SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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InterVoice-Brite, Inc.
(Name of Registrant as Specified In Its Charter)
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INTERVOICE-BRITE, INC.
17811 WATERVIEW PARKWAY
DALLAS, TEXAS 75252
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 28, 2002
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To the Shareholders of INTERVOICE-BRITE, INC.:
The annual meeting of shareholders of InterVoice-Brite, Inc., a Texas
corporation (the "Company"), will be held on Wednesday, August 28, 2002, at
10:00 a.m., local time, at the Renaissance Dallas North Hotel, 4099 Valley View,
Dallas, Texas, for the following purposes:
1. To elect the Board of Directors for the ensuing year;
2. To consider and vote upon a proposal to amend the Company's Employee
Stock Purchase Plan to increase from 1,000,000 to 1,500,000 the aggregate
number of shares of Common Stock authorized for issuance under the Plan;
3. To consider and vote upon a proposal to approve the issuance of shares
of Common Stock upon conversion of the Company's outstanding convertible
notes, in lieu of cash payments on the convertible notes, and upon the
exercise of the Company's outstanding warrants, to the extent that such
issuance would require shareholder approval under the rules of the Nasdaq
National Market;
4. To consider and vote upon a proposal to amend the Articles of
Incorporation of the Company to change its corporate name to "InterVoice,
Inc."; and
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed July 15, 2002 as the record date for the
determination of shareholders entitled to notice of and to vote at the meeting
or any adjournment thereof. Only shareholders of record at the close of business
on the record date are entitled to notice of and to vote at the meeting. A
complete list of such shareholders will be available for examination at the
offices of the Company in Dallas, Texas, during ordinary business hours for a
period of 10 days prior to the meeting.
A record of the Company's activities during the fiscal year ended February
28, 2002 and the financial statements for such fiscal year are contained in the
accompanying 2002 Annual Report. The 2002 Annual Report does not form any part
of the material for the solicitation of proxies.
All shareholders are cordially invited to attend the meeting. SHAREHOLDERS
ARE URGED, WHETHER OR NOT THEY PLAN TO ATTEND THE MEETING, TO COMPLETE, DATE AND
SIGN THE ACCOMPANYING PROXY AND TO RETURN IT PROMPTLY IN THE POSTAGE-PAID RETURN
ENVELOPE PROVIDED. If a shareholder who has returned a proxy attends the meeting
in person, such shareholder may revoke the proxy and vote in person on all
matters submitted at the meeting.
By order of the Board of Directors,
David W. Brandenburg
Chairman of the Board
and Chief Executive Officer
Dallas, Texas
July 29, 2002
INTERVOICE-BRITE, INC.
17811 WATERVIEW PARKWAY
DALLAS, TEXAS 75252
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PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 28, 2002
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INTRODUCTION
The accompanying proxy is solicited by and on behalf of the Board of
Directors of the Company for use at the annual meeting of shareholders of the
Company to be held at the time and place and for the purposes set forth in the
foregoing notice. The approximate date on which this proxy statement and the
accompanying proxy were first sent to shareholders of the Company is July 29,
2002.
Shares represented by valid proxies will be voted at the meeting in
accordance with the directions given. If no direction is indicated, the shares
will be voted for the election of the Board's nominees for director, and for the
other three proposals described in the foregoing notice.
The Board of Directors is not aware of any other matter to be presented
for consideration at the meeting. If any other matter is properly presented for
action at the meeting, the proxy holders will vote the proxies in accordance
with their best judgment in such matters. The proxy holders may also, if it is
deemed to be advisable, vote such proxies to adjourn the meeting or to recess
the meeting from time to time.
Any shareholder of the Company returning a proxy has the right to revoke
the proxy at any time before it is exercised by giving written notice of such
revocation to the Company addressed to David W. Brandenburg, Chairman of the
Board and Chief Executive Officer, InterVoice-Brite, Inc., 17811 Waterview
Parkway, Dallas, Texas 75252; however, no such revocation shall be effective
until such notice of revocation has been received by the Company at or prior to
the meeting.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
Only holders of record of Common Stock at the close of business on July
15, 2002, the record date for the meeting, are entitled to notice of and to vote
at the meeting or any adjournment(s) thereof. The presence of a majority of the
Common Stock outstanding on the record date is necessary to constitute a quorum.
On the record date for the meeting, there were issued and outstanding 34,077,307
shares of Common Stock. At the meeting, each shareholder of record on the record
date will be entitled to one vote for each share registered in such
shareholder's name on the record date. The Articles of Incorporation of the
Company deny cumulative voting rights. The following table sets forth certain
summary information with respect to the only shareholder who was known to the
Company to be the beneficial owner of more than five percent of the outstanding
shares of Common Stock as of July 19, 2002.
NAME AND ADDRESS NUMBER OF SHARES
OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
Daniel D. Hammond (1) 1,973,086(2) 5.0%
17811 Waterview Parkway
Dallas, Texas 75252
(1) Mr. Hammond is the former Chairman of the Board and Chief Executive
Officer of the Company. He is currently employed as Technical Advisor for
the Company.
(2) Includes 977,600 shares not outstanding but subject to currently
exercisable stock options, 28,838 shares held by his spouse and 342 shares
in the Company's 401(k) Employee Savings Plan.
VOTING PROCEDURES AND TABULATION
The Company will appoint one or more inspectors of election to act at the
meeting and to make a written report thereof. Prior to the meeting, the
inspectors will sign an oath to perform their duties in an impartial manner and
to the best of their abilities. The inspectors will ascertain the number of
shares outstanding and the voting power of each of such shares, determine the
shares represented at the meeting and the validity of proxies and ballots, count
all votes and ballots and perform certain other duties as required by law. The
inspectors will
tabulate the number of votes cast for or withheld as to the vote on each nominee
for director and for, against or abstained from the other three proposals
described in the foregoing notice.
With regard to the election of directors, votes may be cast in favor of or
withheld from each nominee. Votes that are withheld will be excluded entirely
from the vote and will have no effect on the voting on the election of
directors, provided a quorum is present, because directors are elected by a
plurality of the shares of Common Stock of the Company present in person or by
proxy at the meeting and entitled to vote and voted thereat.
Each of the proposals to amend the Company's Employee Stock Purchase Plan,
and to issue shares of Common Stock upon the conversion of convertible notes and
upon the exercise of warrants to the extent such issuance would require
shareholder approval under the rules of the Nasdaq National Market, must be
approved by a majority of the shares of Common Stock present or represented and
voting on the applicable proposal at the meeting. If a shareholder abstains from
voting on either proposal, it will have the same effect as a vote cast "AGAINST"
such proposal.
The proposal to amend the Articles of Incorporation of the Company to
change its corporate name to "InterVoice, Inc." must be approved by the
affirmative vote of at least a majority of the outstanding Common Stock on the
record date. If a shareholder abstains from voting on this proposal, it will
have the same effect as a vote cast "AGAINST" the proposal.
If the Company receives a signed proxy card with no indication of the
manner in which shares are to be voted on a particular proposal, such shares
will be voted in accordance with the recommendation of the Board of Directors
for such proposal.
Brokers who hold shares in street name only have the authority to vote on
certain items when they have not received instructions from beneficial owners.
Any "broker non-votes" will have no effect on the election of directors or the
next two proposals described in the foregoing notice, but such would have the
same effect as a vote cast "AGAINST" the proposal to amend the Articles of
Incorporation.
EXECUTIVE OFFICERS
Following is certain information regarding certain executive officers of
the Company. Information regarding the only other executive officer of the
Company, David W. Brandenburg, Chairman of the Board and Chief Executive
Officer, is included under "Proposal 1. Election of Directors".
ROB-ROY J. GRAHAM, age 49, is currently Executive Vice President, Chief
Financial Officer, Secretary and Controller. He has held the positions of Chief
Financial Officer and Secretary since August 1994, the position of Controller
since August 1992, and he became an Executive Vice President on July 22, 2002.
From April 1994 to May 2001, he held the position of Chief Accounting Officer.
RAY S. NAEINI, age 51, was President and General Manager Network Solutions
Division from December 2000 until May 2002, when he resigned from the Company to
pursue other opportunities. From July 1999 to December 2000, Mr. Naeini served
as Executive Vice President - Global Network Business. From November 1998 to
July 1999, he served as Executive Vice President of Global Products for Brite
Voice Systems, Inc. ("Brite"). The Company acquired Brite during fiscal 2000.
Mr. Naeini joined Brite in November 1995 as Vice President of Advanced
Technologies and later served as Senior Vice President, General Manager of
Network Products.
ROBERT RITCHEY, age 55, is President of the Company, a position he has
held since July 22, 2002. From December 2000 until his recent promotion, Mr.
Ritchey served as President and General Manager Enterprise Solutions Division.
Prior to joining the Company, from May 1999 to November 2000, Mr. Ritchey served
as Vice President and General Manager of Notifier Integrated Systems, a
subsidiary of Honeywell International, a provider of network based integration
products to the electronic security and building controls industry. Before
joining Notifier Integrated Systems, from July 1994 to May 1999 he served as
Vice President General Manager for the Integrated Systems Division of
Sensormatic Electronics, a company engaged in, among other things, access
control, video products, CCTV systems, and integrated systems.
H. DON BROWN, age 46, is Executive Vice President - Human Resources. He
has held the position of Vice President of Human Resources since September 1995,
and became an Executive Vice President on July 22, 2002. From November 1994 to
August 1995, Mr. Brown served as Director of Human Resources. From August 1992
to September 1994, he served as Manager of Human Resources for the Permian Basin
business unit of Unocal Corporation, a company that produces and sells energy
resources and specialty minerals.
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DEAN C. HOWELL, age 44, is Executive Vice President and General Counsel.
He has held the position of Vice President and General Counsel since July 2000,
and became an Executive Vice President on July 22, 2002. From March 1996 to June
2000, he served as Vice President and Corporate Counsel, and from October 1992
to February 1996, as Legal Counsel.
GEORGE T. PLATT, age 37, is currently Senior Vice President - Business
Development and Marketing, a position he has held since July 22, 2002. Prior to
his recent promotion, Mr. Platt served as Vice President of Distribution and
Strategic Alliances for the Company's ESD Division, a position he had held since
March 1, 2002. From March 2000 to February 2001, Mr. Platt served as Vice
President Managing Director, Asia and Latin America. From September 1999 to
February 2000, Mr. Platt served as Vice President Managing Director, Latin
America. Prior thereto, he served as Managing Director, Asia Pacific from
October 1996 until November 1999. Mr. Platt is the son of George C. Platt, a
member of the Company's Board of Directors.
MIKE J. POLCYN, age 44, is currently Senior Vice President - Engineering,
a position he has held since July 22, 2002. Prior to his recent promotion, Mr.
Polcyn served as Vice President, Research and Development for the Company's ESD
Division, a position he had held since March 1, 2001. From December 2000 to
February 2001, Mr. Polcyn served as Vice President, Engineering. From March 1998
to December 2000, Mr. Polcyn served as Vice President, Packaged Products Line of
Business. Prior thereto, he served as Vice President, Business Development and
Product Marketing from December 1995 to March 1998.
PHILLIP C. WALDEN, age 57, is Executive Vice President - Manufacturing. He
held the position of Vice President-Manufacturing since July 1987, and became an
Executive Vice President on July 22, 2002.
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS
Q. WHAT PROPOSALS ARE SHAREHOLDERS BEING ASKED TO CONSIDER AT THE UPCOMING
ANNUAL MEETING?
A. Shareholders will elect the Board of Directors for the ensuing year and vote
upon a proposal to amend the Company's Stock Purchase Plan to increase from
1,000,000 to 1,500,000 the aggregate number of shares of Common Stock authorized
for issuance under such plan. The Company is also seeking approval to issue
Common Stock upon the conversion of or in lieu of cash payments on the
convertible notes and the exercise of the warrants, each of which were issued in
a private placement on May 30, 2002, to the extent such issuance equals or
exceeds 20% of the Company's outstanding Common Stock before the issuance of the
convertible notes and warrants. Finally, the Company is seeking approval to
amend the Articles of Incorporation of the Company to change its corporate name
to "InterVoice, Inc."
Q. WHY IS THE COMPANY PROPOSING TO AMEND THE EMPLOYEE STOCK PURCHASE PLAN?
A. The purpose of the Company's Stock Purchase Plan is to provide employees of
the Company and its subsidiaries with an opportunity to acquire a proprietary
interest in the Company through the regular and systematic purchase of shares of
Common Stock through voluntary payroll deductions, and thus to develop a
stronger incentive to work for the continued success of the Company and its
subsidiaries. As of June 14, 2002, 809,390 of the 1,000,000 shares authorized
for issuance under the Stock Purchase Plan had been issued, and options for an
additional 130,518 shares were outstanding. The Company is seeking approval to
amend the Stock Purchase Plan to increase from 1,000,000 to 1,500,000 the number
of shares of Common Stock authorized for issuance thereunder so that it may
continue to use the Stock Purchase Plan to provide an incentive to the employees
of the Company and its subsidiaries, which would align the interests of the
employees with the objectives of the shareholders.
Q. WHY IS THE COMPANY SEEKING SHAREHOLDER APPROVAL TO ISSUE COMMON STOCK UPON
THE CONVERSION OF OR IN LIEU OF CASH PAYMENTS ON THE CONVERTIBLE NOTES AND THE
EXERCISE OF THE WARRANTS TO THE EXTENT SUCH ISSUANCE EQUALS OR EXCEEDS 20% OF
THE COMPANY'S OUTSTANDING COMMON STOCK BEFORE THE ISSUANCE OF THE CONVERTIBLE
NOTES AND WARRANTS?
A. The Company is subject to the NASD Marketplace Rules because its Common Stock
is listed on the Nasdaq National Market. Those rules require shareholder
approval for any issuance of stock at a price below the book or market price,
where the amount of stock being issued is equal to or in excess of 20% of the
common stock or voting power outstanding before the issuance. Even though the
Company intends to make all required payments on the convertible notes in cash,
because of this rule, the Company is seeking approval to issue Common Stock upon
the conversion of or in lieu of cash payments on the convertible notes and the
exercise of the warrants to the extent such issuance equals or exceeds 20% of
the Company's outstanding Common Stock before the issuance of the convertible
notes and warrants. If due to the 20% Nasdaq limitation the Company is unable to
issue sufficient shares of Common Stock to satisfy exercise of the warrants,
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conversion of the convertible notes or payments required on the convertible
notes that the Company cannot satisfy in cash (whether due to inadequate funds
or the prohibition in its credit facility against making cash payments on the
convertible notes when the Company has borrowings under the credit facility),
the Company would, in the case of the convertible notes, be in default and
subject to penalties, and, in the case of the warrants, be subject to an
obligation to redeem that portion of the warrants with respect to which shares
cannot be issued. If the Company is able to repay the convertible notes
completely in cash and assuming the convertible notes were not converted by the
holders at the fixed conversion price (initially $6.184), the dilutive effect of
the private placement of convertible notes and warrants would be limited to the
621,304 shares of Common Stock issuable upon exercise of the warrants, which
have an initial exercise price of $4.0238.
Q. WHY WAS THE PRIVATE PLACEMENT DONE?
A. The Company issued the convertible notes and warrants in May 2002 as part of
an overall financing transaction that consisted of the private placement of
$10.0 million in convertible notes and the accompanying warrants; a three-year
$14.0 million mortgage loan on the Company's headquarters in Dallas, Texas; the
sale of the Company's facility in Wichita, Kansas for approximately $2.0
million; and the repayment of approximately $26.0 million under the Company's
senior credit facility. The financing transactions were required, in part,
because from February 28, 2002 through May 30, 2002 the Company had been
operating under a temporary waiver of one of four financial covenants required
by its credit facility, which related to the fixed charge coverage ratio. In
connection with the Company's repayment of indebtedness under the credit
facility, the lenders agreed to waive the Company's breach of the fixed charge
coverage ratio covenant and agreed to provide the Company with a revolving
credit line of up to $12.0 million. On June 19, 2002, the Company repaid the
approximately $4.0 million of indebtedness then outstanding under its revolving
credit facility. By paying off all remaining loans under the revolving credit
facility, the Company has satisfied a covenant in the credit facility which
prevents the Company from making cash payments on the convertible notes while
there are outstanding borrowings under the facility. Accordingly, and for so
long as no new borrowings are outstanding under the credit facility, the Company
may pay installments on the convertible notes in cash instead of Common Stock.
Q. WHAT HAPPENS IF THE THIRD PROPOSAL IS APPROVED?
A. If the third proposal is approved, then the owners of the convertible notes
may, at their option, convert their convertible notes into Common Stock, and
they may exercise their warrants for Common Stock, even if the number of shares
issued equals or exceeds 20% of the Company's outstanding Common Stock before
the issuance of the convertible notes and warrants. Since the initial conversion
price of the convertible notes by the holders is $6.184 per share and the
initial exercise price of the warrants is $4.0238 per share, the aggregate
percentage of Common Stock for which they would be convertible or exercisable
would be significantly below the 20% threshold under present circumstances.
Nevertheless, if the Company does not have sufficient cash to pay installments
on the convertible notes (or if the Company is prohibited from paying such
installments in cash due to the existence of borrowings under its revolving
credit facility), the Company could be required to effect conversion of the
convertible notes at approximately market prices. Additionally, the occurrence
of certain events could trigger anti-dilution adjustments entitling the holders
of the convertible notes and warrants to a lower conversion or exercise price
(or, in the case of the warrants, also an adjustment in the number of shares for
which the warrants are exercisable).
Q. WHAT IF THE THIRD PROPOSAL IS NOT APPROVED?
A. If the third proposal does not receive shareholder approval, and if the
issuance equals or exceeds 20% of the Company's outstanding Common Stock before
the issuance of the convertible notes and warrants, then the Company may be
required to redeem for cash the portion of the convertible notes and the portion
of the warrants that is not convertible or exercisable due to such 20%
limitation. If the Company does not have sufficient cash at such time to effect
a redemption (or if the Company is prohibited from using cash for such purpose
due to the existence of borrowings under its credit facility), the Company will
default on its obligations under the convertible notes and warrants.
Q. CAN THE CONVERSION OF THE CONVERTIBLE NOTES AND THE EXERCISE OF THE WARRANTS
LEAD TO A CHANGE OF CONTROL OF THE COMPANY?
A. No. The terms of the convertible notes and the warrants prohibit the
conversion of any principal under the convertible notes or the exercise of any
warrants which, after giving effect to such conversion or exercise, would cause
a note or warrant holder and its affiliates to beneficially own more than 4.99%
of the outstanding Common Stock of the Company. Accordingly, no note or warrant
holder could ever effect a change of control of the Company through conversion
of the convertible notes or exercise of the warrants.
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Q. WHY DOES THE BOARD OF DIRECTORS RECOMMEND AMENDING THE ARTICLES OF
INCORPORATION OF THE COMPANY TO CHANGE ITS CORPORATE NAME?
A. The proposed amendment would restore the Company's corporate name to
"InterVoice, Inc.," the name used by the Company prior to its merger with Brite
Voice Systems, Inc. in 1999. The Board of Directors believes the products,
services, operations and personnel of the former InterVoice and the former Brite
have been fully integrated and that it is therefore appropriate to shorten the
Company's name to "InterVoice, Inc."
PROPOSAL 1. ELECTION OF DIRECTORS
The business and affairs of the Company are managed by and under the
direction of the Board of Directors, which exercises all corporate powers of the
Company and establishes broad corporate policies. The Articles of Incorporation
of the Company provide that the number of directors constituting the Board of
Directors shall not be less than three nor more than nine as from time to time
shall be fixed and determined by a vote of a majority of the Company's directors
serving at the time of such vote. The number of director positions presently
constituting the Board is five.
The five directors, constituting the entire Board of Directors, are to be
elected at the meeting to serve until the next annual meeting of shareholders
and until their successors have been elected and qualified. Four of the nominees
are current directors of the Company: David W. Brandenburg, Joseph J.
Pietropaolo, George C. Platt and Grant A. Dove. Stanley G. Brannan will continue
to serve as a director through the date of the annual meeting, but has decided
not to stand for reelection. A new nominee, Jack P. Reily, is a nominee for
election as a director at the annual meeting. During the fiscal year ended
February 28, 2002, the Board of Directors held six meetings. Each member of the
Board attended at least 75% of the aggregate of the total number of meetings of
the Board of Directors and the total number of meetings of any committees of the
Board of Directors on which he served during the last fiscal year.
The five nominees for election to the Board of Directors who receive the
greatest number of votes cast at the meeting will be elected to the Board of
Directors. All duly submitted and unrevoked proxies in the form accompanying
this proxy statement will be voted for the nominees selected by the Board of
Directors except where authorization so to vote is withheld. If any nominee
becomes unable or unwilling to serve (which is not presently foreseen), the
persons designated as proxies will have full discretion to cast votes for
another person designated by the Board. THE BOARD RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE ELECTION OF SUCH NOMINEES. Set forth below is certain information
with respect to the five nominees for director.
DAVID W. BRANDENBURG, age 57, is Chairman of the Board and Chief Executive
Officer of the Company. Mr. Brandenburg has held the position of Chief Executive
Officer since June 2000 and the position of Chairman of the Board since December
2000. He held the position of President from February 2001 to July 2002. Mr.
Brandenburg is also President of the Brandenburg Life Foundation, a position he
has held since October 1996. From November 1997 to May 1998 Mr. Brandenburg
served as President and Chief Executive Officer of AnswerSoft, Inc. Prior
thereto, Mr. Brandenburg served as President of the Company from July 1990 to
December 1994. Mr. Brandenburg has served as a director since 1997 and from 1990
to 1995 during which he served as Vice Chairman of the Company from December
1994 to May 1995.
JOSEPH J. PIETROPAOLO, age 46, is currently Vice President and co-owner of
I.A.Q. Enterprises L.L.C., a company specializing in mold remediation and
restoration services, a position he has held since October 2001. From March 1998
to June 2001, Mr. Pietropaolo served as an independent consultant providing
financial consulting services. He is the former Chief Financial Officer of
Transactive Corporation, a company that specializes in electronic benefits
transfers, a position he held from August 1994 to March 1997. Mr. Pietropaolo is
also the former Vice President and Treasurer of GTECH Corporation, a company
specializing in on-line lottery systems, positions he held from 1990 to August
1994. Mr. Pietropaolo has served as a director since 1989.
GEORGE C. PLATT, age 61, is currently the President and Chief Executive
Officer of Viewcast.com, d.b.a. Viewcast Corporation, a company engaged in video
networking and internet video streaming, a position he has held since October
1999. From January 1991 to September 1999 Mr. Platt served as the President and
Chief Executive Officer of InteCom Inc., a wholly owned subsidiary of
Matra-Hachette, a company engaged in the manufacture and sale of telephone
switching systems. Mr. Platt is a member of the Board of Directors of
Viewcast.com and UniView Corp. Mr. Platt has served as a director since 1991.
Mr. Platt is the father of George T. Platt, Senior Vice President - Business
Development and Marketing.
GRANT A. DOVE, age 74, is currently a Managing Partner of Technology
Strategies and Alliances, a firm which provides investment banking and
consulting services, a position he has held since January 1993. Mr. Dove
currently serves as a director of INET Technologies, Intrusion.com and Tipping
Point Technologies, Inc. Mr. Dove has served as a director since 1997.
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JACK P. REILY, age 51, is President of Reily Communications, a firm which
provides consulting services to high technology clients in the communications
equipment and software market, a position he has held since 1998. From December
2000 to March 2002, he also held the position of Senior Vice President and
General Manager for Efficient Networks (affiliated with Siemens Corporation), a
leading provider of DSL modems for consumer and business applications. From 1997
to 1998 Mr. Reily was Executive Director of the Hardware Practice Group for
Broadview International, an investment banking firm with special focus on merger
and acquisition activity for telecommunications equipment manufacturers. Mr.
Reily has not previously served as a director of the Company.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The tabulation below sets forth certain information with respect to the
beneficial ownership of shares of Common Stock, as of July 19, 2002, of each
director and nominee for director of the Company, each executive officer listed
in the Summary Compensation Table included elsewhere in this proxy statement,
and all directors, nominees for director and executive officers of the Company
as a group.
Common Stock
Beneficially Owned (1)
--------------------------
Number Percent
Name of Shares of Class
---- ---------- --------
Directors and Nominees for Director
David W. Brandenburg.................................................... 1,431,991 (2) 3.7%
Joseph J. Pietropaolo................................................... 18,000 (3) *
George C. Platt......................................................... 52,700 (3) *
Grant A. Dove........................................................... 104,000 (3) *
Stanley G. Brannan...................................................... 240,498 (4) *
Jack P. Reily........................................................... -0- *
Named Executive Officers (who are not a director or nominee named above)
Rob-Roy J. Graham....................................................... 380,798 (5) *
Ray S. Naeini........................................................... 99,998 (5) *
Robert Ritchey.......................................................... 60,582 (5) *
Dean C. Howell.......................................................... 169,359 (5) *
All Directors, Nominees for Director and Executive Officers
as a Group (14 persons)..................................................... 3,274,964 (6) 8.4%
* Less than 1%
(1) Unless otherwise indicated, all shares listed are directly held with sole
voting and investment power.
(2) Includes 213,846 shares held in Mr. Brandenburg's wife's IRA, and 506,000
shares not outstanding but subject to currently exercisable stock options.
(3) Shares are not outstanding but are subject to currently exercisable stock
options, other than 34,000 shares held by Mr. Dove and 10,700 shares held
by Mr. Platt.
(4) Includes 5,434 shares held by members of Mr. Brannan's family, and 30,000
shares not outstanding but subject to currently exercisable stock options.
(5) Shares are not outstanding but are subject to currently exercisable stock
options, other than 68,237 shares held directly by Mr. Graham and 318
shares held by him in the Company's 401(k) Employee Savings Plan, 10,584
shares held by Mr. Ritchey and 60,294 shares held by Mr. Howell.
(6) Consists of shares beneficially owned by the Company's principal executive
officers and directors. The shares beneficially owned by all directors and
executive officers as a group include 1,479,150 shares issuable upon
exercise of currently exercisable options and options which are
exercisable within 60 days of July 19, 2002. The total also includes
222,380 shares held by, or in trust for, spouses and other family members
of directors and executive officers, and 180,336 shares held in joint
accounts with spouses. The inclusion of shares in this table as
beneficially owned is not an admission of beneficial ownership.
6
AUDIT COMMITTEE REPORT
We have reviewed and discussed the Company's audited financial statements
for the year ended February 28, 2002 with management and have discussed with
Ernst & Young LLP, certified public accountants, the independent auditors and
accountants for the Company, the matters required to be discussed by SAS 61
(Codification of Statements on Auditing Standards, AU Section 380) with respect
to those statements.
We have been advised of the content of, and have received the written
disclosures and the letter from Ernst & Young LLP required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees)
and have discussed with Ernst & Young LLP its independence in connection with
its audit of the Company's most recent financial statements. Based on this
review and these discussions, we recommended to the Board of Directors that
these audited financial statements be included in the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 2002.
Joseph J. Pietropaolo, George C. Platt and Grant A. Dove comprised the
Audit Committee. As of the date of this report, all are independent, as defined
in Rule 4200(a)(14) of the Nasdaq Stock Market.
The Board of Directors has adopted a written charter for the Audit
Committee.
The information in this Audit Committee report shall not be deemed to be
soliciting material, or be filed with the SEC or subject to Regulation 14A or
14C or to liabilities of Section 18 of the Securities Act of 1933, nor shall it
be deemed to be incorporated by reference into any filing under the Securities
Act of 1933 or the Securities Exchange Act of 1934, except to the extent that
the Company specifically incorporates these paragraphs by reference.
June 20, 2002
AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS
Joseph J. Pietropaolo, Chairman
George C. Platt
Grant A. Dove
COMPENSATION OF DIRECTORS
All directors who are not employees of the Company receive a fee of $1,000
per month for serving as a director of the Company. The Company also reimburses
all directors for travel, lodging and related expenses incurred in attending
Board and committee meetings. Directors who are not employees of the Company
also receive a fee of $1,000 for each Board or committee meeting attended in
person, and $500 for each Board meeting attended by phone conference. In
addition, under the 1999 Stock Option Plan, each nominee for director who is
presently serving as a non-employee director and who is elected as a director at
the annual meeting automatically will be granted a stock option to purchase
6,000 shares of Common Stock, which option can be exercised commencing on the
date of the next annual meeting of shareholders. Each nominee for director who
is not an employee of the Company and who is elected as a director of the
Company for the first time at an annual meeting automatically will be granted an
option to purchase 18,000 shares of Common Stock, which option can be exercised
commencing on the date of the next annual meeting of shareholders. Mr. Reily is
the only nominee for director who has not previously served as a director of the
Company. Pursuant to the 1999 Stock Option Plan, on June 27, 2001 each of
Messrs. Pietropaolo, Brannan, Dove and Platt was granted an option to purchase
6,000 shares of Common Stock at an exercise price based on the market price on
that date, $10.93 per share, which options can be exercised commencing on the
date of the 2002 annual meeting.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established committees which deal with certain
specific areas of the Board's responsibility. These committees include the Audit
Committee, Compensation Committee, Executive Committee and Nominating Committee.
The Audit Committee, which held six meetings during fiscal 2002, has the
primary responsibility to ensure the integrity of the financial information
reported by the Company. Its functions include: (a) making recommendations on
the selection of independent auditors; (b) reviewing the scope of the annual
audit to be performed by the independent auditors prior to commencement of the
audit; (c) reviewing the results of those audits; (d) reviewing the organization
and scope of the Company's internal system of audit and financial controls; (e)
meeting periodically with management and the independent public accountants to
review financial, accounting and internal control matters; and (f) meeting
periodically with the independent public accountants to
7
discuss the results of their audit work and their opinions as to the adequacy of
internal accounting controls and the quality of financial reporting. Its current
members are Joseph J. Pietropaolo, Chairman and Grant A. Dove. George C. Platt
served as the third member of the Audit Committee until July 19, 2002 when he
resigned from his position on the committee because his son, George T. Platt,
was elected as an executive officer of the Company effective July 22, 2002. The
Nasdaq Marketplace Rules do not permit a director to serve on an audit committee
if a member of his or her immediate family is an executive officer of the
company. Assuming Jack P. Riley is elected as a director of the Company at the
Annual Meeting of Shareholders, he will be eligible to fill the current vacancy
on the Audit Committee.
The Compensation Committee, which held seven meetings during fiscal 2002,
has the authority to determine and approve all the terms of the employment,
compensation and benefits payable to officers of the Company, including those
officers who are also directors. The Company's management is from time to time
directed by the Compensation Committee to review certain compensation matters
and make recommendations to the Compensation Committee concerning such matters.
The Compensation Committee also has the authority to administer and award stock
options and restricted stock under the 1999 Stock Option Plan, the 1998 Stock
Option Plan and the Restricted Stock Plan. The Compensation Committee also
administers the Employee Stock Purchase Plan. The Compensation Committee is
composed of George C. Platt, Chairman, Joseph J. Pietropaolo, Stanley G. Brannan
and Grant A. Dove.
The Executive Committee, which did not meet during fiscal 2002, may, to
the extent permitted by law, exercise the power of the Board of Directors when
the Board is not in session. It also has the responsibility for reviewing
long-range plans, capital expenditure programs, acquisitions and general
corporate financing matters and making related recommendations to the Board of
Directors. Its only current member is David W. Brandenburg, Chairman.
The Nominating Committee, which met once during fiscal 2002, has the
function to identify and propose to the full Board of Directors nominees to fill
vacancies on the Board of Directors. Although the Nominating Committee has no
formal policy on the subject, it will consider persons brought to its attention
by officers, directors and shareholders. The names of proposed nominees should
be sent to the Company at the address shown on the cover of this Proxy
Statement, Attention: Nominating Committee. The current members of the
Nominating Committee are Grant A. Dove, Chairman, and George C. Platt.
PROPOSAL 2. TO APPROVE AMENDMENT TO THE COMPANY'S
EMPLOYEE STOCK PURCHASE PLAN
The InterVoice-Brite, Inc. Employee Stock Purchase Plan (the "Stock
Purchase Plan") was adopted by the Board of Directors as of October 14, 1993.
The Stock Purchase Plan has been approved by the Company's shareholders. On June
20, 2002, the Board of Directors adopted, subject to shareholder approval, an
amendment to the Stock Purchase Plan to increase from 1,000,000 to 1,500,000 the
number of shares of Common Stock authorized for issuance thereunder. A copy of
the Stock Purchase Plan, as amended, is attached hereto as Appendix A.
As of June 14, 2002, the aggregate number of shares that had been issued
under the Stock Purchase Plan was 809,390, and options for an additional 130,518
shares were outstanding.
The purpose of the Stock Purchase Plan is to provide employees of the
Company and its subsidiaries with an opportunity to acquire a proprietary
interest in the Company through the regular and systematic purchase of shares of
Common Stock through voluntary payroll deductions, and thus to develop a
stronger incentive to work for the continued success of the Company and its
subsidiaries. In fiscal 2002, 5,174 shares of Common Stock were issued to
executive officers of the Company and 189,281 shares of Common Stock were issued
to other employees of the Company pursuant to the Stock Purchase Plan. It is
anticipated that there will be a similar level of participation in the Stock
Purchase Plan in fiscal 2003. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
PROPOSED AMENDMENT TO THE STOCK PURCHASE PLAN. PROXIES SOLICITED BY THE BOARD OF
DIRECTORS WILL BE VOTED IN FAVOR OF THE PROPOSAL UNLESS SHAREHOLDERS SPECIFY
OTHERWISE.
DESCRIPTION OF THE STOCK PURCHASE PLAN AS AMENDED BY THE PROPOSED AMENDMENT
The following is a summary of the Stock Purchase Plan incorporating the
proposed amendment and is qualified in its entirety by reference to the full
text of the Stock Purchase Plan as set forth in Appendix A to this proxy
statement.
Participation in the Stock Purchase Plan is open to each eligible employee
of the Company or its participating subsidiaries. The approximate number of
persons eligible to participate in the plan as of June 14,
8
2002, was 907. Employees whose customary employment is for 20 hours or less per
week or five months or less in any calendar year are not eligible to
participate. A participating subsidiary is any subsidiary that is owned 50% or
more by the Company or, with respect to a lower-tier subsidiary, by a subsidiary
of the Company, and that has been designated by the Compensation Committee as a
participating affiliate in the Stock Purchase Plan. The Company's wholly-owned
subsidiaries have been designated as participating affiliates in the Stock
Purchase Plan.
Each eligible employee may elect to have payroll deductions over each
"option period" of an amount which shall not exceed 10% of such employee's
compensation for the option period. An option period consists of the 12-month
period beginning July 1 and ending the following June 30, or beginning January 1
and ending the following December 31. At the end of each option period, the
Company uses the funds accumulated in each participating employee's stock
purchase account to purchase the number of whole shares of Common Stock
determined by dividing (i) the aggregate payroll deduction authorized by the
participant for the option period, by (ii) 85% of the Fair Market Value per
share on the first day of the option period. The purchase price of a single
share of Common Stock under the Stock Purchase Plan is the lower of either (i)
85% of the Fair Market Value per share on the date of grant of the option, which
is the first day of the option period, or (ii) 85% of the Fair Market Value per
share on the date on which the option is exercised, which is the last day of the
option period. The term "Fair Market Value" is defined as the closing price on
the date in question of a share of Common Stock on the Nasdaq National Market.
No participant may purchase shares under the Stock Purchase Plan at a rate which
exceeds $25,000 in Fair Market Value of shares for each calendar year. In
addition, an otherwise eligible employee may not be granted an option under the
Stock Purchase Plan if such employee would, immediately after grant of the
option, own stock possessing 5% or more of the total combined voting power or
value of all classes of stock of the Company or any parent or subsidiary
corporation of the Company. Stock certificates representing such purchased
shares are issued to the participating employees as soon as practicable after
the end of each option period; provided, however, that the obligation of the
Company to deliver such Common Stock may be postponed for such period of time as
may be necessary to register or qualify the purchase of the shares under the
Securities Act of 1933 or any applicable foreign or state securities law. No
fractional shares are issued upon exercise of an option. Any balance remaining
in a participant's stock purchase account following exercise of an option is
returned to the participant. The cash proceeds received by the Company upon
exercise of an option constitute general funds of the Company. An option granted
under the Stock Purchase Plan is not transferable by the participant and is
exercisable only by the participant. A participant may withdraw from the Stock
Purchase Plan at any time by written notice to the Company. Upon withdrawal, the
balance in the participant's stock purchase account is returned to the
participant.
The Compensation Committee, composed of three or more members of the Board
of Directors of the Company, who are not employees of the Company, is
responsible for administration of the Stock Purchase Plan. Fees and expenses
incurred in connection with the administration of the Stock Purchase Plan are
paid by the Company.
The Board of Directors may amend or terminate the Stock Purchase Plan at
any time without shareholder approval; provided, however, that shareholder
approval is required for any amendment that would (i) increase the total number
of shares of Common Stock issuable under the Stock Purchase Plan (other than
pursuant to certain provisions of the Stock Purchase Plan relating to stock
splits, stock dividends, mergers and other changes in the Common Stock), (ii)
modify the criteria for determining the employees or class of employees eligible
to participate or (iii) materially increase benefits accruing under the Stock
Purchase Plan to participants who are subject to Section 16 of the Securities
Exchange Act of 1934. No termination or amendment of the Stock Purchase Plan
will adversely affect the rights of a participant under an option outstanding at
the time of such termination or amendment, except with the consent of such
participant.
FEDERAL INCOME TAX CONSEQUENCES
The following summary relates to U.S. Federal income tax consequences only
and applies to United States citizens and foreign persons who are United States
residents. In addition to the income tax consequences described below, the
acquisition, ownership or disposition of an option or shares acquired upon the
exercise of an option under the Stock Purchase Plan may have tax consequences
under U.S. Federal estate tax laws and various state laws that may be applicable
to certain participants in the Stock Purchase Plan.
The Stock Purchase Plan is designed to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code"). Amounts deducted from the income of a participating
employee under the Stock Purchase Plan will be included in such employee's
income for the year in which such amounts would otherwise have been paid to the
employee, and will be deductible by the Company. The employee will not recognize
additional taxable income either (i) at the time options are granted
9
pursuant to the Stock Purchase Plan or (ii) at the time options are exercised
under the Stock Purchase Plan, and no further deduction is allowed to the
Company at either time. The employee's basis in shares purchased under the Stock
Purchase Plan will equal the amount paid for such shares.
An employee who purchases shares pursuant to an option under the Stock
Purchase Plan and disposes of such shares more than two years after the option
is granted and more than one year after the option is exercised, or who dies at
any time while holding the shares, will recognize ordinary income at the time of
disposition or death in an amount equal to the lesser of (i) the excess, if any,
of the fair market value of the shares at the time of the disposition or death
over the amount paid for the shares, or (ii) 15% of the fair market value of the
shares at the time the option was granted. The Company will not be entitled to a
deduction in respect of any amount of ordinary income so recognized by the
employee. The employee's basis in the shares disposed of will be increased by
the amount of ordinary income recognized. Any further gain recognized on the
disposition will be taxed as long-term capital gain. Long-term capital gain of
an individual is subject to a maximum rate of 20%. If the fair market value of
shares purchased under the Stock Purchase Plan is less on the date of
disposition or death than the amount paid for the shares, no amount will be
included in the employee's gross income as ordinary income, and the full amount
of any loss (assuming the shares are sold in an arm's length transaction) will
be a long-term capital loss.
An employee who purchases shares pursuant to an option under the Stock
Purchase Plan and disposes of such shares less than two years after the option
is granted or less than one year after the option is exercised will recognize
ordinary income at the time of disposition in an amount equal to the excess of
the fair market value of the shares on the date of exercise of the option over
the amount paid for such shares or, if less, the gain on disposition. The
Company will be entitled to a deduction equal to the amount of ordinary income
recognized by the employee. Any additional gain recognized by the employee on
the disposition will be short-term or long-term capital gain, depending on the
employee's holding period for the shares transferred. If the employee's basis in
the shares purchased under the Stock Purchase Plan is greater than the amount
received for the shares, the excess of the basis over the amount received will
be short-term or long-term capital loss (assuming the shares are sold in an
arm's length transaction), depending on the employee's holding period for the
shares.
The Stock Purchase Plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1974 and is not qualified under Section 401(a)
of the Code.
PROPOSAL 3. TO APPROVE THE ISSUANCE OF SHARES OF COMMON STOCK UPON
CONVERSION OF THE CONVERTIBLE NOTES, IN LIEU OF CASH PAYMENTS ON THE
CONVERTIBLE NOTES, AND UPON THE EXERCISE OF THE WARRANTS TO THE
EXTENT SUCH ISSUANCE WOULD REQUIRE SHAREHOLDER APPROVAL UNDER THE
RULES OF THE NASDAQ NATIONAL MARKET.
On May 30, 2002, the Company issued in a private placement $10.0 million
of notes initially convertible by the holders into 1,617,077 shares of Common
Stock and warrants initially exercisable for 621,304 shares of common stock. In
addition, under the terms of the convertible notes, the Company may make certain
payments of principal and interest through the issuance of Common Stock in
partial conversion of the notes. The issuance of shares of Common Stock upon the
conversion of or in lieu of cash payments on the convertible notes and upon the
exercise of the warrants under certain circumstances, including prior
shareholder approval, could equal 20% or more of the Company's Common Stock
outstanding prior to the private placement.
The Company is subject to the NASD Marketplace Rules because its Common
Stock is listed on the Nasdaq National Market. Those rules require shareholder
approval for any issuance of stock at a price below the book or market price,
where the amount of stock being issued is at least 20% of the outstanding common
stock. Because of this rule and a related contractual commitment by the Company
to the purchasers of the convertible notes and warrants, the Company is seeking
approval to issue Common Stock upon the conversion of or in lieu of cash
payments on the convertible notes and the exercise of the warrants to the extent
such issuance equals or exceeds 20% of the Company's outstanding Common Stock
before the issuance of the convertible notes and warrants. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE ISSUANCE OF SHARES OF COMMON
STOCK UPON CONVERSION OF THE COMPANY'S OUTSTANDING CONVERTIBLE NOTES, IN LIEU OF
CASH PAYMENTS ON THE CONVERTIBLE NOTES, AND UPON THE EXERCISE OF THE WARRANTS TO
THE EXTENT SUCH ISSUANCE WOULD REQUIRE SHAREHOLDER APPROVAL UNDER THE RULES OF
THE NASDAQ NATIONAL MARKET. Set forth below is certain information with respect
to the issuance of the convertible notes and the warrants.
10
REASON FOR ISSUANCE OF CONVERTIBLE NOTES AND WARRANTS
The Company issued the convertible notes and warrants in May 2002 as part
of an overall financing transaction that consisted of the private placement of
$10.0 million in convertible notes and the accompanying warrants; a three-year
$14.0 million mortgage loan on the Company's headquarters in Dallas, Texas; the
sale of the Company's facility in Wichita, Kansas for approximately $2.0
million; and the repayment of approximately $26.0 million under the Company's
senior credit facility. The financing transactions were required, in part,
because from February 28, 2002 through May 30, 2002 the Company had been
operating under a temporary waiver of one of four financial covenants required
by its credit facility. The waiver related to the fixed charge coverage ratio
covenant. In connection with the Company's repayment of indebtedness under the
credit facility, the lenders agreed to waive the Company's breach of the fixed
charge coverage ratio covenant and agreed to provide the Company with a
revolving credit line of up to $12.0 million. The amount that the Company may
borrow under the revolving credit line at any point in time will be determined
by a borrowing base based on its U.S. accounts receivable plus its U.S. raw
materials inventory. The credit facility is cross-defaulted with the convertible
notes, so that a default or the occurrence of certain other events under the
convertible notes will be a default under the credit facility. On June 19, 2002,
the Company repaid the approximately $4.0 million of then outstanding
indebtedness under its revolving credit facility.
PRINCIPAL TERMS OF CONVERTIBLE NOTES AND WARRANTS
The $10.0 million in principal amount of convertible notes were issued on
May 30, 2002. They have a term of 13 months and bear interest at the rate of 6%
per year. The Company's obligation to pay principal and interest under the
convertible notes begins September 1, 2002 and ends June 30, 2003. The Company
may meet its payment obligations under the convertible notes in either cash or
Common Stock through mandatory conversions, provided certain conditions are met.
The Company also has the right under specified circumstances to make voluntary
prepayments of any portion or all of the outstanding principal under the
convertible notes. The note holders have the right at any time to convert the
convertible notes into shares of Common Stock of the Company at an initial
conversion price of $6.184, which was 200% of the volume weighted average price
of the Common Stock at May 30, 2002. The convertible notes, excluding accrued
interest, are initially convertible into 1,617,077 shares of Common Stock. This
number of conversion shares is subject to adjustment from time to time upon the
occurrence of certain events described in the convertible notes. The terms of
the convertible notes prohibit the conversion of any principal in excess of that
amount of principal which, after giving effect to such conversion, would cause a
note holder and its affiliates to beneficially own more than 4.99% of the
outstanding Common Stock of the Company.
The warrants were also issued on May 30, 2002. They may be exercised for a
term of three years. The number of shares of Common Stock of the Company
initially issuable upon exercise of the warrants is 621,304 shares at an initial
per share exercise price of $4.0238. Both the number of warrant shares and the
exercise price are subject to adjustment from time to time upon the occurrence
of certain events described in the warrants.
In connection with the issuance of the convertible notes and the warrants,
the Company also entered into a registration rights agreement under which it is
required to register 150% of the number of shares of Common Stock issuable upon
conversion of the convertible notes, at an assumed conversion price
approximately equal to the market price of the Common Stock, and all of the
Common Stock issuable upon exercise of the warrants, pursuant to applicable
securities laws.
WHY THE COMPANY NEEDS SHAREHOLDER APPROVAL
In accordance with Rule 4350 of the Nasdaq Marketplace Rules, which
requires shareholder approval for the issuance of common stock (or securities
convertible into, or exercisable for, common stock) at a price below the book or
market price representing 20% or more of an issuer's common stock or voting
power outstanding before such issuance, and under the terms of the agreement
pursuant to which the Company sold the convertible notes and the warrants, the
Company is soliciting shareholder approval of the issuance of shares of Common
Stock upon conversion of, or in lieu of cash payments on, the convertible notes
and exercise of the warrants, to the extent such issuance equals or exceeds 20%
of the Company's outstanding Common Stock before such issuance. If the Company
obtains shareholder approval, there is no limit over time on the number of
shares that could be issued upon conversion of, or in lieu of cash payments on,
the convertible notes and exercise of the warrants, and such issuance of shares
of Common Stock will no longer be subject to shareholder approval under Nasdaq
Rule 4350. If the Company does not obtain shareholder approval, the Company will
not be obligated to issue any shares representing 20% or more of the outstanding
Common Stock prior to the issuance of the convertible notes and warrants due to
restrictions relating to Nasdaq Rule 4350. The holders would, however, have the
right under such circumstances to require the Company to redeem in cash the
portion of the remaining balance of the convertible notes and the portion of the
warrants with respect to which shares cannot be issued, but there is no
assurance that the Company would
11
have sufficient cash at such time to effect the redemption. If the shareholders
do not approve this proposal, and the Company does not have sufficient cash at
such time to effect a redemption, the Company will default on its obligations
under the convertible notes and warrants.
PROVISIONS OF THE CONVERTIBLE NOTES AND WARRANTS THAT COULD RESULT IN THE
ISSUANCE OF SHARES
Both the convertible notes and the warrants contain a number of provisions
that could require or result in the issuance of, respectively, more than
1,617,077 shares of Common Stock into which the notes are initially convertible
by the holders and the 621,304 shares of Common Stock for which the warrants,
excluding accrued interest, are initially exercisable. These provisions are
summarized below.
CONVERTIBLE NOTES
CONVERSION OF CONVERTIBLE NOTES IN LIEU OF CASH PAYMENTS; ADJUSTMENTS
The repayment of the convertible notes could result in the issuance of
shares of Common Stock equal to or in excess of 20% of the Company's outstanding
Common Stock prior to the private placement. The Company will repay the
convertible notes in monthly installments of principal in the amount of $1.0
million, plus accrued interest on the applicable installments at 6% per annum,
beginning September 1, 2002, and ending June 30, 2003. At the Company's option,
it may make its monthly installments in cash or through a partial conversion of
the convertible notes into shares of the Company's Common Stock at a conversion
rate equal to the lesser of $6.184, which was 200% of the weighted average
trading price for the Company's Common Stock as reported on the Nasdaq National
Market on the issuance date, or 95% of the average of the weighted average
trading prices of the Company's Common Stock during the time period to which the
installment relates. Since the Company is not permitted to make principal
payments on the convertible notes in cash if any amount is outstanding under the
credit facility, and if the weighted average trading price remains low, the
payment of the monthly installments through partial conversion of the
convertible notes could result in the issuance of shares of Common Stock equal
to or in excess of 20% of the Company's outstanding Common Stock prior to the
private placement. On June 19, 2002, the Company repaid the approximately $4.0
million of indebtedness then outstanding under its revolving credit facility. By
paying off all remaining loans under the revolving credit facility, the Company
has satisfied such covenant in the credit facility which prevents the Company
from making cash payments on the convertible notes while there are outstanding
borrowings under the facility. Accordingly, and for so long as no new borrowings
are outstanding under the credit facility, the Company may pay installments on
the convertible notes in cash instead of Common Stock.
Certain events may transpire that lower the applicable conversion price
under the convertible notes or otherwise give the holders rights to additional
shares of Common Stock, which could result in the issuance of shares of Common
Stock equal to or in excess of 20% of the Company's outstanding Common Stock
prior to the private placement. Any determination of the number of shares of the
Company's Common Stock into which the convertible notes may be converted is
subject to adjustment in the event of certain future issuances of securities or
derivative securities, stock dividends, stock splits, stock combinations and
other similar transactions. Any adjustments that lower the applicable conversion
price could result in the issuance of shares of Common Stock equal to or in
excess of 20% of the Company's outstanding Common Stock prior to the private
placement. The convertible notes give the holders the right to any additional
rights, including those obtained through the consolidation, merger or sale of
assets of the Company or a similar transaction, that are granted, issued or sold
to the Company's shareholders as if the holders had held the number of shares of
Common Stock acquirable upon the complete conversion of the convertible notes at
the time such rights become available to the shareholders. The convertible notes
also give the holders the right to any dividends or distributions that are made
to the Company's shareholders as if the holders had held the number of shares of
Common Stock acquirable upon the complete conversion of the convertible notes at
the time such rights become available to the shareholders. These additional
rights could result in the issuance of shares of Common Stock equal to or in
excess of 20% of the Company's total outstanding Common Stock prior to the
private placement.
CONVERSION OF CONVERTIBLE NOTES AT THE OPTION OF THE HOLDER
The $10.0 million in convertible notes the Company issued in May 2002 are
convertible at the option of the holder, in whole or in part, at any time prior
to their maturity in June 2003 at the initial conversion price of $6.184, which
was 200% of the weighted average trading price for the Company's Common Stock as
reported on the Nasdaq National Market on the issuance date. Any determination
of the number of shares of the Company's Common Stock into which the convertible
notes may be converted is subject, however, to adjustment in the event of
certain future issuances of securities or derivative securities, stock
dividends, stock splits, stock combinations and other similar transactions. Any
adjustments that lower the applicable conversion price could result in the
issuance of shares of Common Stock equal to or in excess of 20% of the Company's
outstanding Common Stock prior to the private placement. If the Company does not
timely effect a conversion
12
of the convertible notes, it will be subject to cash penalties, additional
adjustments to the applicable conversion price and other penalties described in
the convertible notes. Moreover, in such case, the holders of the convertible
notes may require the Company to redeem all of the outstanding principal amount
of the convertible notes at that time (as discussed below), which could
ultimately result in a further adjustment to the applicable conversion price.
REDEMPTION AND DEFAULT PROVISIONS IN THE CONVERTIBLE NOTES
Certain events, referred to as "Triggering Events," could result in an
adjustment that lowers the applicable conversion price and the issuance of
shares of Common Stock equal to or in excess of 20% of the Company's outstanding
Common Stock prior to the private placement. Upon the occurrence of a Triggering
Event, the holders of the convertible notes may cause the Company to redeem the
convertible notes in cash. Circumstances under which the holders may redeem the
convertible notes include: the Company's failure to obtain and/or maintain the
effectiveness of the registration statement covering the resale of the Common
Stock underlying the convertible notes and the warrants, the suspension from
trading of the Company's Common Stock or the failure of such stock to be listed
for a period of five consecutive trading days or for more than 10 trading days
in any 365-day period, the Company's failure to timely deliver shares of Common
Stock, material breaches by the Company under the applicable securities purchase
agreement, the convertible notes, the warrants, the registration rights
agreement or any other agreement entered into in connection with the
transactions contemplated by such agreements, and the Company's failure to make
its monthly installments as provided in the convertible notes.
However, if the Company does not have sufficient cash to effect a
redemption as a result of a Triggering Event, the holders are entitled to void
their redemption notices and receive a reset of their applicable conversion
price to the lesser of 200% of the weighted average trading price for the
Company's Common Stock as reported on the Nasdaq National Market on the date of
the private placement, subject to adjustment, or the lowest weighted average
price of the Company's Common Stock during the period beginning on the date on
which the notice of redemption is delivered to the Company and ending on the
date the holder delivers notice to the Company of its intent to void the
redemption notice. This reset to a lower applicable conversion price could
result in the issuance of shares of Common Stock equal to or in excess of 20% of
the Company's outstanding Common Stock prior to the private placement, assuming
prior shareholder approval.
The occurrence of an event of default under the convertible notes could
also result in the issuance of shares of Common Stock equal to or in excess of
20% of the Company's outstanding Common Stock prior to the private placement. If
an event of default occurs, the holders of the convertible notes may declare the
convertible notes, including all amounts due thereunder, to be due and payable
immediately. Such amount shall bear interest at the rate of 2.0% per month until
paid in full. If the Company does not timely pay the amounts due, the holders of
the convertible notes may void the acceleration and the conversion price shall
be adjusted to the lesser of 200% of the weighted average trading price for the
Company's Common Stock as reported on the Nasdaq National Market on the date of
the private placement, subject to adjustment, or the lowest weighted average
price of the Company's Common Stock during the period beginning on the date on
which the convertible notes became accelerated and ending on the date on which
the holders of the convertible notes notify the Company of their intent to void
the acceleration. This reset to a lower applicable conversion price could result
in the issuance of shares of Common Stock equal to or in excess of 20% of the
Company's outstanding Common Stock prior to the private placement, assuming
prior shareholder approval. The events of default include any failure to pay any
principal amount of the convertible notes when due, failure to comply with any
material provision of the convertible notes, some payment defaults of the
Company's other indebtedness, initiation of bankruptcy proceedings by or against
the Company and the Company's failure to timely file any report with the SEC
under the Securities Exchange Act of 1934.
WARRANTS
In connection with the sale of the convertible notes, the Company issued
warrants to the purchasers of the convertible notes. The warrants give the
holders the right to purchase from the Company, for a period of three years, an
aggregate of 621,304 shares of the Company's Common Stock for $4.0238 per share
as of the date of issuance. Certain events may transpire that lower the
applicable exercise price under the warrants, increase the number of warrants or
otherwise give the holders rights to additional shares of Common Stock, which
could result in the issuance of shares of Common Stock equal to or in excess of
20% of the Company's outstanding Common Stock prior to the private placement.
Both the number of warrants and the exercise price of the warrants are subject
to anti-dilution adjustments in the event of certain future issuances of
securities or derivative securities, stock dividends, stock splits, stock
combinations and any other similar transactions. Any adjustments that increase
the number of warrants or lower the exercise price could result in the issuance
of shares of Common Stock equal to or in excess of 20% of the Company's
outstanding Common Stock prior to the private placement. The warrants also give
the holders the right to any additional rights, including those obtained through
the consolidation, merger or sale of assets of the Company or a similar
transaction, that are
13
granted, issued or sold to the Company's shareholders as if the holders had held
the number of shares of Common Stock acquirable upon the complete exercise of
the warrants at the time such rights become available to the shareholders. These
additional rights could result in the issuance of shares of Common Stock equal
to or in excess of 20% of the Company's total outstanding Common Stock prior to
the private placement, assuming prior shareholder approval.
POTENTIAL DILUTION AND MARKET CONSEQUENCES
The issuance of shares of Common Stock pursuant to the convertible notes
and warrants could substantially dilute the interests of the Company's other
shareholders. The $10.0 million in convertible notes the Company issued in May
2002 are convertible by the holders into Common Stock at any time prior to their
maturity in June 2003 at an initial conversion price of $6.184, which was 200%
of the weighted average price of the Company's Common Stock as reported on the
Nasdaq National Market on the date of issuance, subject to adjustments in the
event of certain future issuances of securities or derivative securities, stock
splits, stock dividends, stock combinations and other similar transactions.
Moreover, the conversion price of the convertible notes could be lowered,
perhaps substantially, in a variety of circumstances, including: the Company's
issuance of Common Stock below the convertible notes' conversion price, either
directly or in connection with the issuance of most securities that are
convertible into, or exercisable for, shares of its Common Stock, the Company's
failure to comply with specific registration and listing obligations applicable
to the Common Stock into which the convertible notes are convertible, and the
Company's breaching other obligations to the holders of the convertible notes.
Correspondingly, the Company issued to the holders of convertible notes in
May 2002 three-year warrants entitling the warrant holders to purchase an
aggregate of 621,304 shares of its Common Stock at an exercise price of $4.0238
per share. Both the number of warrants and the exercise price are subject to
adjustments that could make them further dilutive to the Company's other
shareholders. Neither the convertible notes nor the warrants establish a "floor"
that would limit reductions in the conversion price of the convertible notes or
the exercise price of the warrants that may occur under certain circumstances.
Correspondingly, there is no "ceiling" on the number of warrants that may be
issuable under certain circumstances under the anti-dilution adjustments in the
warrants.
In addition, the Company's revolving credit facility prohibits it from
paying any installments on the convertible notes in cash at any time the Company
has indebtedness outstanding under its credit facility. Under such circumstances
the Company would effectively be required to pay installments on the convertible
notes through a partial conversion of the convertible notes into shares of its
Common Stock. The conversion price, subject to certain anti-dilution
adjustments, would be the lower of $6.184, which was 200% of the weighted
average trading price for the Company's Common Stock as reported on the Nasdaq
National Market on the issuance date, or 95% of the average of the weighted
average trading prices of the Company's Common Stock during the time period to
which the installment relates. Since the Company's inability to pay installments
in cash would most likely occur when it is experiencing unsatisfactory operating
results and lower trading prices for its Common Stock, the number of shares
required to pay an installment in a partial conversion of the convertible notes
could increase significantly, with the resultant dilution further depressing the
Company's stock price.
To the extent the holders convert the convertible notes or exercise the
warrants and then sell the shares of the Company's Common Stock they receive
upon conversion or exercise, the Company's stock price could decrease due to the
additional amount of shares available in the market. The subsequent sales of
these shares could encourage short sales by the Company's shareholders and
others, which could place further downward pressure on the Company's stock
price. Moreover, the note and warrant holders, subject to certain limits, may
hedge their positions in the Company's stock by shorting its stock, which could
further adversely affect the stock price. The effect of these activities on the
Company's stock price could increase the number of shares required to be issued
upon conversion of the convertible notes, in lieu of cash payments on the
convertible notes or upon exercise of the warrants.
While the Company intends to make all payments on the convertible notes in
cash, the conversion of and the payment of principal and interest in shares of
Common Stock in lieu of cash on the convertible notes and the exercise of the
warrants could result in substantial dilution to the interests of other holders
of the Company's Common Stock. Even though no holder may convert any principal
amount under its convertible notes or exercise its warrants if upon such
conversion or exercise such holder, together with its affiliates, would
beneficially own more than 4.99% of the Company's outstanding Common Stock
following such conversion or exercise, this restriction does not prevent a
holder from selling a substantial number of shares in the market. By
periodically selling shares into the market, an individual holder could
eventually sell more than 4.99% of the Company's Common Stock while never
holding more than 4.99% at any specific time. This process could also result in
the issuance of shares of Common Stock equal to or in excess of 20% of the
Company's outstanding Common Stock prior to the private placement, assuming
prior shareholder approval.
14
WHERE YOU CAN FIND ADDITIONAL INFORMATION
The terms of the convertible notes and warrants are complex and only
briefly summarized in this proxy statement. Shareholders wishing further
information concerning the rights, preferences and terms of the convertible
notes and warrants are referred to the documents filed as exhibits to the
Company's Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 30, 2002, and its registration statement on Form S-3 filed
with the SEC on June 14, 2002.
In connection with the Company's issuance of the convertible notes and the
warrants, the Company filed a registration statement on Form S-3 with the
Securities and Exchange Commission on June 14, 2002. That registration statement
covers the resale of up to 7,600,000 shares of Common Stock that would
potentially become issuable upon conversion of or in lieu of cash payments on
the convertible notes and upon exercise of the warrants. The Company could be
required from time to time to register additional shares for such purposes due
to declines in the trading price of its Common Stock.
PROPOSAL 4. TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION
TO CHANGE ITS CORPORATE NAME
On June 20, 2002, the Board of Directors of the Company approved, subject
to shareholder approval, an amendment to Article I of the Company's Articles of
Incorporation to change its name to "InterVoice, Inc." If the amendment is
approved, Article I of the Company's Articles of Incorporation will be amended
to read in its entirety as follows:
"The name of the corporation is InterVoice, Inc."
The proposed amendment would restore the Company's corporate name to
"InterVoice, Inc.," the name used by the Company prior to its merger with Brite
Voice Systems, Inc. in 1999. The Board of Directors believes the products,
services, operations and personnel of the former InterVoice and the former Brite
have been fully integrated and that it is therefore appropriate to shorten the
Company's name to InterVoice, Inc.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED AMENDMENT TO
THE COMPANY'S ARTICLES OF INCORPORATION. PROXIES SOLICITED BY THE BOARD OF
DIRECTORS WILL BE VOTED IN FAVOR OF THE PROPOSAL UNLESS SHAREHOLDERS SPECIFY
OTHERWISE.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
To the Shareholders of InterVoice-Brite, Inc.:
COMPENSATION POLICY. The goal of the Company's executive compensation
policy is to ensure that an appropriate relationship exists between executive
pay and the creation of shareholder value, while at the same time motivating and
retaining key employees. To achieve this goal, executive officers are offered
compensation opportunities that are linked to the Company's business objectives
and performance, individual performance and contributions to the Company's
success and enhanced shareholder value. The Company's compensation programs are
designed and revised from time to time to be competitive within the software and
data industry and the telecommunications industry.
The Company's executive compensation program consists primarily of (i)
base salary, (ii) incentive cash bonus opportunities based upon individual and
corporate performance, and (iii) long-term equity based incentives. All
executive officers were eligible for and did participate in the Company's
incentive cash bonus program during fiscal 2002. Only two of the Company's
executive officers received stock options under the Company's equity-based
incentive programs during fiscal 2002. The Company generally targets the
aggregate of annual base salary, bonus opportunities and long-term equity based
incentives made available to officers, who successfully perform their
responsibilities, above the mid-point level for officers with similar positions
in companies of comparable size in the software and data/telecommunications
industries. The Compensation Committee believes that compensation opportunities
above the mid-point for its comparison group are appropriate provided incentive
cash bonus opportunities are a significant part of each executive officer's
compensation package and such bonus opportunities are dependant upon the Company
achieving important elements of its business and financial plans. As discussed
below, the compensation opportunities are largely dependent upon the Company's
ability to achieve its earnings and/or revenue targets.
15
Generally, both cash bonus and equity-based incentive compensation
opportunities for officers increased at a greater rate than their base salaries
from fiscal 1996 through fiscal 2002. The Compensation Committee determined to
put a greater emphasis on incentive compensation commencing with fiscal 1995 to
encourage further the achievement of corporate and individual objectives. To
ensure compliance with the compensation policy, the Company hired an independent
consultant for fiscal 2002. In this capacity the consultant analyzed
compensation paid to the five highest paid executive officers of the Company
based on a survey of compensation information in proxy statements issued by a
variety of software and telecommunications companies. The consultant also
analyzed compensation paid to the Company's other officers based on market
surveys of executive compensation, including surveys for software and
data/telecommunications companies. These surveys included a separate study of
companies within the SIC code for Telephone and Telegraph Apparatus used in the
"Performance Graph" contained in this proxy statement.
STOCK OWNERSHIP GUIDELINES. In April 1995, the Compensation Committee
established stock ownership guidelines for key executives of the Company. These
guidelines provide that executives should hold shares in varying amounts as a
multiple of salary, currently ranging from a minimum of four times annual salary
for the Chairman of the Board and Chief Executive Officer to one times annual
salary for vice presidents who are not executive officers of the Company. The
value of each executive's share holdings for purposes of the guidelines, is
based on the greater of the current market price of the Company's Common Stock
or the aggregate amount the executive paid for the shares.
Although some executives are already at or above the prescribed levels,
the Compensation Committee recognizes that newer employees or those recently
promoted may require some period of time to achieve these levels. Therefore, the
guidelines provide for a transition period of approximately five years for the
suggested levels to be met. The Compensation Committee monitors each executive's
progress toward achieving these guidelines when deciding on future stock option
awards and other equity incentive opportunities.
FISCAL 2002 COMPENSATION.
BASE SALARY. The Compensation Committee annually reviews and sets base
salaries for each of the Company's executive officers at levels within the range
of those persons holding comparable positions at other companies in the
Company's comparison group. In establishing base salaries for executive
officers, the Compensation Committee reviewed the compensation surveys provided
by the compensation consultant. Annual salaries, including increases to
salaries, for fiscal 2002 were reviewed and approved on the basis of the
individual performance of the executive, as determined through an evaluation by
the officer's immediate supervisor in consultation with the Company's executive
management and by the executive's tenure and level of responsibility, the
Company's expected financial performance and changes in competitive pay levels.
Raises to annual base salaries for officers of the Company, including executive
officers, for fiscal 2002, ranged from 2% to 16.7%. Most of the officers
received a raise of between 6% and 8%.
The Company amended and restated its employment agreement with the
Chairman of the Board and Chief Executive Officer of the Company, David W.
Brandenburg, during fiscal 2002, which provided for a base salary of $350,000
for fiscal 2002. The base salary payable to Mr. Brandenburg under his new
agreement increased by $50,000. Mr. Brandenburg's salary for fiscal 2002 was
approximately equal to the base salary payable to the Company's former Chief
Executive Officer, Daniel D. Hammond, during fiscal 2000. The Compensation
Committee supports this salary level, which was less than the median base salary
for chief executive officers in the Company's comparison group. See "Agreements
with Executive Officers" for a discussion of the employment agreements with Mr.
Brandenburg and the Company's Executive Vice President, Chief Financial Officer
and Secretary, Rob-Roy J. Graham.
ANNUAL INCENTIVES. The Company has a bonus program that provides for the
payment of periodic cash bonuses to executive officers contingent upon the
achievement of certain earnings targets, revenue targets and/or other individual
and corporate performance targets. The program is intended to reward the
accomplishment of corporate objectives, reflect the Company's priority on
maintaining growth and stability of earnings, and to provide a fully competitive
compensation package which will attract, reward and retain quality individuals.
Targets and objectives vary for the specific officers involved. For example,
bonus opportunities for the Chairman of the Board and Chief Executive Officer,
and the Executive Vice President, Chief Financial Officer and Secretary, were
based on formulas designed to compensate such officers for any increases to
revenues and earnings per share achieved for fiscal 2002. These officers are
responsible for making and implementing strategic decisions concerning how the
Company plans to achieve its long-term goals for growth and stability of
earnings and revenues. The Compensation Committee believes that the amount of
growth in the Company's annual earnings per share and revenues should continue
to serve as a basis for a significant component of the total compensation for
these officers.
16
The other officers were eligible to receive annual incentive bonuses and
in some cases quarterly incentive bonuses for fiscal 2002 established in
connection with their annual performance reviews, based upon the attainment of
one or more associated individual and/or corporate performance goals. The
performance goals for these other officers were based on factors such as sales
volume, receipt of purchase orders and expense containment. A significant amount
of the annual bonuses for several of the executive officers was contingent upon
the Company attaining a targeted annual sales objective determined by the
Compensation Committee. The Company did not achieve its annual sales objective
for fiscal 2002. Because of the Company's disappointing results from operations
for fiscal 2002, the Company's officers generally received smaller cash bonuses
than in prior years, and certain officers did not earn any bonus. The aggregate
of quarterly and annual bonuses paid to executive officers for fiscal 2002
ranged from approximately 0% to 20% of base salary.
Pursuant to his employment agreement, the bonus opportunity for fiscal
2002 for the Chairman of the Board and Chief Executive Officer would reward Mr.
Brandenburg for increases to the Company's revenues and earnings per share. The
Compensation Committee amended the bonus provisions for fiscal 2002 in the
employment agreement to reflect the Company's business and financial plans for
the fiscal year. Mr. Brandenburg did not receive a bonus for fiscal 2002 because
the Company did not achieve the minimum revenues or earnings per share required
for bonus payments under his employment agreement. The employment agreement with
Mr. Brandenburg also permitted payment of an additional discretionary bonus if
the Compensation Committee determined that such a bonus was appropriate. No such
discretionary bonus was paid to Mr. Brandenburg for fiscal 2002.
Mr. Graham, the Company's Executive Vice President, Chief Financial
Officer and Secretary, has an employment agreement similar to Mr. Brandenburg's
agreement, with similar provisions governing his bonus. Mr. Graham also did not
receive a bonus for fiscal 2002.
LONG-TERM EQUITY-BASED INCENTIVES. Long-term equity based incentive awards
strengthen the ability of the Company to attract, motivate and retain executives
of superior capability and more closely align the interests of management with
those of shareholders. The Compensation Committee believes that such equity
based compensation provides executives with a continuing stake in the long term
success of the Company, and will assist them to achieve the share ownership
targeted under the stock ownership guidelines discussed above. Long-term awards
granted in fiscal 2002 consisted of nonqualified stock options granted under the
Company's 1999 Stock Option Plan. Unlike cash, the value of a stock option will
not be immediately realized and does not result in a current expense to the
Company.
The stock options are granted at the market price on the date of grant and
will only have value if the Company's stock price increases, resulting in a
commensurate benefit to the Company's shareholders. Generally, grants vest in
equal amounts over a three-year to four-year period. Executives generally must
be employed by the Company at the time of vesting in order to exercise the
options.
The Compensation Committee, in consultation with the Company's executive
management, determines from time to time the executive officers who shall
receive options or shares of restricted stock under the Company's employee stock
option plans and restricted stock plan, the timing of such awards, the number of
shares of Common Stock to be subject to each award and the other terms of each
award. Annual stock option awards are made in light of a compensation review and
recommendations prepared by a compensation consultant comparing stock option
awards to officers by the Company to awards made by companies in the Telephone
and Telegraph Apparatus industry whose description of business and revenues most
closely approximated those of the Company. These companies are included in the
Company's peer group index set forth in the section entitled "Stock Performance
Graph". Grants to individual executive officers by the Compensation Committee
are based on their annual performance evaluations, relative salary levels, the
number of shares under options previously granted, and their potential
contribution to the long-term performance of the Company. The emphasis placed on
equity-based incentive opportunities was also considered by the Compensation
Committee in determining stock option awards.
The Compensation Committee did not make its normal annual grant of stock
options to key employees during fiscal 2002. The Compensation Committee decided
not to make an annual grant because it had granted stock options for more shares
than usual during the previous fiscal year, fiscal 2001, in an effort to retain
its most talented employees. The only executive officers who received stock
options during fiscal 2002 were the Presidents of the Enterprise Solutions and
Network Solutions Divisions. The Compensation Committee decided the Division
Presidents should have a larger equity stake in the Company because their future
performance is critical to the long-term success of the Company. Stock options
were not granted to the Company's Chief Executive Officer during fiscal 2002.
17
The Compensation Committee believes that linking executive compensation to
corporate performance results in a better alignment of compensation with
corporate goals and shareholder interest. As performance goals are met or
exceeded, resulting in an increased value to shareholders, executives are
rewarded commensurately. The Compensation Committee believes that compensation
levels during fiscal 2002 adequately reflect the Company's compensation goals
and policies.
June 20, 2002
COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
George C. Platt , Chairman
Joseph J. Pietropaolo
Stanley G. Brannan
Grant A. Dove
18
SUMMARY COMPENSATION TABLE
The following table sets forth certain summary information concerning the
compensation paid or awarded to the Chief Executive Officer and the other four
most highly compensated executive officers of the Company in fiscal 2002 (the
"Named Officers") for services rendered in all capacities to the Company and its
subsidiaries for the fiscal years ended February 28, 2002, February 28, 2001,
and February 29, 2000.
LONG TERM COMPENSATION ALL OTHER
ANNUAL COMPENSATION AWARDS COMPENSATION
--------------------------- --------------------------- ------------
ALL OTHER
RESTRICTED SECURITIES CASH
FISCAL STOCK UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS ISSUANCES OPTIONS SATION(2)
------------------------------ ------ ------------ ------------ ------------ ------------ ------------
David W. Brandenburg 2002 $ 350,486 -- -- -- $ 5,948
Chairman of the Board 2001 205,979 -- -- 500,000 4,086
and Chief Executive Officer(3) 2000 -- -- -- -- --
Rob-Roy J. Graham 2002 $ 255,861 -- -- -- $ 6,467
Executive Vice President 2001 215,926 $ 100,000 -- 100,000 5,867
Chief Financial Officer 2000 196,708 245,333 $ 631,542 40,000 5,668
Secretary
Controller(4)
Ray S. Naeini 2002 $ 264,486 -- -- 50,000 $ 6,689
Former President and General 2001 225,504 $ 154,955 -- 100,000 6,337
Manager Network Solutions 2000 147,949 180,000 -- 100,000 2,956
Division(5)
Robert Ritchey 2002 $ 241,236 $ 24,075 -- 50,000 $ 8,680
President(6) 2001 56,250 28,125 100,000 390
2000 -- -- -- -- --
Dean C. Howell 2002 $ 195,246 $ 38,952 -- -- $ 5,047
Executive Vice President and 2001 173,837 67,400 -- 50,000 5,012
General Counsel(7) 2000 160,441 48,000 -- 15,000 4,981
(1) Includes amounts deferred at the Named Officer's election pursuant to the
Company's 401(k) Employee Savings Plan.
(2) Represents Company contributions on behalf of the Named Officers under the
Company's 401(k) Employee Savings Plan and amounts includable in
compensation for Company-paid group term life insurance.
(3) Mr. Brandenburg became employed by the Company during June 2000. All other
cash compensation for Mr. Brandenburg includes $2,594 for contributions
under the Company's 401(k) Employee Savings Plan and $3,354 for
Company-paid group term life insurance in fiscal year 2002; and $2,312 for
contributions under the Company's 401(k) Employee Savings Plan and $1,774
for Company-paid group term life insurance in fiscal year 2001.
(4) Mr. Graham was issued 9,228 restricted shares of Common Stock on each of
February 10 and February 28, 2000. All restrictions on the restricted
shares issued to Mr. Graham on February 10 and February 28, 2000 lapsed
during February 2002. The value of restricted shares is based on the
closing price of the Company's Common Stock on the Nasdaq National Market
on February 28, 2000. At February 28, 2002, the aggregate restricted share
holdings in shares (and dollars) issued in fiscal 2000 was 18,456 ($93,018)
for Mr. Graham, based on the closing price of the Company's Common Stock on
that date. The restricted shares disclosed in this table will earn
dividends when, as, and if dividends are declared on the Common Stock by
the Board of Directors. All other cash compensation for Mr. Graham includes
$5,564 for contributions under the Company's 401(k) Employee Savings Plan
and $903 for Company-paid group term life insurance in fiscal year 2002;
$5,190 for contributions under the Company's 401(k) Employee Savings Plan
and $677 for Company-paid group term life insurance in fiscal year 2001;
and $4,836 for contributions under the Company's 401(k) Employee Savings
Plan and $832 for Company-paid group term life insurance in fiscal year
2000.
19
(5) All other cash compensation for Mr. Naeini includes $5,370 for
contributions under the Company's 401(k) Employee Savings Plan and $1,319
for Company-paid group term life insurance in fiscal year 2002; $5,561 for
contributions under the Company's 401(k) Employee Savings Plan and $776 for
Company-paid group term life insurance in fiscal year 2001; and $1,925 for
contributions under the Company's 401(k) Employee Savings Plan and $1,031
for Company-paid group term life insurance in fiscal year 2000.
(6) Mr. Ritchey became employed by the Company during December 2000. All other
cash compensation for Mr. Ritchey includes $6,454 for contributions under
the Company's 401(k) Employee Savings Plan and $2,226 for Company-paid
group term life insurance in fiscal year 2002; and $390 for Company-paid
group term life insurance in fiscal year 2001.
(7) All other cash compensation for Mr. Howell includes $4,606 for
contributions under the Company's 401(k) Employee Savings Plan and $441 for
Company-paid group term life insurance in fiscal year 2002; $4,656 for
contributions under the Company's 401(k) Employee Savings Plan and $356 for
Company-paid group term life insurance in fiscal year 2001; and $4,594 for
contributions under the Company's 401(k) Employee Savings Plan and $387 for
Company-paid group term life insurance in fiscal year 2000.
OPTION GRANTS IN FISCAL YEAR 2002
The following table sets forth certain information with respect to grants
of stock options to the Named Officers during fiscal 2002 pursuant to the
Company's 1999 Stock Option Plan.
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM (2)
------------------------------------------- ------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED(1) 2002 (/SH) DATE 5% 10%
-------------------- ------------ ------------ ------------ ------------ ------------ ------------
David W. Brandenburg
Rob-Roy J. Graham
Ray S. Naeini 50,000 19.3% $ 12.77 8/10/11 $ 401,500 $ 1,017,500
Robert Ritchey 50,000 19.3% $ 11.99 5/11/11 $ 377,000 $ 955,500
Dean C. Howell
(1) All options were granted at fair market value (the average of the high and
low trading prices of the Common Stock on the Nasdaq National Market) on
the date of grant and expire ten years from the date of grant. The options
become exercisable in three equal amounts on the first three annual
anniversaries of the date of grant.
(2) The assumed 5% and 10% rates of stock price appreciation are specified by
the proxy rules and do not reflect expected appreciation. The amounts shown
represent the assumed value of the stock options (less exercise price) at
the end of the ten-year period beginning on the date of grant and ending on
the option expiration date. For a ten-year period beginning February 28,
2002, based on the closing price on the Nasdaq National Market of the
Common Stock of $5.04 on such date, a share of the Common Stock would have
a value on February 28, 2012 of approximately $8.21 at an assumed
appreciation rate of 5% and approximately $13.07 at an assumed appreciation
rate of 10%.
20
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2002 AND FISCAL YEAR-END OPTION
VALUES
The following table provides information concerning option exercises in
fiscal 2002 and the value of unexercised options held by each of the Named
Officers at the end of fiscal 2002.
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR FISCAL YEAR
END(#) END($)(1)
--------------- ---------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
-------------------- --------------- --------------- --------------- ---------------
David W. Brandenburg 0 $ 0 381,000/125,000 $0/$0
Rob-Roy J. Graham 0 $ 0 264,798/80,002 $18,000/$0
Ray S. Naeini 0 $ 0 99,998/150,002 $0/$0
Robert Ritchey 0 $ 0 33,333/116,667 $0/$0
Dean C. Howell 0 $ 0 87,400/38,334 $6,179/$0
(1) Values stated are based on the closing price ($5.04) of the Company's
Common Stock as reported on the Nasdaq National Market on February 28,
2002 and the exercise price of the options.
EQUITY COMPENSATION PLAN INFORMATION
The Company currently maintains six compensation plans that provide for
the issuance of Common Stock of the Company to officers and other employees of
the Company. These plans consist of the 1990 Employee Stock Option Plan, 1999
Stock Option Plan, 1990 Non-Employee Option Plan, Employee Stock Purchase Plan
and the Restricted Stock Plan, which have been approved by shareholders, and the
1998 Employee Non-Qualified Plan which has not been approved by the
shareholders. The following table sets forth information regarding outstanding
options and shares of Common Stock reserved for future issuance under the
foregoing plans as of February 28, 2002:
(A) (B) (C)
Number of Shares of
Common Stock Remaining
Number of Shares of Available For Future
Common Stock To Be Weighted-Average Issuance Under Equity
Issued Upon Exercise Of Exercise Price Of Compensation Plans
Outstanding Options, Outstanding Options and (Excluding Shares
Plan Category Warrants And Rights Rights Reflected In Column (A)
---------------------------- -------------------------- -------------------------- --------------------------
Equity compensation plans 5,061,718 $ 9.39 1,469,123(1)
approved by shareholders
Equity compensation plans 375,418 $ 5.83 121,751(2)
not approved by
shareholders
--------- ------ ---------
TOTAL 5,437,136 $ 9.14 1,590,874
--------- ------ ---------
(1) Includes 60,092 shares of the Company Common Stock remaining available for
future issuance under the Employee Stock Purchase Plan as of February 28,
2002.
(2) Consists of options that are outstanding or may be issued pursuant to the
1998 Employee Non-Qualified Plan. The material features of the 1998
Employee Non-Qualified Plan are as described in the Company's Form 10-K
filed for the fiscal year ended February 28, 2002.
21
AGREEMENTS WITH EXECUTIVE OFFICERS
EMPLOYMENT AGREEMENT WITH DAVID W. BRANDENBURG. On June 26, 2000 the
Company entered into an employment agreement with David W. Brandenburg, the
Company's Chairman of the Board and Chief Executive Officer, for the period from
June 26, 2000 through February 28, 2003. Effective March 1, 2002, the employment
agreement was extended one year through February 28, 2004. Under the agreement,
Mr. Brandenburg received an annual salary of $300,000 during fiscal 2001. His
salary was increased to $350,000 for fiscal 2002. The provisions in the
employment agreement governing Mr. Brandenburg's bonus opportunities for fiscal
2002 were amended as of February 28, 2001, and the provisions governing his
bonus opportunities for fiscal 2003 and fiscal 2004 were amended as of March 1,
2002. Mr. Brandenburg's annual bonus opportunity under his employment agreement
for fiscal 2002 was based on increases to earnings per share, and on any
increase in revenues, in each case as compared to the immediately preceding
fiscal year. For fiscal 2002, Mr. Brandenburg's bonus opportunity for earnings
per share ranged from 22.5% of his base salary if earnings per share were
between $.30 and $.36, to 75% of his base salary if earnings per share were $.58
or more. The bonus opportunity for revenues for fiscal 2002 ranged from 25% of
base salary if revenues were between $230 million and $258 million to 125% for
revenues of $316 million or greater. Mr. Brandenburg's annual bonus opportunity
for fiscal 2003 and fiscal 2004 is based 50% on increases to earnings per share
and 50% on increases to revenues, in each case as compared to the immediately
preceding fiscal year. For each of earnings per share and revenues, Mr.
Brandenburg's bonus opportunity ranges from 25% of his base salary for an
increase of up to 9%, to 125% of his base salary for an increase of 40% or more.
If earnings per share for fiscal 2002 or 2003 are less than $.15, however, then
the change in earnings per share for the immediately following year will be
compared to $.15. In an effort to help the Company reduce expenses, on July 22,
2002 Mr. Brandenburg waived his right to receive any bonus he might otherwise
have earned under such bonus provisions for fiscal 2003.
Based on the Company's earnings and revenue performance, Mr. Brandenburg
did not earn a bonus for fiscal 2001 or 2002. See the "Summary Compensation
Table" for a discussion of the bonuses and salary paid to Mr. Brandenburg for
the three-year period ended February 28, 2002. In connection with the execution
of Mr. Brandenburg's initial employment agreement, he was awarded stock options
during fiscal 2001 covering 500,000 shares of Common Stock under the Company's
1999 Stock Option Plan and 1990 Incentive Stock Option Plan. In connection with
the extension of his employment agreement through fiscal 2004, Mr. Brandenburg
was granted a stock option on March 1, 2002 covering 160,000 shares of Common
Stock under the Company's 1999 Stock Option Plan.
Except as discussed below, Mr. Brandenburg's employment agreement requires
that he not compete with the Company while he renders services under the
agreement and for a period of 18 months thereafter. The agreement further
provides that the Company can only terminate Mr. Brandenburg for cause or
because he becomes disabled (as such terms are defined in the agreement). If Mr.
Brandenburg is terminated for cause, the Company will have no liability for
further payments to him. If Mr. Brandenburg becomes completely disabled, the
Company is obligated to pay him an amount equal to his base salary in effect at
the time of disability through the expiration date of the agreement. If,
however, following a change of control of the Company (defined as a triggering
event in the agreement), Mr. Brandenburg's employment is terminated without
cause, if Mr. Brandenburg terminates his employment for good reason (as defined
in the agreement), or if he terminates his employment without good reason by
giving 12 months' prior notice, the Company will have to pay him a lump sum
amount (the "Change in Control Amount") equal to 2.99 multiplied by an amount of
salary and bonus which he would have received for the year in which he was
terminated (as determined in accordance with the agreement). The agreement also
provides that, if the Change in Control Amount is subject to certain federal
excise taxes, the Company will "gross-up" the Change in Control Amount such that
Mr. Brandenburg will receive a net amount after such taxes, equal to the Change
in Control Amount that he would have received had such taxes not been imposed.
In addition, following a change in control of the Company, Mr. Brandenburg can
terminate his employment for any reason by giving 12 months' prior written
notice. Mr. Brandenburg is released from his covenant not to compete if he is
terminated by the Company without cause and without being disabled, or if he
elects to terminate his employment after a default by the Company prior to a
triggering event or after a triggering event for good reason. If Mr.
Brandenburg's employment is terminated without cause, the Company is obligated
to pay him an amount equal to the remaining compensation he would have received
under the agreement (as determined in accordance with the agreement), and the
options to purchase an aggregate of 660,000 shares of Common Stock that Mr.
Brandenburg was granted in connection with his agreement and the extension to
his agreement will become completely exercisable, to the extent that the options
are not already exercisable as of such date.
EMPLOYMENT AGREEMENT WITH ROB-ROY J. GRAHAM. Rob-Roy J. Graham, the
Company's Executive Vice President, Chief Financial Officer and Secretary,
entered into an employment agreement with the Company for the
two-and-one-half-year term commencing on September 1, 1998. The agreement has
been extended through fiscal 2003. Under the agreement, Mr. Graham received an
annual salary of $255,375 during fiscal 2002. The provisions in the employment
agreement governing Mr. Graham's bonus opportunities for fiscal
22
2002 were amended as of February 28, 2001, and the provisions governing his
bonus opportunities for fiscal 2003 were amended as of March 1, 2002. Mr.
Graham's annual bonus for fiscal 2002 was based on increases to revenues and
earnings per share, in each case as compared to the immediately preceding fiscal
year. For fiscal 2002, Mr. Graham's bonus opportunity for earnings per share
ranged from 15% of his base salary if earnings per share were between $.30 and
$.36, to 50% of his base salary if earnings per share were $.58 or more. The
bonus opportunity for revenues for fiscal 2002 ranged from 20% of base salary if
revenues were between $230 million and $258 million, to 100% of his base salary
if revenues were $316 million or more. Based on the Company's earnings and
revenue performance, Mr. Graham did not earn a bonus for fiscal 2002 under the
above referenced bonus provisions of his agreement. The employment agreement
also provides that the Company may award Mr. Graham a discretionary bonus. Mr.
Graham was not awarded a discretionary bonus for fiscal 2002. Mr. Graham's
annual bonus opportunity for fiscal 2003 under his contract was based 50% on
increases to earnings per share and 50% on increases to revenue, in each case as
compared to the immediately preceding fiscal year. In an effort to help the
Company reduce expenses, on July 22, 2002 Mr. Graham waived his right to receive
any bonus he might otherwise have earned under such bonus provisions for fiscal
2003. The agreement did not provide for Mr. Graham to receive any stock options
or restricted stock in connection with the execution of his agreement. Other
than the matters discussed in this paragraph, Mr. Graham's employment agreement
(including the terms governing any termination of his employment with the
Company before or after a change of control of the Company) are substantially
the same as Mr. Brandenburg's employment agreement, which is discussed above.
AGREEMENT WITH RAY S. NAEINI. Ray S. Naeini offered his resignation from
the Company's employment to pursue other opportunities on May 6, 2002. In
connection with the resignation, Mr. Naeini and the Company entered into a
separation agreement pursuant to which each party released the other party from
any and all claims and demands it might have had. Under the separation
agreement, Mr. Naeini agreed, among other things, to refrain from making any
disparaging remarks about the Company or its products, not to induce the
Company's employees or customers to terminate their relationship with the
Company, not to disclose the Company's confidential and proprietary information,
and to cooperate with the Company in any pending or future litigation,
arbitration or similar proceedings. In accordance with the separation agreement,
the Company paid Mr. Naeini $264,000, and extended the exercise period for his
vested stock options (covering approximately 100,000 shares) through June 5,
2003. The exercise prices for these previously vested stock options are
substantially above the closing price for the Company's stock on July 25, 2002.
Mr. Naeini's separation agreement further provides that he will not compete with
the Company for a period of 12 months after the date of his resignation. The
covenant not to compete in the separation agreement is very similar to the
covenant not to compete in Mr. Brandenburg's employment agreement. In
consideration for Mr. Naeini's covenant not to compete, the Company will pay him
an additional amount of $264,000 in three equal installments on the first day of
September, October, and November 2002.
23
STOCK PERFORMANCE GRAPH
The following graph sets forth the cumulative total shareholder return
(assuming reinvestment of dividends) to the Company's shareholders during the
five-year period ended February 28, 2002, as well as an overall broad stock
market index, the Nasdaq Market Index, and a peer group index for the Company,
the index for SIC Code 3661 Telephone and Telegraph Apparatus. The stock
performance graph assumes $100 was invested on March 1, 1997 in the Company's
Common Stock and each such index.
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET(1)
[PERFORMANCE GRAPH]
FISCAL YEAR ENDED
-------------------------------------------------------------------------------
COMPANY / INDEX / MARKET 2/28/1997 2/27/1998 2/26/1999 2/29/2000 2/28/2001 2/28/2002
--------- --------- --------- --------- --------- ---------
InterVoice-Brite, Inc. 100.00 81.82 197.73 656.82 154.55 91.64
Telephone, Telegraph Apparatus 100.00 130.80 139.63 389.95 144.34 57.69
Nasdaq Market Index 100.00 136.00 175.74 341.39 159.78 130.47
(1) Assumes $100 invested on March 1, 1997 and all dividends reinvested
through February 28, 2002.
CERTAIN TRANSACTIONS
For information concerning agreements between the Company and each of
David W. Brandenburg, Rob-Roy J. Graham and Ray S. Naeini, see "Agreements with
Executive Officers".
AUDITORS
The Board of Directors appointed the firm of Ernst & Young LLP as
independent auditors of the Company for the fiscal year ending February 28,
2003. Ratification or other action by the Company's shareholders concerning the
appointment of the independent auditors of the Company for fiscal 2003 is not
required.
During the fiscal year ended February 28, 2002, Ernst & Young LLP provided
audit services to the Company consisting of examination of the financial
statements of the Company. Ernst & Young LLP has advised the Company that no
material relationship exists between Ernst & Young LLP or any of its partners
and the Company and that it is independent from the Company in all respects. The
Audit Committee of the Board of Directors has considered the non-audit services
provided to the Company by Ernst & Young LLP and believes such are compatible
with maintaining such firm's independence.
Representatives of Ernst & Young LLP are expected to attend the 2002
annual meeting. These representatives will have the opportunity to make a
statement at the meeting if they desire to do so and will also be available to
respond to appropriate questions.
24
AUDIT FEES
The aggregate fees billed by Ernst and Young LLP in connection with the
audit of the Company's consolidated financial statements for the fiscal year
ended February 28, 2002, and the review of quarterly financial statements
included in the Company's reports on Form 10-Q, were $371,400.
ALL OTHER FEES
The aggregate fees billed by Ernst and Young LLP for professional
services, other than services related to the audit of annual financial
statements or the review of quarterly financial statements, rendered in
connection with the Company's fiscal year ended February 28, 2002 were $291,655.
Services relating to statutory audits and accounting consultations accounted for
$252,950 of the total fees for such other professional services.
SHAREHOLDER PROPOSALS AND OTHER MATTERS
If a shareholder intends to present a proposal for action at the Company's
2003 annual meeting and wishes to have such proposal considered for inclusion in
the Company's proxy materials in reliance on Rule 14a-8 under the Securities
Exchange Act of 1934, the proposal must be submitted in writing and received by
the Company by February 28, 2003. Such proposals must also meet the other
requirements of the rules of the Securities and Exchange Commission relating to
shareholder proposals.
In addition, if a shareholder submits a proposal outside of Rule 14a-8 for
the 2003 annual meeting, then the Company's proxy may confer discretionary
authority on the persons being appointed as proxies on behalf of management to
vote on the proposal. Proposals and nominations should be addressed to the
Secretary of the Company at 17811 Waterview Parkway, Dallas, Texas 75252.
The cost of solicitation of proxies will be borne by the Company.
Solicitation may be made by mail, personal interview, telephone and/or telegraph
by officers and regular employees of the Company, who will receive no additional
compensation therefor. To aid in the solicitation of proxies, the Company may
employ the firm of Georgeson Shareholder, a proxy solicitation firm in
Carlstadt, New Jersey, to solicit proxies from brokers, banks, nominees,
institutional holders and individual holders for use at the meeting at a fee of
approximately $6,000 plus out-of-pocket expenses. The Company will bear the
reasonable expenses incurred by banks, brokerage firms and custodians, nominees
and fiduciaries in forwarding proxy material to beneficial owners.
For a discussion of the Company's financial condition, changes in
financial condition and results of operations, see Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
2002 Annual Report on Form 10-K, which Item is incorporated herein by reference
and made a part of this proxy statement. For a discussion of quantitative and
qualitative disclosures about market risk, see Item 7A "Quantitative and
Qualitative Disclosures About Market Risk" in the 2002 Annual Report on Form
10-K, which Item is incorporated herein by reference and made a part of this
proxy statement. For the financial statements and supplementary financial
information for the Company, see Item 8 "Financial Statements and Supplementary
Data" in the 2002 Annual Report on Form 10-K, which Item is incorporated herein
by reference and made a part of this proxy statement. For a discussion of any
changes in or disagreements with the accountants on accounting and financial
disclosure, see Item 9 "Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure" in the 2002 Annual Report on Form 10-K,
which Item is incorporated by reference and made a part of this proxy statement.
The Company will provide, by first class mail or other equally prompt means, a
copy of the information that is incorporated by reference in the proxy
statement, without charge, to each person to whom a proxy statement is delivered
upon written or oral request within one day of receipt of such request. Requests
for such information may be directed to InterVoice-Brite, Inc., Attention:
Corporate Secretary, 17811 Waterview Parkway, Dallas, Texas 75252, telephone
(972) 454-8000.
INTERVOICE-BRITE, INC.
DAVID W. BRANDENBURG
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
Dallas, Texas
July 29, 2002
25
APPENDIX A
INTERVOICE-BRITE, INC.
EMPLOYEE STOCK PURCHASE PLAN*
As amended and restated effective June 20, 2002
Section 1. Purpose. It is the purpose of the Plan to promote the interests
of the Company and its shareholders by providing a method by which eligible
employees may use voluntary payroll deductions to purchase shares of Common
Stock at a discount, thereby affording them the opportunity to invest in the
Company at a preferential price, and to acquire a proprietary interest in the
Company and an increased personal interest in its continued success and
progress. The Plan is intended to qualify as an employee stock purchase plan
within the meaning of Section 423 of the Code and shall be construed
accordingly.
Section 2. Definitions. As used herein the following terms have the
following meanings:
(a) "Affiliate" means any corporation that is a subsidiary corporation of
the Company within the meaning of Section 424(f) of the Code and that has been
designated by the Committee as an Affiliate for purposes of the Plan.
(b) "Board of Directors" means the Board of Directors of the Company.
(c) "Code" means the United States Internal Revenue Code of 1986, as from
time to time amended.
(d) "Committee" means the Committee described in Section 4 hereof.
(e) "Common Stock" means the Common Stock, no par value, of the Company.
(f) "Company" means InterVoice-Brite, Inc.
(g) "Compensation" for an option period means the total compensation of an
employee for services rendered to the Company or any Affiliate. The Compensation
of an employee who does not receive salary or wages computed in United States
dollars shall be determined by converting such salary or wages into United
States dollars in accordance with the Compensation Exchange Rate.
(h) "Compensation Exchange Rate" means the New York foreign currency
exchange rate as reported in The Wall Street Journal for the first business day
immediately preceding the first business day of the applicable option period.
(i) "Eligible Employee" means any employee of the Company or an Affiliate
who is eligible to participate in the Plan pursuant to Section 5 hereof.
(j) "Fair Market Value" means the closing sale price on the date in
question (or, if there was no reported sale on such date, on the last preceding
day on which any reported sale occurred) of the Common Stock on the NASDAQ
National Market System or, if the Common Stock is not traded on the NASDAQ
National Market System, such national stock exchange or stock market on which
the Common Stock may from time to time be traded.
(k) "Option" means any option to purchase shares of Common Stock granted
by the Committee pursuant to the provisions of the Plan.
(l) "Participant" means an Eligible Employee who elects to participate in
the Plan pursuant to Section 6 hereof.
(m) "Plan" means this InterVoice-Brite, Inc. Employee Stock Purchase Plan.
Section 3. Number of Shares. The aggregate number of shares of Common
Stock issued pursuant to Options granted under the Plan shall not exceed a total
of 1,000,000 1,500,000 shares. The maximum number of shares of Common Stock
available for sale under the Plan is subject to adjustment as provided in
Section 14. The Common Stock to be delivered upon exercise of Options may
consist of authorized but unissued shares of Common Stock or shares of Common
Stock previously issued and reacquired by the Company.
Section 4. Administration of the Plan. The Plan shall be administered by
the Committee, which shall consist of three or more directors or executive
officers of the Company. Each member of the Committee shall be appointed by and
shall serve at the pleasure of the Board of Directors. The Board of Directors
shall have the sole continuing authority to appoint members of the Committee
both in substitution for members previously appointed and to fill vacancies
however caused. The following provisions shall apply to the administration of
the Plan by the Committee:
(a) The Committee shall designate one of its members as Chairman and shall hold
meetings at such times and places as it may determine. Each member of the
Committee shall be notified in writing of the time and place of any meeting of
the Committee at least two days prior to such meeting, provided that such notice
may be waived by a Committee member. A majority of the members of the Committee
shall constitute a
A-1
quorum and any action taken by a majority of the members of the Committee
present at any duly called meeting at which a quorum is present (or action
unanimously approved in writing) shall constitute action by the Committee.
(b) The Committee may appoint a Secretary (who need not be a member of the
Committee) who shall keep minutes of its meetings. The Committee may make such
rules and regulations for the conduct of its business as it may determine.
(c) The Committee shall have full authority, subject to the express provisions
of the Plan to interpret the Plan, to provide, modify and rescind rules and
regulations relating to it and to make all other determinations and perform such
actions as the Committee deems necessary or advisable to administer the Plan.
(d) No member of the Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Option granted
hereunder.
Section 5. Eligible Employees. Each employee of the Company or an
Affiliate who is employed by the Company or an Affiliate on the date his
participation in the Plan is to become effective shall be eligible to
participate in the Plan; provided, however, that:
(a) An employee shall not be granted an Option if such employee would,
immediately after grant of the Option, own stock possessing 5% or more of the
total combined voting power or value of all classes of stock of the Company or
any parent or subsidiary corporation of the Company (within the meaning of
Section 424(e) and (f) of the Code). For purposes of determining stock ownership
under this paragraph, the rules of Section 424(d) of the Code shall apply, and
stock which the employee may purchase under any outstanding options shall be
treated as stock owned by the employee; and
(b) No employee shall be granted an Option under the Plan which would permit
such employee's rights to purchase shares of stock under all employee stock
purchase plans of the Company and its parent and subsidiary corporations (within
the meaning of Section 424(e) and (f) of the Code) to accrue (within the meaning
of Section 423 (b) (8) of the Code) at a rate which exceeds U.S. $25,000 of fair
market value of such stock (determined at the time such option is granted) for
each calendar year during which any such option granted to such employee is
outstanding at any time.
For purposes of this Section 5, the term "employee" shall not include an
employee whose customary employment is 20 hours or less per week or is for not
more than five months in any calendar year.
Section 6. Method of Participation. Each person who will be an Eligible
Employee on any January 1 or July 1 may elect to participate in the Plan by
executing and delivering, on or before the immediately preceding December 31 or
June 30, respectively, a payroll deduction authorization as provided in this
Section; provided, however, that an Eligible Employee who elects not to
participate on a given January 1 or July 1 shall not be eligible to participate
in the Plan until the following January 1 or July 1, respectively. Such Eligible
Employee shall thereby become a Participant on such January 1 or July 1 and
shall remain a Participant until such Eligible Employee's participation is
Terminated as provided in Section 10 or 11 hereof.
The payroll deduction authorization executed by a Participant shall
request withholding, by means of substantially equal payroll deductions over the
period during which he or she is a Participant, of an amount which shall be no
more than 10% nor less than 1 % of such Participant's Compensation for a given
option period. A Participant may change the withholding rate of his or her
payroll deduction authorization within such limits by delivering a new payroll
deduction authorization form to the Company on or before the December 31 or June
30, as the case may be, immediately preceding the option period with respect to
which the change is to be effective, A Participant may not change the
withholding rate of his or her payroll deduction authorization with respect to
an option period at any time after the deadline set forth in the immediately
preceding sentence. All amounts withheld in accordance with a Participant's
payroll deduction authorization shall be credited to a withholding account for
such Participant. No interest shall be payable on withholding accounts.
Effective on and after November 30, 1999, the first day of each subsequent
option period (i) shall be January 1, with respect to each Eligible Employee
whose option period as of November 30, 1999, began each December 1, and (ii)
shall be July 1, with respect to each Eligible Employee whose option period as
of November 30, 1999, began each June 1. Each Eligible Employee who would have
been eligible for the first time to elect to participate in the Plan on December
1, 1999, shall be eligible to elect to participate on January 1, 2000, provided
such individual is an Eligible Employee on such date. Each Eligible Employee who
would have been eligible for the first time to elect to participate in the Plan
on June 1, 2000, shall be eligible to elect to participate on July 1, 2000,
provided such individual is an Eligible Employee on such date.
Section 7. Grant of Options. The Plan will be implemented in twelve-month
option periods beginning on the first day of January and the first day of July
and ending on the following December 31 and June 30, respectively, until the
Plan is terminated. Each Participant shall be granted an Option on the first day
of each option period to purchase the number of whole shares of Common Stock
determined by dividing (x) the aggregate payroll deduction authorized by such
Participant for the option period by (y) 85% of the Fair Market Value per share
of Common Stock on the first day of the option period. Each Option shall be
exercisable as provided in Section 9 on the last business day of an option
period. In no event shall the
A-2
number of shares with respect to which an Option is granted to a Participant for
a calendar year exceed that number of shares which has an aggregate Fair Market
Value (determined on the date of grant) of U.S. $25,000, and the number of
shares actually purchased by a Participant in a calendar year may not exceed
this number. The Company shall reduce, on a substantially proportionate basis,
the number of shares of Common Stock receivable by each Participant upon
exercise of an Option in the event that the total number of shares then
available under the Plan is less than the total number of shares with respect to
which all Participants exercise Options in such option period.
Section 8. Option Price. The purchase price per share of Common Stock
under each Option shall equal the lesser of (a) 85% of the Fair Market Value per
share of Common Stock on the date of grant of the Option or (b) 85% of the Fair
Market Value per share of Common Stock on the date on which the Option is
exercised. If the Common Stock of the Company is not admitted to trading on any
of the aforesaid dates for which closing prices of the stock are to be
determined, then reference shall be made to the Fair Market Value of the stock
on that date, as determined on such basis as shall be established or specified
for the purpose by the Committee.
Section 9. Exercise of Options. An employee who is a Participant in the
Plan on the last business day of an option period shall be deemed automatically
to have exercised the current installment of the Option granted to him or her
for that option period. Upon such exercise, the Company shall apply the entire
balance of the Participant's withholding account to the purchase of the maximum
number of whole shares of Common Stock as determined under Section 7. For
purposes of this Section 9, the balance in the withholding account of a
Participant whose salary or wages are not computed in United States dollars
shall be converted into United States dollars in accordance with the New York
foreign currency exchange rate as reported in The Wall Street Journal for the
last business day of the option period. Certificates representing shares of
Common Stock purchased for a Participant under the Plan shall be issued and
delivered to the Participant as soon as practicable after such shares are
purchased; provided, however, that the obligation of the Company to deliver
shares of Common Stock shall be postponed for such period of time as may be
necessary to register or qualify the purchased shares under the Securities Act
of 1933 and any applicable foreign or state securities law.
A Participant shall possess none of the rights or privileges of a
shareholder of the Company with respect to Common Stock purchased under the Plan
unless and until certificates representing such shares have been issued. No
fractional shares shall be issued upon exercise of any installment of an Option.
Any balance remaining in a Participant's withholding account following exercise
of an installment shall be returned to the Participant. The cash proceeds
received by the Company upon exercise of an Option shall constitute general
funds of the Company. Any unexercised portion of an Option shall expire and
become null and void as of the end of the option period in which such Option was
granted.
Section 10. Cancellation of Option and Withdrawal From the Plan. A
Participant who holds an Option under the Plan may at any time prior to exercise
thereof pursuant to Section 9 cancel the remaining unexercised portion of such
Option by written notice delivered to the Treasurer of the Company. Upon such
cancellation, the balance in the Participant's withholding account shall be
returned to such Participant and he or she shall cease to be a Participant.
Partial cancellations shall not be permitted.
A Participant may terminate his payroll deduction authorization as of any
date by written notice delivered to the Treasurer of the Company and shall
thereby cease to be a Participant as of such date. Partial termination of a
payroll deduction authorization shall not be permitted, except to the extent
expressly permitted by Section 6 of this Plan. Any Participant who voluntarily
terminates his or her payroll deduction authorization prior to the last business
day of an option period shall be deemed to have cancelled his or her Option for
such option period.
A Participant who withdraws from the Plan pursuant to this Section 10 may
re-enroll as of any subsequent January 1 or July 1 on which he or she is an
Eligible Employee in accordance with the procedure set forth in Section 6 of
this Plan; provided, however, that a Participant shall not be permitted to
re-enroll in the Plan until a January 1 or July 1 that is at least one month
after the date of his or her withdrawal.
Section 11. Termination of Employment. Upon the termination of a
Participant's employment with the Company or an Affiliate for any reason, such
person shall cease to be a Participant, the Option held by such Participant
under the Plan shall be deemed cancelled, the balance of such Participant's
withholding account shall be returned to such Participant (or, in the event of
the Participant's death, to the executor or administrator of his or her estate)
and he or she shall have no further rights under the Plan.
All Participants shall have the same rights and privileges under the Plan.
Notwithstanding the foregoing, nothing in the Plan shall confer upon any
Participant any right to continue in the employ of the Company or an Affiliate
or in any way interfere with the right of the Company or an Affiliate to
terminate the employment of the Participant at any time, with or without cause.
Transfers of employment among the Company and its Affiliates and approved leaves
of absence not exceeding 90 days shall not be considered terminations of
employment for purposes of this Plan.
A-3
Section 12. Transferability. An Option granted under the Plan shall not be
transferable by the Participant and shall be exercisable only by the
Participant.
Section 13. Adjustments Upon Changes in Common Stock. In the event the
Company shall effect a split of the Common Stock or declare a dividend payable
in Common Stock, or in the event the outstanding Common Stock shall be combined
into a smaller number of shares, the maximum number of shares as to which
Options may be granted under the Plan shall be increased or decreased
proportionately, and the Fair Market Value per share of Common Stock as of the
date of grant of all outstanding Options shall be adjusted, for purposes of
making the determination required by Section 8 of this Plan, in a manner deemed
appropriate by the Board of Directors.
In the event of a reclassification of Common Stock not covered by the
foregoing, or in the event of a liquidation or reorganization of the Company,
including a merger, consolidation or sale of assets, the Board of Directors
shall make such adjustments, if any, as it may deem appropriate in the number,
purchase price and kind of shares that are covered by Options theretofore
granted under the Plan or that are otherwise subject to the Plan. The provisions
of this Section shall only be applicable if, and only to the extent that, the
application thereof does not conflict with any valid governmental statute,
regulation or rule.
Section 14. Amendment and Termination of the Plan. Subject to the right of
the Board of Directors to terminate the Plan prior thereto, the Plan shall
terminate when all or substantially all of the Common Stock reserved for
purposes of the Plan has been purchased. No Options may be granted after
termination of the Plan. The Board of Directors may alter or amend the Plan but
may not without the approval of the shareholders of the Company and of any
regulatory authorities having jurisdiction make any alteration or amendment
thereof which operates (a) to increase the total number of shares of Common
Stock which may be issued under the Plan (other than as provided in Section 13),
(b) to modify the criteria for determining the employees (or class of employees)
eligible to receive Options under the Plan or (c) to materially increase
benefits accruing under the Plan to Participants who are subject to Section 16
of the Securities Exchange Act of 1934 (the "Exchange Act").
No termination or amendment of the Plan shall adversely affect the rights
of a Participant under an outstanding Option, except with the consent of such
Participant.
Section 15. Requirements of Law. The granting of Options and the issuance
of Common Stock upon the exercise of an Option shall be subject to all
applicable laws, rules and regulations and to such approval by governmental
agencies as may be required.
Section 16. Effective Date of the Plan. The Plan shall become effective,
as of the date of its adoption by the Board of Directors, if it is duly approved
at the 1994 annual meeting of shareholders of the Company. The affirmative vote
of the holders of at least a majority of the shares of stock of the Company
present and voting on the approval of the Plan at the meeting, provided that the
total number of shares voting for the proposal represents more than 50% of the
total number of shares of stock present in person or represented by proxy and
entitled to vote at such annual meeting, shall be required to approve the Plan.
If the Plan is not so approved, the Plan shall terminate, the unexercised
portions of all Options granted hereunder shall be null and void and all shares
of Common Stock theretofore issued upon the exercise of Options under the Plan
shall be deemed cancelled. Certificates representing shares issued to
Participants prior to shareholder approval of the Plan shall bear appropriate
legends indicating that the shares have been issued contingent upon shareholder
approval and are cancelable in the event such approval is not obtained. Upon
such cancellation, Participants shall promptly deliver to the Company all
certificates representing cancelled shares and the Company shall promptly return
to the Participants, without interest, all funds obtained from such Participants
through payroll deductions and used for the purchase of such shares.
Section 17. Rule 16b-3 Compliance. Transactions under this Plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors adopted under the Exchange Act, some of which conditions are not set
forth herein. To the extent any provision of the Plan or action by the Committee
fails to so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Committee.
* LANGUAGE ADDED BY AMENDMENT ADOPTED BY THE BOARD OF DIRECTORS ON JUNE 20, 2002
IS UNDERSCORED. DELETED LANGUAGE IS STRUCK THROUGH.
A-4
PROXY PROXY
INTERVOICE-BRITE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David W. Brandenburg, and Rob-Roy J. Graham,
and either of them, proxies with power of substitution in each, and hereby
authorizes them to represent and to vote, as designated below, all shares of
common stock, no par value per share ("Common Stock"), of INTERVOICE-BRITE,
INC., standing in the name of the undersigned at the close of business on July
15, 2002, at the annual meeting of shareholders to be held on August 28, 2002,
at Dallas, Texas, and at any adjournment thereof and especially to vote on the
items of business specified herein, as more fully described in the notice of the
meeting dated July 29, 2002, and the proxy statement accompanying the same, the
receipt of which is hereby acknowledged.
This proxy when duly executed will be voted in the manner directed herein by
the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR ALL NOMINEES FOR DIRECTOR NAMED HEREIN, FOR THE PROPOSAL TO AMEND THE
COMPANY'S EMPLOYEE STOCK PURCHASE PLAN, FOR THE PROPOSAL TO APPROVE ISSUANCE OF
SHARES OF COMMON STOCK TO THE EXTENT APPROVAL IS REQUIRED UNDER NASDAQ NATIONAL
MARKET RULES AND FOR THE AMENDMENT OF THE ARTICLES OF INCORPORATION OF THE
COMPANY TO CHANGE ITS CORPORATE NAME.
PLEASE MARK VOTE IN BOX IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
1. Election of Directors
The undersigned hereby votes in response to the election of the Board of
Directors for the ensuing years
[ ] FOR all [ ] WITHHOLD AUTHORITY [ ] FOR all nominees, except
nominees to vote for all nominees vote withheld for those named
below:
----------------------
Nominee Exceptions
NOMINEES: 01 DAVID W. BRANDENBURG, 02 JOSEPH J. PIETROPAOLO,
03 GEORGE C. PLATT, 04 GRANT A. DOVE, AND
05 JACK P. REILY
(Continued and to be signed on reverse side)
2. Proposal to Amend Employee Stock Purchase Plan.
The undersigned hereby votes in response to the proposal to amend the
Company's Employee Stock Purchase Plan to increase from 1,000,000 to
1,500,000 the aggregate number of shares of Common Stock authorized for
issuance under the Plan.
FOR [ ] AGAINST [ ]
ABSTAIN [ ]
3. Proposal to Approve Issuance of Shares of Common Stock, to the Extent
Approval is Required Under Nasdaq National Market Rules.
The undersigned hereby votes in response to the proposal to approve the
issuance of shares of Common Stock upon conversion of the Company's
outstanding convertible notes, in lieu of cash payments on the convertible
notes, and upon the exercise of the Company's outstanding warrants, to the
extent that such issuance would require shareholder approval under the rules
of the Nasdaq National Market.
FOR [ ] AGAINST [ ]
ABSTAIN [ ]
4. Proposal to Amend Articles of Incorporation of the Company to Change its
Corporate Name.
The undersigned hereby votes in response to the proposal to amend the
Articles of Incorporation of the Company to change its corporate name to
"InterVoice, Inc.".
FOR [ ] AGAINST [ ]
ABSTAIN [ ]
5. In their discretion, the undersigned hereby authorizes the proxies to vote
upon such other business or matters as may properly come before the meeting
or any adjournment thereof.
FOR [ ] AGAINST [ ]
ABSTAIN [ ]
The undersigned hereby revokes any
proxy or proxies heretofore given to
represent or vote such Common Stock and
hereby ratifies and confirms all action
that said proxies, their substitutes,
or any of them, might lawfully take in
accordance with the terms hereof.
---------------------------------------
SIGNATURE DATE
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SIGNATURE DATE
NOTE: This proxy should be signed
exactly as name appears hereon. Joint
owners should both sign. If signed as
attorney, executor, guardian, or in
some other representative capacity, or
as an officer of a corporation, please
indicate full title or capacity. Please
complete, date and return it in the
enclosed envelope, which requires no
postage if mailed in the United States.