Davox Corporation
Filed 3/15/01
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996)
For the fiscal year ended December 31, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to __________
Commission file number 0-15578
DAVOX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 02-0364368
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
6 Technology Park Drive
Westford, Massachusetts 01886
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (978) 952-0200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 Par Value
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No _______
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_]
Aggregate market value, as of March 7, 2001 of Common Stock held by non- affiliates of the registrant: $73,671,774 based
on the last reported sale price on the National Market System as reported by Nasdaq on that date.
Number of shares of Common Stock outstanding at March 7, 2001: 12,644,910
DOCUMENTS INCORPORATED BY REFERENCE
The registrant intends to file a definitive Proxy Statement pursuant to Regulation 14A within 120 days of the end of the fiscal
year ended December 31, 2000. Portions of such Proxy Statement are incorporated by reference in Part III.
Cautionary Statements
The Private Securities Litigation Reform Act of 1995 contains certain safe harbors regarding forward-looking statements.
Statements set forth herein may contain "forward-looking" information that involves risks and uncertainties. Actual future
financial or operating results may differ materially from such forward-looking statements. Statements indicating that the
Company "expects," "estimates," "believes," "is planning," or "plans to" are forward-looking, as are other statements concerning
future financial or operating results, product offerings or other events that have not yet occurred. There are several important
factors that could cause actual results or events to differ materially from those anticipated by the forward-looking statements.
Such factors are described throughout this filing, however the Company goes into greater detail under Management's
Discussion and Analysis of Financial Condition and Results of Operations--Certain Factors That May Affect Future Results.
Although the Company has sought to identify the most significant risks to its business, the Company cannot predict whether, or
to what extent, any of such risks may be realized nor can there be any assurance that the Company has identified all possible
issues that the Company may face.
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PART I
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PART II
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PART III
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PART IV
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FINANCIAL STATEMENTS
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Item 1. Business
General
Davox is a leading developer of customer interaction management (CIM) solutions that help companies more effectively
manage customer interactions via the telephone, e-mail, and the Internet. Our solutions are used by more than 1,000 companies
worldwide - including financial institutions, telecommunications firms, utilities, and retailers - to provide premium customer
service, and to successfully establish and build valuable customer relationships.
The mission of Davox is to become the dominant global supplier of CIM solutions that provide companies with a competitive
advantage in attracting and retaining valuable customers.
Davox was incorporated in Massachusetts in 1981 and reorganized in Delaware in 1982. The Company's common stock is
listed on the NASDAQ National Market under the symbol "DAVX". The Company is headquartered in Westford,
Massachusetts. The mailing address for the Company's headquarters is 6 Technology Park Drive, Westford, Massachusetts,
01886 and its telephone number is (978) 952-0200. Davox can also be contacted through its web site at www.davox.com.
Market Overview
The CIM software market includes, inbound routing and queuing of telephone calls, outbound call campaign management using
predictive dialing technologies, automated e-mail response and various forms of real-time interactive Web-based customer
contact. According to the market research firm Datamonitor, the global market for CIM solutions is projected to grow to $3.0
billion by 2003 from $1.2 billion in 1999, a 28% compound annual growth rate (CAGR).
Companies worldwide recognize the need to more effectively attract, retain and grow their customer base. In responding to this
challenge, these companies are aggressively
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implementing customer relationship management (CRM) strategies. CRM strategies, as defined by the market research firm
AMR Research, are designed to "attract and harvest a customer base by creating and supporting profitable customer
relationships."
The customer contact center is a vital element of a CRM strategy. It is in the contact center where a representative of the
company is actually communicating - through the telephone, e-mail or the Internet - with a customer. The quality of these
interactions is a key element in successfully attracting and retaining customers.
To effectively manage communications with customers, a successful contact center must perform a number of critical functions,
including the following:
. Provide the company's customer service representatives with all the information they need to quickly and accurately respond
to customer inquiries received via the telephone, the Internet or through e-mail. This information could include order status,
account balances, shipping information, previous purchase information, detailed product descriptions or any other information
from various sources that could be relevant to serving customers.
. Maximize the productivity of the customer service representatives, ensuring that their time is used effectively. The cost of
customer service representatives is one of the largest on-going expenses of a contact center.
. Provide customer service representatives with the ability to view a complete history of communications with a customer,
whether via telephone, e-mail or the Internet.
. Provide managers with historical and real time reporting data to make effective decisions on how to allocate resources to
maximize results. . Intelligently route telephone calls and e-mails using business rules to the most appropriate customer service
representative, in order to provide faster, more accurate service and reduce the need to transfer calls. . Smoothly transfer calls,
along with the customer data, from one customer service representative to another in order to save time and minimize the
customer's inconvenience.
. Conduct proactive customer contact campaigns efficiently and targeted to the appropriate audience. o Provide a mechanism
to escalate customer contact from the web to e-mail to voice as appropriate.
In evaluating CIM solutions, prudent companies are looking for suppliers who provide the following capabilities:
. Solutions that can manage customer contact over the telephone, e-mail and the Internet.
. Solutions that can enhance agent productivity, management control, and customer satisfaction.
. Solutions that can be integrated into the company's existing technology infrastructure and can add value to these existing
investments. . Solutions that can be implemented rapidly and expanded to meet growing needs.
. An ability to understand the needs of the contact center and reliably service and support the solution.
The Company believes that it provides these capabilities and that its solutions can have a significant positive impact through
increased revenues, reduced operating costs, increased agent productivity and enhanced customer service.
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Principal Products and Applications
Davox's product strategy is focused on its two major product lines:
Ensemble(TM)Customer Contact Suite and Unison(R) Call Management System.
Ensemble(TM) Customer Contact Suite
Ensemble is a comprehensive CIM solution. The system integrates inbound call routing, outbound call management, seamless
call blending, e-mail response management, Internet-based communications, agent desktop automation, and historical and
real-time reporting capabilities. Ensemble is a modular platform, making it possible for companies to deploy the product in
stages and to increase functionality as their needs expand.
Ensemble is comprised of the following modules:
. Inbound - Manages inbound telephone calls by minimizing hold times, routing calls to specific agents, and presenting relevant
customer information to those agents.
. Outbound - Provides tools for proactive customer contact, including predictive and preview dialing, campaign and call list
management, scheduled recalls, and automated messaging. These tools are designed to maximize agent productivity and
effectively reach targeted customers.
. Blend- Monitors telephone traffic and shifts agents between proactive customer contact activities and inbound call handling in
order to minimize hold times and maximize agent productivity.
. Desktop Automation - Provides customer service representatives with all the information they need to quickly and accurately
respond to customers' inquiries coming in via the telephone, the Internet or through e-mail. This information could include order
status, account balances, shipping information, previous purchase information, detailed product descriptions or any other
information from various sources that could be relevant to serving customers. This functionality is marketed as LYRICall(TM),
the Company's browser-based desktop automation software.
. Reporting - Provides real-time and historical reporting capabilities that allow managers to make effective decisions on how to
allocate resources within the contact center and maximize results. This reporting information covers all customer contact
channels including telephone, e-mail and the Internet.
. E-mail response - Allows companies to respond more quickly, accurately and consistently to a high volume of e-mail inquiries
from customers and prospects. This feature automatically routes e-mail to the appropriate agent, responds automatically or
suggests responses to frequent inquiries, and generates reports on e-mail response service levels and agent productivity.
. Web call-back - Provides companies with a means to enhance their web sites to communicate more effectively with
customers and prospects. This feature allows a customer or prospect reviewing a company's web site to click on an icon, fill
out a contact form, and initiate a call from the company to the customer or prospect.
Ensemble has been available for shipment within North America since December 1999 and within other international markets
since the second quarter of 2000.
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Unison(R) Call Management System
Introduced in 1993, the Unison(R) Call Management System is designed to automate proactive customer contact activities. It
manages outbound and call-blending applications and provides high-productivity tools to increase the number of calls handled
and the quality of each customer contact. Unison is used primarily in customer contact centers handling credit/collections,
telemarketing, and fundraising campaigns.
Unison provides key outbound call management functionality, including predictive and preview dialing, campaign and call list
management, scheduled recalls, automated messaging, real-time filtering, system alerts, and voice/data transfers. The Unison
system also provides a graphical management console that monitors critical functions and displays information about calling
campaigns. The LYRICall agent desktop automation software, described earlier, can be used with the Unison call management
system.
Markets and Distribution Channels
Davox products and services are sold worldwide through multiple distribution channels, including a direct sales force,
distributors and resellers.
North American Operations
In North America, Davox sells its products primarily through a direct sales force. Davox's headquarters is in Westford,
Massachusetts with sales offices located throughout the United States and Canada.
Davox account executives and solution consultants take a solutions-focused approach in working with prospective customers.
Customer's business needs and integration requirements are clearly identified and defined before the sale, ensuring customer
expectations are properly met on a timely basis. This consultative selling approach, combined with Davox's own Enterprise
Solutions Services resources for application development and integration, ensure that the right solution is quickly deployed to
meet customer requirements.
In addition to direct sales in North America, Davox uses authorized resellers to provide additional market coverage and
revenue contribution. The primary resellers include Siemens Information & Communication Networks, Inc., SBC Global
Services Inc. and Verizon Communications Inc.
International Operations
During 2000, the Company expanded its sales presence in key geographic areas of the world, establishing subsidiaries in Brazil
and Australia, and a branch office in Japan. In addition, the Company has a direct sales presence in the United Kingdom
(London), Germany (Frankfurt), Singapore, and Mexico (Mexico City). The Company currently plans to continue to expand its
direct sales presence in the international marketplace.
In addition to its direct sales presence in the international marketplace, Davox licenses its products through indirect channels,
utilizing distributors and resellers. These indirect channel partners not only have the ability to resell Davox's product, but also
have substantial skills in systems consulting, integration, and support to meet customer requirements.
In connection with sales outside the United States, some Davox products are subject to
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regulation by foreign governments, which requires the Company to follow certain telecommunications and safety certification
procedures for some countries. Failure to obtain necessary local country approvals or certifications will restrict Davox's ability
to sell into some countries. In addition, other factors including, but not limited to currency rate fluctuation, import/export
restrictions, political and economic instabilities and other unknown or unforeseen eventualities, may affect international sales.
International product revenue was approximately $8.4 million, $10.8 million and $9.7 million, or approximately 18%, 20% and
18% of all product revenue in 2000, 1999, and 1998, respectively.
In 2000, the Company derived 84% of its product revenue from North America; 12% from Europe, the Middle East, and
Africa; 3% from Asia Pacific; and 1% from Latin America.
Support Services
The Company offers a full line of warranty, service and support options in all of its geographic markets. Central to the
Company's maintenance service offerings is its Worldwide Support Center located at Davox headquarters in Westford,
Massachusetts. The Company also operates satellite support offices in Slough, United Kingdom, and Mexico City, Mexico.
From these locations, Davox support professionals manage telephone, Internet and e-mail requests from customers for
information and support. Using state-of-the-art case management and diagnostic tools, the support centers provide end-to-end
problem resolution.
Davox's contract coverage includes access to Davox's support web site for case logging, interactive problem resolution,
periodic product maintenance updates and various levels of support, including 24 hour x 365 day priority phone support,
problem escalation and on-site hardware maintenance requests.
The Company offers a tiered support program for its distributor channel. Included in this program are periodic maintenance
updates to distributors' enrolled end-user base, access to Davox's distributor web site, escalated support for distributor
personnel, recommended training curriculums and a spare parts repair/exchange program.
Davox contracts hardware support with independent third-party service providers who are recognized for quality support and
customer care practices. By contracting with third party providers for hardware support, Davox can more effectively focus on
developing and supporting its software applications.
The Company believes that it has adequate resources internally and externally in order to provide services to its customers and
partners in the event services from these third party organizations should cease in any manner; however, loss of any one of
these relationships could materially adversely affect Davox's ability to provide support to its customers and partners in the
geographic region covered by such organizations until a substitute source could be found.
Davox's Educational Services offers a variety of courses designed to provide customer contact centers with the skills and
knowledge needed to enhance productivity and raise the level of service they deliver to their customers. Davox training facilities
are located in Acton, Massachusetts; Richardson, Texas; and Slough, United Kingdom. The Company also offers customized
courses delivered on-site at customer locations.
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The Company's Enterprise Solutions Services group provides consulting and integration services to Davox customers. This
organization offers consulting expertise on agent desktop automation, database integration, call flow automation, project
management and other services to help customer contact centers enhance the productivity and value of their Davox systems.
These services focus on both the traditional customer contact center as well as the emerging e-business markets.
Services revenue accounted for $47.1 million, or 50% of the Company's total revenue in 2000. This is an increase of $8.5
million from $38.6 million or 42% of the Company's total revenue in 1999. The Company's services revenue for 1999
increased $3.5 million from $35.1 million or 39% of the Company's total revenue in 1998. These increases were due primarily
to increased demand for consulting and implementation services as well as increased maintenance revenue associated with the
Company's growing customer base.
Suppliers
While the majority of the Company's hardware needs are met by readily available off-the-shelf technology, a small portion
remains proprietary. Third-party contractors manufacture these proprietary hardware components, and the Company believes
there are many qualified vendors for these services. The Company's production process consists primarily of product staging,
quality assurance, final test and systems integration, which typically occurs at its Westford facility.
The Company attempts to maintain multiple sources of supply for key components and believes it has adequate sources for its
expected needs. While any of these sources could be replaced if necessary, the Company might face significant delays in
establishing replacement sources or in modifying its products to incorporate replacement components or software code. There
can be no assurance that the Company will not suffer delays resulting from non-performance by its vendors or cost increases
due to a variety of factors, including component shortages or changes in laws or tariffs applicable to items imported by the
Company.
Strategic Partnerships
A complete CRM system is extremely complex and usually entails integration with existing telecommunications systems,
databases and front office applications to adequately meet customer requirements. Currently, no vendor provides all the
requisite elements for a fully integrated CRM system.
To meet this challenge and to increase its market opportunity, Davox has undertaken strategic partnerships with various
complementary technology and platform vendors. These partners include Sun Microsystems, Kana Communications, Siebel
Systems, NICE Systems, FaceTime Communications, IEX Corporation, Witness Systems, and Microsoft Corporation.
In November 1999, Davox entered into a technology licensing agreement and a global reseller agreement with Kana
Communications (Kana), a leading provider of online customer communications solutions based in Palo Alto, California. Under
the terms of these agreements, Davox has integrated selected Kana technology into its Ensemble customer contact suite, and it
has secured rights to resell Kana's online customer communications products.
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Competition
Davox currently competes in the CIM market. In this market, the Company currently competes with, among others, Genesys
Telecommunications (a wholly-owned subsidiary of Alcatel), Cisco System's Intelligent Contact Management product line,
Aspect Communications, eShare Communications and Avaya, Inc.
The Company believes that it has a number of advantages over its competitors in the areas of product functionality, integration,
deployment time and customer service and support.
Certain of the Company's current and potential competitors are larger companies that have greater financial, technical and
marketing resources. It is possible that competitors could produce products that perform the same or similar functions as those
performed by the Company's products. In addition, current and potential competitors have established, and may in the future
establish, cooperative relationships among themselves or with third parties to increase the ability of their products to address the
needs of the Company's current or prospective customers. Accordingly, it is likely that new competitors or alliances among
such competitors will emerge and may rapidly acquire significant market share, which would have a material adverse effect on
the Company's business, financial condition and results of operations. In order to be successful in the future, the Company must
respond promptly and effectively to the challenges of technological change, changing customer requirements and competitive
pressures. Increased competition could make it more difficult for the Company to maintain its market presence.
Significant Customers
Davox has more than 1,000 customers that are located worldwide and represent a cross-section of industries. For the year
ended December 31, 2000, no customer represented more than 10% of total revenue. For the year ended December 31,
1999, AT&T was the Company's largest single customer, accounting for approximately 12% of total revenue. In 1998, Lucent
Technologies, Inc., a reseller of Davox products, was the Company's single largest customer, accounting for approximately
13% of total revenue. Total revenue from the Company's top three customers amounted to approximately 16%, 24% and 24%
of total revenue in 2000, 1999, and 1998, respectively. The Company believes that its dependence on any end-user customer
or reseller is not likely to increase significantly as its products continue to be accepted by both existing customers and new
accounts in major industries worldwide.
Research, Development and Engineering
The Company's product development efforts are aimed at designing and developing customer contact center software that
meets software industry standards and incorporates technologies and features that the Company believes its customers require.
Most of the Company's products are developed internally by research and development teams located at the Company's
headquarters in Westford, Massachusetts, and at a satellite development facility located in Richardson, Texas. The Company
also licenses certain technology and intellectual property rights from third parties. The Company believes that by establishing
mutually beneficial relationships with third-party technology companies it can provide its customers with emerging technologies
in the most timely and cost-effective manner.
The Company's continued success depends on, among other factors, maintaining close working relationships with its customers,
business partners and resellers and anticipating and responding to their evolving applications needs. The Company is committed
to the development of new products, the improvement of existing products, and the continued
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evaluation of new technologies.
The Company spent $16.0 million on research and development in 2000, compared with $13.3 million in 1999 and $12.1
million in 1998. This represented approximately 17%, 14%, and 14%, respectively, of total revenue in each of those years. The
Company currently expects to increase its investment in research and development during 2001 in an effort to continue to
expand the market for the Ensemble product suite.
In addition, the Company did not capitalize any of its software development costs in 2000, 1999, or 1998, as the additional
development costs incurred to bring the Company's products to a commercially acceptable level after technological feasibility
has been established are not significant.
Selling, General and Administrative
During 2000, the Company's selling, general and administrative expenses increased as the expansion of international locations
continued. New offices were opened in Brazil, Australia and Japan. Also driving the increase in selling, general and
administrative expense were increased marketing expense and increased salary-related expenses associated with a growth in
employees. During 2000, Davox increased its investment in global marketing and promotion to increase awareness and demand
for its products. Marketing activities include print advertising, Internet-based marketing, seminars, trade shows and press and
analyst relations.
Intellectual Property
The Company relies on a combination of patent, copyright, trademark, contract and trade secret laws to establish and protect
its proprietary rights in its technology. The Company owns and licenses a number of patents relating to predictive dialing,
real-time telecommunication management, client/server computer telephony software, and user interfaces. Software products
are furnished under software license agreements that grant customers licenses to use, rather than to own, the products. The
license agreements contain provisions protecting the Company's ownership of the underlying technology. Upon commencement
of employment, employees execute a non-disclosure and invention assignment agreement under which inventions developed
during the course of employment will, at the election of the Company, be assigned to the Company and which further prohibits
disclosure of confidential Company information. There can be no assurances that the steps taken by the Company in this regard
will be adequate to prevent misappropriation or infringement of its technology or that Davox's competitors will not
independently develop technologies that are substantially equivalent or superior to Davox's technology. See also "Item 3-Legal
Proceedings." Effective protection of intellectual property rights may be limited or unavailable in certain foreign countries.
Employees
As of December 31, 2000, the Company had 498 employees worldwide, of whom 19 were engaged in operations; 333 in
sales, marketing and customer support; 92 in research, development and engineering; and 54 in administrative functions. None
of the Company's employees are represented by a collective bargaining agreement, nor has the Company ever experienced any
work stoppage. The Company considers its relations with its employees to be good.
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Certain Factors That May Affect Future Results
From time to time, information provided by the Company, statements made by its employees or information included in its
filings with the Securities and Exchange Commission (including this Form 10-K) may contain statements which are not historical
facts, so-called "forward-looking statements". These forward-looking statements may include, but are not limited to a
discussion of expected financial and operating results and expected results of the company's marketing efforts and product
strategy. Such forward-looking statements involve risks and uncertainties which may adversely impact whether or not such
forward-looking statements come true. In particular, but without limitation, statements, using words such as "expects",
"anticipates", "believes", "plans to", "is planning" or "estimates" may be considered forward-looking. The Company's actual
future results may differ significantly from those stated in any forward-looking statements. Factors that may cause such
differences include, but are not limited to, the factors discussed below. Each of these factors, and others, are discussed from
time to time in the Company's filings with the Securities and Exchange Commission.
The Company's future results may be subject to substantial risks and uncertainties. The Company purchases certain equipment
for its products from third-party suppliers and licenses certain components of its software code from a number of third-party
vendors. While the Company believes that third-party equipment and software vendors could be replaced if necessary, the
Company might face significant delays in establishing replacement sources or in modifying its products to incorporate
replacement components or software code. There can be no assurance that the Company will not suffer delays resulting from
non-performance by its vendors or cost increases due to a variety of factors, including component shortages. The Company
uses third-party service providers and co-providers to fulfill its hardware support obligations and professional services with its
customers, therefore risks associated with third-party service provider or co-provider availability or price increases could cause
results to be impacted. While the Company believes that its currently contracted service providers and co-providers are
adequate at this time, the Company may face significant delays in establishing replacement providers for such services.
In addition, when integrating third party equipment or software, inherent risks and uncertainties are present at the early stages of
the products life cycle as a result of the need for live customer environment testing. For example, the Company has recently
integrated Kana technology into its Ensemble solution, however such integrated product is in early tests. Depending upon the
results of the field testing, risks and uncertainties could arise relating to the financial and operating results based upon the sales
of Ensemble that have the integrated Kana technology.
The Company relies on certain intellectual property protections to preserve its intellectual property rights. Any invalidation of
the Company's intellectual property rights or lengthy and expensive defense of those rights could have a material adverse affect
on the financial position and results of operations of the Company.
The Company's products and their use are subject to a variety of laws, rules and regulations. Although the Company's
customers must comply with most of these laws, rules and regulations, there is no guarantee that such laws, rules and
regulations will not be expanded. An expansion could prohibit certain customer uses of the Company's products, which may
significantly delay or prohibit the Company's sale or licensing of its technology. For instance, any banning of predictive dialers
would have a materially adverse impact on the
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Company's operating and financial results.
The development of new products, the improvement of existing products and the continuing evaluation of new technologies is
critical to the Company's success. Successful product development and introduction depends upon a number of factors,
including anticipating and responding to the evolving applications needs of customers and resellers, timely completion and
introduction of new products, and market acceptance of the Company's products.
The CIM and outbound call management industries are extremely competitive. Certain current and potential competitors of the
Company are more established, benefit from greater market recognition and have substantially greater financial, development
and marketing resources than the Company.
Additionally, the Company's quarterly and annual financial and operating results are affected by a wide variety of factors that
could materially adversely affect revenue and profitability, including: general economic conditions; the timing of customer orders;
the Company's ability to introduce new products on a timely basis; introduction of products and technologies by the Company's
competitors; market acceptance of the Company's and its competitors' products; effects of litigation described in Item 3-Legal
Proceedings; the ability to hire and retain key personnel and fluctuations in the tax rates assessed upon Davox.
International revenues are expected to continue to account for a significant portion of the Company's total revenues in future
periods. International sales are subject to certain inherent risks, including, but not limited to those risks discussed in this section
and elsewhere in the Form 10-K: unexpected changes in regulatory requirements and tariffs; difficulties in staffing and managing
foreign operations; longer payment cycles; problems in collecting accounts receivable; exchange rate fluctuations; potentially
adverse tax treatment, and the inability to expand distribution channels. As a result of the foregoing and other factors, the
Company may experience material fluctuations in future financial and operating results on a quarterly or annual basis, which
could materially and adversely affect its business, financial condition, results of operations and stock price.
Item 2. Properties
The Company's corporate offices are located at an 85,000 square foot, two-story building in Westford, Massachusetts. The
facility is occupied under a lease that expires in September 2008. The Company also leases a Richardson, Texas facility of
approximately 26,000 square feet, which expires in January 2002. In addition, the Company leases facilities for sales and
service offices in eight states as well as in Canada, the United Kingdom, Mexico, Singapore, Germany, Brazil and Japan. The
current aggregate annual rental payments for all of the Company's facilities are approximately $2.7 million.
Item 3. Legal Proceedings
In 1998, a customer of Davox was sued for patent infringement by Manufacturing Administration and Management Systems,
Inc. (MAMS) alleging that the customer's use of a computer driven automated dialer infringes MAMS's patent. Under Davox's
contract with this customer, Davox is obligated to defend and indemnify such customer against any such claims. In the third
quarter of 1998, Davox sued MAMS in federal court in the Eastern District of New York in an action entitled "Davox
Corporation v. Manufacturing Administration and Management Systems, Inc.". In the lawsuit, Davox is seeking a declaratory
judgment that its products do not infringe the MAMS patent or, in the alternative,
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that the MAMS patent is invalid. Davox believes that MAMS's assertions of patent infringement are without merit, and Davox
will vigorously pursue this action against MAMS. While the outcome of this litigation cannot be predicted with certainty at this
time, management does not believe that the outcome will have a material adverse effect on the Company's business, financial
condition or results of operations.
The Company is from time to time subject to claims arising in the ordinary course of business. While the outcome of the claims
cannot be predicted with certainty, management does not expect these matters to have a material adverse effect on the results
of operations and financial condition of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 31,
2000.
Item 4A. Executive Officers of the Registrant
The executive officers of the Company, the age of each, and the period during which each has served in his present office are
as follows:
Mr. David M. Sample (52) serves as President, Chief Executive Officer and a Director. He joined Davox in a part time role in
October 2000 and assumed the role of President and Chief Executive Officer on November 7, 2000. Prior to joining the
Company, Mr. Sample was President, Chief Operating Officer and Director of ABT Corporation from September 1998
through August 2000. In addition, he was President, Chief Executive Officer and Chairman of the Board of Directors of PSDI
from March 1997 through May 1998. Mr. Sample was also Senior Vice President at Hyperion Software from July 1986 until
March 1997, and he held various management positions at Control Data Corporation.
Mr. Jeffrey E. Anderholm (44) serves as Executive Vice President, Product Group. Since joining Davox in January 1999, Mr.
Anderholm has held positions of Vice President of Marketing and Senior Vice President of Marketing. Prior to joining Davox,
Mr. Anderholm was the Vice President of Marketing for Art Technology Group from February 1997 through November
1998, Vice President, Electronic Channel Development at Fidelity Investments from January 1996 through January 1997 and a
variety of marketing roles of increasing responsibility at Lotus Development Corporation from March 1984 through December
1995.
Mr. Anthony A. Colangelo (52) serves as Executive Vice President, Worldwide Sales and International Operations. Mr.
Colangelo became Executive Vice President of Davox in December 2000, and is responsible for worldwide sales and
international operations. Prior to joining Davox, Mr. Colangelo served as Senior Vice President for ABT Corporation from
February 1999 through August 2000, Vice President of North American Sales and Global Sales Operations for Hyperion
Software from December 1987 through January 1999, and he held management positions at Total Micro Solutions and Control
Data Corporation.
Mr. Mark Donovan (46) serves as Senior Vice President, Operations and Customer Services. Since joining Davox in 1983,
Mr. Donovan has held management positions including Vice President, Customer Service from June 1992 through June 1994.
Prior to joining Davox, Mr. Donovan held various management positions with Applicon, Inc. and Raytheon Corporation.
Mr. Paul R. Lucchese (34) serves as Vice President, General Counsel and Secretary. Since
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joining Davox in October 1994, Mr. Lucchese has held positions including director of contracts administration and legal
counsel from June 1998 to December 1998 and associate general counsel and contracts manager from October 1994 until
June 1998. Prior to his position at Davox, Mr. Lucchese served as legal counsel for Iris Graphics, Inc.
Mr. James F. Mitchell (54) serves as Chief Technical Consultant. He is a founder of the Company and has served as Senior
Vice President and Chief Technical Officer since 1983. From September 1993 to August 1994, Mr. Mitchell managed the
domestic sales operations of the Company and from 1981 to 1983, he was Vice President, Engineering of the Company. Prior
to joining Davox in 1981, Mr. Mitchell served as Manager of Systems Development at Applicon, Inc., a producer of
CAD/CAM products.
Mr. Michael J. Provenzano III (31) serves as Vice President of Finance, Chief Financial Officer and Treasurer. Mr.
Provenzano joined Davox in November 1999 as corporate controller. Prior to joining Davox, Mr. Provenzano held positions
of increasing responsibility at Arthur Andersen LLP from September 1992 through November 1999, including experienced
audit manager in the high technology practice.
Mr. Mark Zabroske (41) serves as Vice President of North American Sales. Mr. Zabroske joined Davox in October 1997 as
Vice President of Sales for the Southern Region and also served as Director of North American Sales from January 2000
through July 2000. Prior to joining Davox, Mr. Zabroske held positions of increasing responsibility over more than 15 years,
including Regional Manager at Bell South from July 1994 through September 1997.
Officers are elected by and serve at the discretion of the Board of Directors.
13
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
Davox's common stock has been traded on the Nasdaq National Stock market under the symbol "DAVX" since its initial
public offering on April 28, 1987. Prior to that date, there was no public market for Davox's common stock. The following
table sets forth the range of high and low closing sale prices per share of common stock on the Nasdaq National Market for
each quarter of the years ended December 31, 2000 and 1999 as reported by the National Association of Securities Dealers
Automated Quotation System (NASDAQ). During 1997, the Company effected a three for two stock split through the
issuance of a 50% stock dividend. All share and per share amounts affected by this split, that are contained in this report on
Form 10-K have been retroactively adjusted for all periods presented.
Fiscal 2000
High Low
-------------------------
First Quarter $39.00 $19.00
Second Quarter $28.00 $ 9.63
Third Quarter $14.19 $ 7.75
Fourth Quarter $10.63 $ 6.13
Fiscal 1999
High Low
-------------------------
First Quarter $10.13 $5.94
Second Quarter $13.50 $6.00
Third Quarter $17.13 $9.75
Fourth Quarter $25.50 $12.38
As of March 7, 2001, there were approximately 380 holders of record of the Company's common stock and approximately
4,378 beneficial shareholders of the Company's common stock.
In January 1999, the Board of Directors authorized the purchase of up to three million shares of the Company's common stock
at such times when the Company deems such purchases to be an effective use of cash. In October 2000, the Company's
Board of Directors increased the total number of shares authorized to be repurchased under the repurchase program from three
million to six million. Shares that are repurchased may be used for various purposes including the issuance of shares pursuant to
the Company's stock option plans. Under the stock repurchase program, shares may be repurchased, at management's
discretion, from time to time at prevailing prices in the open market. As of December 31, 2000, the Company had repurchased
2,261,700 shares under this repurchase program.
14
The Company has never paid cash dividends on its common stock and has no present intentions to pay cash dividends in the
future. The Company intends to retain any future earnings to finance the growth of the Company.
The Company has not sold any equity securities during the period covered by this report that were not registered under the
Securities Act of 1933, as amended.
15
Item 6. Selected Financial Data
The following table sets forth certain condensed consolidated financial data for each of the five years in the period ended
December 31, 2000:
Years Ended December 31,
--------------------------------------------------------------------------------------
2000 1999 1998 (a) 1997 (a) 1996 (a)
---- ----- -------- -------- --------
(In Thousands, Except Per Share Amounts)
Condensed Consolidated Statement of Operations Data:
Total revenue $ 94,256 $92,354 $88,948 $83,554 $57,098
Cost of revenue 32,817 30,710 30,114 28,029 22,230
-------- --------- -------- -------- ---------
Gross profit 61,439 61,644 58,834 55,525 34,868
Research, development and
engineering expenses 16,009 13,259 12,086 10,418 6,734
Selling, general and
administrative expenses 42,753 37,077 34,841 29,710 19,704
-------- --------- -------- -------- ---------
Non-recurring merger costs - - 1,926 - -
Income from operations 2,677 11,308 9,981 15,397 8,430
Other income, net 4,037 2,815 2,941 2,031 1,217
-------- --------- -------- -------- ---------
Income before provision
for income taxes 6,714 14,123 12,922 17,428 9,647
Provision for income taxes 2,081 2,118 4,393 2,507 1,014
-------- --------- -------- -------- ---------
Net income $ 4,633 $12,005 $ 8,529 $14,921 $ 8,633
======== ========= ======== ======== =========
Earnings per share:
Basic $ 0.35 $ 0.89 $ 0.60 $ 1.15 $ 0.72
======== ========= ======== ======== =========
Diluted $ 0.33 $ 0.85 $ 0.58 $ 1.05 $ 0.64
======== ========= ======== ======== =========
Weighted average shares outstanding:
Basic 13,236 13,531 14,130 12,940 11,947
======== ========= ======== ======== =========
Diluted 13,945 14,165 14,822 14,270 13,593
======== ========= ======== ======== =========
December 31,
----------------------------------------------------------------------------------
2000 1999 1998 (a) 1997 (a) 1996 (a)
----------------------------------------------------------------------------------
(In Thousands)
Condensed Consolidated Balance Sheet Data:
Working capital $66,585 $66,085 $62,756 $52,847 $21,129
Total assets 102,180 99,043 89,423 81,560 44,478
Long-term obligations - - - - - - - - - 297 - - -
Redeemable Preferred Stock - - - - - - - - - 13,911 8,480
Stockholders' equity 75,738 72,514 69,327 44,464 16,890
(a) Historical financial information has been restated to reflect the combination of Davox and AnswerSoft in 1998 accounted
for as a pooling of interests and the 3-for-2 stock split effected in the form of a stock dividend payable to shareholders of
record on May 13, 1997.
16
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
All statements contained herein that are not historical facts, including, but not limited to, statements regarding anticipated future
capital requirements, the Company's future development plans, the Company's ability to obtain debt, equity or other financing,
and the Company's ability to generate cash from operations, are based on current expectations. These statements are
forward-looking in nature and involve a number of risks and uncertainties, as more fully described under "Certain Factors That
May Affect Future Results." Actual results may differ materially.
The following table sets forth, for the periods indicated, the percentage of revenue represented by items as shown in the
Company's Consolidated Statements of Income. This table should be read in conjunction with the Selected Financial Data,
Consolidated Financial Statements and Notes to Consolidated Financial Statements contained elsewhere herein.
Percentage of Total Revenue For The
Years Ended December 31,
2000 1999 1998
--------------------------------------------
Product revenue 50.0% 58.2% 60.5%
Service revenue 50.0 41.8 39.5
--------------------------------------------
Total revenue 100.0 100.0 100.0
Cost of revenue 34.8 33.3 33.8
--------------------------------------------
Gross profit 65.2 66.7 66.2
Research, development
and engineering expenses 17.0 14.4 13.6
Selling, general and
Administrative expenses 45.4 40.1 39.2
Non-recurring merger costs - - 2.2
--------------------------------------------
Income from operations 2.8 12.2 11.2
Other income, net 4.3 3.1 3.3
--------------------------------------------
Income before provision
for income taxes 7.1 15.3 14.5
Provision for income taxes 2.2 2.3 4.9
--------------------------------------------
Net income 4.9% 13.0% 9.6%
=== ==== ===
17
Total revenue was approximately $94.3 million, $92.4 million and $88.9 million for the fiscal years ended December 31, 2000,
1999 and 1998, respectively. Total revenue increased 2.1% for the year ended December 31, 2000 compared to the same
period in 1999 and increased 4.0% in fiscal year 1999 compared to fiscal year 1998. Total cost of revenue as a percentage of
total revenue was 34.8% in fiscal year 2000, 33.3% in fiscal year 1999 and 33.8% in fiscal year 1998.
Product revenue was approximately $47.1 million, $53.8 million and $53.8 million in fiscal years 2000, 1999 and 1998,
respectively. Product revenue decreased 12.3% in 2000 due to a decrease in the number of product shipments as a result of a
slowdown of Unison system sales and a longer sales cycle for Ensemble. Product revenue was unchanged in 1999 as
compared to 1998.
Cost of product revenue as a percentage of product revenue was 17.0%, 18.2%, and 19.5% in fiscal years 2000, 1999 and
1998, respectively. The decrease as a percentage of product revenue in 2000 and 1999 was due to the decrease in the number
of product shipments that included the Company's Digital Communications Server Hardware as well as a continued decrease in
the hardware content of the Company's products.
Service revenue was approximately $47.1 million, $38.6 million, and $35.1 million in fiscal years 2000, 1999 and 1998,
respectively. Service revenue increased 22.1%, 9.9% and 39.1% in 2000, 1999 and 1998, respectively. The increase in 2000
was due primarily to an increase in maintenance revenue related to the growth in the installed base of the Company's products
in recent years and increased professional services revenue in 2000 as compared to 1999.
Cost of service revenue as a percentage of service revenue was 52.6%, 54.2% and 55.8% in 2000, 1999 and 1998,
respectively. The decreases as a percentage of service revenue were attributable to the growth in service revenue in 2000 and
1999, which exceeded the associated increases in the cost of servicing a larger customer installed base.
In 2000, no single customer represented more than 10% of the Company's total revenue. Revenue from the Company's largest
single customer in 1999 and 1998 was approximately 12%, and 13% of total revenue, respectively. Total revenue from the
Company's three largest customers amounted to 16%, 24% and 24% of total revenue in 2000, 1999 and 1998, respectively.
The Company intends to continue to broaden its base of existing and new customers by penetrating new markets, expanding its
direct international sales force and using alternate channels of distribution, thereby decreasing its dependence on its largest
end-user customers.
Research, development and engineering expenses were approximately $16.0 million, $13.3 million and $12.1 million,
representing 17.0%, 14.4% and 13.6% of total revenue during 2000, 1999 and 1998, respectively. The increase in 2000 was
primarily attributable to an increase in employees and higher payroll and related expenses compared to 1999.
Selling, general and administrative expenses were approximately $42.8 million, $37.1 million and $34.8 million, representing
45.4%, 40.1% and 39.2% of total revenue during 2000, 1999 and 1998, respectively. The increases in 2000 were mostly
attributable to increased headcount, payroll and related expenses and the costs associated with the setup and expansion
18
of the Company's international subsidiaries. The increases in 1999 were mostly attributable to increased bonus and commission
expense and increased payroll and related expenses.
For the year ended December 31, 1998, in connection with the merger with AnswerSoft, Inc., the Company incurred
non-recurring merger transaction costs, primarily professional fees, of $1.3 million. In addition, the Company incurred
non-recurring costs, primarily severance and lease termination costs, of $597,000 related to the integration of the two
businesses.
Other income, derived primarily from investments in commercial paper, corporate bonds, Eurodollar bonds, and money market
instruments increased 43.4% in 2000 and decreased 4.3% in 1999. The increase in 2000 was due primarily to the significant
increase in the average cash and cash equivalent and marketable securities balances compared to the previous fiscal year. The
decrease in 1999 was due to lower average cash balances as the Company repurchased approximately
1.3 million shares of its common stock at an aggregate cost of approximately $10.2 million during 1999.
Income Taxes
The Company provided for income taxes at estimated annual effective tax rates of 31.0%, 15.0% and 34.0% for 2000, 1999
and 1998, respectively. These rates are lower than the combined federal and state statutory tax rates due primarily to the
utilization of net operating loss and tax credit carryforwards and benefits derived from the Company's foreign sales corporation.
The Company's 2000 and 1999 effective tax rates also reflect the utilization of net operating losses resulting from the
Company's acquisition of AnswerSoft, Inc. in 1998.
Liquidity and Capital Resources
As of December 31, 2000, the Company's principal sources of liquidity were its cash and cash equivalent balances of
approximately $61.8 million, and its marketable securities of approximately $9.0 million. As of December 31, 1999, the
Company's principal sources of liquidity were its cash and cash equivalent balances of approximately $34.4 million, and its
marketable securities of approximately $30.8 million. The overall increase in cash and cash equivalents and marketable
securities was due primarily to operating activities and sale and maturity of marketable securities.
The Company's primary investing activities were purchases of property and equipment, and purchases and sales of marketable
securities. Property and equipment purchases were approximately $4.8 million in 2000 compared to approximately $3.4 million
and $3.4 million in 1999 and 1998, respectively. Purchases and sales of marketable securities generated a net cash inflow of
approximately $21.8 million in 2000 compared to a net cash outflow of approximately $3.1 million and $3.9 million in 1999
and 1998, respectively.
Cash used by financing activities in 2000 was approximately $2.7 million and resulted from the Company's repurchase of
935,300 shares of its common stock at an aggregate cost of approximately $8.6 million, mostly offset by proceeds generated
from the exercise of stock options and shares purchased by employees under the Company's employee stock purchase plan.
Cash used by financing activities in 1999 was approximately $9.2 million and resulted from the Company's repurchase of
approximately 1.3 million shares of its common stock at an aggregate cost of approximately $10.2 million, partially offset by
proceeds generated from the exercise of
19
stock options and shares purchased by employees under the Company's employee stock purchase plan.
Working capital as of December 31, 2000 was approximately $66.6 million as compared to approximately $66.1 million as of
December 31, 1999. Total assets as of December 31, 2000 were approximately $102.2 million compared to approximately
$99.0 million as of December 31, 1999. These increases were primarily attributable to increases in cash and cash equivalents
due to the Company's favorable operating results and prepaid expenses, which was partially offset by decreases in marketable
securities and accounts receivable.
Management believes, based on its current operating plan, that the Company's existing cash and cash equivalents, marketable
securities and cash generated from operations will be sufficient to meet the Company's cash requirements for the next twelve
months.
Impact of Inflation
The Company believes that inflation did not have a material effect on the results of operations in 2000, 1999 and 1998.
Item 7(A). Quantitative and Qualitative Disclosures About Market Risk
Derivative Financial Instruments, Other Financial Instruments, and Derivative Commodity Instruments.
As of December 31, 2000 and 1999, the Company did not participate in any derivative financial instruments or other financial
and commodity instruments for which fair value disclosure would be required under SFAS No.
107. The Company's investments are primarily short-term, Euro dollar bonds, investment-grade commercial paper, and money
market accounts that are carried on the Company's books at amortized cost, which approximates fair market value.
Accordingly, the Company has no quantitative information concerning the market risk of participating in such investments.
Primary Market Risk Exposures
The Company's primary market risk exposures are in the areas of interest rate risk and foreign currency exchange rate risk. The
Company's investment portfolio of cash equivalent and short-term investments is subject to interest rate fluctuations, but the
Company believes this risk is immaterial due to the short-term nature of these investments.
The Company's exposure to currency exchange rate fluctuations has been and is expected to continue to be modest due to the
fact that the operations of its international
20
subsidiaries are almost exclusively conducted in their respective local currencies. International subsidiary operating results are
translated into U.S. dollars and consolidated for reporting purposes. The impact of currency exchange rate movements on
intercompany transactions was immaterial for the years ending December 31, 2000, 1999, and 1998. Currently the Company
does not engage in foreign currency hedging activities.
21
Item 8. Consolidated Financial Statements and Supplementary Data
Index to Consolidated Financial Statements and Financial Statement Schedule
Page
----
Report of Independent Public Accountants 23
Consolidated Balance Sheets as of December 31,
2000 and 1999 24
Consolidated Statements of Income for the Years
Ended December 31, 2000, 1999 and 1998 25
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 2000, 1999
and 1998 26
Consolidated Statements of Cash Flows for the Years
Ended December 31, 2000, 1999 and 1998 27
Notes to Consolidated Financial Statements 28
Report of Independent Public Accountants on Financial
Statement Schedule 46
Schedule II - Valuation and Qualifying Accounts 47
22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Davox Corporation:
We have audited the accompanying consolidated balance sheets of Davox Corporation (a Delaware corporation) and
subsidiaries as of December 31, 2000 and 1999 and the related consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Davox Corporation and subsidiaries as of December 31, 2000 and 1999 and the results of their operations and
their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States.
/s/ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 19, 2001
23
DAVOX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Amounts)
December 31,
ASSETS 2000 1999
--------- ---------
Current assets:
Cash and cash equivalents $ 61,758 $ 34,433
Marketable securities, at amortized cost 8,999 30,770
Accounts receivable, net of reserves of
$2,255 and $1,631 in 2000 and
1999, respectively 14,195 20,320
Prepaid expenses and other current assets 4,564 2,280
Deferred tax assets 3,511 4,811
--------- ---------
Total current assets 93,027 92,614
Property and equipment, net 5,863 5,050
Other assets 3,290 1,379
--------- ---------
$ 102,180 $ 99,043
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,450 $ 5,733
Accrued expenses 8,092 11,815
Customer deposits 5,914 3,515
Deferred revenue 6,986 5,466
--------- ---------
Total current liabilities 26,442 26,529
Commitments and contingencies (Note 6)
Stockholders' equity:
Common stock, $0.10 par value -
Authorized - 30,000 shares
Issued - 14,556 shares 1,456 1,456
Additional paid-in capital 82,676 74,691
Accumulated foreign currency translation adjustments (299) (17)
Retained earnings 10,988 6,355
--------- ---------
94,821 82,485
Less - Treasury stock, 1,927 and 1,298 shares, at cost,
in 2000 and 1999, respectively (19,083) (9,971)
--------- ---------
Total stockholders' equity 75,738 72,514
--------- ---------
$ 102,180 $ 99,043
========= =========
The accompanying notes are an integral part of these consolidated financial statements.
24
DAVOX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
For the Years Ended December 31,
2000 1999 1998
---- ---- ----
Product revenue $ 47,135 $ 53,757 $ 53,818
Service revenue 47,121 38,597 35,130
-------- -------- -------
Total revenue 94,256 92,354 88,948
-------- -------- -------
Cost of product revenue 8,012 9,809 10,510
Cost of service revenue 24,805 20,901 19,604
-------- -------- -------
Total cost of revenue 32,817 30,710 30,114
-------- -------- -------
Gross profit 61,439 61,644 58,834
-------- -------- -------
Operating expenses:
Research, development and engineering 16,009 13,259 12,086
Selling, general and administrative 42,753 37,077 34,841
Non-recurring merger related transaction costs - - 1,329
Non-recurring merger related integration costs - - 597
-------- -------- -------
Total operating expenses 58,762 50,336 48,853
-------- -------- -------
Income from operations 2,677 11,308 9,981
Other income (primarily interest), net 4,037 2,815 2,941
-------- -------- -------
Income before provision for income taxes 6,714 14,123 12,922
Provision for income taxes 2,081 2,118 4,393
-------- -------- -------
Net income $ 4,633 $ 12,005 $ 8,529
======== ======== =======
Earnings per share:
Basic $ $ 0.35 $ 0.89 $ 0.60
======== ========= =======
Diluted $ 0.33 $ 0.85 $ 0.58
======== ======== =======
Weighted average shares outstanding:
Basic 13,236 13,531 14,130
======== ======== =======
Diluted 13,945 14,165 14,822
======== ======== =======
The accompanying notes are an integral part of these consolidated financial statements.
25
DAVOX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands)
Accumulated Note
Foreign Receivable
Additional Currency Retained Due Total
Common Stock Paid-in Translation (Deficit)/ From Treasury Stock Stockholders' Comprehensive
Shares $ 10 Par Value Capital Adjustments Earnings Offices Shares Amount Equity Income
-------- -------------- --------- ------------ ---------- ------- -------- ------ ----------- -------------
BALANCE, December
31, 1997 12,040 $ 1,204 $ 57,870 $ 7 $ (14,179) ($414) 3 ($24) $44,464
Proceeds from
exercise of stock
options, including
related tax benefit 452 45 1,507 ---- ---- ---- ---- ---- 1,552
Proceeds from
purchases under
employee stock
purchase plan 21 2 451 ---- ---- ---- ---- ---- 453
Conversion of
redeemable
preferred stock
into common stock 1,836 184 13,727 ---- ---- ---- ---- ---- 13,911
Repayment of note
receivable ---- ---- ---- ---- ---- 414 ---- ---- 414
Translation
adjustment ---- ---- ---- 4 ---- ---- ---- ---- 4 4
Net income ---- ---- ---- ---- 8,529 ---- ---- ---- 8,529 8,529
-------
Comprehensive
income for
the year ended
December 31, 1998 ---- ---- ---- ---- ---- ---- ---- ---- ---- 8,533
=======
------- -------- -------- -------- --------- ------ ------- ------- -------
BALANCE, December
31, 1998 14,349 1,435 73,555 11 (5,650) 0 3 (24) 69,327
Proceeds from
exercise of stock
options, including
related tax benefit 161 16 830 ---- ---- ---- (11) 100 946
Proceeds from
purchases under
employee stock
purchase plan 46 5 306 ---- ---- ---- (20) 170 481
Purchase of
treasury stock ---- ---- ---- ---- ---- ---- 1,326 (10,217) (10,217)
Translation
adjustment ---- ---- ---- (28) ---- ---- ---- ---- (28) (28)
Net income ---- ---- ---- ---- 12,005 ---- ---- ---- 12,005 12,005
-------
Comprehensive
income for
the year ended
December 31, 1999 ---- ---- ---- ---- ---- ---- ---- ---- ---- $11,977
=======
------- -------- -------- -------- --------- ------ ------- ------- -------
BALANCE, December
31, 1999 14,556 1,456 74,691 (17) 6,355 ---- 1,298 (9,971) 72,514
Proceeds from
exercise of stock
options, including
related tax benefit ---- ---- 4,207 ---- ---- ---- (405) 3,028 7,235
Proceeds from
purchases under
employee stock
purchase plan ---- ---- 71 ---- ---- ---- (20) 143 214
Settlement of
escrow shares ---- ---- 3,707 ---- ---- ---- 119 (3,707) ----
Purchase of
treasury stock ---- ---- ---- ---- ---- ---- 935 (8,576) (8,576)
Translation
adjustment ---- ---- ---- (282) ---- ---- ---- ---- (282) (282)
Net income ---- ---- ---- ---- 4,633 ---- ---- ---- 4,633 4,633
-------
Comprehensive
income for
the year ended
December 31, 2000 ---- ---- ---- ---- ---- ---- ---- ---- ---- $ 4,351
=======
------- -------- -------- -------- --------- ------ ------- --------- -------
BALANCE, December
31, 2000 14,556 $ 1,456 $ 82,676 $ (299) $ 10,988 $ - 1,927 $(19,083) $75,738
======= ======== ======== ======== ========= ====== ======= ======== =======
The accompanying notes are an integral part of these consolidated financial statements.
DAVOX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
For the Years Ended December 31,
2000 1999 1998
---- ---- -----
Cash Flows From Operating Activities:
Net income $ 4,633 $ 12,005 $ 8,529
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization 3,968 3,606 3,356
Tax benefit from the exercise of stock options 1,649 438 394
Changes in current assets and liabilities -
Accounts receivable 6,158 (4,361) (3,360)
Prepaid expenses and other current assets (2,320) (565) (592)
Deferred tax assets 1,300 876 3,632
Accounts payable (283) 768 (282)
Accrued expenses (3,661) 2,354 (1,376)
Customer deposits 2,392 1,623 (126)
Deferred revenue 1,527 1,688 (830)
------- -------- ---------
Net cash provided by operating activities 15,363 18,432 9,345
------- -------- ---------
Cash Flows From Investing Activities:
Purchases of property and equipment (4,761) (3,358) (3,406)
Increase in other assets (1,911) (85) (464)
Purchases of marketable securities (68,121) (84,073) (82,400)
Sales and maturities of marketable securities 89,893 81,014 78,491
------- -------- ---------
Net cash provided by (used in) investing activities 15,100 (6,502) (7,779)
------- -------- ---------
Cash Flows From Financing Activities:
Proceeds from exercise of stock options 5,586 508 1,158
Proceeds from employee stock purchase plan 214 481 453
Purchases of treasury stock (8,576) (10,217) ----
Principal payments under long-term obligations ---- ---- (475)
Payment of note receivable from officer ---- ---- 414
------- -------- ---------
Net cash (used in) provided by financing activities (2,776) (9,228) 1,550
------- -------- ---------
Effect of exchange rate differences on cash (362) (28) 4
------- -------- ---------
Net increase in cash and cash equivalents 27,325 2,674 3,120
Cash and cash equivalents, beginning of year 34,433 31,759 28,639
-------- -------- ---------
Cash and cash equivalents, end of year $ 61,758 $ 34,433 $ 31,759
======== ======== =========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for income taxes $ 2,508 $ 1,363 $ 1,487
======== ======== =========
Cash paid during the year for interest $ ---- $ ---- $ 21
======== ======== =========
Supplemental Disclosure of Non-Cash Investing and Financing
Activities:
Conversion of redeemable preferred stock into common stock $ ---- $ ---- $ 13,911
======== ======== =========
Recoupment of acquisition escrow shares $ 3,707 $ ---- $ ----
======== ======== =========
The accompanying notes are an integral part of these consolidated financial statements
27
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Amounts In Thousands)
(1) Operations and Significant Accounting Policies
Davox Corporation (the Company) is a leading developer of customer interaction management solutions that help companies
more effectively manage customer interactions via telephone, e-mail and the Internet. These systems are marketed directly,
through joint marketing relationships and distribution agreements. The Company markets its systems to financial institutions,
retailers, entertainment companies, telemarketing organizations, telecommunications and transportation companies and utilities.
These consolidated financial statements reflect the application of certain significant accounting policies as described below and
elsewhere in the accompanying consolidated financial statements.
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.
All significant intercompany balances and transactions have been eliminated in consolidation.
(b) Management Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
(c) Revenue Recognition
The Company generates software revenue from licensing the rights to use its software products. The Company also generates
service revenues from the sale of product maintenance contracts, implementation, education and consulting services. The
Company recognizes revenue in accordance with the provisions of the American Institute of Certified Public Accountants
Statement of Position (SOP) No. 97-2, Software Revenue Recognition and SOP No. 98-9, Modification of SOP 97-2,
Software Revenue Recognition, With Respect to Certain Transactions. Revenue from software license fees are generally
recognized upon delivery provided that there are no significant post delivery obligations, persuasive evidence of an agreement
exists, the fee is fixed or determinable and collection of the related receivable is probable. If acceptance is required beyond the
Company's standard published specifications, software license revenue is recognized upon customer acceptance.
28
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Continued)
(Amounts In Thousands)
(1) Operations and Significant Accounting Policies (continued)
(c) Revenue Recognition (continued)
SOP 98-9 requires use of the residual method for recognition of revenues when vendor-specific objective evidence exists for
undelivered elements but does not exist for the delivered elements of a multiple-element arrangement. In such circumstances,
the Company defers the fair value of the undelivered elements and recognizes, as revenue, the remaining value for the delivered
elements.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 101,
Revenue Recognition in Financial Statements. This bulletin establishes guidelines for revenue recognition. The Company's
revenue recognition policy complies with this pronouncement and accordingly there was no impact of adopting this new
guidance in 2000.
Revenues for consulting implementation and educational services are recognized over the period in which services are provided.
Maintenance revenue is deferred at the time of software license shipment and is recognized ratably over the term of the support
period, which is typically one year. Amounts collected prior to satisfying the revenue recognition criteria are reflected as
deferred revenue.
(d) Cash, Cash Equivalents and Marketable Securities
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash
equivalents consist primarily of commercial paper. Marketable securities that the Company has the positive intent and ability to
hold to maturity are reported at amortized cost and are classified as held-to-maturity. The Company's investments consist of
held-to-maturity securities that are investments in Euro dollar, high-grade commercial paper instruments, corporate bonds and
notes at December 31, 2000 and 1999. All of these investments are classified as current as they mature within one year.
29
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Continued)
(Amounts In Thousands)
(1) Operations and Significant Accounting Policies (continued)
(d) Cash, Cash Equivalents and Marketable Securities (continued)
At December 31, 2000 and 1999, marketable securities consisted of the following:
2000 1999
---- ----
Market Amortized Market Amortized
Value Cost Value Cost
--------------------------------------------------------------------------
Euro dollar bond
(maturity 3-7 months) $------ $------ $4,204 $4,212
Commerical paper obligations
(maturity 3-6 months) ------ ------ 13,825 13,824
Corporate bonds
(maturity 3-7 months) 7,999 7,999 11,023 11,032
Medium & short-term notes
(maturity 5 months) 1,000 1,000 1,702 1,702
----- ----- ----- -----
$8,999 $8,999 $30,754 $30,770
====== ====== ======= =======
30
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Continued)
(Amounts In Thousands)
(1) Operations and Significant Accounting Policies (continued)
(e) Property and Equipment
The Company provides for depreciation and amortization of property and equipment using the straight-line method by charges
to operations in amounts to allocate the cost of the property and equipment over their estimated useful lives. The cost of
property and equipment and their useful lives are summarized as follows:
December 31,
------------
Estimated
Asset Classification Useful Life 2000 1999
-------------------- ----------- ----- ----
Office equipment and software 2-5 Years $20,965 $16,894
Rental and demonstration equipment 2-3 Years 316 316
Furniture and fixtures 5 Years 1,210 943
Leasehold improvements Life of Lease 711 289
------- -------
23,202 18,442
Less-Accumulated depreciation and amortization 17,339 13,392
------- -------
$ 5,863 $ 5,050
======= =======
(f) Research and Development and Software Development Costs
Research and development costs have been charged to operations as incurred. Statement of Financial Accounting Standards
(SFAS) No. 86, Accounting for the Costs of Computer Software to Be Leased, Sold, or Otherwise Marketed, requires the
capitalization of certain computer software development costs incurred after technological feasibility is established. Once
technological feasibility of a software product has been established, the additional development costs incurred to bring the
product to a commercially acceptable level are not significant. Accordingly, all such software development costs have been
expensed.
(g) Foreign Currency Translation
The Company considers the functional currency of its foreign subsidiaries to be the local currency and, accordingly their
financial information is translated into U.S. dollars using exchange rates in effect at period-end for assets and liabilities and
average exchange rates during each reporting period for the results of operations. Adjustments resulting from translation of
foreign subsidiaries' financial statements are included as a component of stockholders' equity.
31
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Continued)
(Amounts In Thousands)
(1) Operations and Significant Accounting Policies (continued)
(h) Earnings Per Share
Basic earnings per share is computed using the weighted average number of common shares outstanding. Diluted earnings per
share is computed using the weighted average number of common shares outstanding and the effect of dilutive common stock
equivalents using the treasury stock method.
A reconciliation of basic and diluted weighted averages shares outstanding is as follows:
For the years ended December 31,
--------------------------------
2000 1999 1998
---- ---- ----
Basic weighted average shares outstanding 13,236 13,531 14,130
Effect of dilutive common stock equivalents 709 634 692
------ ------ ------
Diluted weighted average shares outstanding 13,945 14,165 14,822
====== ====== ======
In 2000, 1999 and 1998, 1,509, 1,657 and 1,484 common stock equivalent shares, respectively, were not included in the
diluted weighted average shares outstanding, as their effect would be antidilutive.
(i) Concentration of Credit Risk
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash
equivalents, marketable securities and trade accounts receivable. The Company places its cash investments in several financial
institutions. The Company has no significant off-balance sheet concentrations such as foreign exchange contracts, options
contracts or other foreign hedging arrangements. The Company has not experienced significant losses related to receivables
from any individual customers or groups of customers in any specific industry or by geographic area. Due to these factors, no
additional credit risk beyond amounts provided for collection losses is believed by management to be inherent in the Company's
accounts receivable. The Company had one customer as of December 31, 2000 with amounts due of approximately 11% and
one customer as of December 31, 1999 with amounts due of approximately 19% of total accounts receivable respectively.
32
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Continued)
(Amounts In Thousands)
(1) Operations and Significant Accounting Policies (continued)
(j) Derivative Financial Instruments and Fair Value of Financial Instruments
In June 1999, the Financial Accounting Standards Board (FASB) issued SFAS No. 137, Accounting for Derivative Financial
Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133, which deferred the effective
date of SFAS No. 133 to all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for hedging activities. It requires entities to recognize
all derivatives as either assets or liabilities in the statement of financial position and to measure those instruments at fair value.
The adoption of these statements did not have a material impact on the Company's financial position or results of operations.
The Company's financial instruments consist of cash equivalents, marketable securities, accounts receivable and accounts
payable. The estimated fair value of these financial instruments approximates their carrying value at December 31, 2000 and
1999 due to the short-term nature of these instruments.
(k) Comprehensive Income
SFAS No. 130, Reporting Comprehensive Income, requires disclosure of all components of comprehensive income on an
annual and interim basis. The Company has disclosed comprehensive income for all periods presented in the accompanying
consolidated statements of stockholders' equity.
33
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Continued)
(Amounts In Thousands)
(2) Acquisition of AnswerSoft, Inc.
In May 1998, the Company acquired AnswerSoft, Inc. (AnswerSoft), a Richardson, Texas, developer of inbound call center
software solutions, in exchange for the issuance of an aggregate of 2,384 shares of Davox common stock, including shares that
were subject to outstanding AnswerSoft stock options and warrants. In December 2000, 119 shares of the Company's
common stock held in escrow in connection with the acquisition were returned to the Company in settlement of a claim against
AnswerSoft. The returned escrow shares were recorded in the accompanying consolidated statement of stockholders' equity
using the book value price per share used to account for the acquistion. The acquisition was accounted for as a pooling of
interests under Accounting Principles Board Opinion No. 16. Accordingly, the Company's historical consolidated financial
statements prior to the merger have been restated to include the financial position, results of operations and cash flows of
AnswerSoft. In connection with the merger with AnswerSoft, the Company incurred non-recurring merger transaction costs
(primarily professional fees) of $1,329. In addition, the Company incurred non-recurring costs (primarily severance and lease
termination costs) of $597 related to the integration of the two businesses.
(3) Accrued Expenses
Accrued expenses consist of the following:
December 31
-----------
2000 1999
---- ----
Payroll and payroll related $3,951 $4,654
Income taxes 1,288 1,654
Sales and property taxes 829 1,419
Other 2,024 4,088
----- -----
$8,092 $11,815
====== =======
34
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Continued)
(Amounts In Thousands)
(4) 401(k) Plan
The Company maintains the Davox Corporation 401(k) Retirement Plan (the Plan), which is a deferred contribution plan that
covers all full-time employees over 21 years of age. Employees may join the Plan in the next quarterly enrollment period
following their date of hire. The participants may make pretax deferred contributions to the Plan of up to 15% of the annual
compensation, as defined. Contributions to the Plan by the Company are discretionary and are determined by the Board of
Directors. The Company made discretionary contributions to the Plan of approximately $917, $777 and $315 for the years
2000, 1999 and 1998, respectively.
(5) Income Taxes
The Company accounts for income taxes using the liability method in accordance with SFAS No. 109, Accounting for Income
Taxes. Under the liability method, a deferred tax asset or liability is determined based on the difference between the financial
statement and tax bases of assets and liabilities, as measured by the enacted tax rates assumed to be in effect when these
differences are expected to reverse.
The components of the provision for income taxes consist of the following:
For the Years Ended December 31,
-------------------------------
2000 1999 1998
---- ---- ----
Current:
Federal $1,281 $1,270 $3,199
State 337 1,108 994
------ ------ ------
Total current 1,618 2,378 4,193
------ ------ ------
Deferred:
Federal 379 (230) 153
State 84 (30) 47
------ ------ ------
Total deferred 463 (260) 200
------ ------ ------
$2,081 $2,118 $4,393
====== ====== ======
35
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Continued)
(Amounts In Thousands)
(5) Income Taxes (continued)
The provision for income taxes for the years ended December 31, 2000, 1999 and 1998 does not reflect approximately
$1,649, $438 and $394, respectively, of tax benefits included in additional paid-in capital related to disqualifying dispositions
and the exercise of non-qualified stock options.
The approximate income tax effect of each type of temporary difference comprising the deferred tax asset is approximately as
follows:
December 31,
2000 1999
---- ----
Net operating loss carryforwards $ 152 $ 332
Depreciation 1,472 1,215
Tax credit carryforwards 2,445 1,762
Other temporary differences 3,511 3,967
------ ------
7,580 7,276
Less-valuation allowance 1,750 1,267
------ ------
$5,830 $6,009
====== ======
Approximately $3,511 and $4,811 of the deferred tax assets are classified as current at December 31, 2000 and 1999,
respectively. Approximately $2,319 and $1,198 of the deferred tax assets are classified as long-term and included in other
assets as of December 31, 2000 and 1999, respectively.
At December 31, 2000, the Company has available net operating loss carryforwards and tax credit carryforwards of
approximately $447 and $2,445, respectively. The operating loss carryforwards and tax credit carryforwards begin to expire in
fiscal years 2008 and 2005, respectively.
36
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Continued)
(Amounts In Thousands)
(5) Income Taxes (continued)
The Company records a valuation allowance against its deferred tax asset to the extent management believes it is more likely
than not that the asset will not be realized. As of December 31, 2000, the Company has provided a valuation allowance against
certain of the Company's tax credit carryforwards due to the uncertainty of their realizability as a result of limitations on their
utilization in accordance with certain tax laws and regulations.
A reconciliation of the federal statutory tax rate to the Company's effective tax rate is as follows:
Years Ended December 31,
------------------------
2000 1999 1998
---- ---- ----
Federal statutory tax rate 34.0% 34.0% 34.0%
State income taxes, net of federal
income tax benefit 2.5 5.1 3.3
AnswerSoft merger expenses not
deductible for tax purposes --- --- 2.6
Change in valuation
allowance/utilization of net
operating loss and tax credit carryforwards (3.7) (24.9) (3.8)
Foreign sales corporation benefit (2.8) (1.7) (1.0)
Other 1.0 2.5 (1.1)
------ ------ ------
31.0% 15.0% 34.0%
====== ====== ======
37
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Continued)
(Amounts In Thousands)
(6) Commitments and Contingencies
(a) Operating Lease Commitments
The Company leases its facilities and sales offices under operating leases that expire at various dates through September 2008.
Pursuant to the lease agreements, the Company is responsible for maintenance costs and real estate taxes. Total rental expense
for all operating leases for the years ended December 31, 2000, 1999 and 1998 amounted to approximately $2,203, $1,720
and $1,771, respectively.
Future minimum lease payments at December 31, 2000 are approximately as follows:
Years Ending December 31, Amount
------------------------- -------
2001 $ 2,691
2002 2,180
2003 2,047
2004 1,646
2005 1,418
Thereafter 3,718
-------
$13,700
=======
(b) Litigation
The Company is, from time to time, subject to claims arising in the ordinary course of business. While the outcome of the claims
cannot be predicted with certainty, management does not expect these matters to have a material adverse effect on the
consolidated results of operations and financial condition of the Company.
38
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Continued)
(Amounts In Thousands)
(7) Stockholders' Equity
(a) 1986 Stock Plan
The Company's 1986 Stock Plan (the 1986 Plan), administered by the Board of Directors, authorizes the issuance of a
maximum of 3,696 shares of common stock for the exercise of options in connection with awards or direct purchases of stock.
Options granted under the 1986 Plan may be either non- statutory stock options or options intended to constitute incentive
stock options under the Internal Revenue Code. Stock options may be granted to employees, officers, employee-directors or
consultants of the Company and are exercisable in such installments as the Board of Directors may specify. The options granted
currently vest over a four-year period and expire ten years from the date of grant. As of December 31, 2000, there were
options to purchase 463 shares of common stock outstanding under this 1986 Plan. The 1986 Plan terminated pursuant to its
terms in September 1996.
(b) 1994 Stock Plan
In 1994, AnswerSoft's Board of Directors approved the adoption of an employee stock option plan (the AnswerSoft Plan), as
amended, which authorized the grant of options to purchase up to 4,200 shares of AnswerSoft's common stock. The
AnswerSoft Plan provided for the granting of options to eligible employees to purchase AnswerSoft's common stock at an
exercise price of not less than 100% of the fair market value per share on the date of grant as determined by AnswerSoft's
Board of Directors. The AnswerSoft Plan was administered by its Board of Directors, who determined the number of shares
for which options will be granted, the effective dates of the grants, the option price and vesting schedules. All options under the
AnswerSoft Plan have a ten year term and typically vested over four years from the effective date of the grant. All outstanding
options became immediately and fully vested upon completion of the merger with Davox. The Company no longer grants
options under the AnswerSoft Plan. As of December 31, 2000, there were options to purchase 0.7 shares of common stock
outstanding under the AnswerSoft Plan.
39
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Continued)
(Amounts In Thousands)
(7) Stockholders' Equity (continued)
(c) 1996 Stock Plan
The Company's 1996 Stock Plan (the 1996 Plan), administered by the Board of Directors, authorizes the issuance of a
maximum of 2,700 shares of common stock for the exercise of options in connection with awards or direct purchases of stock.
Options granted under the 1996 Plan may be either nonstatutory stock options or options intended to constitute incentive stock
options under the Internal Revenue Code. Stock options may be granted to employees, officers, employee-directors or
consultants of the Company and are exercisable in such installments as the Board of Directors may specify. The options
currently vest over a four-year period. As of December 31, 2000, there were options to purchase 2,516 shares of common
stock outstanding and 572 shares available for future grants under the 1996 Plan.
(d) 2000 Stock Option Plan
The Company's 2000 Stock Option Plan (the 2000 Plan), administered by the Board of Directors, authorizes the issuance of a
maximum of 1,500 shares of common stock for the exercise of non-statutory stock options in connection with awards or direct
purchases of stock. Stock options may be granted to employees or consultants of the Company and are exercisable in such
installments as the Board of Directors may specify. The options currently vest over a four-year period. As of December 31,
2000, there were options to purchase 556 shares of common stock outstanding and 944 shares available for future grants
under the 2000 Plan.
(e) Directors Stock Option Plan
The Company's 1988 Non-employee Director Stock Option Plan (the 1988 Plan), as amended, is administered by the Board
of Directors and authorizes the issuance of a maximum of 600 shares of common stock for the exercise of options. The 1988
Plan provides for the automatic grant of options to purchase 60 shares of common stock to each newly elected non-employee
director and additional option grants of 15 shares of common stock per biennial anniversary of election to the Board of
Directors. Options granted under the 1988 Plan vest 25% per year beginning one year from the date of grant and expire five
years from the date of grant. As of December 31, 2000, there were options to purchase 110 shares of common stock
outstanding and 246 shares available for future grants under the 1988 Plan.
40
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Continued)
(Amounts In Thousands)
(7) Stockholders' Equity (continued)
(f) Stock Option Plans Summary
The following is a summary of the stock option activity for all plans for the years ended December 31, 2000, 1999 and 1998:
Weighted
Number of Exercise Average
Options Price Range Exercise Price
------- ----------- --------------
Outstanding, December 31, 1997 2,457 $0.77 - $34.13 $14.11
Granted 1,124 2.01 - 34.12 18.48
Exercised (452) 0.77 - 26.33 2.56
Canceled (593) 0.77 - 34.13 21.72
----- -------------- ------
Outstanding, December 31, 1998 2,536 0.77 - 34.13 16.33
Granted 931 8.50 - 21.75 11.87
Exercised (172) 0.77 - 20.75 2.95
Canceled (246) 0.77 - 34.13 16.23
----- -------------- ------
Outstanding, December 31, 1999 3,049 0.77 - 34.13 15.73
Granted 1,814 6.50 - 29.50 13.24
Exercised (405) 1.33 - 34.13 13.81
Canceled (805) 6.50 - 34.13 18.30
----- -------------- ------
Outstanding, December 31, 2000 3,653 $0.77 - $34.13 $14.14
===== ============== ======
Exercisable, December 31, 2000 1,518 $0.77 - $34.13 $15.94
===== ============== ======
Exercisable, December 31, 1999 1,410 $0.77 - $34.13 $14.88
===== ============== ======
Exercisable, December 31, 1998 1,124 $0.77 - $34.13 $11.09
===== ============== ======
The range of exercise prices for options outstanding and options exercisable at December 31, 2000 are as follows:
Options Outstanding Options Exercisable
Remaining Number Weighted Number Weighted
Range of Contractual Life Of Average Exercise of Average Exercise
Exercise Prices (in years) Options Price Options Price
-------------------------------------------------------------------------------------------------------------------
$ 0.77 - $ 1.67 3.39 213 $ 1.66 213 $ 1.66
2.00 - 2.33 3.74 156 2.33 156 2.33
3.25 - 4.75 3.47 37 3.57 37 3.57
6.17 - 9.00 9.30 1,320 7.72 138 8.06
9.56 - 13.06 9.38 325 10.47 13 13.06
14.63 - 21.75 7.60 556 17.05 312 16.97
24.33 - 34.13 7.09 1,046 26.52 649 25.85
----- ------ ----- ------
3,653 $14.14 1,518 $15.94
===== ====== ===== ======
41
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Continued)
(Amounts In Thousands)
(7) Stockholders' Equity (Continued)
(g) Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan (the Purchase Plan) under which a maximum of 0.8 shares of common
stock may be purchased by eligible employees on an annual basis. Substantially all full-time employees of the Company are
eligible to participate in the Purchase Plan. Shares are purchased through accumulation of payroll deductions (of not less than
0.5% nor more than 10% of compensation, as defined) for the number of whole shares, determined by dividing the balance in
the employee's account by the purchase price per share, which is equal to 85% of the fair market value of the common stock,
as defined. During 2000, 1999 and 1998, approximately 20, 66 and 21 shares, respectively, were purchased under the
Purchase Plan.
(h) Accounting for Stock-Based Compensation
The Company accounts for its stock-based compensation under APB Opinion No. 25, Accounting for Stock Issued to
Employees, and FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation - An
Interpretation of APB Opinion No. 25. In accordance with SFAS No. 123, Accounting for Stock-Based Compensation, the
Company has adopted the disclosure- only alternative under SFAS No. 123, which requires the disclosure of the pro forma
effects on earnings and earnings per share as if the fair-value based method had been adopted, as well as certain other
information.
The Company has computed the pro forma disclosures required under SFAS No. 123 for all stock options granted and shares
issued under the Purchase Plan as of December 31, 2000, 1999 and 1998 using the Black-Scholes option pricing model
prescribed by SFAS No. 123.
42
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Continued)
(Amounts In Thousands)
(7) Stockholders' Equity (Continued)
(h) Accounting for Stock-Based Compensation (continued)
The assumptions used and the weighted average information for the years ended December 31, 2000, 1999 and 1998 are as
follows:
Years ended December 31,
------------------------
2000 1999 1998
---- ---- ----
Risk-free interest rates 5.17%-6.69% 4.60%-6.19% 4.18%-5.61%
Expected dividend yield ----- ---- -----
Expected lives 5.27 years 5.28 years 4.85 years
Expected volatility 69% 68% 69%
Weighted average grant date fair value of
options granted during the period $8.49 $7.35 $11.45
Weighted average remaining contractual
life of options outstanding 7.78 years 7.51 years 7.75 years
The effect of applying SFAS No. 123 would be as follows:
Years ended December 31,
------------------------
2000 1999 1998
---- ---- ----
Net income as reported $ 4,633 $12,005 $8,529
======== ======= ======
Pro forma net income (loss) $ (4,412) $ 5,994 $3,674
======== ======= ======
Earnings per share as reported:
Basic $ 0.35 $ 0.89 $0.60
======== ======= =====
Diluted $ 0.33 $ 0.85 $0.58
======== ======= =====
Pro forma earnings (loss) per share:
Basic $ (0.33) $ 0.44 $0.23
======== ======= =====
Diluted $ (0.32) $ 0.42 $0.22
======== ======= =====
43
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Continued)
(Amounts In Thousands)
(8) Segment and Geographic Information
In accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, the Company
views its operations and manages its business as principally one segment, software sales and associated services. As a result,
the financial information disclosed herein represents all of the material financial information related to the Company's principal
operating segment.
Product revenue from international sources were approximately $8,400, $10,800 and $9,700 in 2000, 1999 and 1998,
respectively. The Company's revenue from international sources were primarily generated from customers located in Europe,
Canada, Asia/Pacific and Latin America. Substantially all of the Company's product sales for the years ended December 31,
2000, 1999 and 1998 were shipped from its headquarters located in the United States.
The following table represents the percentage of product revenue by geographic region from customers for fiscal years 2000,
1999 and 1998:
2000 1999 1998
---- ---- ----
United States 82.2% 80.0% 82.0%
Europe 12.6 16.4 8.1
Asia/Pacific 3.1 2.7 3.5
Latin America 0.6 0.6 1.5
Canada 1.5 0.3 4.9
----- ----- -----
Total 100.0% 100.0% 100.0%
===== ===== =====
Substantially all of the Company's assets are located in the United States.
(9) Significant Customers
No single customer represented more than 10% of the total revenue in 2000. Revenue from the Company's largest single
customer in 1999 was 12% and in 1998 the Company's largest single customer was 13% of total revenue respectively.
44
DAVOX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Continued)
(10) Quarterly Results of Operations (Unaudited)
The following table presents a condensed summary of quarterly results of operations for The years ended December 31, 2000
and 1999:
Year Ended December 31, 2000
----------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Total revenue $26,383 $21,573 $22,479 $23,821
Gross profit 18,576 13,835 13,960 15,068
Net income $ 3,607 $ 383 $ 231 $ 412
======= ======= ======= =======
Earnings per share:
Basic $ 0.27 $ 0.03 $ 0.02 $ 0.03
======= ======= ======= =======
Diluted $ 0.25 $ 0.03 $ 0.02 $ 0.03
======= ======= ======= =======
Year Ended December 31, 1999
----------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Total revenue $20,249 $22,008 $24,046 $26,051
Gross profit 12,778 14,500 16,205 18,161
Net income $ 1,699 $ 2,408 $ 3,476 $ 4,422
======= ======= ======= =======
Earnings per share:
Basic $ 0.12 $ 0.18 $ 0.26 $ 0.33
======= ======= ======= =======
Diluted $ 0.11 $ 0.17 $ 0.25 $ 0.32
======= ======= ======= =======
45
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To Davox Corporation:
We have audited, in accordance with auditing standards generally accepted in the United States, the consolidated financial
statements of Davox Corporation and subsidiaries included in this Form 10-K and have issued our report thereon dated
January 19, 2001. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a
whole. The schedule listed in the index is the responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and regulations and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and in our
opinion, fairly states, in all material respects, the financial data required to be set forth therein in relation to the basic financial
statements taken as a whole.
/S/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 19, 2001
46
DAVOX CORPORATION AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
Balance at Charged to Deductions Balance at
Beginning Costs and From End of
of Year Expenses Reserves Year
------- -------- -------- ----
Accounts Receivable Reserves:
December 31, 2000 $1,631 $1,018 $394 $2,255
December 31, 1999 1,175 958 502 1,631
December 31, 1998 1,134 315 274 1,175
47
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors
The information concerning directors of the Company required under this item is incorporated herein by reference to the
Company's definitive proxy statement pursuant to Regulation 14A, to be filed with the Commission not later than 120 days after
the close of the Company's 2000 fiscal year ended December 31, 2000 under the heading "Election of Directors."
Executive Officers
See Item 4A.
Item 11. Executive Compensation
The information required under this item is incorporated herein by reference to the Company's definitive proxy statement
pursuant to Regulation 14A, to be filed with the Commission not later than 120 days after the close of the Company's 2000
fiscal year ended December 31, 2000, under the heading "Compensation and Other Information Concerning Directors and
Officers."
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required under this item is incorporated herein by reference to the Company's definitive proxy statement
pursuant to Regulation 14A, to be filed with the Commission not later than 120 days after the close of the Company's 2000
fiscal year ended December 31, 2000, under the headings "Principal Holders of Voting Securities" and "Election of Directors."
ITEM 13. Certain Relationships and Transactions
The information required under this item is incorporated herein by reference to the Company's definitive proxy statement
pursuant to Regulation 14A, to be filed with the Commission within 120 days after the close of the Company's 2000 fiscal year
ended December 31, 2000, under the headings "Principal Holders of Voting Securities" and "Election of Directors."
48
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
(a) Financial Statements and Financial Statement Schedules
1. Financial Statements
The following financial information is incorporated in Item 8 above:
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 2000 and 1999
Consolidated Statements of Income for the Years Ended December 31, 2000, 1999 and 1998
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998
Notes to Consolidated Financial Statements
2. Financial Statement Schedule
The following financial information is incorporated in Item 8 above:
Report of Independent Public Accountants on Financial Statement Schedule II - Valuation and Qualifying Accounts.
All other schedules are not submitted because they are not applicable, not required or because the information is included in the
Consolidated Financial Statements or Notes to Consolidated Financial Statements.
(b) Reports on Form 8-K
The Company did not file any Current Report on Form 8-K during the fourth quarter of the fiscal year ended December 31,
2000.
49
(c) List of Exhibits
Exhibit
Number Description of Exhibit
------ ----------------------
3.01(2) Restated Certificate of Incorporation of the Registrant, as
amended.
3.02(2) By-laws of the Registrant, as amended.
4.01(2) Description of Capital Stock contained in the Registrant's
Restated Certificate of Incorporation, as amended, filed as
Exhibit 3.01.
10.01(2) Amended and Restated 1988 Non-Employee Director Stock Option
Plan of the Registrant.
10.02(2) Form of Option Agreement under the Registrant's 1988 Non-
Employee Director Stock Option Plan.
10.03(2) 1991 Employee Stock Purchase Plan, as amended.
10.04(1) 1996 Stock Plan of the Registrant, as amended.
10.05(1) Form of Incentive Stock Option Agreement under the
Registrant's 1996 Stock Plan.
10.06(1) Form of Non-Qualified Stock Option Agreement under the
Registrant's 1996 Stock Plan.
10.07 2000 Stock Option Plan of the Registrant.
10.08 Form of Non-Qualified Stock Option Agreement under the
Registrant's 2000 Stock Option Plan.
10.09 Executive Compensation Plan.
10.10(2) Lease agreement between Registrant and Michelson Farm
Westford Technology Park VI Limited Partnership for Westford
Technology Park Building Six.
10.11(4) First Amendment to Lease by and between the Registrant and
Michaelson Farm - Westford Technology Park Trust VI Limited
Partnership for Westford Technology Park Building Six.
10.12(4)(5) Third-party service provider agreement between the
Registrant and Grumman Systems Support Corporation.
50
10.13(4)(5) OEM Agreement by and between the Registrant and Kana
Communications, Inc. dated as of November 16, 1999.
10.14 Severance Agreement for David M. Sample, President and Chief
Executive Officer.
10.15 Severance Agreement for Jeffrey E. Anderholm, Executive Vice
President, Product Group.
10.16 Severance Agreement for Anthony A. Colangelo, Executive Vice
President, Worldwide Sales and International Operations.
10.17(4) Severance Agreement for Mark Donovan, Senior Vice President
Operations & Customer Service.
10.18(6) Transition and Retention Agreement for Alphonse M. Lucchese,
Chairman.
21. Subsidiaries of the Registrant.
23. Consent of Arthur Andersen LLP.
(1) Previously filed as an exhibit to Form 10-K for the fiscal year ended December 31, 1996.
(2) Previously filed as an exhibit to Form 10-K for the fiscal year ended December 31, 1997.
(3) Previously filed as an exhibit to Form 10-K for the fiscal year ended December 31, 1998.
(4) Previously filed as an exhibit to Form 10-K for the fiscal year ended December 31, 1999.
(5) Confidential treatment granted. Redacted version previously filed.
(6) Previously filed as an exhibit to Form 10-Q for the quarter ended September 30, 2000.
51
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized, in the Town of Westford, Commonwealth of
Massachusetts, on the 9th day of March 2000.
Davox Corporation
By: /s/ David M. Sample
-----------------------
David M. Sample
Chief Executive Officer
and President
POWER OF ATTORNEY
Each person whose signature appears below this Annual Report on Form 10-K hereby constitutes and appoints David M.
Sample and Paul R. Lucchese and each of them, with full power to act without the other, his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead in any and all
capacities (until revoked in writing) to sign all amendments (including post-effective amendments) to this Annual Report on
Form 10-K of Davox Corporation, and to file the same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary fully to all intents and purposes as he might or
could do in person thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or
her substitute, may lawfully do or cause to be done by virtue hereof.
52
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ David M. Sample Chief Executive
-------------------- Officer and President
David M. Sample (Principal Executive
Officer) March 9, 2001
/s/ Michael J. Provenzano III Vice President of
----------------------------- Finance and Chief
Michael J. Provenzano III Financial Officer
(Principal Financial
Officer) March 9, 2001
/s/ Alphonse M. Lucchese Director March 9, 2001
------------------------
Alphonse M. Lucchese
/s/ Michael D. Kaufman Director March 9, 2001
----------------------
Michael D. Kaufman
/s/ R. Scott Asen Director March 9, 2001
-----------------
R. Scott Asen
/s/ Peter Gyenes Director March 9, 2001
----------------
Peter Gyenes
53
EXHIBIT 10.07
DAVOX CORPORATION
2000 STOCK OPTION PLAN
1. PURPOSE
The name of this plan is the Davox Corporation 2000 Stock Option Plan (the "2000 Plan"). The purpose of the 2000 Plan is to
promote the long-term success of Davox Corporation, a Delaware corporation (the "Company"), by providing financial
incentives to employees and consultants of the Company who are in positions to make significant contributions toward such
success except that no member of the Board of Directors of Davox Corporation (the "Board") or officer of the Company
appointed by the Board shall be eligible for grants of options under the 2000 Plan. The 2000 Plan is designed to attract
individuals of outstanding ability to become or to continue as employees of the Company or consultants of the Company, to
enable such individuals to acquire or increase proprietary interests in the Company through the ownership of shares of common
stock of the Company, and to render superior performance during their associations with the Company. The Company intends
that this purpose will be effected by the granting, pursuant to the 2000 Plan, of options for shares of the Company's Common
Stock that do not meet the definition of "incentive stock options" in Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code") (such options granted hereunder, "Nonqualified Options").
References herein to "the Company" shall include any successor corporation to the Company and, except where the context
requires otherwise, also any direct or indirect subsidiary of the Company (such that if the Company has one or more
subsidiaries, individuals who are employees thereof or consultants thereto are eligible to be granted Nonqualified Options under
the 2000 Plan). References herein to "the Board" shall include the board of directors of any successor corporation to the
Company.
2. OPTIONS TO BE GRANTED AND ADMINISTRATION
(a) Options Granted. Options granted under the 2000 Plan shall only be Nonqualified Options.
(b) Administration of 2000 Plan. The 2000 Plan shall be administered by the Board or by a committee (the "Option
Committee") appointed by the Board. Hereinafter, all references in this 2000 Plan to the "Option Committee" shall mean the
Board if no Option Committee is appointed. The Option Committee may select one of its members as its chairman, and shall
hold meetings at such time and places as it may determine. A majority of the Option Committee shall constitute a quorum and
acts of a majority of the members of the Option Committee at a meeting at which a quorum is present, or acts reduced to or
approved in writing by all the members of the Option Committee (if consistent with applicable state law), shall be the valid acts
of the Option Committee. From time to time, the Board may increase the size of the Option Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new
members in substitution therefor, fill vacancies however caused, or remove all members of the Option Committee and thereafter
directly administer the 2000 Plan.
(c) Option Committee. Subject to the terms and conditions of the 2000 Plan, the Option Committee shall have the power:
(i) To determine from time to time the Nonqualified Options to be granted to eligible persons under the 2000 Plan, and to
prescribe the terms and provisions (which need not be identical) of each Nonqualified Option granted under the 2000 Plan to
such persons;
(ii) To construe and interpret the 2000 Plan and Nonqualified Options granted thereunder and to establish, amend, and revoke
rules and regulations for administration of the 2000 Plan. In this connection, the Option Committee may correct any defect or
supply any omission, or reconcile any inconsistency in the 2000 Plan, or in any nonqualified option agreement, in the manner
and to the extent it shall deem necessary or expedient to make the 2000 Plan fully effective. All decisions and determinations by
the Option Committee in the exercise of this power shall be final and binding upon the Company and all optionees; and
(iii) Generally, to exercise such powers and to perform such acts as are deemed necessary or expedient to promote the best
interests of the Company with respect to the 2000 Plan, including all actions the Option Committee deems necessary, under
Section 422 of the Code and the regulations thereunder, to ensure that no Nonqualified Option issued hereunder is treated as
an "incentive stock option" under Section 422(b) of the Code.
3. STOCK SUBJECT TO THE 2000 PLAN
(a) Stock under the 2000 Plan. The stock subject to the Nonqualified Options granted under the 2000 Plan shall be shares of
the Company's authorized but unissued common stock, par value $.10 per share (the "Common Stock"), or previously issued
shares of Common Stock that have been reacquired and reserved by the Board for resale upon exercise of Nonqualified
Options granted under the 2000 Plan. The total number of shares of Common Stock that may be issued pursuant to
Nonqualified Options granted under the 2000 Plan shall not exceed an aggregate of 1,500,000 shares of Common Stock. Such
number shall be subject to adjustment as provided in Section 9 hereof.
(b) Reallocation of Unexercised Options. Whenever any outstanding Nonqualified Option under the 2000 Plan expires, is
canceled or is otherwise terminated (other than by exercise), the shares of Common Stock allocable to the unexercised portion
of such Nonqualified Option may again be the subject of Nonqualified Options under the 2000 Plan.
4. STOCK OPTION GRANTS
Nonqualified Options may be granted to employees of the Company, to consultants to the Company who are not employees of
the Company, and to such other persons as the Option Committee shall select from time to time, provided that, in no event,
shall any member of the
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Board or any officer of the Company appointed by the Board be eligible to receive any grants of Nonqualified Options issued
under the 2000 Plan. The determination of the persons eligible to receive grants and the number of shares of Common Stock
for which Nonqualified Options are granted shall be made by the Option Committee.
5. TERMS OF THE NONQUALIFIED OPTION AGREEMENTS
Each nonqualified option agreement for Nonqualified Options granted under the 2000 Plan (each, a "Nonqualified Option
Agreement") shall contain such provisions as the Option Committee shall from time to time deem appropriate, including
restrictions applicable to shares of Common Stock issuable upon exercise of Nonqualified Options. The Option Committee
may from time to time confer authority and responsibility on one or more of its own members and/or one or more officers of the
Company to execute and deliver the Nonqualified Option Agreements. The proper officers of the Company are authorized and
directed to take any and all action necessary or advisable from time to time to carry out the terms of the Nonqualified Option
Agreements. The Nonqualified Option Agreements need not be identical, but each Nonqualified Option Agreement by
appropriate language, or by reference to this Section 5 of the 2000 Plan, shall include the substance of all of the following
provisions:
(a) Expiration. Each Nonqualified Option shall expire on the date specified in the Nonqualified Option Agreement, which date
shall not be later than the tenth anniversary of the date on which the Nonqualified Option was granted. Unless otherwise
determined by the Option Committee, each Nonqualified Option shall in any event expire not later than 90 days after the
optionee is for any reason no longer employed by (or in the case of a consultant, engaged in a business relationship with) the
Company, except (i) if such termination of employment (or business relationship) results from optionee's disability (within the
meaning of Section 22(e)(3) of the Code), a Nonqualified Option may be exercised within 180 days thereafter (but in no event
later than the scheduled expiration date set forth in the Nonqualified Option Agreement), to the extent such Nonqualified
Option could have been exercised on the date of such termination of employment, and (ii) if such termination of employment (or
business relationship) results from the optionee's death, a Nonqualified Option may be exercised by his executors or
administrators within 180 days thereafter (but in no event later than the scheduled expiration date set forth in the Nonqualified
Option Agreement), to the extent such Nonqualified Option could have been exercised on the date of such optionee's death.
(b) Exercise. Subject to the provisions of Section 5(a), each Nonqualified Option granted under the 2000 Plan shall be
exercisable as follows:
1. Vesting. The Nonqualified Option shall either be fully exercisable on the date of grant or shall become exercisable thereafter
in such installments as the Option Committee may specify.
2. Full Vesting of Installments. Once an installment becomes exercisable it shall remain exercisable until expiration or
termination of the Nonqualified Option, unless otherwise specified by the Option Committee.
-3-
3. Partial Exercise. Each Nonqualified Option or installment may be exercised at any time or from time to time, in whole or in
part, for up to the total number of shares with respect to which it is then exercisable.
4. Acceleration of Vesting. The Option Committee shall have the right to accelerate the date that any installment of any
Nonqualified Option becomes exercisable.
Unless otherwise provided by the Option Committee, for this purpose the date of the grant of a Nonqualified Option shall be
the date on which the Option Committee approves the grant. To the extent not exercised, vested installments shall accumulate
and be exercisable in whole or in part at any time after becoming exercisable, but not later than the date the Nonqualified
Option expires or terminates. Nonqualified Option Agreements may also contain provisions relating to the treatment of
Nonqualified Options in the event of a merger, consolidation or liquidation of, or sale of assets by, the Company.
(c) Purchase Price. Unless the Option Committee shall otherwise determine at the time the Nonqualified Option is granted, the
purchase price per share of Common Stock under each Nonqualified Option shall be not less than the fair market value of a
share of Common Stock on the date the Nonqualified Option is granted. For the purposes of the 2000 Plan, the fair market
value of the shares of Common Stock of the Company shall be determined by the Option Committee.
6. LIMITATION ON RIGHTS OF OPTIONEES
(a) Transferability of Nonqualified Options. Except as set forth below,
(i) no Nonqualified Option shall be transferable by any optionee other than by will or by the laws of descent and distribution
and (ii) Nonqualified Options may be exercised during the optionee's lifetime only by the optionee (or, if the optionee is
disabled and so long as the Nonqualified Option remains exercisable, by the optionee's duly appointed guardian or other legal
representative). However, the Option Committee may, in its discretion, permit a Nonqualified Option recipient to transfer such
Nonqualified Option to family members or other persons for estate planning purposes. In connection with permitting transfers,
the Option Committee may require that (i) no consideration be given or payment made for any such transfer, (ii) the
Nonqualified Option Agreement pursuant to which such Nonqualified Option is granted must be approved by the Option
Committee, and must expressly provide for transferability at the date of grant in a manner consistent with the 2000 Plan, and
(iii) subsequent transfers of the transferred Nonqualified Option shall be prohibited except those in accordance with this
Section. Following any such transfer, any such Nonqualified Options shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided that for purposes of Sections 2(c)(ii),
6(b), 6(c), 7, 8, 9 and 12 hereof the term "optionee" shall be deemed to refer to the transferee. The events of termination of
employment (or business relationship in the case of a consultant) set forth in an optionee's Nonqualified Option Agreement shall
continue to be applied with respect to the original optionee, following which the Nonqualified Options shall be exercisable by
the transferee only to the extent, and for the periods specified, therein.
-4-
(b) No Shareholder Rights. No optionee shall be deemed for any purpose to be the owner of any shares of Common Stock
subject to any Nonqualified Option unless and until (i) the Nonqualified Option shall have been exercised pursuant to the terms
thereof, (ii) the Company shall have issued and delivered the shares to the optionee, and (iii) the optionee's name shall have
been entered as a shareholder of record on the books of the Company. Thereupon, the optionee shall have full voting, dividend
and other ownership rights with respect to such shares of Common Stock.
(c) No Employment Rights. Neither the 2000 Plan nor the grant of any Nonqualified Option thereunder shall be deemed to
confer upon any optionee any rights of employment with the Company, including, without limitation, any right to continue in the
employ of the Company, or affect the right of the Company to terminate the employment of an optionee at any time, with or
without cause.
(d) Authority of the Company. The existence of the Nonqualified Options shall not affect: the right or power of the Company or
its shareholders to make adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or
its business; any issue of bonds, debentures, preferred or prior preference stock affecting the Common Stock or the rights
thereof; the dissolution or liquidation of the Company, or sale or transfer of any part of its assets or business; or any other act,
whether of a similar character or otherwise.
7. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
(a) Notice of Exercise. Any Nonqualified Option granted under the 2000 Plan may be exercised by the optionee by delivering
to the Chief Financial Officer of the Company (or such other representative of the Company as the Option Committee may
designate) on any business day within the Company's "trading window" (as defined in the Company's Securities Compliance
Policy in effect on the date of such exercise) a written notice specifying the number (which shall be consistent with the
provisions of Section 5(b) hereof) of shares of Common Stock the optionee then desires to purchase (the "Notice").
(b) Payment. A Nonqualified Option (or any part or installment thereof) shall be exercised by giving written notice to the
Company at its principal office address, or to such transfer agent as the Company shall designate. Such notice shall identify the
Nonqualified Option being exercised and specify the number of shares as to which such Nonqualified Option is being
exercised, accompanied by full payment of the purchase price therefor either (a) in United States dollars in cash or by check,
(b) at the discretion of the Option Committee, through delivery of shares of Common Stock having a fair market value equal as
of the date of the exercise to the cash exercise price of the Nonqualified Option, (c) at the discretion of the Option Committee,
by delivery of the optionee's personal recourse note bearing interest payable not less than annually at no less than 100% of the
lowest applicable Federal rate, as defined in Section 1274(d) of the Code, (d) at the discretion of the Option Committee and
consistent with applicable law, through the delivery of an assignment to the Company of a sufficient amount of the proceeds
from the sale of the Common Stock acquired upon exercise of the Nonqualified Option and an
-5-
authorization to the broker or selling agent to pay that amount to the Company, which sale shall be at the participant's direction
at the time of exercise, or
(e) at the discretion of the Option Committee, by any combination of (a), (b),
(c) and (d) above.
8. WITHHOLDING; ESCROW
The Company shall be entitled to withhold from any compensation or other payments then or thereafter due to the optionee
such amounts as may be necessary to satisfy any withholding requirements of federal or state law or regulation and, further, to
collect from the optionee any additional amounts which may be required for such purpose as a condition of delivering the shares
of Common Stock acquired pursuant to a Nonqualified Option. The Option Committee may, in its discretion, require shares of
the Common Stock acquired by an optionee upon the exercise of a Nonqualified Option to be held in an escrow arrangement
for the purpose of enabling compliance with this Section 8.
9. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
Upon the occurrence of any of the following events, an optionee's rights with respect to Nonqualified Options granted to such
optionee hereunder shall be adjusted as hereinafter provided, unless otherwise specifically provided in the Nonqualified Option
Agreement between the optionee and the Company relating to such Nonqualified Option:
(a) Stock Dividends and Stock Splits. If the shares of Common Stock shall be subdivided or combined into a greater or
smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding
Common Stock, the number of shares of Common Stock deliverable upon the exercise of Nonqualified Options shall be
appropriately increased or decreased proportionately, and appropriate adjustments shall be made in the purchase price per
share to reflect such subdivision, combination or stock dividend.
(b) Consolidations or Mergers. If the Company is to be consolidated with or acquired by another entity in a merger or other
reorganization in which the holders of the outstanding voting stock of the Company immediately preceding the consummation of
such event, shall, immediately following such event, hold, as a group, less than a majority of the voting securities of the surviving
or successor entity, or in the event of a sale of all or substantially all of the Company's assets or otherwise (each, an
"Acquisition"), the Option Committee or the board of directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board"), shall, as to outstanding Nonqualified Options, either (i) make appropriate provision for the
continuation of such Nonqualified Options by substituting on an equitable basis for the shares then subject to such Nonqualified
Options either (a) the consideration payable with respect to the outstanding shares of Common Stock in connection with the
Acquisition, (b) shares of stock of the surviving or successor corporation or
(c) such other securities as the Successor Board deems appropriate, the fair market value of which shall not materially exceed
the fair market value of the shares of Common Stock subject to such Nonqualified Options immediately preceding the
Acquisition; or (ii) upon written notice to the optionees, provide that all Nonqualified Options must be exercised, to the extent
then exercisable or to be exercisable as a result of the Acquisition, within a specified number of days of the date
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of such notice, at the end of which period the Nonqualified Options shall terminate; or (iii) terminate all Nonqualified Options in
exchange for a cash payment equal to the excess of the fair market value of the shares subject to such Nonqualified Options (to
the extent then exercisable or to be exercisable as a result of the Acquisition) over the exercise price thereof.
(c) Recapitalization or Reorganization. In the event of a recapitalization or reorganization of the Company (other than a
transaction described in subparagraph (b) above) pursuant to which securities of the Company or of another corporation are
issued with respect to the outstanding shares of Common Stock, an optionee upon exercising a Nonqualified Option shall be
entitled to receive for the purchase price paid upon such exercise the securities he or she would have received if he or she had
exercised such Nonqualified Option prior to such recapitalization or reorganization.
(d) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, each Nonqualified
Option will terminate immediately prior to the consummation of such proposed action or at such other time and subject to such
other conditions as shall be determined by the Option Committee.
(e) Issuances of Securities. Except as expressly provided herein, no issuance by the Company of shares of stock of any class,
or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject to Nonqualified Options. No adjustments shall be made for dividends paid in
cash or in property other than securities of the Company.
(f) Fractional Shares. No fractional shares shall be issued under the 2000 Plan and the optionee shall receive from the
Company cash in lieu of such fractional shares.
(g) Adjustments. Upon the happening of any of the events described in subparagraphs (a), (b) or (c) above, the class and
aggregate number of shares set forth in Section 3 hereof that are subject to Nonqualified Options which previously have been
or subsequently may be granted under the 2000 Plan shall also be appropriately adjusted to reflect the events described in such
subparagraphs. The Option Committee or the Successor Board shall determine the specific adjustments to be made under this
Section 9 and, subject to Section 2, its determination shall be conclusive.
10. AMENDMENT OR TERMINATION OF 2000 PLAN
The Board may modify, revise or terminate the 2000 Plan at any time and from time to time. Except as provided in Section 9
hereof, rights and obligations under any Nonqualified Option granted before any amendment of the 2000 Plan shall not be
altered or impaired by such amendment, except with the consent of the optionee.
11. EFFECTIVE DATE; NONEXCLUSIVITY
(a) Effective Date. This 2000 Plan will be deemed to have been adopted and to be effective when approved by the Board.
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(b) Nonexclusivity. The adoption of the 2000 Plan shall not be construed as creating any limitations on the power of the Board
to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of options
otherwise than under the 2000 Plan, and such arrangements may be either applicable generally or only in specific cases.
12. GOVERNMENT AND OTHER REGULATIONS; GOVERNING LAW
(a) Securities Laws. If in the opinion of legal counsel for the Company, the issuance or sale of any shares of Common Stock
pursuant to the exercise of a Nonqualified Option would not be lawful for any reason, including, without limitation, the inability
of the Company to obtain from any governmental authority or regulatory body having jurisdiction the authority deemed by such
counsel to be necessary to such issuance or sale, the Company shall not be obligated to issue or sell any shares of Common
Stock pursuant to the exercise of a Nonqualified Option to an optionee or any other authorized person unless a registration
statement that complies with the provisions of the Securities Act of 1933, as amended (the "Act"), in respect of such shares of
Common Stock is in
effect at the time thereof, or other appropriate action has been taken under and pursuant to the terms and provisions of the Act,
or the Company receives evidence satisfactory to such counsel that the issuance and sale of such shares of Common Stock, in
the absence of an effective registration statement or other appropriate action, would not constitute a violation of the Act or any
applicable state securities law. The Company is in no event obligated to register any such shares of Common Stock, to comply
with any exemption from registration requirements or to take any other action which may be required in order to permit, or to
remedy or remove any prohibition or limitation on, the issuance or sale of such shares of Common Stock to any optionee or
other authorized person.
(b) Governing Law. The 2000 Plan shall be governed by and interpreted under the laws of the State of Delaware.
13. TERMINATION OF GRANTING OF NONQUALIFIED OPTIONS UNDER THE 2000 PLAN
No Nonqualified Option may be granted under the 2000 Plan after the tenth anniversary of the effective date of the 2000 Plan
(as set forth in Section 11 hereto).
-8-
EXHIBIT 10.08
DAVOX CORPORATION
Non-Qualified Stock Option Agreement
Davox Corporation, a Delaware corporation (the "Company"), hereby grants this ___ day of _____, 20__, to __________
(the "Employee"), an option to purchase a maximum of _______ shares of its Common Stock, $.10 par value, at the price of
_______ per share, on the following terms and conditions:
1. Grant Under 2000 Stock Option and Incentive Plan. This option is granted pursuant to and is governed by the Company's
2000 Stock Option and Incentive Plan (the "Plan") and, unless the context otherwise requires, terms
used herein shall have the same meaning as in the Plan. Determinations made in connection with this option pursuant to the Plan
shall be governed by the Plan as it exists on this date.
2. Grant as Non-Qualified Stock Option; Other Options. This option shall be treated for federal income tax purposes as a
Non-Qualified Option (rather than an incentive stock option). This option is in addition to any other options heretofore or
hereafter granted to the Employee by the Company, but a duplicate original of this instrument shall not effect the grant of
another option.
3. Extent of Option if Employment Continues. If the Employee has continued to be employed by the Company on the following
dates, the Employee may, subject to Article 2, exercise this option in cumulative installations as follows:
Six months from the Commencement Date - one-eighth of the shares
One year but less than 18 months from the - an additional one-eighth of the
Commencement Date shares
Eighteen months but less than two years from the - an additional one-eighth of the
Commencement Date shares
Two years but less than thirty months from the - an additional one-eighth of the
Commencement Date shares
Thirty months but less than three years from the - an additional one-eighth of the
Commencement Date shares
Three years but less than forty-two months from the - an additional one-eighth of the
Commencement Date shares
Forty-two months but less than four years from the - an additional one-eighth of the
Commencement Date shares
Four years from the Commencement Date - an additional one-eighth of the
shares
For the purposes hereof, the Commencement Date shall be ___________.
Notwithstanding the vesting schedule set forth in this Article 3 and subject to the provisions of the Plan, in the event the
Employee continues to be employed by the Company on the effective date (the "Effective Date") of:
(a) a change in control of the Company, pursuant to a sale, merger, consolidation, reorganization, combination, recapitalization
or similar transaction, or pursuant to a transaction or series of transactions in which the holders of the then outstanding equity
securities of the Company, after such transactions, shall hold less than 50% of the surviving entity; or
(b) a sale by the Company of all or substantially all of its assets,
then the option shall be immediately and automatically accelerated with respect to the total number of shares of Common Stock
subject to the option which have not previously vested pursuant to the terms of this Article 3.
The foregoing rights are cumulative and, while the Employee continues to be employed by the Company, may be exercised up
to and including the date which is ten years from the date this option is granted. All of the foregoing rights are subject to Articles
4 and 5, as appropriate, if the Employee ceases to be employed by the Company or dies while in the employ of the Company.
4. Retirement; Disability; Termination of Employment. If the Employee retires from employment with the Company, no further
installments of this option shall become exercisable and this option shall terminate after the passage of 90 days from the date
employment ceases, but in no event later than the scheduled expiration date. In such a case, the Employee's only rights
hereunder shall be those which are properly exercised before the termination of this option. If the Employee's termination of
employment results from the Employee's disability (within the meaning of Section 22(e)(3) of the Code), no further installments
of this option shall become exercisable and this option shall terminate after the passage of 180 days from the date employment
ceases, but in no event later than the scheduled expiration date. In such a case, the Employee's only rights hereunder shall be
those which are properly exercised before the termination of this option. If the Employee ceases to be employed by the
Company, other than by reason of retirement, disability or death, no further installments of this option shall become exercisable
and this option shall terminate after the passage of 30 days from the date employment ceases, but in no event later than the
scheduled expiration date. In such a case, the Employee's only rights hereunder shall be those which are properly exercised
before the termination of this option.
5. Death. If the Employee dies while in the employ of the Company, this option may be exercised, to the extent of the number
of shares with respect to which the Employee could have exercised it on the date of his death, by his estate, personal
representative or beneficiary to whom this option has been assigned pursuant to Article 10, at any time within 180 days after
the date of death, but not later than the scheduled expiration date.
6. Partial Exercise. Exercise of this option up to the extent above stated may be made in part at any time and from time to time
within the above limits, except that this option may not be exercised for a fraction of a share unless such exercise is with respect
to the final installment of stock subject to this option and a fractional share (or cash in lieu thereof) must be issued to permit the
Employee to exercise completely such final installment.
7. Payment of Price. The option price is payable in United States dollars and may be paid in cash or by check in the amount
equal to the option price.
8. Agreement to Purchase for Investment. By acceptance of this option, the Employee agrees that a purchase of shares under
this option will not be made with a view to their distribution, as that term is used in the Securities Act of 1933, as amended,
unless in the opinion of counsel to the Company such distribution is in compliance with or exempt from the registration and
prospectus requirements of that Act, and the Employee agrees to sign a certificate to such effect at the time of exercising this
option and agrees that the certificate for the shares so purchased may be inscribed with a legend to ensure compliance with that
Act.
9. Method of Exercising Option. Subject to the terms and conditions of this Agreement, this option may be exercised by written
notice to the Company, at the principal executive office of the Company, or to such transfer agent as the Company shall
designate. Such notice shall state the election to exercise this option and the number of shares in respect of which it is being
exercised and shall be signed by the person or persons so exercising this option. Such notice shall be accompanied by payment
of the full purchase price of such shares, and the Company shall deliver a certificate or certificates representing such shares as
soon as practicable after the notice shall be received. The certificate or certificates for the shares as to which this option shall
have been so exercised shall be registered in the name of the person or persons so exercising this option (or, if this option shall
be exercised by the Employee and if the Employee shall so request in the notice exercising this option, shall be registered in the
name of the Employee and another person jointly, with right of survivorship) and shall be delivered as provided above to or
upon the written order of the person or persons exercising this option. In the event this option shall be exercised, pursuant to
Article 5 hereof, by any person or persons other than the Employee, such notice shall be accompanied by appropriate proof of
the right of such person or persons to exercise this option. All shares that shall be purchased upon the exercise of this option as
provided herein shall be fully paid and non-assessable.
10. Option Not Transferable. This option is not transferable or assignable except in accordance with the terms of the Plan.
11. No Obligation to Exercise Option. The grant and acceptance of this option imposes no obligation on the Employee to
exercise it.
12. No Obligation to Continue Employment. The Company and any subsidiary are not by the Plan or this option obligated to
continue the Employee in employment.
13. No Rights as Stockholder until Exercise. The Employee shall have no rights as a stockholder with respect to shares subject
to this Agreement until a stock certificate therefor has been issued to the Employee and is fully paid for. Except as is expressly
provided in the Plan with respect to certain changes in the capitalization of the Company, no adjustment shall be made for
dividends or similar rights for which the record date is prior to the date such stock certificate is issued.
14. Capital Changes and Business Successions. It is the purpose of this option to encourage the Employee to work for the best
interests of the Company and its stockholders. Since, for example, that might require the issuance of a stock dividend or a
merger with another corporation, the purpose of this option would not be served if such a stock dividend, merger or similar
occurrence would cause the Employee's rights hereunder to be diluted or terminated and thus be contrary to the Employee's
interest. The Plan contains extensive provisions designed to preserve options at full value in a number of contingencies.
Therefore, provisions in the Plan for adjustment with respect to stock subject to options and
the related provisions with respect to successors to the business of the Company are hereby made applicable hereunder and
are incorporated herein by reference. In particular, without affecting the generality of the foregoing, it is understood that for the
purposes of Articles 3 through 5 hereof, both inclusive, employment by the Company includes employment by a subsidiary.
15. Withholding Taxes. If the Company or any subsidiary in its discretion determines that it is obligated to withhold any tax in
connection with the exercise of this option, or in connection with the transfer of, or the lapse of restrictions on, any Common
Stock or other property acquired pursuant to this option, the Employee hereby agrees that the Company or any subsidiary may
withhold from the Employee's wages or other remuneration the appropriate amount of tax. At the discretion of the Company or
subsidiary, the amount required to be withheld may be withheld in cash from such wages or other remuneration or in kind from
the Common Stock or other property otherwise deliverable to the Employee on exercise of this option. The Employee further
agrees that, if the Company or subsidiary does not withhold an amount from the Employee's wages or other remuneration
sufficient to satisfy the withholding obligation of the Company or subsidiary, the Employee will make reimbursement on
demand, in cash, for the amount underwithheld.
16. Governing Law. This Agreement shall be governed by and interpreted in accordance with the internal laws of Delaware.
IN WITNESS WHEREOF the Company and the Employee have caused this instrument to be executed, and the Employee
whose signature appears below acknowledges receipt of a copy of the Plan and acceptance of an original copy of this
Agreement.
By:__________________________________________________
DAVOX CORPORATION
Employee
EXHIBIT 10.09
DAVOX CORPORATION EXECUTIVE COMPENSATION PLAN
The compensation arrangements between Davox Corporation (the "Company") and each of its executive officers are based on
the Company's Executive Compensation Plan (the "Plan"), the terms of which are described herein.
The Company's executive compensation program is administered by the three member Compensation Committee of the Board
of Directors (the "Compensation Committee"). The three members of the Compensation Committee are non-employee
Directors. Pursuant to the authority delegated by the Board of Directors, the Compensation Committee establishes each year
the compensation of the Chief Executive Officer, and together with the Chief Executive Officer, establishes the compensation of
the other executive officers of the Company pursuant to the Plan.
The Plan is designed to reward executive officers whose performance yields improvement in corporate operating results,
market share and shareholder value. The ultimate goal of the Plan is to align the interests of management with those of the
stockholders. Compensation under the Plan is comprised of cash compensation in the form of annual base salary, incentive
compensation in the form of performance-based cash bonuses, and long-term incentive compensation in the form of stock
options.
In setting cash compensation levels for executive officers, the Compensation Committee takes into account such factors as: (i)
the Company's past financial performance and future expectations, (ii) the general and industry-specific business environment,
and (iii) corporate and individual performance goals. The base salaries are established at levels comparable to the amounts paid
to senior executives with comparable qualifications, experience and responsibilities at other companies located in the
northeastern United States of similar size and engaged in a similar business to that of the Company.
Incentive compensation in the form of performance-based bonuses for the Company's executive officers is based upon
management's success in meeting the Company's financial and strategic goals as well as meeting individual performance goals.
Target levels of revenue and net income are set annually, and bonuses are allocated to the executive officers contingent upon
the achievement of the target levels. In addition, based on the Company's exceeding both target revenues and target net
income, additional bonuses are awarded to executive officers in the same proportion as bonuses are allocated under the Plan.
Incentive compensation in the form of stock options is designed to provide long term incentives to executive officers, to
encourage the executive officers to remain with the Company and to enable optionees to develop and maintain a significant,
long-term stock ownership position in the Company's Common Stock. The Compensation Committee grants stock options to
the Company's executive officers in consideration of the strategic goals and direction of the Company.
EXHIBIT 10.14
DAVOX CORPORATION
PRESIDENT & CHIEF EXECUTIVE OFFICER
SEVERANCE AGREEMENT
Davox Corporation ("Davox") will extend to you a severance package such that, in the event of your termination from
employment without cause or in the event there is a change in control of the company that results in the demotion of your title,
change in responsibilities, relocation of the company by more than fifty (50) miles or removal from the Board of Directors.
Without cause shall mean for any reason other than:
(a) illegal acts (other than minor traffic violations, misdemeanors, or other acts that do not result in criminal conviction) including
convictions for theft or embezzlement.
(b) Material violation of published written policies of the company that if broken would have a material negative impact on the
company.
(c) Irresponsible, unauthorized acts of a willful nature in the performance of duties that have a substantial financial impact on the
company.
This severance package will provide you with medical / dental benefits continuation coverage and compensation at the rate
equal to your current base salary in effect at the time of such termination, plus an amount equal to the actual earned bonus paid
during the previous twelve months prior to the date of termination. This compensation and benefits continuation (severance
package) will be payable for a period of twelve months from the date of separation from employment or until such time you
acquire other employment, whichever comes sooner.
Following the effective date of termination, as set forth in writing and furnished to you by Davox, your employment with Davox
shall cease and you shall not hold yourself as an employee, agent, or representative of Davox.
Continuation of salary and benefits shall further be subject to your compliance with any then existing company policies and such
other terms as may be in effect between you and Davox pertaining to the disclosure of confidential or proprietary information.
Davox has final authority to determine all questions of eligibility to receive benefits under this arrangement and to interpret and
construe the terms of this arrangement.
Approval:
/s/ David M. Sample March 1, 2001
------------------- ----------------
President & Chief Executive Officer Date
/s/ Alphonse M. Lucchese March 1, 2001
------------------------ -------------
Chairman of the Board Date
EXHIBIT 10.15
DAVOX CORPORATION
EXECUTUVE VICE PRESIDENT - PRODUCT GROUP
SEVERANCE AGREEMENT
DAVOX Corporation ("DAVOX") will provide to you the following terms and condition of salary and benefits continuation:
(1.) DAVOX shall provide a continuation of your base salary and medical benefits at DAVOX's cost, as may be in effect at the
time of a qualifying termination as set forth in subclause 2, commencing upon the date of termination, for a period of six (6)
months or until such time as you assume new employment, whichever comes first;
(2.) DAVOX shall provide continuation of salary and benefits as set forth in subclause (1) in the event your employment is
terminated for the following reasons: (a) economic layoff; (b) downsizing of the Marketing or Development organizations which
results in the elimination of your position as Executive Vice President Product Group; or (c) reorganization of the Marketing or
Development organizations which would require you to relocate.
Following the effective date of termination, as set forth in writing and furnished to you by DAVOX, your employment with
DAVOX shall cease and you shall not hold yourself as an employee, agent, or representative of DAVOX.
Continuation of salary and benefits shall further be subject to your compliance with any then existing company policies and such
other terms as may be in effect between you and DAVOX pertaining to the disclosure of confidential or proprietary
information.
DAVOX has final authority to determine all questions of eligibility to receive benefits under this arrangement and to interpret
and construe the terms of this arrangement.
Approval:
/s/ David M. Sample March 1, 2001
------------------- -------------
President and Chief Executive Officer Date
/s/ Jeffrey E. Anderholm March 1, 2001
------------------------ -------------
Executive Vice President - Product Group Date
EXHIBIT 10.16
DAVOX CORPORATION
EXECUTUVE VICE PRESIDENT - GLOBAL SALES
SEVERANCE AGREEMENT
DAVOX Corporation ("DAVOX") will provide to you the following terms and condition of salary and benefits continuation:
(1.) DAVOX shall provide a continuation of your base salary and medical benefits at DAVOX's cost, as may be in effect at the
time of a qualifying termination as set forth in subclause 2, commencing upon the date of termination, for a period of six (6)
months.
(2.) DAVOX shall provide continuation of salary and benefits as set forth in subclause (1) in the event your employment is
terminated for the following reasons: (a) economic layoff; (b) merger, acquisition or downsizing of the Sales organization which
results in the elimination of your position as Executive Vice President Global Sales; or (c) reorganization of the Sales
organization which would require you to relocate.
Following the effective date of termination, as set forth in writing and furnished to you by DAVOX, your employment with
DAVOX shall cease and you shall not hold yourself as an employee, agent, or representative of DAVOX.
Continuation of salary and benefits shall further be subject to your compliance with any then existing company policies and such
other terms as may be in effect between you and DAVOX pertaining to the disclosure of confidential or proprietary
information.
DAVOX has final authority to determine all questions of eligibility to receive benefits under this arrangement and to interpret
and construe the terms of this arrangement.
Approval:
/s/ David M. Sample March 1, 2001
------------------- -------------
President and Chief Executive Officer Date
/s/ Anthony A. Colangelo March 1, 2001
------------------------ -------------
Executive Vice President - Global Sales Date
Exhibit 21
Davox Corporation
List of Subsidiaries
Name of Subsidiary Jurisdiction of Incorporation
------------------ -----------------------------
Davox (Asia Pacific) Pte. Ltd. Singapore
Davox GmbH Germany
Davox (Canada) Inc. Nova Scotia
Davox (UK) Limited England
Davox Sales Corporation Barbados
Davox Belgium S.P.R.L. Belgium
Davox International Holdings, Inc. Massachusetts
Davox Mexico, S. de R.L. de C.V. Mexico
Davox Securities Corporation Massachusetts
Davox do Brasil Ltda. Sao Paulo
Davox (Australia) Pty Limited New South Wales
Davox Corporation Hong Kong Limited Hong Kong
Davox (Japan) Corporation (Branch) Tokyo
Davox (Japan) Corporation Delaware
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our reports included in this Form 10-K, into the
Company's previously filed Registration Statements File Nos. 333-42492, 333-83687, 333-52551, 333-30727, 333-16209,
333-07003, 33-47618, 33-47619, 33-51578, and 33-89582.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 9, 2001