--------------
Capital Expenditures:
Network Products...................................................................... $ 3,460
Business Systems...................................................................... 133
Customer Support...................................................................... 464
Corporate............................................................................. 5,409
--------------
$ 9,466
--------------
--------------
Depreciation Expense:
Network Products...................................................................... $ 1,021
Business Systems...................................................................... 292
Customer Support...................................................................... 513
Corporate............................................................................. 2,590
--------------
$ 4,416
--------------
--------------
</TABLE>
41
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
NOTE 15: FINANCIAL INFORMATION RELATING TO FOREIGN AND DOMESTIC OPERATIONS AND
EXPORT SALES
Operations for the years ended December 31, 1998, 1997 and 1996 are as
follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ---------
<S> <C> <C> <C>
Sales from:
United States...................................................... $ 94,965 $ 65,755 $ 63,452
Europe, Middle East, Africa........................................ 40,750 37,618 30,714
---------- ---------- ---------
Total.......................................................... $ 135,715 $ 103,373 $ 94,166
---------- ---------- ---------
---------- ---------- ---------
Operating profit (loss):
United States...................................................... $ 2,784 $ (10,610) $ 4,354
Europe, Middle East, Africa........................................ 923 (127) 2,985
---------- ---------- ---------
Total.......................................................... $ 2,218 $ (10,737) $ 7,339
---------- ---------- ---------
---------- ---------- ---------
Identifiable assets:
United States...................................................... $ 101,341 $ 73,079 $ 49,712
Europe, Middle East, Africa........................................ 20,778 31,147 24,781
---------- ---------- ---------
Total.......................................................... $ 122,119 $ 104,226 $ 74,493
---------- ---------- ---------
---------- ---------- ---------
Export sales from United States...................................... $ 19,293 $ 7,113 $ 8,355
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
One domestic customer represented 16% of total revenues in 1998 and one
international customer represented 11% of consolidated revenues in 1998, and 12%
of consolidated revenues for each of 1997 and 1996.
NOTE 16: UNAUDITED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
1998 QUARTER ENDED
--------------------------------------------
<S> <C> <C> <C> <C>
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
----------- --------- --------- ---------
Revenues.............................................................. $ 25,375 $ 34,158 $ 35,449 $ 40,733
Operating income (loss)............................................... 249 778 1,286 (95)
Net income............................................................ 696 1,219 1,314 9,888
Basic earnings per common share....................................... 0.06 0.10 0.11 0.81
Diluted earnings per common share..................................... 0.06 0.10 0.11 0.81
</TABLE>
<TABLE>
<CAPTION>
1997 QUARTER ENDED
--------------------------------------------
<S> <C> <C> <C> <C>
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
----------- --------- --------- ---------
Revenues.............................................................. $ 27,630 $ 25,705 $ 25,006 $ 25,032
Operating income (loss)............................................... 1,798 (7,339) (2,161) (3,035)
Net income (loss)..................................................... 1,291 (4,876) (968) 16,235
Basic earnings (loss) per common share................................ 0.11 (0.41) (0.08) 1.36
Diluted earnings (loss) per common share.............................. 0.11 (0.41) (0.08) 1.34
</TABLE>
42
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
NOTE 16: UNAUDITED QUARTERLY FINANCIAL INFORMATION (CONTINUED)
The 1998 results included a pre-tax gain of $14,670,000 relating to the sale
of the Company's telecommunications management services division, which was
effective December 1, 1998, and nonrecurring charges of $1,410,000.
The 1997 results included a pre-tax gain of $29,091,000 relating to the sale
of the Company's electronic publishing business, which was consummated on
October 30, 1997, and restructuring and other non-recurring charges of
$10,980,000.
43
<PAGE>
BRITE VOICE SYSTEMS, INC. AND SUBSIDIARIES
------------
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
- ------------------------------------------------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1998.................................... $ 1,134 $ 1,657 $ 1,030 $ 1,761
Year ended December 31, 1997.................................... $ 471 $ 1,296 $ 633 $ 1,134
Year ended December 31, 1996.................................... $ 481 $ 429 $ 439 $ 471
Allowance for obsolete inventory:
Year ended December 31, 1998.................................... $ 1,759 $ 850 $ 345 $ 2,264
Year ended December 31, 1997.................................... $ 1,415 $ 750 $ 406 $ 1,759
Year ended December 31, 1996.................................... $ 1,069 $ 625 $ 279 $ 1,415
Restructuring Reserves
Year ended December 31, 1998.................................... $ 2,393 $ 1,410 $ 2,757 $ 1,046
Year ended December 31, 1997.................................... $ -- $ 10,980 $ 8,587 $ 2,393
</TABLE>
44
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
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 1999 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 1999 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 1999 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 1999 Proxy Statement under the heading "Compensation Committee
Interlocks and Insider Participation", and is incorporated herein by reference.
45
<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:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
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 Asset Purchase Agreement dated September 23, 1997 between the Registrant and IT Network, Inc.
(incorporated by reference to the Exhibit filed with the Registrant's Current Report on Form 8-K
dated October 30, 1997).
2.3 Amendment to Asset Purchase Agreement dated October 7, 1997 between the Registrant and IT Network,
Inc. (incorporated by reference to the Exhibit filed with the Registrant's Current Report on Form 8-K
dated October 30, 1997).
2.4 Stock Purchase Agreement dated November 30, 1998, by and among Brite Voice Systems, Inc., BVS
Investco, Inc., TSL Services, Inc. and ProfitSource Corporation, together with the related TSL
Services, Inc. Agreement Re: Preferred Stock (incorporated by reference to the Exhibits filed with
the Registrant's Current Report on Form 8-K dated December 14, 1998).
3.1 Restated Articles of Incorporation of the Registrant (incorporated by reference to the Exhibit filed
with the 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 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).
10.4 Registrant's Amended and Restated Non-Employee Director 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,
1995).
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.5 Office Lease Agreement between the Registrant and Heathrow Office Building Corporation dated April
16, 1997 pertaining to the Registrant's headquarters facility in Lake Mary, Florida (incorporated by
reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997).
10.6 First Amendment to Lease dated June 30, 1997 between the Registrant and Heathrow Office Building
Corporation (incorporated by reference to the Exhibit filed with the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997).
10.7 Sublease dated June 1, 1997 between the Registrant and Olsten Staffing Services, Inc. (incorporated
by reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997).
10.8 Lease covering the Registrant's facility at Brook House, Park Road, Gatley, England dated June 24,
1996 (incorporated by reference to the Exhibit filed with the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996).
10.9 Lease covering the Registrant'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).
10.10 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).
10.11 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).
10.12 Registrant's 1994 Employee Stock Purchase Plan (as amended through May 12, 1998) (incorporated by
reference to the Exhibit filed with the Registrant's Registration Statement on Form S-8, No.
333-70005).
10.13 Employment Agreement dated December 4, 1996 between the Registrant and David S. Gergacz (incorporated
by reference to the Exhibit filed with the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996).
10.14 Stock Option Agreement dated May 13, 1997 between the Registrant and David S. Gergacz (incorporated
by reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997).
10.15 Employment Agreement dated February 25, 1997 between the Registrant and Samuel J. Kline (incorporated
by reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997).
10.16 Employment Agreement dated March 22, 1997 between the Company and Christine King (incorporated by
reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997).
10.17 Employment Agreement dated March 27, 1997 between the Company and Brian Klumpp (incorporated by
reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997).
10.18 Employment Agreement dated June 23, 1997 between the Company and Glenn A. Etherington (incorporated
by reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997).
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.19 Amendment to Employment Agreement dated June 1, 1997 between the Registrant and Alan C. Maltz
(incorporated by reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997).
10.20 Employment Agreement dated July 1, 1997 between the Registrant and Donald R. Walsh (incorporated by
reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997).
10.21 Employment Agreement dated July 23, 1997 between the Registrant and Ray S. Naeini (incorporated by
reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997).
10.22 Agreement between the Registrant and AT&T Corp. dated December 12, 1997. (incorporated by reference
to the Exhibit filed with the Registrant's Annual Report on Form 10-K for the year ended December 31,
1997). Confidential treatment has been granted with respect to portions of this exhibit.
10.23 Supplemental Agreement between the Registrant and AT&T Corp. dated May 29, 1998. Confidential
treatment has been requested with respect to portions of this Exhibit.
10.24 Supplemental Agreement between the Registrant and AT&T Corp. dated September 8, 1998. Confidential
treatment has been requested with respect to portions of this Exhibit.
10.25 Office Lease Agreement between the Registrant and 701 International Parkway Development Corporation
dated March 3, 1998 covering the Registrant's facility in Lake Mary, Florida (incorporated by
reference to the Exhibit filed with the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997).
10.26 Agreement dated January 12, 1998 between the Registrant and Stanley G. Brannan (incorporated by
reference to the Exhibit filed with the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997).
10.27 Amended and Restated Credit Agreement between the Registrant and NationsBank, N.A. dated December 9,
1998, including the Amended and Restated Revolving Promissory Note, Negative Pledge Agreement and the
Tax Indemnity Agreement.
10.28 Employment Agreement dated October 12, 1997 between the Company and Garrett H. Digman (incorporated
by reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998).
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K.
During the last quarter of the period covered by this Re port, the
Registrant filed Current Reports on Form 8-K as follows:
1. Form 8-K dated November 16, 1998, wherein the Registrant announced the
resignation of David S. Gergacz as Chairman of the Board of Directors,
President and Chief Executive Officer. The Registrant also reported that
Stanley G. Brannan, founder of the Company and member of the Board would
replace Mr. Gergacz on an interim basis until a new CEO is hired.
2. Form 8-K dated December 23, 1998, wherein the Registrant reported the
sale of its telecommunications management services division effective
December 1, 1998 to EPS Solutions Corporation.
3. Form 8-K/A dated December 30, 1998, wherein the Registrant amended the
Form 8-K filed on December 23, 1998, to include pro forma financial
statements.
48
<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.
<TABLE>
<S> <C> <C>
BRITE VOICE SYSTEMS, INC.
DATED: MARCH 30, 1999 By: /s/ STANLEY G. BRANNAN
-----------------------------------------
Stanley G. Brannan
CHIEF EXECUTIVE OFFICER
By: /s/ GLENN A. ETHERINGTON
-----------------------------------------
Glenn A. Etherington
CHIEF FINANCIAL OFFICER
</TABLE>
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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ STANLEY G. BRANNAN
- ------------------------------ Chairman of the Board, March 30, 1999
Stanley G. Brannan CEO and President
/s/ C. MACKAY GANSON, JR.
- ------------------------------ Director March 30, 1999
C. MacKay Ganson, Jr.
/s/ DAVID S. GERGACZ
- ------------------------------ Director March 30, 1999
David S. Gergacz
/s/ J. DARRELL KELLEY
- ------------------------------ Director March 30, 1999
J. Darrell Kelley
/s/ JOHN F. KELSEY, III
- ------------------------------ Director March 30, 1999
John F. Kelsey, III
/s/ ALAN C. MALTZ
- ------------------------------ Director March 30, 1999
Alan C. Maltz
/s/ SCOTT A. MALTZ
- ------------------------------ Director March 30, 1999
Scott A. Maltz
</TABLE>
49
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<S> <C>
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
Service, 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 Asset Purchase Agreement dated September 23, 1997 between the Registrant and IT Network, Inc.
(incorporated by reference to the Exhibit filed with the Registrant's Current Report on Form 8-K
dated October 30, 1997).
2.3 Amendment to Asset Purchase Agreement dated October 7, 1997 between the Registrant and IT Network,
Inc. (incorporated by reference to the Exhibit filed with the Registrant's Current Report on Form
8-K dated October 30, 1997).
2.4 Stock Purchase Agreement dated November 30, 1998, by and among Brite Voice Systems, Inc., BVS
Invesco, Inc., TSL Services, Inc. and ProfitSource Corporation, together with the related TSL
Services, Inc. Agreement Re: Preferred Stock (incorporated by reference to the Exhibits filed with
the Registrants's Current Report on Form 8-K dated December 14, 1998.
3.1 Restated Articles of Incorporation of the Registrant (incorporated by reference to the Exhibit filed
with the 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 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).
10.4 Registrant's Amended and Restated Non-Employee Director 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, 1995).
10.5 Office Lease Agreement between the Registrant and Heathrow Office Building Corporation dated April
16, 1997 pertaining to the Registrant's headquarters facility in Lake Mary, Florida (incorporated
by reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997).
10.6 First Amendment to Lease dated June 30,1997 between the Registrant and Heathrow Office Building
Corporation (incorporated by reference to the Exhibit filed with the Registrant's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997).
10.7 Sublease dated June 1, 1997 between the Registrant and Olsten Staffing Services, Inc. (incorporated
by reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997).
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<S> <C>
10.8 Lease covering the Registrant's facility at Brook House, Park Road, Gatley, England dated June 24,
1996 (incorporated by reference to the Exhibit filed with the Registrant's Annual Report on Form
10-K for the year ended December 31, 1996).
10.9 Lease covering the Registrant'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).
10.10 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).
10.11 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).
10.12 Registrant's 1994 Employee Stock Purchase Plan (as amended through May 12, 1998) (incorporated by
reference to the Exhibit filed with the Registrant's Registration Statement on Form S-8, No.
333-70005).
10.13 Employment Agreement dated December 4, 1996 between the Registrant and David S. Gergacz (incorporated
by reference to the Exhibit filed with the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996).
10.14 Stock Option Agreement dated May 13, 1997 between the Registrant and David S. Gergacz (incorporated
by reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997).
10.15 Employment Agreement dated February 25, 1997 between the Registrant and Samuel J. Kline (incorporated
by reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997).
10.16 Employment Agreement dated March 22, 1997 between the Company and Christine King (incorporated by
reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997).
10.17 Employment Agreement dated March 27, 1997 between the Company and Brian Klumpp (incorporated by
reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997).
10.18 Employment Agreement dated June 23, 1997 between the Company and Glenn A. Etherington (incorporated
by reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997).
10.19 Amendment to Employment Agreement dated June 1, 1997 between the Registrant and Alan C. Maltz
(incorporated by reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997).
10.20 Employment Agreement dated July 1, 1997 between the Registrant and Donald R. Walsh (incorporated by
reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997).
10.21 Employment Agreement dated July 23, 1997 between the Registrant and Ray S. Naeini (incorporated by
reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997).
10.22 Agreement between the Registrant and AT&T Corp. dated December 12, 1997. (incorporated by reference
to the Exhibit filed with the Registrant's Annual Report on Form 10-K for the year ended December
31, 1997). Confidential treatment has been granted with respect to portions of this exhibit.
10.23 Supplemental Agreement between the Registrant and AT&T Corp. dated May 29, 1998.
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
Confidential treatment has been requested with respect to portions of this Exhibit.
<S> <C>
10.24 Supplemental Agreement between the Registrant and AT&T Corp. dated September 8, 1998. Confidential
treatment has been requested with respect to portions of this Exhibit.
10.25 Office Lease Agreement between the Registrant and 701 International Parkway Development Corporation
dated March 3, 1998 covering the Registrant's facility in Lake Mary, Florida (incorporated by
reference to the Exhibit filed with the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997).
10.26 Agreement dated January 12, 1998 between the Company and Stanley G. Brannan (incorporated by
reference to the Exhibit filed with the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997).
10.27 Amended and Restated Credit Agreement between the Registrant and NationsBank, N.A. dated December 9,
1998, including the Amended and Restated Revolving Promissory Note Negative Pledge Agreement and
the Tax Indemnity Agreement.
10.28 Employment Agreement dated October 12, 1997 between the Company and Garrett H. Digman (incorporated
by reference to the Exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998).
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
27 Financial Data Schedule
</TABLE>
52
<PAGE>
Exhibit 10.23
5/26/98
Contract No. LLJ268E
Page 1 of 30
SUPPLEMENTAL AGREEMENT
FOR *********** ON NSAP
BETWEEN
AT&T CORP.
AND
BRITE VOICE SYSTEMS, INC.
AND
BRITE VOICE SYSTEMS GROUP, LTD.
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
5/26/98
Contract No. LLJ268E
Page 2 of 30
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION DESCRIPTION PAGE NO.
- ------- ----------- --------
<S> <C> <C>
1.1 STATEMENT OF PURCHASES 4
1.2 GOVERNING TERMS 4
1.3 DURATION 5
1.4 DEFINITIONS 5
1.5 DESCRIPTION 12
1.6 REPRESENTATIVES 12
1.7 SERVICES 14
1.7.1 Documentation 14
1.7.2 Training 14
1.7.2.1 Pilot Training 14
1.7.2.2 Rollout Training 15
1.7.2.3 Additional Training 15
1.7.3 Engineering and Installation 15
1.8 SPECIFICATIONS 16
1.9 APPLICATION PROGRAMMING INTERFACE 17
1.10 DESIGN REVIEWS 18
1.11 CHANGE CONTROL AND MODIFICATION REQUESTS 18
1.11.1 Changes in Scope 18
1.11.2 Non-Compliance 19
1.12 ACCEPTANCE CRITERIA 20
1.12.1 Software Acceptance Criteria 20
1.12.1.1 Entrance Criteria for Q4 20
1.12.1.2 Entrance Criteria for Q2 21
1.12.1.3 Exit Criteria for Q2 22
1.12.2 Product Acceptance Criteria 23
1.13 SUPPLIER'S SUPPORT AT ITN AND FFA SITES 23
1.14 QUALITY AUDITS 24
1.15 PARTIAL SHIPMENTS 24
1.16 APPLICABILITY OF LIQUIDATED DAMAGES 24
1.16.1 Software 24
1.16.2 Product 24
1.17 SUPPLIER'S MILESTONES 25
1.17.1 Milestones Applicable to Liquidated Damages 25
1.17.2 Supplier's Other Key Milestones 25
1.18 PRICES AND PAYMENT 27
1.19 FIELD SUPPORT AGREEMENT 27
1.19.1 Software Distribution Process 28
1.19.1.1 Scheduled Software Release 28
1.19.1.2 Unscheduled Software Patches 28
</TABLE>
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
5/26/98
Contract No. LLJ268E
Page 3 of 30
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<CAPTION>
<S> <C> <C>
1.19.2 Trouble Ticket Reporting Process 28
1.19.3 Supplier Consultation Support 29
APPROVALS 30
EXHIBITS:
Exhibit A Central Office Sites for the Initial Deployment of ********
Exhibit B ******* Service Description and NSAP Product Description and
Configuration
Exhibit C NSAP Feature Commitments and Exclusivity Designation
Exhibit D NSAP Platform Feature and ****** Service Feature Specifications
Exhibit E NSAP Documentation Provided by Brite Voice Systems, Inc.
Exhibit F NSAP & ******* Training Provided by Brite Voice Systems, Inc.
Exhibit G Severity Level Definitions and Response Times
Exhibit H Prices and Payment Schedule for ***************** and NSAP -
Release 1.0
Exhibit I Additional Pricing
</TABLE>
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
5/26/98
Contract No. LLJ268E
Page 4 of 30
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
[LOGO]
1200 Peachtree Street
Atlanta, Georgia 30309
ACCEPTANCE SHALL BE INDICATED BY
SIGNING AND RETURNING DUPLICATE TO:
Brite Voice Systems AT&T Corp.
250 International Parkway 101 Crawfords Corner Road.
Suite 300 Room 1F229
Heathrow, FL 32746-5006 Holmdel, NJ 07733-3030
Attn. Ray Naeini Attn. Victoria Melillo
This agreement ("Agreement") is made between AT&T Corp., ("Company"), having a
place of business at 101 Crawfords Corner Road, Holmdel, NJ 07733-3030, and
Brite Voice Systems Inc. and Brite Voice Systems Group, Ltd. (jointly and
severally "Supplier") having a place of business at 250 International Parkway,
Suite 300, Heathrow, Florida 32746-5006 and Brite Court, Park Road, Gatley,
Cheshire, SK8 4HZ respectively, do hereby agree as follows.
1.1 STATEMENT OF PURCHASES:
Company agrees to purchase and Supplier agrees to sell Products and Services and
develop and license Software on an "as-ordered" basis for deployment of the
Network Service Adjunct Platform (NSAP) into Company's Development Lab,
Integrated Test Network (ITN), and the Central Office sites noted in Exhibit A.
1.2 GOVERNING TERMS:
The terms and conditions of General Agreement (GA) GA0023D apply to this
Agreement as if fully set forth herein. Should the terms and conditions of this
Agreement conflict with the GA terms and conditions referenced above, this
Agreement shall prevail. Capitalized terms not defined herein shall have the
same definition as in GA0023D.
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
5/26/98
Contract No. LLJ268E
Page 5 of 30
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Exhibit A, "Prices and Payment Schedule for the ****** Service," is hereby
removed from the GA, modified, and made part of this Supplemental Agreement (SA)
as Exhibit H, Prices and Payment Schedule for ****************** and NSAP
- -Release 1.0.
Exhibit B, "****** Service and Configuration Description," is hereby removed
from the GA, modified, and made part of this SA as Exhibit B, "****** Service
Description and NSAP Product Description and Configuration."
Exhibit C, "Exclusivity Designation for *****************," is hereby removed
from the GA, modified, and made part of this SA as Exhibit C, "NSAP Feature
Commitments and Exclusivity Designation."
1.3 DURATION:
This Agreement shall be effective as of January 1, 1998 and shall continue in
effect for a three and one half (3 1/2) year period, ending June 30, 2001 (the
"Term"). The Term of this Agreement shall thereafter be automatically extended
for two (2) additional one (1) year periods unless either party provides the
other party six (6) months prior written notice of its desire to permit this
Agreement to expire without further extension of its Term, in which event this
Agreement shall expire on the day before this Agreement would otherwise be
automatically extended. The termination of this Agreement shall not affect the
obligations of Company or Supplier under any then existing Order or Technology
Commitment Letter (TCL).
1.4 DEFINITIONS:
ACTUAL DELIVERY DATE means the date Supplier delivers to Company key
documentation and Product which are not subject to Company's formal Acceptance
testing.
ACTUAL PRODUCT DELIVERY DATE means the date Supplier turns over Product or
Software for Company to begin Acceptance testing. Supplier will notify Company's
Order Management Representative in writing of turn over of Supplier's Product.
Supplier will notify Company's Technology Management Representative in writing
of turn over of Supplier's Software.
APPLICATION PROGRAMMING INTERFACE (API) means the interface or calling
conventions by which Service Applications access Platform resources and
capabilities. The API also defines autonomous indications provided by the
Platform to the Service Applications.
APPLICATION PROGRAMMING INTERFACE SPECIFICATIONS means the documentation of the
APIs.
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
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ASSIGNED means that a Modification Request (MR) has been accepted by Company and
Company has authorized Supplier to begin the work described in the MR.
CCB means Change Control Board and represents a group comprised of Company's
personnel and Supplier's personnel who are responsible for reviewing MRs.
CENTRAL OFFICE means the physical location where communications common carriers
terminate customer lines and locate the switching equipment that interconnects
those lines to trunks.
COMMITTED DELIVERY DATE means the date Supplier commits to deliver to Company
key documentation and Product which are not subject to Company's formal
Acceptance testing.
COMMITTED PRODUCT DELIVERY DATE means the date Supplier commits to turn over
Product or Software for Company to begin Acceptance testing.
COMPANY'S CCB COORDINATOR means the person designated by Company as the person
responsible for managing Company's change control process. Company's CCB
Coordinator has authority to accept or reject an MR.
COMPANY'S NESAC REPRESENTATIVE means the person designated by Company as the
single point of interface to the NESAC.
COMPANY'S PRODUCT ACCEPTANCE TEST PLAN means the mutually agreed to document,
authored by Company, which is based on Supplier's Hardware Installation
Procedures and Acceptance Plan.
COMPANY'S TECHNOLOGY MANAGEMENT REPRESENTATIVE means the person designated by
Company as the person responsible for Development Management.
COMPANY'S TRAINING REPRESENTATIVE means the person designated by Company as the
person responsible for approving Supplier's training material and courses.
DEVELOPMENT LAB means Company's development, test and trial facility used to
evaluate technology used to provide consumer services.
DRAFT COPY means a form in which Supplier delivers documentation. A Draft Copy
is a copy which is still undergoing Supplier reviews and revisions and is
intended to provide Company with an advance view of the document.
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
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EF&I means Engineer, Furnish and Install and refers to the activities associated
with all elements of central office equipment installation engineering, material
procurement and related installation.
EIS means External Interface Specification which is created by Company and
Supplier, owned solely by Company, and which defines the interface
specifications between the Platform and Company's network elements, operations
support systems and service support systems.
FEATURE means Software and/or Product that implements a communications service
and related Supplier provided technical services (e.g., systems engineering,
integration planning and test, technical planning, Software design/evolution
consulting), documented in one or more FSDs and identified in a TCL by means of
a unique FRF number.
FIELD GRADE means Supplier has used Supplier's standard processes to manufacture
and deliver Product, spares, Software or documentation and such Product, spares,
Software or documentation is of sufficient quality to be deployed directly into
a live field site handling live network traffic.
FINAL COPY means a form in which Supplier delivers documentation. A Final Copy
is a copy which is in its final bound form and is no longer undergoing
revisions. A Final Copy is the copy which one receives from Supplier if ordered
using Supplier's assigned order number.
FINAL WORKING DRAFT COPY means a form in which Supplier delivers documentation.
A Final Working Draft is a copy which may undergo revisions between the Actual
Product Delivery Date of the Platform Feature Software and the Actual Product
Delivery Date of the Service Feature Software due to the fact that Supplier is
still testing the Service Feature Software after the Actual Delivery Date for
the Final Working Draft Copy of a particular document.
FIX TIME means the interval of time, in days, allowed for Supplier to provide a
fix or work-around to a non-compliance MR or Trouble Ticket.
FTP means File Transfer Protocol and refers to a standard protocol which
supports both connection-less as well as connection-oriented file transfer
sessions between remote computers.
ISV means Inter-System Verification and refers to tests, conducted by Supplier,
which verify that the Platform, Platform Feature(s) and Service Feature(s)
developed by Supplier meet the interfaces to Company's network elements,
operations support systems and service support systems as specified in Company's
Specifications.
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
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IVBN means Interactive Voice Broadcast Network and represents the location where
Company's broadcast training is conducted.
MR means Modification Request and serves as written notice by Company or
Supplier of a request to change the scope of work done under this Agreement, an
Order, or TCL. An MR also serves as written notice from Company to Supplier of
Supplier's non-compliance to (i) Company's requirements documented in Company's
Specifications, or (ii) Supplier's documentation listed on Pages one (1) or two
(2) of Exhibit E.
MTBF means Mean Time Between Failures and refers to the value which represents
the expected value of time, in hours, until the next failure of an item assuming
that the item is renewed to "as-good-as-new" condition through replacement,
maintenance or repair1.
MTP means Master Test Plan which is created and owned solely be Company, and
which describes Company's testing methodology used from Q5 through SG0. The MTP
contains, at least, test suite definitions, test scheduling and planning
requirements, test documentation and reporting requirements, test execution and
personnel scheduling, test execution documentation and change control, master
test schedule, and supporting test plans.
NESAC means Company's National Electronic System Assistance Center.
NCC means Company's Network Control Center.
NSAP means Network Service Adjunct Platform which is a network element designed
to provide a platform for Company's business units to implement adjunct-based
communications services.
NSAP ORDERING SPECIFICATIONS means the single line order number and bill of
material associated with each NSAP node, which is used by Company in ordering
NSAP nodes.
OPEN INTERFACE means an interface specification which is documented and is an
industry standard or exists in the public domain.
OSWF means Company's On Site Work Force.
PLATFORM means hardware and software which together provide common resources to
Service Applications.
********************************************************************************
********************************************************************************
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS
- --------
1 What Every Engineer Should Know About Reliability and Risk Analysis, M.
Modarres
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
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**************************************************************** A Platform is
implemented to support one or more Service Applications.
PLATFORM ACCEPTANCE CRITERIA means the criteria specified in Company's Product
Acceptance Test Plan upon which acceptance of Supplier's Product will be based.
PLATFORM FEATURE means Software implemented to support Service Features on NSAP
Products.
PRODUCT INSTALLATION START DATE means the earliest date when Supplier can begin
its installation activities of Supplier's Product in Company's Central Office
sites.
PRODUCT ON-SITE DATE means the earliest date that Supplier's Product can arrive
at Company's Central Office sites.
PV means Performance Verification and refers to tests, conducted by Supplier,
which verify that (i) the performance of the Platform, Platform Feature(s) and
Service Feature(s) developed by Supplier meet the performance requirements
specified in Company's Specifications, and (ii) the Platform, Platform
Feature(s) and Service Feature(s) can communicate with and transfer data to
Company's network elements, operations support systems and service support
systems as specified in Company's Specifications. Performance Verification
measures, verifies and demonstrates the performance of the completed system
against a given workload benchmark. The PV test suite is defined as a weighted
mix of tests covering throughput, response time, system availability and
guaranteed next cycle availability (for real time systems). Upon completion of
the PV tests, the Platform, Platform Feature(s) and Service Feature(s) must meet
the entrance criteria for Q4.
Q8, Q7 and Q6 means the Company Quality Gates as pertain to Orders, Supplemental
Agreements or TCLs under this Agreement or under the GA as follows:
Q8 Start design implementation
Q7 Start unit test
Q6 Start integration
REGRESSION VERIFICATION means tests extracted from Supplier's test suites,
conducted by Supplier, which are executed following problem resolution to (i)
verify that tests which had executed successfully prior to problem resolution
continue to execute successfully
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
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following the resolution, and (ii) verify that tests which had failed prior to
problem resolution execute successfully following the resolution.
REGULAR BUSINESS HOURS means the start and end time for a typical work day as
defined by Company. Company reserves the right to have Regular Business Hours
begin any time within the twenty-four (24) hour clock and end no later than ten
(10) hours after the start of Company's defined Regular Business Hours.
RESPONSE TIME means the interval of time, in minutes or days, allowed for
Supplier's Tier III Support/Supplier Support personnel or Supplier's management
personnel to respond to Company indicating that Supplier is ready to begin
diagnosing a non-compliance MR or Trouble Ticket.
SCHEDULED SOFTWARE RELEASE means a software release defined by one or more FRFs,
and having FSDs associated with each FRF.
SERVICE APPLICATION means one or more software modules, each containing specific
call processing logic for a particular Company service, such as the *******
Service. A Service Application can consist of one or more Service Features.
SERVICE FEATURE means a Software Feature which will operate on the NSAP to
implement a communications service.
SG0 means Company's Service Gates as pertain to Orders, Supplemental Agreements
or TCLs under this Agreement or under the GA as follows:
SG0 Deployment complete for all technologies supporting a specific service
SOFTWARE ACCEPTANCE CRITERIA means the requirements as set forth in Exhibit D
upon which acceptance of Supplier's Platform Feature software and Service
Feature software will be based.
STATUS INTERVAL means the frequency for Supplier to provide status to Company on
outstanding Severity Level 1, 2, 3, or 4 Trouble Tickets.
SUPPLIER'S CUSTOMER SUPPORT ORGANIZATION means the organization responsible for
providing Tier III Support/Supplier Support to Company.
SUPPLIER'S CUSTOMER SUPPORT REPRESENTATIVE means the person designated by
Supplier as the single point of interface to Supplier's Customer Support
Organization.
SUPPLIER'S HARDWARE INSTALLATION PROCEDURES AND ACCEPTANCE PLAN means the
document, authored and owned by Supplier, which contains the installation
procedures for Supplier's Product and contains the criteria upon which Supplier
declares the
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
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installation of the Product complete and ready for turnover to Company for
Company's Acceptance.
SV means System Verification and refers to tests, conducted by Supplier, which
verify that the Platform, Platform Feature(s) and Service Feature(s) developed
by Supplier meet the requirements as specified in Company's Specifications.
TAB means Technical Analysis Brief and represents the document which is created
and owned solely by Company, and which captures the key decision criteria and
analysis of proposed architectural solutions. The reasons for choosing a
solution provided in a TAB is to provide an audit path for a project to assess
and reassess decisions later in the life of a project. The analysis required to
produce a TAB is structured to encourage attention to customer needs.
TARGET RESPONSE TIME means the interval of time, in minutes, that Supplier's
Tier III Support/Supplier Support personnel or Supplier's management personnel
will attempt to respond to Company indicating that Supplier is ready to begin
diagnosing a non-compliance MR or Trouble Ticket.
TIER I SUPPORT means actions, taken by Company's OSWF and NCC personnel,
required to (i) maintain the Product, (ii) monitor the Product, Software,
Platform, Platform Feature(s) and Service Feature(s), (iii) analyze alarm data
and error logs, (iv) repair problems discovered through analysis of alarm data
and error logs, (v) restore Product, Software, Platform, Platform Feature(s)
and/or Service Feature(s) to normal operational processing capabilities, and
(vi) verify that Product, Software, Platform, Platform Feature(s), and/or
Service Feature(s) are operating as described in documentation provided by
Supplier. Tier I Support is also referred to as Maintenance Support.
TIER II SUPPORT means actions, taken by Company's NESAC personnel, required to
resolve problems with Supplier's Product, Software, Platform, Platform
Feature(s) and/or Service Feature(s) which could not be resolved by Company's
personnel providing Tier I Support/Maintenance Support. Tier II Support is also
referred to as Technical Support.
TIER III SUPPORT means actions, taken by Supplier's Customer Support personnel
to assist in the diagnosis of problems with Supplier's Product, Software,
Platform, Platform Feature(s) and/or Service Feature(s) referred to Supplier by
Company's Tier II Support/Technical Support personnel. Tier III Support is
initiated by a telephone request from Company's authorized Tier II
Support/Technical Support personnel to Supplier's published support line.
Company shall provide to Supplier all information requested by
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS
Supplier and which can be obtained by Company. Tier III Support is provided by
telephone from Supplier locations remote to Company's installation sites through
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
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consultative communication with Tier II Support/Technical Support personnel.
Tier III Support is also referred to as Supplier Support.
TP means Technical Plan and represents the document which is created and owned
solely by Company, and which generally precedes system-specific requirements and
serves to (i) define the key functional requirements of a service and, (ii)
allocate functions across the various physical and logical components affected.
TRACEABILITY MATRIX means Supplier's document which correlates each test case to
an enumerated requirement(s) specified in Company's FSD(s) and/or EIS(s).
TROUBLE TICKET means the medium used by Company's Tier II Support/Technical
Support personnel to notify Supplier of problems detected in Supplier's Product
or Software from Q2 through the life of the Product or Software.
UNSCHEDULED SOFTWARE PATCHES means software which (i) does not have an FSD
associated with it and (ii) incorporates fixes to Severity Level 1, Severity
Level 2, Severity Level 3 and/or Severity Level 4 MRs, and (iii) is initiated
and managed by Company's Tier II Support/Technical Support personnel.
VERIFICATION COPY means a form in which Supplier delivers documentation. A
Verification Copy is a copy which is as close to the Final Copy as possible. The
only modifications that are intended to be made to a Verification Copy are those
that are requested by Company via an MR during the acceptance testing of
Supplier's Product or Software.
1.5 DESCRIPTION:
Exhibit B describes the first Service Application, *******, which will reside on
the NSAP, and provides the Product description and Product configuration for
NSAP. Platform Feature Software and Service Feature Software commitments are
listed in Exhibit C, or in an Order or in a TCL issued hereunder and subject to
the provisions hereof. Platform Feature Software Specifications for NSAP and
Service Feature Software Specifications for ******* are listed in Exhibit D.
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
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1.6 REPRESENTATIVES:
For purposes of this Agreement, Company's Agreement Representative(s), Company's
Technical Representative(s), Company's Technology Management Representative(s),
Company's Order Management Representative(s), Company's Training
Representative(s), and Company's NESAC Representative(s) shall be specified
either in an Order, TCL or this Supplemental Agreement. All Work rendered under
this Agreement is subject to inspection and acceptance by Company's Technology
Management Representative or, in the Technology Management Representative's
absence, by others as may be delegated in writing by Company.
Company's Agreement Representative is:
Victoria Melillo
AT&T Corp.
Supplier Management Division
101 Crawfords Corner Road
Holmdel, NJ 07733-3030
Phone (732) 949-4717
Facsimile (732) 949-8982
Company's Technical Representative is:
Julie D. Regalado
AT&T Corp.
101 Crawfords Corner Road
Holmdel, NJ 07733-3030
Phone (732) 949-1554
Facsimile (732) 949-5955
Company's Technology Management Representative is:
Edward R. Carlucci
AT&T Corp.
200 Route 202/206N PO Box 752
Bedminster, NJ 07921-0752
Phone (908) 234-6262
Facsimile (908-234-8776
Company's Order Management Representative is:
Julie D. Regalado
AT&T Corp.
101 Crawfords Corner Road
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Holmdel, NJ 07733-3030
Phone (732) 949-1554
Facsimile (732) 949-5955
Company's Training Representative is:
Eric S. Norman
AT&T Corp.
101 Crawfords Corner Road
Holmdel, NJ 07733-3030
Phone (732) 949-7691
Facsimile (732) 949-5955
Company's NESAC Representative is:
Pat Litzo
AT&T Corp.
28W 615 Ferry Road
Warrenville, IL. 60555
Phone (630) 393-5430
Facsimile (630) 393-5595
or such other persons as may be designated in writing from time to time by
Company.
Supplier's Agreement Representative is:
Ray Naeini
Brite Voice Systems, Inc.
250 International Parkway
Suite 300
Heathrow, FL 32746-5006
Phone (407) 357-1010
Facsimile (407) 357-1410
Supplier's Technical Representative is:
Steve Wilcox
Brite Voice Systems, Inc.
7309 E. 21st Street North
Wichita, KS 67206-1083
Phone (316) 652-6500
Facsimile (316) 652-6800
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
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Supplier's Customer Support Representative is:
Paul Epps
Brite Voice Systems, Inc.
2377 Gold Meadow Way, Suite 100
Gold River, CA. 95670
Phone (916) 631-1588
Facsimile (916) 631-1515
or such other persons as may be designated in writing by Supplier from time to
time.
1.7 SERVICES:
In addition to Services specifically listed in the GA as being offered by
Supplier, Supplier agrees to provide the Services listed in the following
sections.
1.7.1 DOCUMENTATION:
Supplier will provide the documentation described and listed in Exhibit E
according to the date(s) specified in Section 1.17, "SUPPLIER'S MILESTONES."
Supplier agrees to grant and hereby grants to Company the right to use the
Supplier-owned documents listed in Exhibit E. Supplier agrees that Company may
make a reasonable number of copies of such documents for internal business
purposes of Company and Ordering Companies.
1.7.2 TRAINING:
Supplier will provide training courses as described in Exhibit F.
1.7.2.1 PILOT TRAINING:
Supplier will conduct pilot training courses associated with each new Generic
Release, for up to twenty (20) students, covering the operations,
administration, maintenance, and provisioning processes for Company personnel
that will perform Tier I Support/Maintenance Support and Tier II
Support/Technical Support for the Product. The location of this training is
dependent on the hardware and software needed to conduct the course and will be
mutually agreed upon and documented in Exhibit F or Company's Quality Plan for
each new Generic Release. Company's Training Representative will be responsible
for ensuring training materials and supporting documentation are thoroughly
reviewed by Company subject matter experts, and that feedback is provided to
Supplier regarding the content of the course.
Following the completion of the pilot training course and prior to the rollout
training, Supplier agrees to modify training materials, training content, and
related documentation to
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
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incorporate mutually agreed upon corrections and mutually agreed upon
improvements identified during pilot training.
1.7.2.2 ROLLOUT TRAINING:
After completion of the pilot training course(s), Supplier will offer two (2)
hands-on sessions and at least two (2) classroom sessions of the rollout
training course. The number and location of the hands-on and broadcast sessions
will be mutually agreed to and documented in Exhibit F or in Company's Quality
Plan. The total of all rollout training sessions will provide training for at
least fifty (50) of Company's personnel who will be performing Tier I
Support/Maintenance and Tier II Support/Technical Support for the Product and
Software.
1.7.2.3 ADDITIONAL TRAINING:
At Company's request, Supplier agrees to develop and deliver a
"Train-the-Trainer" course, intended for use (i.e., delivery and modification)
by Company, which will be subject to content and pricing agreed to in a separate
purchase order. This course will be designed to provide Company's training
personnel and selected subject matter experts education, skills and knowledge
for their use in delivering end-user, maintenance and system administration
training to Company's personnel without the aid of Supplier's trainers or
subject matter experts. This training will be designed to be equivalent to and
will capture all of the pertinent subjects covered during training delivered
under contract by Supplier.
At Company's request, Supplier further agrees to offer additional training, for
a Generic or Non-Generic Release, which will be subject to content and pricing
agreed to in a separate purchase order. Supplier agrees to update the training
material concurrently with Generic Software Releases to reflect subsequent and
continuing technology releases.
1.7.3 ENGINEERING AND INSTALLATION:
Supplier will provide engineering and installation services, including site
surveys, identification of power and cooling requirements, and installation of
the NSAP Product at the request of Company. Supplier agrees that Company shall
own all rights, title and interest associated with all documents, including but
not limited to interconnection drawings, cabling plans and installation
specification drawings, that Supplier either creates, updates or provides in the
course of performing Services for Company relating to EF&I, or that are required
by Company to perform EF&I. Supplier has the right to use the aforementioned
drawings as necessary for Supplier to perform Services. The provisions of the
previous two (2) sentences (i) shall apply to all documents, drawings or plans
that are shown in Exhibit E and that are marked "AT&T Proprietary" and, (ii)
shall not apply to all documents, drawings or plans that are shown in Exhibit E
and that are marked "Brite Proprietary".
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
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1.8 SPECIFICATIONS:
Service Feature Specifications and Platform Feature Specifications are listed in
Exhibit D. Said Service Features and Platform Features shall perform in
accordance with the mutually agreed upon Specifications for these Features.
All rights, title and interest to feasibility documents (e.g., Technical
Analysis Brief (TAB)), requirements documents (e.g., Technical Plan (TP),
Feature Specification Document (FSD), External Interface Specification (EIS)),
and test documents which are used for post-Q4 testing (e.g., Master Test Plan
(MTP), Test Specification) will be owned by Company even if Supplier provides
some input to the creation of such feasibility, requirements and test documents.
All rights to Product and Software design documents (e.g., Functional Design
Specification (FDS)) and test documents created by Supplier for pre-Q4 testing
will be owned by Supplier even if Company provides some input to the creation of
such Product and Software design documents and test documents. Supplier agrees
to provide copies of such Product test documents and such Software design
documents and test documents to Company for its internal use by Company and
Ordering Companies solely in conjunction with the Deliverables furnished
hereunder.
Company may distribute any feasibility, requirements or test document to a third
party without Supplier's written consent. Notwithstanding the Use of Information
clause in the General Agreement, Supplier may distribute any design document to
a third party provided that all technical and business information that is
Company's proprietary information, which includes but is not limited to any
Company proprietary information relating to the concept defined in paragraph two
(2) of Exhibit C, is expunged from such document by Supplier.
Feasibility, requirement and test documents will be marked as follows:
- - "This document is AT&T Proprietary and shall not be disclosed to a third
party without Company's prior written express approval.
- - "The AT&T proprietary information and Brite Voice Systems proprietary
information, if any, are governed by the applicable terms and conditions of
the GA, and/or relevant Non-Disclosure Agreements, and/or relevant
Supplemental Agreements."
- -
Design documents will be marked as follows:
- - "This document is Brite Voice Systems, Inc. Proprietary. However, it may
contain information specific to and/or proprietary to AT&T. Brite Voice
Systems personnel are responsible for protecting any AT&T proprietary
information. If this document is not associated with a feature designated
as exclusive to AT&T, it may be shared with a third party, but the Senior
Vice President of Engineering for Brite Voice Systems or other
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
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- - designated Brite individual, as appropriate, has the responsibility for
deleting any AT&T proprietary information."
- - "The Brite Voice Systems proprietary information and AT&T proprietary
information, if any, are governed by the applicable terms and conditions of
the GA, and/or relevant Non-Disclosure Agreements, and/or relevant
Supplemental Agreements."
1.9 APPLICATION PROGRAMMING INTERFACE:
Supplier agrees to provide the NSAP Voice and Telephony Application Programming
Interface Specification which contains the Application Programming Interface
(API)
Specifications for the APIs that exist within the NSAP for communication between
the Service Applications and Platform as defined by Company's Specifications
listed in Exhibit D.
Supplier agrees that the scope of the API Specifications will include all
Service Application to Platform communications defined for the Platform software
to be delivered to Company. The API Specifications will include calling
conventions and autonomous indications associated with the following areas:
- - *******
- - *******
- - *******
- - *******
- - *******
Supplier agrees that the API Specifications will include all Platform
capabilities available in the Software, including capabilities not used at all
by the ************* Application as well as unused arguments or options of
capabilities that are used by the ************ Application. Supplier further
agrees that the API Specifications will include the following:
- - *******
- - *******
- - *******
- - *******
- - *******
- - *******
Upon completion of the API Specifications, Supplier agrees to make the APIs an
Open Interface. The API Specifications will be delivered as per the milestone
specified in Section 1.17, "SUPPLIER'S MILESTONES". Supplier agrees that Company
may release the API Specifications to a third party, without Supplier's written
consent, for use in developing other Service Applications on the NSAP.
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
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1.10 DESIGN REVIEWS:
Supplier agrees to provide to Company a list of design, development and testing
milestones along with definitions of said milestones. Supplier further agrees to
notify Company ten (10) days prior to Supplier's Software and user interface
screen design reviews. Supplier further agrees that Company may participate in
said reviews and reviews of any associated documentation.
1.11 CHANGE CONTROL AND MODIFICATION REQUESTS:
1.11.1 CHANGES IN SCOPE:
Company may, at any time, by written notice, advise Supplier of Company's intent
to make changes in, alterations of, or deductions from (all hereinafter referred
to as "Changes"), the work performed hereunder. Rigorous change control shall be
implemented to monitor such Changes which are prompted primarily by
modifications to FSD(s) and External Interface Specifications (EIS(s)). These
Changes may affect committed schedules and committed costs.
Company or Supplier may request Changes to the work called for by an FSD(s) or
an EIS(s). All requests for Changes in FSD(s), EIS(s), Services or Work must be
made in writing, via an MR, to the appropriate Company Change Control Board
(CCB) which shall include Supplier representation. Company's notification of
acceptance or rejection of Change(s) shall be documented in said MR. No Change
shall be considered as an addition to or deduction from work called for by an
FSD(s), an EIS(s), an Order, or TCL nor shall Supplier be entitled to any
compensation for work done pursuant to or in contemplation of a Change, unless
the Change is made pursuant to a written MR Assigned to Supplier by Company's
CCB Coordinator.
Supplier shall, within ten (10) working days after receipt of an MR from Company
requesting an addition, alteration, deduction or deviation to work called for by
an FSD(s), an EIS(s), an Order or TCL, submit a proposal to Company which
includes any change in Supplier's price or change in delivery schedule
necessitated by such Change. Supplier's response may include a recommendation
against pursuing such Change. Supplier's response also may include a request to
extend the response to a mutually agreed upon date. In any instances where the
schedule will be impacted by the analysis of such Change, the scope and duration
of the analysis will be negotiated before the analysis of the Change is started.
Company shall, within ten (10) working days of receipt of Supplier's proposal,
either (i) accept the proposal, in which event Company shall, in writing, Assign
the MR to Supplier, thus directing Supplier to perform the Change(s), or (ii)
advise Supplier via the MR not to perform the Change(s), in which event Supplier
shall proceed with the original work. MRs which are Assigned to Supplier will be
assigned a Severity Level as defined in Exhibit G. If under this Section 1.11.1,
Supplier recommends against making a Change that adversely impacts Supplier or
Supplier's obligations under this Agreement or the GA, and Company
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
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Contract No. LLJ268E
Page 20 of 30
still desires to make such Change, then Supplier shall at its option determine
whether to make such Change and if not, Supplier and Company will cooperate in
good faith to determine if alternative options are available to implement such
Change for Company.
Should Company choose to make any Change as specified above, the applicable
FSD(s) or EIS(s), will be changed accordingly and the appropriate Order(s) or
TCL(s) changed to reflect any agreed to changes to committed schedules or
prices.
If the cost of supplies or materials made obsolete or excess as a result of such
change is included in Supplier's claim for adjustment, Company shall have the
right to prescribe the manner of disposition of such supplies or materials. Any
claim for adjustment under this clause must be asserted within thirty (30) days
from the date the change is ordered. However, if Company determines that the
facts justify such action, it may receive, consider and adjust any such claim
asserted at any time prior to the date of final payment. Nothing contained in
this clause shall excuse Supplier from proceeding with the work so changed.
1.11.2 NON-COMPLIANCE:
Company may, at any time after Q4, by written notice, advise Suppler of (i)
Supplier's non-compliance of any requirements documented in FSD(s) and/or
EIS(s), or (ii) Supplier's non-compliance to Supplier's documentation listed in
Exhibit E (all hereinafter referred to as "Modifications"). Rigorous change
control shall be implemented to monitor such Modifications which are prompted
primarily from Company's acceptance testing of Supplier's Product and Software,
as well as Company's acceptance testing of Company's network elements requiring
development to support Features identified in Exhibit C. These Modifications
shall not affect committed schedules or committed costs.
All requests for Modifications shall be made in writing, via Company's Change
Control Board, to Supplier. An MR created as a result of a request for a
Modification shall be assigned a Severity Level as defined in Exhibit G. All
Modifications must be completed by Supplier prior to exiting Q2, unless
specified otherwise in Company's Quality Plan. If Company agrees that some
Modifications are not to be completed prior to exiting Q2, Supplier agrees to,
at Company's option, either (i) reduce the final invoice by an amount that is
mutually agreed to, or (ii) agree to implement the Modifications is a subsequent
Release, to be determined by Company, at no cost to Company.
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
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Contract No. LLJ268E
Page 21 of 30
1.12 ACCEPTANCE CRITERIA:
Company business operates under quality standards and International Standards
Organization (ISO) 9001 guidelines. Quality processes are in place to govern the
execution of the Quality Plans for the various company organizations. Supplier
agrees to participate with Company in developing Supplier's deliverables in
accordance with the criteria specified in this Section 1.12 and in the Quality
Plans as mutually agreed upon by both parties.
The Acceptance Criteria specified herein are the key criteria used to determine
Company's Acceptance of Supplier's Product and Software. A complete set of
criteria used to monitor the progress from one quality gate to another will be
specified in Company's Quality Plan for the NSAP.
1.12.1 SOFTWARE ACCEPTANCE CRITERIA:
Software acceptance will not occur until after completion of the entrance
criteria for Q4 and entrance and exit criteria for Q2. Supplier agrees that
acceptance of the Software will be based on the Software Acceptance Criteria.
1.12.1.1 ENTRANCE CRITERIA FOR Q4:
The following criteria will be used to determine whether Supplier's Software
will pass the Q4 Quality Gate so that Acceptance testing can begin in the ITN.
1. *****************************************************************************
2. *****************************************************************************
3. *****************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
************************************
4. *****************************************************************************
*******************************************************************
5. ****************************************************************************
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
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Contract No. LLJ268E
Page 22 of 30
6. ***************************************************************************
7. ***************************************************************************
**********************************************************************
8. ***************************************************************************
**********************************************************************
9. ***************************************************************************
10. ***************************************************************************
**********************************************************************
11. ***************************************************************************
12. ***************************************************************************
**********************************************************************
13. ***************************************************************************
14. ***************************************************************************
**********************************************************************
15. ***************************************************************************
**********************************************************************
16. ***************************************************************************
***************************************************************************
****************************************************************
17. ***************************************************************************
*
18. ***************************************************************************
**********************************************************************
19. ***************************************************************************
*
20. *******
21. *******
22. *******
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS
1.12.1.2 ENTRANCE CRITERIA FOR Q2:
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
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Contract No. LLJ268E
Page 23 of 30
The following criteria will be used to determine whether Supplier's Software
will pass the Q2 Quality Gate so
that Acceptance testing can proceed into the FFA.
1. ****************************************************************************
2. ****************************************************************************
*********************************************************************
3. ****************************************************************************
4. ****************************************************************************
5. ****************************************************************************
6. ****************************************************************************
7. ****************************************************************************
- *******
- *******
- *******
8. *******
9. *****************************************************************************
********************************************************************
10.****************************************************************************
********************************************************************
11.*****************************************************************************
********************************************************************
12.*****************************************************************************
********************************************************************
13.*****************************************************************************
********************************************************************
14.****************************************************************************
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
5/26/98
Contract No. LLJ268E
Page 24 of 30
15.*****************************************************************************
********************************************************************
16.*******
17.*****************************************************************************
********************************************************************
1.12.1.3 EXIT CRITERIA FOR Q2:
The following criteria will be used to determine whether Supplier's Software
will exit the Q2 Quality Gate so that deployment at the remaining sites can
begin.
1. ****************************************************************************
2. ****************************************************************************
3. ****************************************************************************
4. ****************************************************************************
5. ****************************************************************************
6. ****************************************************************************
7. *****************************************************************************
********************************************************************
1.12.2 PRODUCT ACCEPTANCE CRITERIA:
Product Acceptance at a particular site will not begin until (i) after full
shipment of Product for that site has been received at Company's site, (ii) full
product installation has occurred, and (iii) Supplier has provided written
notice to Company of the completion of installation, if Supplier provides
installation services, or Supplier has provided written notice to Company that
Product has been delivered to Company's site. The Product Acceptance test period
shall conclude thirty (30) days from Supplier's written notice of installation
completion, if Supplier provides installation services. If Supplier does not
provide installation services, the Product Acceptance test period shall conclude
thirty (30)
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
5/26/98
Contract No. LLJ268E
Page 25 of 30
days from Supplier's Actual Product Delivery Date. Product Acceptance will be
based upon Company's Platform Acceptance Criteria.
1.13 SUPPLIER'S SUPPORT AT ITN AND FFA SITES:
Supplier agrees to provide **************************************************
********************************************************************************
********************************************************************************
****************************************.
Supplier further agrees to provide ********************************************
********************************************************************************
*****************************************.
Supplier further agrees that Company will be able to contact *******************
********************************************************************************
********************************************************************************
********************************************************************************
***************************************************************.
1.14 QUALITY AUDITS:
Supplier shall, upon written request by Company and based on agreement as to
appropriate confidentiality restrictions, permit Company to conduct a quality
audit of Supplier's production and other processes for purposes of validating
intervals. Supplier further agrees to reasonably review and consider
implementation of any reasonable processes and/or suggestions resulting from
this audit based upon a mutually-agreed to implementation schedule.
1.15 PARTIAL SHIPMENTS:
Supplier may deliver partial shipments only upon written authorization from
Company.
1.16 APPLICABILITY OF LIQUIDATED DAMAGES:
1.16.1 SOFTWARE:
Company agrees that, for this initial contract only, liquidated damages for the
Software will be based on the latest Q4 date between the Platform Feature
software and Service
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
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Contract No. LLJ268E
Page 26 of 30
Feature software. Company and Supplier agree that liquidated damages for
Software, if applicable, will be (i) calculated from Supplier's Committed
Product Delivery Date of the *********************************************
**************************, and(ii) based on *****************************
**************************************************************************
**************************************************************************
***********************************************.
1.16.2 PRODUCT:
Company and Supplier agree that, since there were no previously Committed
Product Delivery Dates for Product delivery to Company's ITN, FFA or Central
Office sites, liquidated damages, if applicable, will be calculated from the
Committed Product Delivery Dates for said sites as documented in Section 1.17.1,
"Milestones Applicable to Liquidated Damages" and Exhibit A. Company agrees to
allow a ********** grace period for the Product delivery to the ITN before
imposing liquidated damages, which means that liquidated damages, if applicable,
will be calculated from the ****************************************************
*****************. Company further agrees that liquidated damages for Product
will be applied on a per Product delivery basis and will be based on a per
Product price of ***************************************************************
********************************************************************************
*********************************************************.
1.17 SUPPLIER'S MILESTONES:
Supplier shall comply with the milestones set forth in this Section 1.17.
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
5/26/98
Contract No. LLJ268E
Page 27 of 30
1.17.1 MILESTONES APPLICABLE TO LIQUIDATED DAMAGES:
<TABLE>
<CAPTION>
- ---------------------------------------------- -------------------------------------------- ----------------
MILESTONE LOCATION COMMITTED
PRODUCT
DELIVERY DATE
- ---------------------------------------------- -------------------------------------------- ----------------
<S> <C> <C>
************************** **************** *****
****************
****************
- ---------------------------------------------- -------------------------------------------- ----------------
********************************************** *********************** ********************
- ---------------------------------------------- -------------------------------------------- ----------------
******************************************** ***************** *****
****************
****************
- ---------------------------------------------- -------------------------------------------- ----------------
</TABLE>
1.17.2 SUPPLIER'S OTHER KEY MILESTONES:
<TABLE>
<CAPTION>
- ---------------------------------------------- -------------------------------------------- ----------------
MILESTONE LOCATION COMMITTED
DELIVERY DATE
- ---------------------------------------------- -------------------------------------------- ----------------
<S> <C> <C>
******************************************** *************** ******
***************
***************
- ---------------------------------------------- -------------------------------------------- ----------------
******************************************** *************** *****
***************
***************
***********************************************
- ---------------------------------------------- -------------------------------------------- ----------------
*********************************** ************** ******************
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
**************************** ************** *******************
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
******************************************** ************** ******
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
- ---------------------------------------------- -------------------------------------------- ----------------
- ---------------------------------------------- -------------------------------------------- ----------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
5/26/98
Contract No. LLJ268E
Page 28 of 30
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ---------------------------------------------- -------------------------------------------- ----------------
************************************** ************** ********************
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
**************************** ************** ********************
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
********************************* ************** ********************
**************
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
********************************* ************** *******************
**************
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
******************************************* ************** ********************
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
******************************************* ************** ********************
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
*************************************** ************** *****
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
***************************************** ************** ********************
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
*************************************** ************** ********************
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
***************************************** ************** *****
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
**************************************** ************** ********************
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
*************************** ************** ********************
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
- ---------------------------------------------- -------------------------------------------- ----------------
- ---------------------------------------------- -------------------------------------------- ----------------
</TABLE>
<PAGE>
5/26/98
Contract No. LLJ268E
Page 29 of 30
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ---------------------------------------------- -------------------------------------------- ----------------
********************************************** ******************************************** ********************
**************
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
********************************************** ******************************************** ************
**************
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
********************************************** ******************************************** **********
**************
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
********************************************** ************************************ ****************************************
*****************************
- ---------------------------------------------- -------------------------------------------- ----------------
********************************************** ******************************************** ******************
**************
**************
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
********************************************** ******************************************** **************
**************
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
******************** ************** ********************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
*********************** ******************* *******************
- ---------------------------------------------- -------------------------------------------- ----------------
*********************** ******************* *******************
- ---------------------------------------------- -------------------------------------------- ----------------
********************************************** ********************************* *****
**************
**************
**************
- ---------------------------------------------- -------------------------------------------- ----------------
</TABLE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
5/26/98
Contract No. LLJ268E
Page 30 of 30
1.18 PRICES AND PAYMENT:
The prices and payment schedule for NSAP - Release 1 and ***************** are
listed in Exhibit H and Exhibit I.
1.19 FIELD SUPPORT AGREEMENT:
Company and Supplier agree that Company shall provide Tier I Support/Maintenance
Support and Tier II Support/Technical Support. Supplier agrees to provide Tier
III Support/Supplier Support during the Warranty Period and under the terms of
the maintenance contract during the period of time that a maintenance contract
is in effect. Company agrees that Supplier shall not be responsible or liable
for Company's action or inaction in providing Tier I Support/Maintenance Support
or Tier II Support/Technical Support, unless Company was specifically instructed
to take such action by Supplier in providing Tier III Support/Supplier Support
or in Supplier's support documentation listed in Exhibit E.
1.19.1 SOFTWARE DISTRIBUTION PROCESS:
The following sections are meant to provide additional clarification to the
Software update requirements specified in Company's Specifications.
1.19.1.1 SCHEDULED SOFTWARE RELEASE:
Company and Supplier shall mutually agree to all Committed Product Delivery
Dates for Scheduled Software Releases. For Scheduled Software Releases, Supplier
agrees to deliver two (2) sets of tapes each for the Platform Feature Software
and/or Service Feature Software to the ITN at Q4 for Company's Acceptance. The
name and address for the person to whom the tapes should be delivered is
provided in Section 1.17 "SUPPLIER'S MILESTONES". After Company has completed
Acceptance testing at the ITN and at Company's direction, Supplier agrees to
deliver two (2) sets of tapes each for the Platform Feature Software and/or
Service Feature Software to the FFA at Q2 for Company's Acceptance testing. Upon
meeting the exit criteria at Q2, Supplier agrees to deliver two (2) sets of
tapes each for the Platform Feature Software and Service Feature Software to
each remaining Central Office site listed in Exhibit A.
1.19.1.2 UNSCHEDULED SOFTWARE PATCHES:
For Unscheduled Software Patches, Company shall access Supplier's FTP server on
the public internet and FTP the Unscheduled Software Patch to Company's ITN.
Company agrees to be responsible for distribution of Unscheduled Software
Patches to Company's Central Office Sites.
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
5/26/98
Contract No. LLJ268E
Page 31 of 30
1.19.2 TROUBLE TICKET REPORTING PROCESS:
This section is meant to provide a high level description of the process used by
Company to refer a Trouble Ticket to Supplier. A document describing the details
of the mechanics (e.g., method of communicating Trouble Tickets - email,
facsimile, etc.) will be developed jointly between Company's NESAC
Representative and Supplier's Customer Support Representative prior to Company's
Q2 date.
Company agrees that only authorized persons from Company's Tier II
Support/Technical Support organization will refer Trouble Tickets to Supplier.
When Company's Tier II Support/Technical Support personnel determine the need to
refer a Trouble Ticket to Supplier, Company shall initiate a telephone call to
Supplier's published support line and, at a minimum, shall describe the nature
of the problem, the Severity Level of the problem, and shall provide Company's
Trouble Ticket number. Supplier agrees that Supplier's support line personnel
will contact Supplier's Tier III Support/Supplier Support personnel for
resolution of Company's Trouble Ticket. Supplier further agrees to respond to
Company's Tier II Support/Technical Support personnel per the Response Times
documented in Exhibit G.
1.19.3 SUPPLIER CONSULTATION SUPPORT:
Supplier agrees that, from time to time, Company may initiate a call directly to
Supplier's Tier III Support/Supplier Support personnel for general consultation
and questions. Company agrees that at no time shall Company refer a Trouble
Ticket directly to Supplier's Tier III Support/Supplier Support personnel.
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
5/26/98
Contract No. LLJ268E
Page 32 of 30
IN WITNESS WHEREOF, the Supplier and Company have executed this Agreement in
duplicate as of the dates set forth below.
BRITE VOICE SYSTEMS, INC. BRITE VOICE SYSTEMS GROUP, LTD.
/S/ D. S. GERGACZ /S/ D. S. GERGACZ
- ---------------------------------- -------------------------------
Signature Signature
DAVID S. GERGACZ DAVID S. GERGACZ
- ---------------------------------- -------------------------------
Name - typed or printed Name - typed or printed
CHAIRMAN & CEO DIRECTOR
- ---------------------------------- -------------------------------
Title - typed or printed Title - typed or printed
5/29/98 5/29/98
- ---------------------------------- -------------------------------
Date Date
On behalf of
AT&T CORP.
/S/ BY JUDY L. BURDS
- ----------------------------------
Signature
JUDY L. BURDS
- ----------------------------------
Name - typed or printed
DIRECTOR - NETWORK SUPPLIER MGMT.
- ----------------------------------
Title - typed or printed
5/26/98
- ----------------------------------
Date
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT A (PAGE 1 OF 2)
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELYWITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
CENTRAL OFFICE SITES FOR THE INITIAL DEPLOYMENT OF *******
<TABLE>
<CAPTION>
- -------------------------- -------------------------------------------- ----------------- -------------------- --------------------
COMMON LANGUAGE LOCATION ADDRESS NUMBER OF NSAP PRODUCT ON-SITE PRODUCT
IDENTIFIER (CLLI) CODE NODES DATE INSTALLATION START
DATE
- -------------------------- -------------------------------------------- ----------------- -------------------- --------------------
<S> <C> <C> <C> <C>
***************** **************** * ****** ******
****************
****************
****************
- -------------------------- -------------------------------------------- ----------------- -------------------- --------------------
***************** **************** * ****** ******
****************
****************
- -------------------------- -------------------------------------------- ----------------- -------------------- --------------------
***************** **************** * ****** ******
****************
****************
- -------------------------- -------------------------------------------- ----------------- -------------------- --------------------
***************** **************** * ****** ******
****************
****************
****************
- -------------------------- -------------------------------------------- ----------------- -------------------- --------------------
***************** **************** * ****** ******
****************
****************
****************
- -------------------------- -------------------------------------------- ----------------- -------------------- --------------------
***************** **************** ********* ****** ******
****************
****************
****************
- -------------------------- -------------------------------------------- ----------------- -------------------- --------------------
***************** **************** * ****** ******
****************
****************
****************
- -------------------------- -------------------------------------------- ----------------- -------------------- --------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------- ---------------------
COMMON LANGUAGE LOCATION COMMITTED PRODUCT COMMENTS
IDENTIFIER (CLLI) CODE DELIVERY DATE [+]
- ---------------------------------------------- ---------------------
<S> <C> <C>
***************** ****** *********
- ---------------------------------------------- ---------------------
***************** ******
- ---------------------------------------------- ---------------------
***************** ******
- ---------------------------------------------- ---------------------
***************** ******
- ---------------------------------------------- ---------------------
***************** ******
- ---------------------------------------------- ---------------------
***************** ******
- ---------------------------------------------- ---------------------
***************** ******
- ---------------------------------------------- ---------------------
</TABLE>
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT A (PAGE 2 OF 2)
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<CAPTION>
- -------------------------- -------------------------------------------- ----------------- -------------------- --------------------
COMMON LANGUAGE LOCATION ADDRESS NUMBER OF NSAP PRODUCT ON-SITE PRODUCT
IDENTIFIER (CLLI) CODE NODES DATE INSTALLATION START
DATE
<S> <C> <C> <C> <C>
- -------------------------- -------------------------------------------- ----------------- -------------------- --------------------
***************** **************** * ****** ******
****************
****************
- -------------------------- -------------------------------------------- ----------------- -------------------- --------------------
- -------------------------- -------------------------------------------- ----------------- -------------------- --------------------
***************** **************** * ****** ******
****************
****************
- -------------------------- -------------------------------------------- ----------------- -------------------- --------------------
- -------------------------- -------------------------------------------- ----------------- -------------------- --------------------
***************** **************** * ****** ******
****************
****************
- -------------------------- -------------------------------------------- ----------------- -------------------- --------------------
- -------------------------- -------------------------------------------- ----------------- -------------------- --------------------
***************** **************** ********* ******* ******
****************
****************
****************
- -------------------------- -------------------------------------------- ----------------- -------------------- --------------------
- -------------------------- -------------------------------------------- ----------------- -------------------- --------------------
***************** **************** * ****** *******
****************
- -------------------------- -------------------------------------------- ----------------- -------------------- --------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------- -------------------- ---------------------
COMMON LANGUAGE LOCATION PRODUCT DELIVERY COMMENTS
IDENTIFIER (CLLI) CODE DATE [+]
<S> <C> <C>
- -------------------------- -------------------- ---------------------
***************** ******
- -------------------------- -------------------- ---------------------
- -------------------------- -------------------- ---------------------
***************** ****** **********************
- -------------------------- -------------------- ---------------------
- -------------------------- -------------------- ---------------------
***************** ****** *************
- -------------------------- -------------------- ---------------------
- -------------------------- -------------------- ---------------------
***************** ******
- -------------------------- -------------------- ---------------------
- -------------------------- -------------------- ---------------------
***************** ****** *************
- -------------------------- -------------------- ---------------------
</TABLE>
+ Company and Supplier agree that any modifications to Committed Product
Delivery Dates shall be mutually agreed to and documented in an amendment to
this Agreement.
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT B (Page 1 of 3)
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
********* DESCRIPTION AND NSAP PRODUCT DESCRIPTION AND CONFIGURATION
1.0 ************** DESCRIPTION
***************************************************************************
***************************************************************************
***************************************************************************
***************************************************************************
***************************************************************************
***************************************************************************
***************************.
2.0 PRODUCT CONFIGURATION
***************************************************************************
***************************************************************************
***************************************************************************
***************************************************************************
***************************************************************************
***************************************************************************
***************************************************************************
***************************************************************************
********************.
***********************************************************:
- *******************************
- *******************************
- *******************************
- ************************************************************************
*************************************************
- ************************************************************************
************************************************************************
************************************************************************
************************************************************************
**************************************
- ********************************************
- ************************************************************************
*****************
********************************************************************.
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT B (Page 2 of 3)
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
NSAP NODE TELCO CABINET CONFIGURATION
TO SUPPORT THE ****** SERVICE
***************************************************************************
***************************************************************************
***************************************************************************
***************************************************************************
***************************************************************************
***********************************
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT B (Page 3 of 3)
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
NSAP NODE APPLICATION PROCESSING UNIT (APU) CABINET CONFIGURATION
TO SUPPORT THE ****** SERVICE
***************************************************************************
***************************************************************************
***************************************************************************
***************************************************************************
***************************************************************************
***********************************
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT C (PAGE 1 OF 1)
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
NSAP FEATURE COMMITMENTS AND EXCLUSIVITY DESIGNATION (FRF 6672 & FRF 6776)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- --------------------------- ------------ -------- --------------------------------------------------------- --------------------
FEATURE NAME Q4 DATE FRF# COMPANY SPECIFICATION DOCUMENT DEVELOPMENT + RTU
LICENSE FEE
- --------------------------- ------------ -------- --------------------------------------------------------- --------------------
***************** ****** 6672 ****** Service Release 1.0 ********************* ************
**********Issue 1.0
- --------------------------- ------------ -------- --------------------------------------------------------- --------------------
- --------------------------- ------------ -------- --------------------------------------------------------- --------------------
NSAP - Release 1.0 ****** 6776 Network Service Adjunct Platform (NSAP) Feature
Specification Document Release 1.0
- --------------------------- ------------ -------- --------------------------------------------------------- --------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------- --------------------- ----------------------
FEATURE NAME EXCLUSIVITY / UNLIMITED
EXCLUSIVITY PERIOD REPLICATION RIGHTS
- --------------------------- --------------------- ----------------------
***************** No / N/A No
- --------------------------- --------------------- ----------------------
- --------------------------- --------------------- ----------------------
NSAP - Release 1.0 No / N/A No
- --------------------------- --------------------- ----------------------
</TABLE>
[++] This total includes the cost for FRF 6672 and FRF 6776.
Company and Supplier agree that all Features in the initial commitment for
****** Service-Release 1.0 and NSAP-Release 1.0 are included in FRF 6672 & FRF
6776 and no such features are considered to be exclusive, developed information
or an original work of authorship and no such Features shall be considered to be
inventions owned by the Company. Company and Supplier further agree that Company
shall solely own all intellectual property rights, including, without
limitation, patent rights and trade secret rights that are associated with the
following concept: The combination of the following elements, an account number
that can be used as a dialable number to receive telecommunication services from
a particular carrier and operating as a billing mechanism to which such
communication services and communication services from other carriers can be
charged.
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT D (PAGE 1 OF 1)
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
NSAP PLATFORM FEATURE AND ****** SERVICE FEATURE SPECIFICATIONS
- - NETWORK SERVICE ADJUNCT PLATFORM NSAP FEATURE SPECIFICATION DOCUMENT -
(RELEASE 1.0) VERSION 2, FRF 6776, Mayra Caceres (coordinator), March 19,
1998
- - ****** SERVICE RELEASE 1.0 ******************* ISSUE 1.0- FINAL COPY, FRF
6672, Kwang Suh, Cory Ginourginas (coordinators), March 16, 1998
- - NETWORK SERVICE ADJUNCT PLATFORM ****** INTERFACE SPECIFICATIOn, Brunken,
Jere (AT&T), Bugga, Prabhakar (AT&T), Leavell, Blair (Brite Voice Systems),
April 22,1998
- - NETWORK SERVICE ADJUNCT PLATFORM ****** INTERFACE SPECIFICATION, DasGupta,
Naupam (AT&T), Leavell, Blair (Brite Voice Systems), April 22, 1998
- - NETWORK SERVICE ADJUNCT PLATFORM ***** INTERFACE SPECIFICATIOn, Leavell,
Blair (Brite Voice Systems), Wu, Hui-Ling (AT&T), TBD +
- - PLATFORM TO ********** INTERFACE SPECIFICATION DOCUMENt, January 9, 1998
+ Company and Supplier shall mutually agree to the delivery date of this
document by ******.
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT E (PAGE 1 OF 6)
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
****** AND NSAP DOCUMENTATION PROVIDED BY BRITE VOICE SYSTEMS, INC.
(TIER I SUPPORT/MAINTENANCE SUPPORT AND TIER II SUPPORT/TECHNICAL SUPPORT
DOCUMENTATION)
********************************************************************************
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**********************************************************
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT E (PAGE 2 OF 6)
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
****** AND NSAP DOCUMENTATION PROVIDED BY BRITE VOICE SYSTEMS, INC.
(TIER I SUPPORT/MAINTENANCE SUPPORT AND TIER II SUPPORT/TECHNICAL SUPPORT
DOCUMENTATION)
********************************************************************************
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********************************************************************************
********************************************************************************
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**********************************************************
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT E (PAGE 3 OF 6)
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
****** AND NSAP DOCUMENTATION PROVIDED BY BRITE VOICE SYSTEMS, INC.
(TRAINING MATERIAL)
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
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**********************************************************
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT E (PAGE 4 OF 6)
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
****** AND NSAP DOCUMENTATION PROVIDED BY BRITE VOICE SYSTEMS, INC.
(ENGINEERING DRAWINGS)
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
**********************************************************
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT E (PAGE 5 OF 6)
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
****** AND NSAP DOCUMENTATION PROVIDED BY BRITE VOICE SYSTEMS, INC.
(DEVELOPMENT MANAGEMENT DOCUMENTS) [+]
********************************************************************************
********************************************************************************
********************************************************************************
****************************
+ These documents are not orderable through Supplier's standard, published
practices.
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT E (PAGE 6 OF 6)
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
****** AND NSAP DOCUMENTATION PROVIDED BY BRITE VOICE SYSTEMS, INC.
(THIRD PARTY VENDOR DOCUMENTATION)
********************************************************************************
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**********************************************************
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT F (PAGE 1 OF 1)
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
****** AND NSAP TRAINING PROVIDED BY BRITE VOICE SYSTEMS, INC.
(TIER I SUPPORT/MAINTENANCE SUPPORT AND TIER II SUPPORT/TECHNICAL SUPPORT
TRAINING)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------- ------------------- -------------------------------
COURSE # OF COURSE # OF STUDENTS
OCCURRENCES
- -------------------------------------------------------------------- ------------------- -------------------------------
<S> <C> <C>
**************************** * *****************************
- -------------------------------------------------------------------- ------------------- -------------------------------
**************************** * *****************************
- -------------------------------------------------------------------- ------------------- -------------------------------
**************************** * *********
- -------------------------------------------------------------------- ------------------- -------------------------------
**************************** * *********
- -------------------------------------------------------------------- ------------------- -------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------- ------------------------------------ ------------------
COURSE LOCATION DATES
- -------------------------------------------------------------------- ------------------------------------ ------------------
<S> <C> <C>
**************************** ********************** **********
**********
- -------------------------------------------------------------------- ------------------------------------ ------------------
**************************** ********************** **********
**********
- -------------------------------------------------------------------- ------------------------------------ ------------------
**************************** **************** ********
- -------------------------------------------------------------------- ------------------------------------ ------------------
**************************** **************** ********
- -------------------------------------------------------------------- ------------------------------------ ------------------
</TABLE>
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT G (Page 1 of 3)
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
SEVERITY LEVEL DEFINITIONS AND RESPONSE TIMES
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*************************
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT G (Page 2 of 3)
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
********************************************************************************
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*******************************************************************************
********************************************************************************
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*************************
AT&T Proprietary (Restricted)
Solely for Those Persons Having a Need to Know
Use Pursuant to Company Instructions
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT G (Page 3 of 3)
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
********************************************************************************
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*************************
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT H (Page 1 of 1)
EXHIBIT H, PAGES 1 THROUGH 8, CONTAINS MATERIAL WHICH HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION.
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT I (Page 1 of 4)
ADDITIONAL PRICING
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
The following information details the pricing for the additional items and for
extra training courses and documentation guides.
********************************************************************************
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**********************************************************************
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
ADDITIONAL PRICING
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT I (Page 2 of 4)
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
ONE-TIME DISCOUNT
********************************************************************************
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*************************
*ADDITIONAL ITEMS PRICING NOTES
Payment terms are net thirty (30) days from signing of this Agreement.
Notwithstanding the foregoing, Company and Supplier have removed the following
items, and their associated prices, from the list of requirements shown on Page
one (1) of this exhibit:
o ***********
o ***********
o ***************************************************************************
***************************************************************************
****************************************.
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
ADDITIONAL PRICING
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT I (Page 3 of 4)
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
EXTRA TRAINING AND DOCUMENTATION
Company may order additional training and documentation at the prices set forth
below.
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
****************************************
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
ADDITIONAL PRICING
<PAGE>
5/26/98
Contract No. LLJ268E
EXHIBIT I (Page 4 of 4)
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
********************************************************************************
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****************************************
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS HAVING A NEED TO KNOW
USE PURSUANT TO COMPANY INSTRUCTIONS
ADDITIONAL PRICING
<PAGE>
Exhibit 10.24
Contract No. LH0827D
Page 1 of 22
SUPPLEMENTAL AGREEMENT FOR
********* MANAGED SERVICE
BETWEEN
AT&T CORP.
AND
BRITE VOICE SYSTEMS, INC.
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
8/24/98
Contract No. LH0827D
Page 2 of 22
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Description Page No.
- ------- ----------- --------
<S> <C> <C>
1.1 STATEMENT OF SERVICES 3
1.2 GOVERNING TERMS 3
1.3 RELATED AGREEMENTS 4
1.4 DURATION 4
1.5 DEFINITIONS 4
1.6 DESCRIPTION 7
1.7 INTELLECTUAL PROPERTY RIGHTS 7
1.8 REPRESENTATIVES 8
1.9 INSTALLATION 9
1.9.1 Initial Installation 9
1.9.2 Subsequent Installations for Capacity Expansion 9
1.10 DIRECT MEASURES OF QUALITY 10
1.11 NETWORK AVAILABILITY AND INTEGRITY 10
1.12 CHANGES FOR NONCOMPLIANCE 10
1.13 SUPPLIER'S INTEGRATION AND SERVICE TESTING 11
1.14 ENTRANCE CRITERIA FOR SUPPLIER TESTING IN
COMPANY'S LIVE NETWORK 11
1.15 COMPANY'S SERVICE TESTING 12
1.15.1 Exit Criteria from Company's Service Testing 13
1.16 SUPPLIER'S COMMITTED MILESTONES 13
1.17 PRICES AND PAYMENT 14
1.18 MAINTENANCE SUPPORT AGREEMENT 14
1.19 TRANSITION PLAN 14
1.20 DAMAGES 14
1.21 CREDIT FOR FUTURE PURCHASE 15
1.22 MALICIOUS TERMINATION OF MANAGED SERVICE 15
Exhibit A ******* Service Description and NSAP Product
Description and Configuration 17
Exhibit B Network Connectivity to NSAP for the Managed Service 20
Exhibit C Calculation for Liquidated Damages 21
Exhibit D Managed Service Confidence Suite 22
</TABLE>
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
8/24/98
Contract No. LH0827D
Page 3 of 22
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
[LOGO]
1200 Peachtree Street
Atlanta, Georgia 30309
ACCEPTANCE SHALL BE INDICATED BY
SIGNING AND RETURNING DUPLICATE TO:
Brite Voice Systems AT&T Corp.
250 International Parkway 101 Crawfords Corner Road
Suite 300 2B-406A
Heathrow, FL 32746-5006 Holmdel, NJ. 07733-3030
Attn: Ray Naeini Attn: William F. Condon
This agreement ("Agreement") is made between AT&T Corp., ("Company"), having
a place of business at 101 Crawfords Corner Road, Holmdel, NJ 07733-3030, and
Brite Voice Systems Inc. ("Supplier") having a place of business at
250 International Parkway, Suite 300, Heathrow, Florida 32746-5006, do hereby
agree as follows.
1.1 STATEMENT OF SERVICES:
Supplier agrees to provide, at no charge to Company, ******* as a Managed
Service (as defined herein) to Company during the Term of this Agreement.
1.2 GOVERNING TERMS:
The terms and conditions of General Agreement (GA) GA0023D apply to this
Agreement as if fully set forth herein, except for Sections 5.2, "Indemnity",
5.4, "Network Outage", 5.6, "Service Availability", 6.2, "Documentation",
6.12, "Training" and 6.13, "Spares" which do not apply to this Agreement.
Should the terms and conditions of this Agreement conflict with the GA terms
and conditions referenced above, this Agreement shall prevail. Capitalized
terms not defined herein shall have the same definition as in GA0023D or in
the Supplemental Agreement for ******* on NSAP (SA-LLJ268E).
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
8/24/98
Contract No. LH0827D
Page 4 of 22
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Should the capitalized terms in SA-LLJ628E conflict with the capitalized
terms in GA0023D, SA-LLJ628E shall prevail.
1.3 RELATED AGREEMENTS:
Except as otherwise set forth herein, Supplier agrees that this Agreement
shall in no way negatively affect Supplier's obligations under SA-LLJ268E.
Nothing in this Agreement supersedes the provisions in SA-LLJ268E, except as
specified in Sections 1.9, "INSTALLATION" and 1.19 "DAMAGES" of this
Agreement, and the parties agree that Supplier's milestones contained in
SA-LLJ268E are hereby superseded and shall be replaced by written
modification between the parties setting forth new milestones.
1.4 DURATION:
This Agreement shall be effective as of July 24, 1998 and shall continue in
effect until the earlier to occur of the following two (2) events: (i) Q1
occurs for ******* as defined by SA-LLJ268E and all customers provisioned on
the Managed Service Nodes have been transitioned to Installed Service Nodes
deployed per SA-LLJ268E; or (ii) ************ (the "Term"). Company and
Supplier agree that if the Q4 date for the Installed Service slips beyond the
************************ ********************************, the date in (ii)
of the previous sentence shall be extended accordingly. Company and Supplier
further agree to use best efforts to complete the transition of customers
from the Managed Service Nodes to the Installed Service Nodes by
**************. The Term of this Agreement may thereafter be extended by
mutual written agreement of the parties.
1.5 DEFINITIONS:
COMPANY'S CUSTOMER DATABASE means Company's database which is used to store
information relating to Company's calling card customers.
COMPANY'S LIVE NETWORK means the telecommunications network carrying
Company's live, revenue bearing traffic for all of Company's customers. This
includes, but is not limited to, AT&T's*************************************.
COMPANY'S SERVICE DATE means the date that Company provides the Managed
Service to Company's customers.
COMPANY'S SERVICE TESTING means the testing which is performed by Company to
determine if the Managed Service Software and associated Managed Service Nodes
meet the Managed Service Specifications.
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
8/24/98
Contract No. LH0827D
Page 5 of 22
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
CUSTOMER PROVISIONING ACTIVITIES means the tasks required to provision a
customer in Company's Customer Database and to provision a customers personal
************** number to access a specific Managed Service Node.
INSTALLED SERVICE means the ************* service provided under SA-LLJ628E.
INSTALLED SERVICE NODE means an NSAP node which has been deployed in
Company's Central Office and on which the Installed Service Software shall
execute following Company's acceptance of the Installed Service Softwars.
INSTALLED SERVICE SOFTWARE means the software that will be providing the
Installed Service on the Installed Service Nodes.
INSTALLED SERVICE SPECIFICATIONS means the complete set of requirements
specified in the documents listed Exhibit D of SA-LLJ628E.
ISDN/PRI means the telephony link protocol used for inbound calls to the
Managed Service Nodes and outbound calls from the Managed Service Nodes.
LIVE MANAGED SERVICE NODE means a Managed Service Node that is carrying
Company's revenue bearing traffic.
MAINTENANCE PLAN means a mutually agreed interface agreement specifying the
methods and procedures for addressing (i) customer complaints, and (ii)
troubles with Company-provided network facilities.
MANAGED SERVICE means a consumer service provided by Supplier, and operated
and maintained by Supplier at Supplier's NOC(s). Associated services,
provided by Supplier, include operations surveillance, technical support
structure and operations management for managed service systems.
MANAGED SERVICE CONFIDENCE SUITE means the set of test scenarios, listed in
Exhibit D, used by Supplier to demonstrate to Company, Supplier's progress
during Supplier's engineering integration and system integration test
intervals.
MANAGED SERVICE FEATURES means the features that will be tested by Company
during the acceptance testing for the Managed Service.
MANAGED SERVICE NODE means an NSAP node which has been deployed in Supplier's
NOC and on which the Managed Service Software shall execute.
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
8/24/98
Contract No. LH0827D
Page 6 of 22
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
MANAGED SERVICE SOFTWARE means the software that will be providing the
Managed Service on the Managed Service Notes.
MANAGED SERVICE SPECIFICATIONS means the Installed Service Specifications
excluding the references to (i) the NSAP interface to *******************,
(ii) the NSAP interface to ********, (iii) the NSAP interface to **********,
and (iv) the operations and maintenance requirements specific to Company's
Central Office sites documented in said requirements.
NETWORK CONNECTIONS means (i) the ************** facilities connecting
Supplier's equipment in Supplier's NOCs to Company's switched network, (ii)
the Network Interconnect (NI) links connecting a Managed Service Node to
Company's signaling network, (iii) the ******** connections between
Supplier's ethernet network within the NSAP and Company's ***********
network, and (iv) the TIs between a Managed Service Node and the LEC.
NETWORK OPERATIONS CENTER OR (NOC) means Supplier's operations center(s) used
to operate the Managed Service.
SERVICE RELIABILITY AND AVAILABILITY REQUIREMENTS means the requirements
which specify the service reliability and availability on a per adjunct basis.
SOFTWARE UPDATE means a modification made to the Managed Service Software
after Supplier's Turnover To Company.
SUPPLIER'S CUSTOMER SUPPORT ORGANIZATION means the organization responsible
for providing Tier 1 Support, Tier II Support and Tier III Support to Company.
SUPPLIER'S SERVICE TEST means a series of new tests for the equipment and
procedures used exclusively for the Managed Service environment, a subset of
Company's operational readiness tests, and Supplier's tests contained in the
NSAP Installation Guide.
SUPPLIER'S SYSTEM INTEGRATION TEST means a series of test activities that
verifies system adherence to Installed Service Specifications.
SUPPLIER'S TURNOVER TO COMPANY means the date that Supplier has made
available to Company the Managed Service Software and Managed Service Nodes
for Company to begin Company's Service Testing.
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
8/24/98
Contract NO. LH0827D
Page 7 of 22
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
TIER I SUPPORT means actions, taken by Supplier's Network Operation
Center personnel, required to (i) maintain the Managed Service, (ii) monitor the
Managed Service, (iii) analyze alarm data and error logs, (iv) repair problems
discovered through analysis of alarm data and error logs, (v) restore the
Managed Service to normal operational processing capabilities, and (vi) verify
that the Managed Service is operating as required in the Managed Service
Specifications.
TIER II SUPPORT means actions, taken by Supplier's Product Engineering
and Deployment personnel, required to resolve problems with the Managed Service
which could not be resolved by Supplier's Network Operation Center personnel
providing Tier I Support.
TIER III SUPPORT means actions, taken by Supplier's Customer Support
Organization personnel to assist in the diagnosis of problems with the Managed
Service which could not be resolved by Supplier's Product Engineering and
Deployment personnel providing Tier II Support.
TRANSACTION CAPABILITIES APPLICATION PART OR (TCAP) means the protocol
layer of the ***************************** that defines the signaling interface
between Company's Customer Database and NSAP.
TRANSITION PLAN means the document that describes the process and
sequence of tasks that must be done to move customers from the Managed Service
Nodes to the Installed Service Nodes.
1.6 DESCRIPTION:
Exhibit A describes the ******* Service Application which will reside
on the NSAP, access to which will be offered as the Managed Service, and
provides the Product description and Product configuration for NSAP. Supplier
agrees that, as a function of the Managed Service, Supplier will own, operate,
maintain and provision the NSAP platforms on which the Managed Service is
provided for the Term of this Agreement. Supplier further agrees that the
Managed Service Software shall meet the Installed Service Specifications.
Company and Supplier agree that the Managed Service will be provided
using Supplier's existing standard NOC facilities and capabilities for
generating reports, provisioning, maintaining, and monitoring the Managed
Service Nodes. Supplier will provide new and or additional equipment, processes
and personnel that, in Supplier's opinion, are required for the Managed Service.
Company and Supplier will mutually agree on a plan for generating reports
requested by Company.
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company's Instructions.
<PAGE>
8/24/98
Contract NO. LH0827D
Page 8 of 22
1.7 INTELLECTUAL PROPERTY RIGHTS:
Company and Supplier agree that no features provided by the Managed
Service are considered to be exclusive, developed information or an original
work of authorship and no such features shall be considered to be inventions
owned by the Company. Company and Supplier further agree that Company shall
solely own all intellectual property rights, including, without limitation,
patent rights and trade secret rights that are associated with the following
concept: The combination of the following elements, an account number that can
be used as a dialable number to receive telecommunication services from a
particular carrier and operating as a billing mechanism to which such
communication services and communication services from other carriers can be
charged.
1.8 REPRESENTATIVES:
For purposes of this Agreement, Company's Agreement Representative(s)
and Company's Technical Representative(s), shall be as specified below.
Company's Agreement Representative is:
William F. Condon
AT&T Corp.
Supplier Management Division
101 Crawfords Corner Road
Holmdel, NJ 07733-3030
Phone (732) 949-7256
Facsimile (732) 949-4364
Company Technical Representative is:
Julie D. Regalado
AT&T Corp.
101 Crawfords Corner Road
Holmdel, NJ 07733-3030
Phone (732) 949-1554
Facsimile (732) 949-5955
or such other persons as may be designated in writing from time to time by
Company.
Supplier's Agreement Representative is:
Ray Naeini
Brite Voice Systems, Inc.
250 International Parkway
Suite 300
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company's Instructions.
<PAGE>
8/24/98
Contract NO. LH0827D
Page 9 of 22
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Heathrow, FL 32746-5006
Phone (407) 357-1010
Facsimile (407) 357-1410
Supplier's Senior Program Manager is:
Jim Dedmon
Brite Voice Systems, Inc.
250 International Parkway
Suite 300
Heathrow, FL 32746-5006
Phone (407) 357-1056
Facsimile (407) 357-1400
or such other persons as may be designated in writing by Supplier from time to
time.
1.9 INSTALLATION:
1.9.1 INITIAL INSTALLATION:
Supplier agrees to install one (1) NSAP node at Supplier's facility in
Wichita, Kansas and one (1) NSAP node at Supplier's facility in Heathrow,
Florida, to ensure the Service Reliability and Availability Requirements
specified in "******* SERVICE RELEASE 1.0 ****************** 1.0 - FINAL
COPY, FRF 6672". For such installation, Company and Supplier agree that
Supplier shall use the two (2) NSAP nodes which were designated to be
delivered to Oxnard, California and Lansing, Michigan (second of two (2)
nodes) as defined in SA-LLJ268E. Company agrees that Supplier shall not be
responsible to deliver or liable for failure to deliver such nodes as
required under SA-LLJ268E, but shall deliver them to Company as set forth in
a mutually agreed to Transition Plan.
Supplier agrees that the initial installation of ******* NSAP nodes will
support a service capacity of ************************ customers across the
********* NSAP nodes at the completion of Supplier's Service Test milestone
listed in Section 1.16, "SUPPLIER'S COMMITTED MILESTONES". Supplier further
agrees that during a disaster recovery event involving only one (1) site, the
service capacity shall not degrade.
Within ************* business days following execution of this Agreement,
Company and Supplier may mutually agree that the Managed Service be initially
installed and thereafter provided by Supplier through NSAP nodes located at
Company's Central Offices as
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
8/24/98
Contract No. LH0827D
Page 10 of 22
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
designated by Company. Promptly thereafter, Company and Supplier shall
mutually develop a plan to implement such agreement.
1.9.2 Sub sequent Installations for Capacity Expansion:
Supplier agrees to provide capacity to support an additional *****************
customers if such capacity is determined by Company to be needed. For such
capacity, Company and Supplier agree that Supplier shall use the Installed
Service Node that is designated to be delivered to Flemington, New Jersey as
defined in SA-LLJ268E. Company agrees that Supplier shall not be responsible
to deliver or liable for failure to deliver such node as required under
SA-LLJ268E, but shall deliver the node to Company as set forth in a mutually
agreed to Transition Plan. Supplier agrees that during a disaster recovery
event involving only one (1) site, the service capacity shall not degrade
below *********************** customers. Supplier further agrees that during
a disaster recovery event involving ************ Managed Service Node, the
service capacity shall not degrade below ************************ customers.
1.10 DIRECT MEASURES OF QUALITY:
The Direct Measures of Quality (DMoQ's) monitored by Company shall be based
on the following:
1. **************************************************************************
**************************************************************************
**************************************************************************
**************************************************************************
**************************************************************************
2. **************************************************************************
**************************************************************************
**************************************************************************
3. **************************************************************************
**************************************************************************
**************************************************************************
4. **************************************************************************
**************************************************************************
1.11 NETWORK AVAILABILITY AND INTEGRITY:
Company agrees to provide and maintain, at Company's expense, the integrity
of all network connections in Company's Live Network denoted by the dashed
lines in Exhibit B.
AT&T Proprietary (Restricted)
Solely for Those Persons with a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
8/24/98
Contract No. LH0827D
Page 11 of 22
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Company agrees to provide additional network connectivity to Company's ITN no
later than ********** days prior to Supplier's Service Test milestone listed
in Section 1.16, "SUPPLIER'S COMMITTED MILESTONES". Company further agrees to
provide network connectivity to Company's Live Network and make operational
and available such connectivity no later than ********** days prior to
Supplier's Service Test milestone listed in Section 1.16, "SUPPLIER'S
COMMITTED MILESTONES". Actual use of Company's ITN and Company's Live Network
will be based on mutual agreement of the parties.
Company further agrees to provide all Customer Provisioning Activities
necessary to support the Managed Service.
1.12 CHANGES FOR NONCOMPLIANCE:
Company may, at any time during the Term of this Agreement, by written
notice, advise Supplier of Supplier's non-compliance of the Managed Service
Specifications. Supplier shall not be required to modify or enhance the
Managed Service, except for such modifications relating to non-compliance of
the Managed Service Specifications (all hereinafter referred to as
"Modifications"). Rigorous change control shall be implemented to monitor
such Modifications that are prompted primarily from Company's testing of the
Managed Service. Supplier agrees that such Modifications shall not relieve
Supplier from its obligations to meet committed schedules documented in
Section 1.16, "SUPPLIER'S COMMITTED MILESTONES".
All requests for Modifications shall be made in writing, via Company's
Change Control Board, to Supplier. An MR created as a results of a request for
a Modification shall be assigned a Severity Level as defined in Exhibit G of
SA-LLJ628E. All Modifications shall be completed by Supplier within a
mutually agreed time frame.
1.13 SUPPLIER'S INTEGRATION AND SERVICE TESTING:
Supplier shall conduct Supplier's System Integration Test to demonstrate that
the Managed Service complies with the Managed Service Specifications prior
to Supplier's Turnover To Company. Supplier agrees to allow Company to
participate, when possible, during Supplier's System Integration Test
milestone interval, documented in Section 1.16, "SUPPLIER'S COMMITTED
MILESTONES", to reduce the time frames for testing by Company. Company shall
notify Supplier if its testing indicates that the Managed Service fails to
comply with the Managed Service Specifications, specifically identifying each
such failure. Supplier shall correct such failures and proceed to re-test
prior to Supplier's Turnover To Company. If such failures are detected after
Supplier's Turnover To Company and before Company's Service Date, Supplier
shall correct such
AT&T Proprietary (Restricted)
Solely for Those Persons with a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
8/24/98
Contract No. LH0827D
Page 12 of 22
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
failures prior to Company's Service Date. If such failures are detected after
Company's Service Date, Supplier shall correct such failures only at the
direction of Company.
For any Software Updates, software upgrades or hardware upgrades, (all
hereinafter referred to as "System Modifications"), Supplier shall conduct
Supplier's System Integration Test (or relevant part thereof) (to demonstrate
that the Managed Service Software which incorporates System Modifications,
complies with the Managed Service Specifications. Supplier agrees that no
System Modifications shall be made to the Managed Service Nodes after
Supplier's Turnover To Company without Company's consent.
1.14 ENTRANCE CRITERIA FOR SUPPLIER TESTING IN COMPANY'S LIVE NETWORK:
The following criteria will be used to determine whether Supplier will be
allowed to use Company's Live Network for Supplier's Service Test prior to
Supplier's Turnover To Company.
1. **************************************************************************
**************************************************************************
**************************************************************************
2. **************************************************************************
**************************************************************************
**************************************************************************
3. **************************************************************************
**************************************************************************
**************************************************************************
4. **************************************************************************
**************************************************************************
5. **************************************************************************
**************************************************************************
**************************************************************************
6. **************************************************************************
**************************************************************************
7. **************************************************************************
**************************************************************************
8. ****************************************************************
9. **************************************************************************
*****************************************************************
10.**************************************************************************
************************************************************
AT&T Proprietary (Restricted)
Solely for Those Persons with a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
8/24/98
Contract No. LH0827D
Page 13 of 22
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
11.****************************************************************************
****************************************************************************
*****************************************************
12.****************************************************************************
****************************************************************************
************************
13.****************************************************************************
************************************
14.****************************************************************************
*****************************************************************
15.**********************************************************************
16.****************************************************************************
********************************************************
17.****************************************************************************
********************************************************
18.****************************************************************************
****************************************************
1.15 COMPANY'S SERVICE TESTING:
Upon completion of Supplier's System Integration Test interval, Company
agrees to immediately begin to perform testing at Supplier's NOC facility
located in Heathrow, Florida, on the Managed Service Node located at said
facility, which is connected to Company's ITN, in order for Company to
complete items********************** of Section 1.14. "ENTRANCE CRITERIA FOR
SUPPLIER'S TESTING IN COMPANY'S LIVE NETWORK".
Upon Supplier's Turnover To Company, Company shall begin Company's Service
Testing. Company's Service Date shall be determined by the completion of
Company's Service Testing and by meeting the exit criteria documented in
Section 1.15.1, "Exit Criteria from Company's Service Testing". Company
agrees that Company's Service Testing shall be based on the Managed Service
Specifications.
1.15.1 EXIT CRITERIA FROM COMPANY'S SERVICE TESTING:
The following criteria will be used to determine whether Supplier's Managed
Service Software will exit Company's Service Testing and revenue bearing
traffic will be routed to the Live Managed Service Nodes.
1.*****************************************************************************
*****************************************************************************
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
8/24/98
Contract No. LH0827D
Page 14 of 22
2. ****************************************************************************
****************************************************************
3. ****************************************************************************
*********************************************************************
4. ****************************************************************************
*************************************************************************
5. ****************************************************************************
****************************************************************************
1.16 SUPPLIER'S COMMITTED MILESTONES:
Supplier shall comply with the committed milestones set forth in this
Section 1.16.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
MILESTONE START END
DATE DATE
- -------------------------------------------------------------------------------
<S> <C> <C>
*********************************************** ****** ********
************************************************* ********** ******
**********
************************************************* ******** ********
- -------------------------------------------------------------------------------
</TABLE>
- -Dagger- Use of Company's Live Network shall be dependent on meeting the
criteria specified in Section 1.14, "ENTRANCE CRITERIA FOR SUPPLIER TESTING
IN COMPANY'S LIVE NETWORK".
1.17 PRICES AND PAYMENT:
Supplier agrees to provide the Managed Service contracted under this
Agreement at *********** to Company. Supplier further agrees that Company
will ********* for any equipment at Supplier's NOCs.
1.18 MAINTENANCE SUPPORT AGREEMENT:
Company and Supplier agree that Supplier shall provide Tier I Support, Tier II
Support, and Tier III Support for the Managed Service during the Term of this
Agreement. Supplier agrees to provide proactive maintenance during the *******
per week and ***************** per day surveillance of the Managed Service.
Company
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
8/24/98
Contract No. LH0827D
Page 15 of 22
and Supplier further agree to develop a Maintenance Plan. Supplier agrees to
provide reactive maintenance based on customer complaints as outlined in said
Maintenance Plan.
1.19 TRANSITION PLAN:
Company and Supplier agree that a written transition plan will be developed
and mutually agreed upon no later than the ********************************
****************************************************. The transition plan,
among other things, will contain milestones to de-install, pack and ship NSAP
nodes in Wichita, Kansas and Heathrow, Florida to the designated Company
locations following the completion of the transition to NSAP nodes installed
in Company's Central Office sites.
1.20 DAMAGES:
Neither party shall be responsible to the other for any damages of any type
arising under this Agreement or from access to or lack of access to the
Managed Service. Supplier specifically disclaims all warranties including
warranties of merchantability and fitness for a particular purpose.
Notwithstanding the first sentence of this Section 1.20, Supplier shall be
responsible for its obligations to indemnify and to pay damages as provided
under Section 4.3 of GA0023D, with the exception of the last sentence of such
section 4.3. Under no circumstances, shall either party be responsible to the
other for any lost profits or expectation damages of any type.
Company agrees that Supplier is not liable for any liquidated damages under
Section 1.16 of SA-LLJ628E with respect to the timing of delivery of
Software. If Supplier's ******************************************************
************************, is not met, Supplier agrees to pay Company
liquidated damages************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
***********************************************.
121. CREDIT FOR FUTURE PURCHASE:
******************************************************************************
******************************************************************************
******************************************************************************
*****************************************************************************
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
8/24/98
Contract No. LH0827D
Page 16 of 22
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
1.22 MALICIOUS TERMINATION OF MANAGED SERVICE:
If Supplier intentionally and maliciously permanently ceases to provide the
Managed Service, in breach of this Agreement and as long as SA-LLJ628E has not
been canceled, then Supplier agrees to pay Company liquidated damages ********
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
***************************. Any termination of providing the Managed Service
under the terms of Section 4.3 of GA0023D shall not give rise to any
liquidated damages. The total of all liquidated damages under this Agreement
shall be limited to the amount of ********************************************
******************************************************************************
*******************.
IN WITNESS WHEREOF, the Supplier and Company have executed this Agreement in
duplicate as of the dates set forth below.
BRITE VOICE SYSTEMS, INC.
/s/ Ray S. Naeini
- -------------------------
Signature
Ray S. Naeini
- -------------------------
Name - typed or printed
SVP & GM
- -------------------------
Title - typed or printed
9-8-98
- -------------------------
Date
AT&T CORP.
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
8/24/98
Contract No. LH0827D
Page 17 of 22
/s/ William F. Condon
- -------------------------------
Signature
William F. Condon
- -------------------------------
Name - typed or printed
Manager -- Supplier Management Division
- ---------------------------------------
Title - typed or printed
8/25/98
- -------------------------------
Date
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
8/24/98
Contract No. LH0827D
Page 18 of 22
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
EXHIBIT A
*******Service Description and **** Product Description and Configuration
1.0 ******Service Description
**************************************************************************
**************************************************************************
**************************************************************************
******************************************
2.0 Product Configuration
**************************************************************************
- ********************************
- *******************************************************
- *****************************************
- ***********************************************************
- ***************************************************************
- *****************************************************
- ********************************************************************
*********************
**********************************************************************
AT&T Proprietary (Restricted)
Solely for Those Persons With a Need to Know.
Use Pursuant to Company Instructions.
<PAGE>
8/24/98
Contract No. LH0827D
Page 19 of 22
Confidential material omitted and filed separately with
the Commission. Asterisks denote such omissions.
NSAP NODE TELCO CABINET CONFIGURATION
TO SUPPORT THE MANAGED SERVICE
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*****************************************
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS WITH A NEED TO KNOW.
USE PURSUANT TO COMPANY INSTRUCTIONS.
<PAGE>
8/24/98
Contract No. LH0827D
Page 20 of 22
Confidential material omitted and filed separately with
the Commission. Asterisks denote such omissions.
NSAP NODE APPLICATION PROCESSING UNIT (APU) CABINET CONFIGURATION
TO SUPPORT THE MANAGED SERVICE
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*****************************************
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS WITH A NEED TO KNOW.
USE PURSUANT TO COMPANY INSTRUCTIONS.
<PAGE>
8/24/98
Contract No. LH0827D
Page 21 of 22
Confidential material omitted and filed separately with
the Commission. Asterisks denote such omissions.
EXHIBIT B
NETWORK CONNECTIVITY TO NSAP FOR THE MANAGED SERVICE
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*****************************************
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS WITH A NEED TO KNOW.
USE PURSUANT TO COMPANY INSTRUCTIONS.
<PAGE>
8/24/98
Contract No. LH0827D
Page 22 of 22
Confidential material omitted and filed separately with
the Commission. Asterisks denote such omissions.
EXHIBIT C
CALCULATION FOR LIQUIDATED DAMAGES
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*****************************************
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS WITH A NEED TO KNOW.
USE PURSUANT TO COMPANY INSTRUCTIONS.
<PAGE>
8/24/98
Contract No. LH0827D
Page 23 of 22
Confidential material omitted and filed separately with
the Commission. Asterisks denote such omissions.
EXHIBIT D
MANAGED SERVICE CONFIDENCE SUITE
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*****************************************
AT&T PROPRIETARY (RESTRICTED)
SOLELY FOR THOSE PERSONS WITH A NEED TO KNOW.
USE PURSUANT TO COMPANY INSTRUCTIONS.
<PAGE>
AMENDED AND RESTATED
CREDIT AGREEMENT
NationsBank, N.A. Date: As of December 9, 1998
390 N. Orange Avenue; Suite 700
Orlando, Florida 32801
RE: BRITE VOICE SYSTEMS, INC., a Kansas Corporation ("Borrower")
THIS AMENDED AND RESTATED CREDIT AGREEMENT ("AGREEMENT") IS BEING EXECUTED AND
DELIVERED BY BORROWER TO REPLACE AND SUPERSEDE, IN ITS ENTIRETY, THAT CERTAIN
BUSINESS LOAN AGREEMENT, DATED JULY 28, 1997 AND EXECUTED BY AND BETWEEN
BORROWER AND BARNETT BANK, N.A. (THE "PRIOR LOAN AGREEMENT"). THE PRIOR LOAN
AGREEMENT SHALL HAVE NO FURTHER FORCE AND EFFECT, AND THE TERMS AND CONDITIONS
OF THIS AGREEMENT SHALL GOVERN AND CONTROL THE TERMS OF THE LOAN DESCRIBED
HEREIN.
In consideration of NationsBank, N.A., a national banking association,
successor by merger to Barnett Bank, N.A. ("Bank"), making an unsecured loan of
TWENTY FIVE MILLION AND NO/100 DOLLARS ($25,000,000.00) to Borrower (the
"Loan"), as evidenced by that certain Amended and Restated Revolving Promissory
Note dated as of December 9, 1998 (the "Note"), Borrower agrees as follows:
1. THE LOAN.
a. AMOUNT AND TERM. From the date hereof until November 30, 2001 (the
"Loan Term") and subject to the terms and conditions of this Agreement, Bank
will lend to Borrower and Borrower will borrow from Bank certain funds, on a
revolving credit basis, up to the principal amount of the Loan.
b. EVIDENCE OF INDEBTEDNESS. The obligation of Borrower to repay the
Loan is evidenced by the Note, this Agreement and other loan documents, along
with any written modifications thereof as may be approved by Bank from time to
time. The Note shall evidence cash advances and the issuance of Letters of
Credit. Principal and interest on the Loan shall be due and payable as set forth
in the Note.
c. CASH ADVANCES.
i. MAXIMUM AMOUNT AVAILABLE. During the Loan Term, Borrower may
borrow, repay and reborrow funds under the Note, at any time, up to a
maximum aggregate amount outstanding at any one time equal to the
principal amount of the Loan LESS the face amount of any outstanding
Letters of Credit issued by Bank pursuant to Section 1(d) below.
Bank's records of amounts borrowed and face amounts of outstanding
Letters of Credit shall be conclusive proof thereof.
<PAGE>
ii. CONDITIONS TO FIRST ADVANCE. Bank may, but shall not be
required to, make any advances to Borrower under the Loan until Bank
has received the following documentation in form acceptable to Bank
and its counsel: (1) the Note, this Agreement, the Negative Pledge
Agreement (as defined below) and documents related thereto, the
Guaranties (as defined below), and any other documents and instruments
necessary or advisable in connection with the Loan duly executed by
Borrower (the "Loan Documents"); (2) written opinion of Borrower's and
Guarantors' counsel as to the validity and enforceability of the Loan
Documents and such other matters as Bank may reasonably require; and
(3) such other financial or other information as Bank may reasonably
require.
iii. CONDITIONS TO EACH ADVANCE. Bank may, but shall not be
required to, make any additional advances to Borrower under the Loan
unless and until Bank has determined that: (1) the conditions listed
in Section 1(c)(ii) above have been met; (2) no Event of Default or
Default under the Loan has occurred; (3) the representations and
warranties contained in the Loan Documents shall be true and accurate
as of the date of such advance; (4) no material adverse change in the
financial condition of Borrower or any Guarantor has occurred; and (5)
the prospect of payment or performance of the Loan has not been
materially impaired.
d. LETTERS OF CREDIT. Bank shall, from time to time during the Loan
Term, issue Letters of Credit on behalf of Borrower in accordance with the
terms, conditions and limitations of this Section 1(d). If requested by
Borrower, Bank shall issue a Letter of Credit and/or Letters of Credit provided
that: (i) Borrower submits to Bank Bank's standard form of letter of credit
application and agreement, and such other documents as Bank may require; (ii) no
Event of Default or Default under the Loan has occurred; (iii) the aggregate
face amount of all issued and outstanding Letters of Credit do not and will not
exceed TWO MILLION AND NO/100 DOLLARS ($2,000,000.00); and (iv) the aggregate
outstanding principal balance of all advances under the Loan PLUS the face
amount of all issued and outstanding Letters of Credit do not and will not
exceed the principal amount of the Loan. Bank shall have no liability to
Borrower for its refusal to issue Letters of Credit based upon a determination
that any conditions of such issuance have not been met. Any Letter of Credit
issued hereunder shall have a term no greater than twelve (12) months from the
date of issuance, and may expire later than the expiration of the Loan Term.
e. PAYMENT OF LETTERS OF CREDIT IF DRAWN UPON. If a Letter of Credit
is drawn upon, all such funds shall be immediately due and payable, in full. If
such drawn funds are not fully paid when due, the outstanding balance of such
funds shall bear interest at the Default Rate provided in the Note.
- 2 -
<PAGE>
f. APPLICATION OF PAYMENTS. The application of all payments received
on the Loan shall be determined by Bank, and if not otherwise determined shall
be applied first to costs, expenses, and fees hereunder, next to interest to the
extent then accrued, and then to principal.
g. FEES.
i. COMMITMENT FEE. On a quarterly basis, commencing on March 9,
1999, and continuing for each quarter thereafter until the Loan is
paid in full, Borrower shall pay Bank an unused commitment fee in the
amount of one tenth percent (0.10%) of the difference between the
maximum principal amount of the Loan and the average principal amount
outstanding under the Loan for the preceding calendar quarter.
ii. LETTER OF CREDIT ISSUANCE FEE. A fee equal to one-half
percent (0.50%) of the face amount of the Letter of Credit shall be
due and payable by Borrower to Bank simultaneously with the issuance
and/or renewal of each Letter of Credit. Borrower shall also pay all
reasonable, standard and customary fees or expenses charged or
incurred by Bank when issuing a Letter of Credit.
2. USE OF LOAN PROCEEDS. The proceeds of the Loan will be used by Borrower
only for the purpose or purposes of general business and working capital needs
and to purchase outstanding shares of Borrower.
3. NEGATIVE PLEDGE AGREEMENT. In consideration of the Loan, Borrower hereby
agrees to execute a Negative Pledge Agreement in form and content as set forth
in EXHIBIT A attached hereto and incorporated herein by this reference (the
"Negative Pledge"). Borrower further agrees to pay all documentary stamp and
intangible taxes that may be associated with the creation or recordation of the
Negative Pledge, as well as all costs to record the Negative Pledge in the
counties and file it in the personal property records when and where Bank deems
appropriate.
4. GUARANTY. The Loan shall be guarantied by the following subsidiaries of
Borrower (each a "Guarantor" and collectively, "Guarantors"): (a) Brite Voice
Systems Group, Limited (United Kingdom); and (b) BVSI, Inc. (Wilmington, DE).
Each Guarantor shall execute and deliver a guaranty agreement in form and
content acceptable to Bank. The guaranty to be provided from Brite Voice Systems
Group, Limited, may be delivered within thirty (30) days from the date hereof.
Any newly created or acquired U.S. based subsidiaries must promptly execute
guaranties of the Loan, and if the sale of Borrower's TSL Division does not
close by March 31,1999, then TSL Services, Inc. and BVS Invesco, Inc. shall
execute and deliver to Bank, on or before April 15, 1999, guaranty agreements
guarantying the Loan.
- 3 -
<PAGE>
5. REPRESENTATIONS AND WARRANTIES. To induce Bank to make the Loan,
Borrower makes the following representations and warranties, which shall survive
the execution and delivery of the Note:
a. FINANCIAL CONDITION. The financial information furnished to Bank in
connection with its application for the Loan and in the financial statements
submitted to Bank is complete and accurate and Borrower has no undisclosed
direct or contingent liabilities. There has been no material adverse change in
the operations or the financial condition of Borrower since September 30, 1998.
b. ORGANIZATION AND AUTHORITY. Borrower is duly organized, existing
and in good standing under the laws of the State of Kansas, is qualified to do
business in the State of Florida, has corporate power to carry on the business
in which it is engaged, and the obtaining and performance of the Loan have been
duly authorized by all necessary action of the board of directors and
shareholders of Borrower under applicable law, and do not and will not (i)
violate any provision of law or any of its organizational or other organic
documents, or (ii) result in a breach of, constitute a default under, require
any consent under, or result in the creation of any lien, charge, or encumbrance
upon any property of Borrower pursuant to any instrument, order, or other
agreement to which Borrower is a party or by which Borrower, any of its officers
as such, or any of its property is bound.
c. OWNERSHIP OF ASSETS; NO LITIGATION OR LIENS. Borrower has good,
marketable title to all the assets reflected on the financial statements
submitted to Bank, and such assets are free and clear of all liens, charges and
encumbrances except as shown on such financial statements. There are no actions,
proceedings investigations, judgments, liens, encumbrances, or other security
interests outstanding against Borrower or any of its property other than those
disclosed to Bank in connection with its request for the Loan.
d. LIABILITIES. Borrower has not incurred any debts, liabilities, or
obligations and has not committed itself to incur any debts, liabilities, or
obligations other than those disclosed to Bank in connection with its request
for the Loan or shown on the financial statements submitted to Bank.
e. PAYMENT OF TAXES. Borrower has filed all federal and state tax
returns which are required to be filed, and has paid all taxes as shown on the
returns and on all assessments received by it to the extent that the taxes have
become due.
f. PRINCIPAL PLACES OF BUSINESS. Borrower's principal place of
business in Kansas is located at 9229 East 37th Street N., Wichita, Kansas
67726-2001. Borrower's principal place of business in Florida is located at 250
International Parkway, Suite 300, Heathrow, Florida 32746.
g. COMPLIANCE WITH ENVIRONMENTAL LAWS. Borrower and the property owned
by Borrower (the "Property") are in full compliance with all Environmental
- 4 -
<PAGE>
Laws (as hereinafter defined), and there are no civil, criminal or
administrative actions, suits, demands, claims, hearings, notices or demand
letters, notices of violation, investigations, or proceedings pending or
threatened against Borrower or the Property relating in any way to any
Environmental Law or any agreement, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
under any Environmental Law. No notice or advice has been received by
Borrower of any condition or state of facts that would be contributing to a
claim of pollution or any other damage to the environment by reason of the
conduct of any business on the Property or operation of the Property, whether
past or present. As used in this Agreement, the term "Environmental Law"
shall mean any federal, state or local law, statute, ordinance, code, rule,
regulation, license, authorization, decision, order, injunction, decree, or
rule of common law, and any judicial or agency interpretation of any of the
foregoing, which pertains to health, safety, any Hazardous Material (as
hereinafter defined), or the environment (including but not limited to ground
or air or water or noise pollution or contamination, and underground or above
ground tanks) and shall include without limitation, the Solid Waste Disposal
Act, 42 U.S.C. Section 6901 et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et
seq. ("CERCLA"), as amended by the Superfund Amendments and Reauthorization
Act of 1986 ("SARA"); the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801 et seq.; the Federal Water Pollution Control Act, 33 U.S.C.
Section 1251 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the
Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Safe
Drinking Water Act, 42 U.S.C. Section 300f et seq.; the Florida Resource
Recovery and Management Act, the Water Quality Assurance Act of 1983, The
Florida Resource Conversation and Recovery Act, the Florida Air and Water
Pollution Control Act, The Florida Safe Drinking Water Act, The Pollution
Spill Prevention and Control Act and any other local, state or federal
environmental statutes, and all rules, regulations, orders and decree now or
hereafter promulgated under any of the foregoing, as any of the foregoing now
exist or may be changed or amended or come into effect in the future. For
purposes of this Agreement, "Hazardous Materials" shall include, without
limitation, asbestos, polychlorinated biphynals, petroleum products, any
flammable explosives, radioactive materials, hazardous materials, hazardous
waste, hazardous or toxic substance or similar term defined in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended, (42 USC Section 9601, et seq.), the Hazardous Materials
Transportation Act, as amended (49 USC Section 1801, et seq.), the Resource
Conservation and Recovery Act, as amended ("RCRA") (42 USC Section 6901, et
seq.), the Toxic Substances Control Act, a amended (15 USC Section 2601, et
seq.) or in the regulations adopted and publications promulgated pursuant
thereto or defined in any other present or future federal, state or local
governmental law, ordinance, rule or regulation relating in whole or in part
to environmental regulation.
h. YEAR 2000 COMPLIANCE. Borrower has: (i) initiated a review and
assessment of all areas within the business and operations of Borrower and each
of its respective affiliates, subsidiaries and other related entities (the
"Related Entities"), including those areas affected by suppliers and vendors,
that could be adversely affected
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<PAGE>
by the "Year 2000 Problem" (that is, the risk that computer applications used by
Borrower or any of its respective Related Entities or its respective suppliers
and vendors may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and after December 31, 1999); (ii)
developed a plan and a timetable for addressing the Year 2000 Problem on a
timely basis; and (iii) to date, implemented that plan in accordance with that
timetable. Borrower reasonably believes that all computer applications
(including those of their suppliers and vendors) that are material to the
business and operations of Borrower or any of its Related Entities will, on a
timely basis, be able to perform properly date-sensitive functions for all dates
before and after January 1, 2000 (that is, be "Year 2000 compliant"), except to
the extent that a failure to do so could not reasonably be expected to have a
material adverse effect on the business, operations, creditworthiness or
financial status of Borrower or any of its Related Entities.
i. EMPLOYEE BENEFIT PLANS. No employee benefit plan established or
maintained, or to which contributions have been made, by Borrower which is
subject to Part 3 of Subtitle 13 of Title 1 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), had an "accumulated funding
deficiency" (as such term is defined in Section 302 of ERISA) as of the last day
of the most recent fiscal year of such plan ended prior to the date hereof, or
would have had such an accumulated funding deficiency on such day if such year
were the first year of such plan to which such Part 3 applied; and no material
liability to the Pension Benefit Guaranty Corporation has been incurred with
respect to any such plan by Borrower.
j. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands
and agrees that Bank, without independent investigation, is relying upon the
above representations and warranties in extending advances to Borrower under the
Loan. Borrower further agrees that the foregoing representations and warranties
shall be continuing in nature and shall remain in full force and effect until
such time as the Loan shall be paid in full, or until this Agreement shall be
terminated in the manner provided herein, whichever is the last to occur.
6. AFFIRMATIVE COVENANTS. Borrower will:
a. EXISTENCE AND COMPLIANCE. Maintain its existence, good standing and
qualification to do business where required, and preserve and keep in force all
licenses, permits, and franchises necessary for the proper conduct of its
business, and comply with all laws, regulations and governmental requirements
including, without limitation, Environmental Laws applicable to it or to any of
its property, business operations and transactions.
b. TAXES. Duly pay and discharge all taxes, assessments, and
governmental charges upon Borrower or against Borrower's property before the
date on which penalties attach thereto, unless and to the extent only that the
same shall be contested in good faith and by appropriate proceedings.
- 6 -
<PAGE>
c. FINANCIAL STATEMENTS AND SEC FILINGS. Furnish to Bank: (i)
immediately upon filing, copies of all SEC filings, including Borrower's 10K and
10Qs; (ii) annually, a copy of the CPA Management Letter that Borrower's
certified public accountant addresses to Borrower and Borrower's response
thereto; and (iii) such other information respecting the financial condition and
operations of Borrower as Bank may from time to time reasonably request. At or
before the time of furnishing the annual report of audit and each quarterly
report, Borrower shall provide to Bank a compliance certificate containing a
calculation of each of the financial ratio covenants with which Borrower must
comply and a non-default statement signed by Borrower's certified public
accountant, as to each annual report, or Borrower's Chief Financial Officer, as
to each quarterly report.
d. INSURANCE. Maintain with financially sound and reputable insurance
companies insurance of the kinds, covering the risks, and in the amounts usually
carried by companies engaged in businesses similar to that of Borrower and which
provide that Notice will be sent to Bank thirty (30) days prior to cancellation
thereof. Borrower will also exhibit or deliver such policies of insurance to
Bank upon request by Bank.
e. CONTINGENT LIABILITIES. Borrower shall immediately notify Bank if
it obtains knowledge of the existence of contingent liabilities of Borrower that
exceed $1,000,000.00 in the aggregate for any fiscal year. For the purposes
hereof, "contingent liabilities" shall mean actual or potential liabilities that
would be required to be disclosed in accordance with GAAP.
f. INSPECTION OF BOOKS AND RECORDS. Permit any representative or agent
of Bank to examine and audit any or all of Borrower's books and records when
requested by Bank.
g. NOTICE OF ADVERSE CHANGE, LITIGATION AND ENVIRONMENTAL CLAIMS.
Inform Bank immediately of any material adverse change in the financial
condition of Borrower. Borrower will also promptly inform Bank of any
litigation, threatened litigation, or any notice of a claim that it may not be
in compliance with any Environmental Law, which might substantially affect
Borrower's financial condition.
h. MAINTENANCE OF PROPERTY. Maintain Borrower's property and equipment
in a state of good repair.
i. FINANCIAL COVENANTS: Maintain the following financial ratios and
covenants:
i. DEFINITIONS: The following terms shall have the meanings set
forth below:
(1) "Capital Expenditures" shall mean, for the period under
consideration, Borrower's ending net fixed assets LESS Borrower's
beginning net fixed assets PLUS depreciation expense,
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<PAGE>
LESS any gains on the sale of fixed assets PLUS any losses on the
sale of fixed assets.
(2) "EBITDA" shall mean Borrower's consolidated net income
before interest, taxes, depreciation and amortization.
(3) "Total Capitalization" shall mean the sum of Total
Funded Debt and book net worth.
(4) "Total Funded Debt" shall mean the sum of all
indebtedness for money borrowed, purchase money mortgages,
capitalized leases, outstandings under asset securitization
vehicles, conditional sales contracts and similar title retention
debt instruments, including any current maturities of such
indebtedness, and shall include all Funded Debt of Borrower and
its Related Entities, PLUS all Funded Debt of other entities or
persons which have been guaranteed by Borrower or any subsidiary
or which is supported by a letter of credit issued for the
account of Borrower or any Related Entities, PLUS the redemption
amount with respect to any redeemable preferred stock of Borrower
or its Related Entities required to be redeemed within the next
twelve months from the date of this Agreement.
(5) Unless defined otherwise herein, all terms noted herein
shall have the meaning accorded to them under Generally Accepted
Accounting Principals ("GAAP").
ii. The ratio of Total Funded Debt to EBITDA (calculated on a
trailing four quarter basis) shall not exceed 2.0:1.0
iii. (EBITDA LESS Capital Expenditures) DIVIDED BY (interest
expense PLUS scheduled maturities of long term debt and capitalized
leases PLUS dividends) shall be no less than 2.0:1.0.
iv. Total Funded Debt to Total Capitalization shall not exceed
0.40:1.0.
v. Borrower shall maintain a minimum net worth at all times
during the term of this Agreement as follows: not less than
$75,000,000.00 initially, which amount shall increase each quarter in
an amount equal to 85% of net income (with no adjustment for losses
and excluding any comprehensive income gains/losses, including foreign
exchange transactions) PLUS 100% of the proceeds from stock issuances.
j. YEAR 2000 COMPLIANCE. Borrower will promptly notify Bank in the
event Borrower discovers or determines that any computer application (including
those
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<PAGE>
of its suppliers and vendors) that is material to the business and operations of
Borrower or any of its affiliates, subsidiaries, or Related Entities will not be
Year 2000 compliant on a timely basis, except to the extent that such failure
could not reasonably be expected to have a material adverse effect on the
business, operations, creditworthiness or financial status of Borrower or any of
its Related Entities.
7. NEGATIVE COVENANTS. Until full payment and performance of all
obligations of Borrower under the Loan Documents, and without limiting any other
requirement of the Loan Documents, Borrower will not, without prior written
consent of Bank:
a. INDEBTEDNESS AND OBLIGATIONS. Create, incur, assume or become
liable in any manner for ANY indebtedness for borrowed money or contingent
liability, other than to Bank, except for existing indebtedness disclosed to
Bank in writing and acknowledged by Bank prior to the date of this Agreement.
For the purposes hereof, the sale or assignment of accounts receivable, the
deferred payment for the purchase of assets (but excluding accounts payable
incurred in the normal course of business) and the execution of agreements which
would be classified as capitalized leases pursuant to GAAP shall constitute
incurring indebtedness for borrowed money, and the execution of any guaranty
agreement or letter of credit agreement shall constitute the incurrence of a
contingent liability.
b. LIENS. Assign, mortgage, pledge, encumber, or grant, suffer or
permit any contractual or non-contractual lien or security interest in its
assets, whether now owned or hereafter acquired, EXCEPT those statutory liens
incurred in the ordinary course of Borrower's business and liens in favor of
Bank, or fail to promptly pay when due all lawful claims, whether for labor,
materials or otherwise.
c. MERGERS OR ACQUISITIONS. Enter into any mergers, consolidations, or
acquisitions UNLESS viewing each on a pro-forma basis: (i) Borrower would not be
in violation of any of the covenants set forth in this Agreement or otherwise be
in default under the Loan; and (ii) Borrower would be the surviving or parent
entity.
d. TRANSFER OF ASSETS OR CONTROL. Sell, lease, assign or otherwise
dispose of or transfer any of its assets, EXCEPT in the ordinary course of its
business and except as between or to its subsidiaries, whether now owned or
hereafter acquired. Notwithstanding the foregoing, the sale of Borrower's TSL
division shall be permitted.
e. INVESTMENTS/EXTENSIONS OF CREDIT. Make any investments EXCEPT
investments in United States Government obligations, provided that Borrower may
make transfers to, or, investments in non U.S. based subsidiaries, and/or in
joint ventures with third parties, and may loan money or credit to individuals,
corporations, partnerships or other entities, provided such loans, investments
and transfers to not exceed TWO MILLION AND NO/100 DOLLARS ($2,000,000.00), in
the aggregate, during
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<PAGE>
any fiscal year. The foregoing provision shall not prohibit Borrower from using
Loan proceeds to purchase outstanding shares of Borrower.
f. CHARACTER AND OPERATION OF BUSINESS. Change the general character
of its business as conducted on the date of this Agreement, or engage in any
type of business that is not reasonably related to its business as presently
conducted. Borrower will not change its name or any name in which it does
business; or move its principal place of business without giving written notice
thereof to Bank at least thirty (30) days prior thereto.
8. EVENTS OF DEFAULT. Bank shall have the option to declare the entire
unpaid amount of the Loan and accrued interest immediately due and payable,
without presentment, demand, or notice of any kind, if any of the following
events occur before the Loan is fully repaid:
a. Any payment of principal or interest on the Loan is not made when
due.
b. Any provision of this Agreement is breached or proves to be untrue
or misleading in any material respect.
c. Any warranty, representation, or statement made or furnished to
Bank by Borrower in connection with the Loan and this Agreement (including any
warranty, representation, or statement in Borrower's financial statements) or to
induce Bank to make the Loan, is untrue or misleading in any material respect.
d. Any default occurs under any agreement with another financial
institution, which default is not corrected within the cure period provided in
such agreement, if any.
e. Any voluntary or involuntary bankruptcy, reorganization,
insolvency, arrangement, receivership, or similar proceeding is commenced by or
against Borrower under any federal or state law, or Borrower makes any
assignment for the benefit of creditors.
f. Any substantial part of the inventory, equipment, or other property
of Borrower, real or personal, tangible or intangible, is damaged or destroyed
and the damage or destruction is not covered by collectible insurance.
g. Borrower defaults in the payment of any principal or interest on
any obligation to Bank or any other creditor.
h. Borrower suffers or permits any lien, encumbrance, or security
interest to arise or attach to any of the Borrower's property, or any judgment
is entered against Borrower that is not satisfied or appealed within thirty
days.
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<PAGE>
i. The failure to deliver the guaranty from Brite Voice Systems,
Limited in accordance with Section 4 hereof.
9. REMEDIES UPON DEFAULT. Upon the occurrence, or the discovery by Bank of
the occurrence, of any of the foregoing events, circumstances, or conditions of
default, Bank shall have, in addition to its option to declare the entire unpaid
amount of the Loan and accrued interest thereon immediately due and payable, all
of the rights and remedies under applicable State law. Without in any way
limiting the generality of the foregoing, Bank shall also have the following
specific rights and remedies:
a. To exercise any and all rights of set-off which Bank may have
against any account, fund, or property of any kind, tangible or intangible,
belonging to Borrower which shall be in Bank's possession or under its control.
b. To cure such defaults, with the result that all costs and expenses
incurred or paid by Bank in effecting such cure shall be additional charges on
the Loan which bear interest at the interest rate of the Loan and are payable
upon demand.
10. WAIVER; MODIFICATION. No failure or delay on the part of Bank in
exercising any power or right hereunder, and no failure of Bank to give Borrower
notice of a default hereunder, shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power preclude any other or
further exercise thereof or the exercise of any other right or power hereunder.
No modification or waiver of any provision of this Agreement or any instrument
executed pursuant hereto or consent to any departure by Borrower from this
Agreement or such instrument shall in any event be effective unless the same
shall be in writing, and such waiver or consent shall be effective only in the
specific instance and for the particular purpose for which given.
11. BENEFIT; ASSIGNMENT. This Agreement shall be binding upon and shall
inure to the benefit of Borrower and Bank and their respective successors and
assigns. Bank may assign this Agreement in whole or in part with any assignment
of the Loan. Borrower may not assign this Agreement or its obligations under the
Loan without Bank's prior written consent.
12. CONSTRUCTION. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida, and, subject to the
requirements of Section 13 hereof, any litigation arising out of or relating to
this Agreement or the Loan shall be commenced and conducted in the courts of the
State of Florida or in the federal courts located in the State of Florida.
13. MANDATORY ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE
PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING ANY CLAIM
BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING
- 11 -
<PAGE>
ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT
APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR
THE ARBITRATION OF COMMERCIAL DISPUTES OF JUDICIAL ARBITRATION AND MEDIATION
SERVICES, INC. (J.A.M.S.), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT
OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY
ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO
THIS AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING,
TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT
APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
a. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN ORANGE COUNTY,
FLORIDA AND ADMINISTERED BY ENDISPUTE, INC., D/B/A J.A.M.S./ENDISPUTE, WHO WILL
APPOINT AN ARBITRATOR; IF J.A.M.S./ENDISPUTE IS UNABLE OR LEGALLY PRECLUDED FROM
ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL
SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND
FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE
PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60
DAYS.
b. RESERVATIONS OF RIGHTS. NOTHING IN THIS AGREEMENT SHALL BE DEEMED
TO: (i) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (ii) BE A
WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY
SUBSTANTIALLY EQUIVALENT STATE LAW; OR (iii) LIMIT THE RIGHT OF BANK HERETO (A)
TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO
FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN
FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO)
INJUNCTIVE RELIEF OR THE APPOINTMENT OF A RECEIVER. BANK MAY EXERCISE SUCH SELF
HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR
ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION
PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT. AT BANK'S OPTION, FORECLOSURE
UNDER A DEED OF TRUST OR MORTGAGE MAY BE ACCOMPLISHED BY ANY OF THE FOLLOWING:
THE EXERCISE OF A POWER OF SALE UNDER THE DEED OF TRUST OR MORTGAGE, OR BY
JUDICIAL SALE UNDER THE DEED OF TRUST OR MORTGAGE, OR BY JUDICIAL FORECLOSURE.
NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE
OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL
CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY
SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING
RESORT TO SUCH REMEDIES.
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<PAGE>
BRITE VOICE SYSTEMS, INC,
WITNESSES A KANSAS CORPORATION
/s/ Gaylyn K. McGregor By: /s/ Stanley G. Brannan
- ------------------------------ ------------------------------
Name: Stanley G. Brannan
----------------------------
Title: President
- ------------------------------ ----------------------------
CORPORATE SEAL
ACCEPTED:
NATIONSBANK, N.A., A NATIONAL BANKING
ASSOCIATION, SUCCESSOR BY MERGER TO BARNETT
BANK, N.A.
/S/ Misty R. Lawson By: Gaylyn K. McGregor
- ------------------------------ ------------------------------
Name: /s/ Gaylyn K. McGregor
----------------------------
Title: Vice President
- ------------------------------ ----------------------------
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<PAGE>
AMENDED AND RESTATED REVOLVING
PROMISSORY NOTE
<TABLE>
<S> <C> <C> <C>
DATE: AS OF DECEMBER 9, 1998 / / NEW /X/ RENEWAL - THIS NOTE IS A RENEWAL OF NOTE #3229452-026 & 034
AMOUNT: $25,000,000.00 MATURITY DATE: NOVEMBER 30, 2001
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- ------------------------------------------------------------------------------------------------------------------------------------
BANK: BORROWER:
NATIONSBANK, N.A, A NATIONAL BANKING ASSOCIATION, SUCCESSOR TO BRITE VOICE SYSTEMS, INC., A KANSAS CORPORATION
BARNETT BANK, N.A. 250 International Parkway; Suite 300
Heathrow, Seminole County, Florida 32746
Banking Center:
390 N. Orange Avenue; Suite 700
Orlando, Orange County, Florida 32801
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FOR VALUE RECEIVED, the undersigned Borrower unconditionally promises to pay to
the order of Bank, its successors and assigns, without setoff, at its offices
indicated at the beginning of this Note, or at such other place as may be
designated by Bank, the principal amount of TWENTY FIVE MILLION AND NO/100
DOLLARS ($25,000,000.00), or so much thereof as may be advanced from time to
time, in immediately available funds, together with interest computed daily on
the outstanding principal balance hereunder, at an annual interest rate, and in
accordance with the payment schedule, indicated below.
1. AMENDED AND RESTATED NOTE. This Amended and Restated Revolving Promissory
Note ("Note") is given in renewal of that that certain Promissory Note,
dated July 28, 1997 and executed by Borrower to and in favor or Barnett
Bank, N.A., in the original principal amount of TEN MILLION AND NO/100
DOLLARS ($10,000,000.00) (the "Original Note"). It is the intention of
Borrower and Bank that this Note shall not extinguish the Original Note;
however, the indebtedness represented by the Original Note will be paid in
accordance with the terms and conditions provided herein. This Note is also
given to enlarge the outstanding principal balance of the Original Note to
TWENTY FIVE MILLION AND NO/100 DOLLARS ($25,000,000.00) and to amend and
restate certain other provisions of the Original Note.
2. RATE. The outstanding principal balance of this Note shall bear interest at
a fixed interest rate per annum equal to the Fixed Adjusted LIBOR Rate (as
defined below), plus seventy-five (75) basis points (0.75%) (the "Fixed
Rate"). The Fixed Adjusted LIBOR Rate shall be fixed at the beginning of
each Interest Period (as defined below). Each Interest Period shall begin
on the first (1st) Business Day (as defined below) of each calendar month.
As used herein, the following terms shall have the respective meanings set
forth below:
a. "BUSINESS DAY" means a banking day which shall be a day on which
Bank is open for the transaction of domestic and foreign exchange business
in both Fort Lauderdale, Florida and Charlotte, North Carolina and on which
the London Interbank Market is open for the transaction of foreign exchange
business, excluding any national holidays, and any performance which would
otherwise be required on a day other than a banking day shall be timely
performed in such instance, if performed on the next succeeding banking
day.
b. "FIXED ADJUSTED LIBOR RATE" means a rate per annum equal to the sum
of (a) the quotient of (i) the LIBOR Rate (as hereinafter defined), divided
by (ii) the remainder of 1.00 minus the LIBOR Reserve Requirement (as
hereinafter defined), plus (b) the net assessment rate (expressed as a
percentage rounded to the next highest .01 of 1%) which is in effect on
such day [under the regulations of the Federal Deposit Insurance
Corporation ("FDIC") or its successor] for determining the assessments paid
by Bank to the FDIC for insuring time deposits made in dollars at Bank's
principal offices in Tampa, Florida. The computation of the Fixed Adjusted
LIBOR Rate shall include adjustments in respect of impositions
<PAGE>
or assessments on Bank for FDIC insurance or other insurance or other fees,
reserves, assessments and surcharges which occur for insuring time deposits
or because of the sale of a related deposit.
c. "INTEREST PERIOD" means the time period during which the Fixed Rate
(as such term is defined in the first paragraph of this Section 2) shall
apply, which time period shall be a thirty (30) day period and shall begin
on the first (1st) Business Day of each calendar month.
d. "LIBOR RATE" means the rate of interest per annum equal to the
interest settlement rate for U.S. Dollars as published by the British
Bankers Association as of 11:00 a.m. London time two (2) Business Days
before the first day of the Interest Period and for a period comparable to
the applicable Interest Period.
e. "LIBOR RESERVE REQUIREMENT" means on any day, that percentage
(expressed as a decimal fraction) which is in effect on such date, as
provided by the Federal Reserve System for determining the maximum reserve
requirements generally applicable to financial institutions regulated by
the Federal Reserve Board (including, without limitation, basic
supplemental, marginal and emergency reserves) under Regulation D with
respect to "Eurocurrency liabilities" as currently defined by Regulation D,
or under any similar or successor regulation with respect to Eurocurrency
liabilities or Eurocurrency funding (or other category of liabilities which
includes deposits by reference to which the interest rate is determined or
any category or extensions of credit which includes loans by a non-United
States office of Bank to United States residents). Each determination by
Bank of the LIBOR Reserve Requirement, shall, in the absence of manifest
error, be conclusive and binding.
Notwithstanding any provision of this Note, Bank does not intend to charge and
Borrower shall not be required to pay any amount of interest or other charges in
excess of the maximum permitted by the applicable law of the State of Florida;
if any higher rate ceiling is lawful, then that higher rate ceiling shall apply.
Any payment in excess of such maximum shall be refunded to Borrower or credited
against principal, at the option of Bank.
3. ACCRUAL METHOD. Unless otherwise indicated, interest at the Rate set forth
above will be calculated by the 365/360 day method (a daily amount of
interest is computed for a hypothetical year of 360 days; that amount is
multiplied by the actual number of days for which any principal is
outstanding hereunder).
4. RATE CHANGE DATE. Any Rate based on a fluctuating index or base rate will
change, unless otherwise provided, each time and as of the date that the
index or base rate changes. In the event any index is discontinued, Bank
shall substitute an index determined by Bank to be comparable, in its sole
discretion.
5. PAYMENT SCHEDULE. All payments received hereunder shall be applied first to
the payment of any expense or charges payable hereunder or under any other
loan documents executed in connection with this Note, then to interest due
and payable, with the balance applied to principal, or in such other order
as Bank shall determine at its option.
SINGLE PRINCIPAL PAYMENT. Principal shall be paid in full in a single
payment on November 30, 2001. Interest thereon shall be paid monthly,
commencing on January 28, 1999, and continuing on the same day of each
successive month thereafter, with a final payment of all unpaid interest at
the stated maturity of this Note.
6. REVOLVING FEATURE. Borrower may borrow, repay and reborrow hereunder at any
time, up to a maximum aggregate amount outstanding at any one time equal to
the principal amount of this Note, provided that Borrower is not in default
under any provision of this Note, any other Loan Documents executed in
connection with this Note, or any other note or other loan documents now or
hereafter executed in connection with any other obligation of Borrower to
Bank, and provided that the borrowings hereunder do not exceed any
borrowing base or other limitation on borrowings by Borrower and are in
accordance with the terms of the Loan Documents. Bank shall incur no
liability for its refusal to advance funds based upon its determination
that any conditions of such further advances have not been met. Bank
records of the amounts borrowed from time to time shall be conclusive proof
thereof.
7. AUTOMATIC PAYMENT. Borrower has elected to authorize Bank to effect payment
of sums due under this Note by means of debiting Borrower's account number
2835559595. This authorization shall not affect the obligation of Borrower
to pay such sums when due, without notice, if there are insufficient funds
in such account to make such payment in full on the due date thereof, or if
Bank fails to debit the account.
- 2 -
<PAGE>
8. WAIVERS, CONSENTS AND COVENANTS. Borrower, any indorser or guarantor
hereof, or any other party hereto (individually an "Obligor" and
collectively "Obligors") and each of them jointly and severally: (a) waive
presentment, demand, protest, notice of demand, notice of intent to
accelerate, notice of acceleration of maturity, notice of protest, notice
of nonpayment, notice of dishonor, and any other notice required to be
given under the law to any Obligor in connection with the delivery,
acceptance, performance, default or enforcement of this Note, any
indorsement or guaranty of this Note, or any other documents executed in
connection with this Note or any other note or other loan documents now or
hereafter executed in connection with any obligation of Borrower to Bank,
including without limitation the Amended and Restated Credit Agreement (the
"Loan Documents"); (b) consent to all delays, extensions, renewals or other
modifications of this Note or the Loan Documents, or waivers of any term
hereof or of the Loan Documents, or release or discharge by Bank of any of
Obligors, or release, substitution or exchange of any security for the
payment hereof, or the failure to act on the part of Bank, or any
indulgence shown by Bank (without notice to or further assent from any of
Obligors), and agree that no such action, failure to act or failure to
exercise any right or remedy by Bank shall in any way affect or impair the
obligations of any Obligors or be construed as a waiver by Bank of, or
otherwise affect, any of Bank's rights under this Note, under any
indorsement or guaranty of this Note or under any of the Loan Documents;
and (c) agree to pay, on demand, all costs and expenses of collection or
defense of this Note or of any indorsement or guaranty hereof and/or the
enforcement or defense of Bank's rights with respect to, or the
administration, supervision, preservation, or protection of, or realization
upon, any property securing payment hereof, including, without limitation,
reasonable attorneys' and paralegals' fees, including fees related to any
suit, mediation or arbitration proceeding, out of court payment agreement,
trial, appeal, bankruptcy proceedings or other proceeding, in such amount
as may be determined reasonable by any arbitrator or court, whichever is
applicable.
9. INDEMNIFICATION. Obligors agree to promptly pay, indemnify and hold Bank
harmless from all State and Federal taxes of any kind and other liabilities
with respect to or resulting from the execution and/or delivery of this
Note or any advances made pursuant to this Note.
10. PREPAYMENTS. This Note may be prepaid in whole or in part at any time. All
prepayments of principal shall be applied in the inverse order of maturity,
or in such other order as Bank shall determine in its sole discretion.
11. DELINQUENCY CHARGE. To the extent permitted by law, a delinquency charge
may be imposed in an amount not to exceed four percent (4%) of any payment
that is more than fifteen (15) days late.
12. EVENTS OF DEFAULT. The following are events of default hereunder: (a) the
failure to pay or perform any obligation, liability or indebtedness of any
Obligor to Bank, or to any affiliate or subsidiary of NationsBank
Corporation, whether under this Note or any Loan Documents, as and when due
(whether upon demand, at maturity or by acceleration); (b) the failure to
pay or perform any other obligation, liability or indebtedness of any
Obligor to any other party; (c) the commencement of a proceeding against
any Obligor for dissolution or liquidation, the voluntary or involuntary
termination or dissolution of any Obligor or the merger or consolidation of
any Obligor with or into another entity; (d) the insolvency of, the
business failure of, the appointment of a custodian, trustee, liquidator or
receiver for or for any of the property of, the assignment for the benefit
of creditors by, or the filing of a petition under bankruptcy, insolvency
or debtor's relief law or the filing of a petition for any adjustment of
indebtedness, composition or extension by or against any Obligor; (e) the
determination by Bank that any representation or warranty made to Bank by
any Obligor in any Loan Documents or otherwise is or was, when it was made,
untrue or materially misleading; (f) the failure of any Obligor to timely
deliver such financial statements, including tax returns, other statements
of condition or other information, as Bank shall request from time to time;
(g) the entry of a judgment against any Obligor which Bank deems to be of a
material nature, in Bank's sole discretion; (h) the seizure or forfeiture
of, or the issuance of any writ of possession, garnishment or attachment,
or any turnover order for any property of any Obligor; (i) the
determination by Bank that a material adverse change has occurred in the
financial condition of any Obligor; or (j) the failure of Borrower's
business to comply with any law or regulation controlling its operation.
13. REMEDIES UPON DEFAULT. Whenever there is a default under this Note (a) the
entire balance outstanding hereunder and all other obligations of any
Obligor to Bank (however acquired or evidenced) shall, at the option of
Bank, become immediately due and payable and any obligation of Bank to
permit further borrowing under this Note shall immediately cease and
terminate, and/or (b) to the extent permitted by law, the Rate of interest
on the unpaid principal shall be increased at Bank's discretion up to the
maximum rate allowed by law, or if none, 25% per annum (the "Default
Rate"). The provisions herein for a Default Rate shall not be deemed to
extend the time for any payment hereunder or to constitute a "grace period"
- 3 -
<PAGE>
giving Obligors a right to cure any default. At Bank's option, any accrued
and unpaid interest, fees or charges may, for purposes of computing and
accruing interest on a daily basis after the due date of the Note or any
installment thereof, be deemed to be a part of the principal balance, and
interest shall accrue on a daily compounded basis after such date at the
Default Rate provided in this Note until the entire outstanding balance of
principal and interest is paid in full. Upon a default under this Note,
Bank is hereby authorized at any time, at its option and without notice or
demand, to set off and charge against any deposit accounts of any Obligor
(as well as any money, instruments, securities, documents, chattel paper,
credits, claims, demands, income and any other property, rights and
interests of any Obligor), which at any time shall come into the possession
or custody or under the control of Bank or any of its agents, affiliates or
correspondents, any and all obligations due hereunder. Additionally, Bank
shall have all rights and remedies available under each of the Loan
Documents, as well as all rights and remedies available at law or in
equity. Any judgment rendered on this Note shall bear interest at the
highest rate of interest permitted pursuant to Chapter 687, Florida
Statutes.
14. NON-WAIVER. The failure at any time of Bank to exercise any of its options
or any other rights hereunder shall not constitute a waiver thereof, nor
shall it be a bar to the exercise of any of its options or rights at a
later date. All rights and remedies of Bank shall be cumulative and may be
pursued singly, successively or together, at the option of Bank. The
acceptance by Bank of any partial payment shall not constitute a waiver of
any default or of any of Bank's rights under this Note. No waiver of any of
its rights hereunder, and no modification or amendment of this Note, shall
be deemed to be made by Bank unless the same shall be in writing, duly
signed on behalf of Bank; each such waiver shall apply only with respect to
the specific instance involved, and shall in no way impair the rights of
Bank or the obligations of Obligors to Bank in any other respect at any
other time.
15. APPLICABLE LAW, VENUE AND JURISDICTION. This Note and the rights and
obligations of Borrower and Bank shall be governed by and interpreted in
accordance with the law of the State of Florida. In any litigation in
connection with or to enforce this Note or any indorsement or guaranty of
this Note or any Loan Documents, Obligors, and each of them, irrevocably
consent to and confer personal jurisdiction on the courts of the State of
Florida or the United States located within the State of Florida and
expressly waive any objections as to venue in any such courts. Nothing
contained herein shall, however, prevent Bank from bringing any action or
exercising any rights within any other state or jurisdiction or from
obtaining personal jurisdiction by any other means available under
applicable law. The interest rate charged on this Note is authorized by
Chapter 655, Florida Statutes and Section 687.12, Florida Statutes.
16. PARTIAL INVALIDITY. The unenforceability or invalidity of any provision of
this Note shall not affect the enforceability or validity of any other
provision herein and the invalidity or unenforceability of any provision of
this Note or of the Loan Documents to any person or circumstance shall not
affect the enforceability or validity of such provision as it may apply to
other persons or circumstances.
17. BINDING EFFECT. This Note shall be binding upon and inure to the benefit of
Borrower, Obligors and Bank and their respective successors, assigns, heirs
and personal representatives, provided, however, that no obligations of
Borrower or Obligors hereunder can be assigned without prior written
consent of Bank.
18. CONTROLLING DOCUMENT. To the extent that this Note conflicts with or is in
any way incompatible with any other document related specifically to the
loan evidenced by this Note, this Note shall control over any other such
document, and if this Note does not address an issue, then each other such
document shall control to the extent that it deals most specifically with
an issue.
19. DOCUMENTARY STAMP AND INTANGIBLE TAXES. This Note is not secured by Florida
real property and will be executed and delivered outside the State of
Florida. Therefore, this Note is not subject to State of Florida
Documentary Stamp or Intangible Taxes.
20. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT,
SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL
ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES
OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF
J.A.M.S./ENDISPUTE OR ANY SUCCESSOR THEREOF
- 4 -
<PAGE>
("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY
INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY
ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY
PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION,
INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY
CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.
a. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF
ANY BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT,
AGREEMENT OR DOCUMENT, OR IF THERE IS REAL OR PERSONAL PROPERTY COLLATERAL,
IN THE COUNTY WHERE SUCH REAL OR PERSONAL PROPERTY IS LOCATED, AND
ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS
UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE
AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
b. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL
BE DEEMED TO (i) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE
STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS
INSTRUMENT, AGREEMENT OR DOCUMENT; OR (ii) BE A WAIVER BY BANK OF THE
PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY
EQUIVALENT STATE LAW; OR (iii) LIMIT THE RIGHT OF BANK HERETO (A) TO
EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO
FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO
OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT
LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A
RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING
OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO
THIS INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP
REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR
PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF
ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE
MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
Borrower represents to Bank that the proceeds of this loan are to be used
primarily for business, commercial or agricultural purposes. Borrower
acknowledges having read and understood, and agrees to be bound by, all terms
and conditions of this Note and hereby executes this Note under seal as of the
date here above written.
NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY NOTE REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
- 5 -
<PAGE>
EXECUTION DATE: December 9, 1998
BORROWER:
BRITE VOICE SYSTEMS, INC., A KANSAS
CORPORATION
By: /s/ Stanley G. Brannan (Seal)
--------------------------------
STANLEY G. BRANNAN, President
[Corporate Seal]
STATE OF KANSAS
COUNTY OF SEDGWICK
The foregoing instrument was acknowledged before me on December 9th,
1998, by STANLEY G. BRANNAN, as President of BRITE VOICE SYSTEMS, INC., a Kansas
corporation, on behalf of the corporation. He is personally known to me or has
produced _____________________________ as identification.
/s/ Misty R. Lawson
---------------------------------------
Notary Public in and for the
State of Kansas
------------------------------
Misty R. Lawson
---------------------------------------
Print Name of Notary
My Commission Expires 10-12-99
-----------------
- 6 -
<PAGE>
THIS INSTRUMENT PREPARED BY
AND SHOULD BE RETURNED TO:
Cindy L. Rodgers, Esq.
FOLEY & LARDNER
111 North Orange Avenue, Suite 1800
Post Office Box 2193
Orlando, FL 32802-2193
(407) 423-7656 FOR RECORDING PURPOSES ONLY
NEGATIVE PLEDGE AGREEMENT
THIS NEGATIVE PLEDGE AGREEMENT dated as of December 9, 1998, by and between
NATIONSBANK, N.A. ("Bank") whose mailing address is 390 North Orange Avenue, 7th
Floor, Orlando, Florida 32801 and BRITE VOICE SYSTEMS, INC., a Kansas
corporation ("Borrower"), whose address is 250 International Parkway, Suite 300,
Heathrow, Florida 32746.
WITNESSETH:
WHEREAS, Borrower desires to modify and increase the principal amount of an
existing loan from Bank to Borrower, dated as of even date herewith (together
with all extensions and renewals thereof hereafter referred to as the "Loan"),
in order to finance its working capital needs; and
WHEREAS, Bank is willing to modify and increase the Loan provided Borrower
agrees not to encumber Borrower's real or personal property.
NOW, THEREFORE, for and in consideration of the Loan made or to be made by
Bank to Borrower, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by both Borrower and Bank, the
parties hereto do agree as follows:
1. PROPERTY Borrower hereby agrees that, for so long as any part of the
Loan remains outstanding, that it will not, without first obtaining the prior
written consent of Bank, create or permit any lien, encumbrance, charge, or
security interest of any kind to exist on:
Any real or personal property now owned or hereinafter acquired by
Borrower (the "Property"), nor will Borrower transfer, sell, assign or
in any manner dispose of the Property or any interest therein (except
for statutory liens incurred in the ordinary course
<PAGE>
of Borrower's business and easements, rights of way and similar rights
granted in connection with the provision of utilities to the Property
or in connection with any construction on the Property).
2. RECORDING. Bank is hereby authorized and permitted to cause this
instrument, and notice hereof, to be recorded and filed at such times and at
such places as Bank, at its option, may elect.
3. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower represents and
warrants to Bank as follows:
(i) Borrower is a corporation duly organized and validly existing and
in good standing under the laws of the State of Kansas and has
all requisite power and authority to enter into this Agreement.
(ii) The execution and delivery by Borrower of this Agreement and the
performance of the respective obligations hereunder and
thereunder have been duly authorized. This Agreement constitutes
the legal valid and binding obligation of Borrower enforceable in
accordance with their terms. The execution and delivery of this
Agreement and the compliance with the provisions thereof will not
conflict with or constitute a breach of, or default under, any of
the provisions of any other agreement to which the Borrower is a
party.
(iii) The continued validity in all respects of the aforesaid
representations and warranties shall be a condition precedent to
Bank's obligation to fund the Loan. If any of the representations
and warranties shall not be correct at the time the same is made
or at the time a request for an advance under the Loan is made,
Bank will be under no obligation to make any such advance under
the Loan.
4. DEFAULT. Any failure by Borrower to comply with the terms of this
Agreement shall constitute an event of default under the documents evidencing
the Loan and the Borrower agrees that in such event Bank shall have the right in
addition to such other remedies as may be available to it, to injunctive relief
enjoining such breach of this Agreement and neither Borrower, its officers,
directors, employees, agents or representatives shall urge that such remedy is
not appropriate under the circumstances, it being expressly acknowledged by
Borrower that such action shall cause Bank irreparable damage for which legal
remedies are inadequate to protect Bank.
5. TERMINATION. This Agreement shall remain in full force and effect until
the Loan described above shall have been paid in full, or until sooner
terminated by Bank.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives.
Signed, sealed and delivered in BRITE VOICE SYSTEMS, INC., :a Kansas
the Presence of corporation
/s/ W. T. Braun III By: /s/ Stanley G. Brannan
- ----------------------------------- -----------------------------------
Print Name W. T. Braun III Stanley G. Brannan, President
------------------------
/S/ Gaylyn K. McGregor
- -----------------------------------
Print Name Gaylyn K. McGregor
------------------------
Signed, sealed and delivered in the NATIONSBANK, N.A., a national banking
Presence of association
/S/ Misty R. Lawson By: /S/ Gaylyn K. McGregor
- ----------------------------------- -----------------------------------
Print Name Misty R. Lawson Print Name: Gaylyn K. McGregor
------------------------ --------------------------
Title: Vice President
- ----------------------------------- -------------------------------
Print Name
------------------------
STATE OF KANSAS
COUNTY OF SEDGWICK)
The foregoing instrument was acknowledged before me on December 9th,
1998, by STANLEY G. BRANNAN, as President of BRITE VOICE SYSTEMS, INC., a Kansas
corporation, on behalf of the corporation. He is personally known to me or has
produced _____________________________ as identification.
/s/ Misty R. Lawson
--------------------------------------
Notary Public in and for the
State of Kansas
-----------------------------
/S/ Misty R. Lawson
--------------------------------------
Print Name of Notary
My Commission Expires 10-12-99
----------------
3
<PAGE>
STATE OF KANSAS
COUNTY OF SEDGWICK)
The foregoing instrument was acknowledged before me on December 9th,
1998, by Gaylyn McGregor, as Vice President of NATIONSBANK, N.A., a national
banking association, on behalf of the bank. He is personally known to me or has
produced _____________________________ as identification.
/s/ Misty R. Lawson
--------------------------------------
Notary Public in and for the
State of Kansas
-----------------------------
/S/ Misty R. Lawson
--------------------------------------
Print Name of Notary
My Commission Expires 10-12-99
----------------
4
<PAGE>
TAX INDEMNITY AGREEMENT
(FLORIDA EXCISE TAXES)
THIS TAX INDEMNITY AGREEMENT (this "Agreement") is made and entered into
this 9th day of December, 1998, by and among NATIONSBANK, N.A. (hereinafter
referred to as "Bank") and BRITE VOICE SYSTEMS, INC., a Kansas corporation
(hereinafter referred to as "Borrower").
W I T N E S S E T H:
WHEREAS, Bank has agreed to modify a certain unsecured line of credit loan
to Borrower increasing the line from Ten Million Dollars ($10,000,00.00) to
TWENTY-FIVE MILLION AND NO/100 DOLLARS ($25,000,000.00) (the "Loan"); and
WHEREAS, simultaneously with the execution of this Agreement, Borrower has
executed various instruments related to the modification of the Loan including,
but not limited to that certain Amended and Restated Revolving Promissory Note
in the principal amount of the Loan (the "Note"); and
WHEREAS, Bank and Borrower have each been advised by, or have had the
opportunity to seek advice from, their own counsel with respect to whether the
Note and/or the Loan are subject to Documentary Stamp Tax under Chapter 201 of
the, Florida Statutes, as amended, and other applicable laws and regulations;
and
WHEREAS, Bank and Borrower have each been advised by, or have had the
opportunity to seek advice from, their own counsel with respect to whether the
Note and/or the Loan, are subject to intangible tax under Chapter 199 of the
Florida Statutes, and other applicable laws and regulations ("Intangible
Taxes"); and
WHEREAS, Documentary Stamps, Intangible Taxes and all other transaction or
loan taxes imposed at this time or at any time in the future by any state, local
or federal governmental entity (a "Governmental Entity") shall be hereinafter
referred to collectively as "Excise Taxes"; and
WHEREAS, Bank and Borrower believe in good faith that the Note and the Loan
are not subject to Excise Taxes other than those provided in the Loan Closing
Statement of even date herewith; and
WHEREAS, Borrower has not relied on any statement, representation, advice,
or knowledge on the part of Bank in the structuring or closing of the Loan and
is consummating the extension and modifications to the Loan regardless of
whether the same are subject to additional Excise Taxes.
<PAGE>
WHEREAS, in order to induce Bank to modify the Loan, Borrower has agreed to
indemnify Bank should it be determined that the Note are subject to additional
Excise Taxes.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. The foregoing recitals are true and correct and are hereby incorporated
as a part of this Agreement.
2. Borrower hereby agrees, jointly and severally, to defend, indemnify and
hold Bank harmless from and against the payment of any and all Excise Taxes due
to any Governmental Entity, together with all interest, fines, penalties, costs
or other charges thereon, regardless of when, or the party against whom, the
same may be assessed or imposed.
3. In the event an Excise Tax assessment is made against any of the parties
hereto, Borrower shall pay the full amount of such assessment before a warrant
for the collection of the same is issued by a Governmental Entity. Borrower
shall not contest or otherwise challenge the assessment except in connection
with a request for a refund in accordance with the applicable regulations
adopted by the applicable Governmental Entity.
4. Borrower waives any defense to an action by Bank to enforce the Loan or
collect the indebtedness evidenced by the Loan or the Note based upon the
nonpayment of Excise Taxes.
5. The obligations of Borrower under this Agreement shall survive the
repayment of the indebtedness evidenced by the Loan and the Note.
6. In the event it becomes necessary for Bank to institute litigation or
otherwise engage the services of any attorney to enforce the terms of this
Agreement, Bank shall be entitled to recover its reasonable attorneys' fees from
Borrower.
7. This Agreement shall be governed and construed in accordance with the
laws of the State of Florida and any laws of the United States preempting the
same. The venue for any action pertaining to this Agreement shall be Orange
County.
8. Borrower hereby agrees to pay to Bank, its successors and/or assigns,
all sums of money requested by Bank hereunder, which Bank shall or may advance,
pay or cause to be paid, or become liable to pay, on account of or in connection
with the failure by Borrower to pay such Excise Taxes and any interest and
penalties associated therewith, and will make such payment to Bank within ten
(10) days after Bank shall request the same under the reasonable belief that
Bank has become liable therefor. If such payment is not made within ten (10) day
period provided above, all sums due shall bear interest at the default rate set
forth in the Note. In any accounting which may be had between Bank and Borrower,
Bank shall be entitled to charge for any and all disbursements made in
connection with the matters herein contemplated in good faith under the
reasonable belief that it is or was liable for the amounts so assessed.
- 2 -
<PAGE>
9. In the event of an assignment of the Loan, Borrower agrees that this
Agreement shall inure to the benefit of the assignee of the Loan and shall be
fully enforceable by the assignee of the Loan.
IN WITNESS WHEREOF, the parties hereto have caused this Tax Indemnity
Agreement to be properly executed as of the day and year first set forth above.
BORROWER:
BRITE VOICE SYSTEMS, INC., a Kansas
Corporation
By: /s/ Stanley G. Brannan
----------------------------------
STANLEY G. BRANNAN, President
BANK:
NATIONSBANK, N.A., a national banking
association
By: /s/ Gaylyn K. McGregor
---------------------------------
Name: Gaylyn K. McGregor
-------------------------------
Title: Vice President
------------------------------
- 3 -
<PAGE>
EXHIBIT 21.1
BRITE VOICE SYSTEMS, INC.
SUBSIDIARIES
Brite Voice Systems Group, Limited
Manchester, England
Brite Voice Systems Group, GmbH
Germany
Brite Holding AG
Switzerland
Brite Voice Systems AG
Switzerland
Brite Voice Systems S.p.A.
Italy
Brite Voice Systems Pte Ltd.
Singapore
Brite Voice Systems S.A. (Pty) Ltd.
South Africa
BVSI, Inc.
Wilmington, Delaware
BVS Investco, Inc.
Wilmington, Delaware
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our reports included in this Form 10-K, into the Company's
previously filed Registration Statement File Nos. 33-44609, 33-59371,
33-66812, 33-67274, 33-80478 and 333-70005.
Arthur Andersen LLP
March 26, 1999,
Orlando, Florida
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 11,208
<SECURITIES> 0
<RECEIVABLES> 57,559
<ALLOWANCES> 1,761
<INVENTORY> 21,676
<CURRENT-ASSETS> 97,410
<PP&E> 27,655
<DEPRECIATION> 10,480
<TOTAL-ASSETS> 122,119
<CURRENT-LIABILITIES> 35,373
<BONDS> 0
0
0
<COMMON> 45,221
<OTHER-SE> 39,692
<TOTAL-LIABILITY-AND-EQUITY> 122,119
<SALES> 97,984
<TOTAL-REVENUES> 135,715
<CGS> 50,556
<TOTAL-COSTS> 133,497
<OTHER-EXPENSES> (628)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (204)
<INCOME-PRETAX> 2,846
<INCOME-TAX> 1073
<INCOME-CONTINUING> 1,773
<DISCONTINUED> 11,344
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,117
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.07
</TABLE>
