SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INTER-TEL, INCORPORATED
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration No.
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3) Filing party:
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4) Date filed:
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<PAGE>
INTER-TEL, INCORPORATED
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 23, 1997
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TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Inter-Tel, Incorporated (the "Company"), an Arizona corporation, will be held on
April 23, 1997, at 10:00 a.m., local time, at the Wyndham Gardens Hotel, 427 N.
44th Street, Phoenix, Arizona 85008, for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected and qualified.
2. Approval of the Company's 1997 Long-Term Incentive Plan.
3. Approval of the Company's 1997 Employee Stock Purchase Plan.
4. Approval of an amendment to the Company's Restated Articles of
Incorporation regarding director and officer indemnification.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on March 14, 1997,
are entitled to notice of and to vote at the meeting. A copy of the Company's
1996 Annual Report to Shareholders, which includes certified financial
statements, was mailed with this Notice and Proxy Statement on or about March
21, 1997, to all shareholders of record on the record date.
All shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder attending
the meeting may vote in person even if he has previously returned a proxy.
Sincerely,
KURT R. KNEIP,
Secretary
Phoenix, Arizona
March 21, 1997
<PAGE>
INTER-TEL, INCORPORATED
120 North 44th Street, Suite 200
Phoenix, Arizona 85034-1822
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PROXY STATEMENT
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INFORMATION CONCERNING SOLICITATION AND VOTING
General
This Proxy Statement is furnished by Inter-Tel, Incorporated
("Inter-Tel" or the "Company"), for use at the Annual Meeting of Shareholders to
be held April 23, 1997, at 10:00 a.m., local time (the "Annual Meeting"), or at
any adjournment thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Shareholders. The Annual Meeting will
be held at the Wyndham Gardens Hotel, 427 N. 44th Street, Phoenix, Arizona,
85008 (telephone number 602-220-4400).
These proxy solicitation materials were mailed on or about March 21,
1997, to all shareholders entitled to vote at the Annual Meeting.
Record Date and Share Ownership
Shareholders of record at the close of business on March 14, 1997 are entitled
to notice of and to vote at the meeting. As of the record date, 12,957,263
shares of the Company's Common Stock were issued and outstanding. As of the
record date, the following person was known by the Company to be, or may be
deemed to be, the beneficial owner of more than 5% of the Company's Common
Stock:
Shares of Common Stock
Beneficially Owned
--------------------------
Number Percent
Name of Shares of Total
Steven G. Mihaylo
120 North 44th Street, Suite 200
Phoenix, Arizona 85034 2,750,000 21.2%
Revocability of Proxies
The enclosed proxy is solicited by the Board of Directors of the
Company. Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Company a
written notice of revocation or a duly executed proxy bearing a later date, or
by attending the Annual Meeting and voting in person.
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Voting and Solicitation
Every shareholder voting at the Annual Meeting for the election of
directors may either (i) cumulate such shareholder's votes and give one nominee
for director a number of votes equal to (a) the number of directors to be
elected, multiplied by (b) the number of shares of the Company's Common Stock
held by such shareholder; or (ii) distribute such shareholder's votes on the
same principle among as many nominees for director as the shareholder thinks
fit, provided that votes cannot be cast for more than six nominees. However, no
shareholder will be entitled to cumulate votes for any nominee unless such
nominee's name has been placed in nomination prior to the voting and such
shareholder, or another shareholder, has given notice at the Annual Meeting
prior to the voting for directors of the intention of such shareholder to
cumulate such shareholder's votes. On all other matters, one vote may be cast
for each share held of the Company's Common Stock.
A quorum will be present if a majority of the votes entitled to be cast
are present in person or by valid proxy. All matters to be considered and acted
upon by the shareholders at the Annual Meeting must be approved by a majority of
the shares represented at the Annual Meeting and entitled to vote. Consequently,
abstentions will have the same legal effect as votes against a proposal. In
contrast, broker "non-votes" resulting from a broker's inability to vote a
client's shares on non-discretionary matters will have no effect on the approval
of such matters.
If the enclosed proxy is properly executed and returned to the Company
in time to be voted at the Annual Meeting, it will be voted as specified on the
proxy, unless it is properly revoked prior thereto.
The cost of this solicitation will be borne by the Company. In
addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for expenses incurred in forwarding
solicitation material to such beneficial owners. Proxies also may be solicited
by certain of the Company's directors, officers and regular employees,
personally or by telephone or telegram, without additional compensation.
Deadline for Receipt of Shareholder Proposals
Proposals of security holders of the Company that are intended to be
presented by such shareholders at the annual meeting of the Company for the
fiscal year ending December 31, 1997 must be received by the Company no later
than November 23, 1997, in order to be included in the proxy statement and form
of proxy relating to such meeting.
Independent Auditors
The independent auditors of the Company for the fiscal year ended
December 31, 1996 were Ernst & Young LLP. A representative of Ernst & Young LLP
will attend the annual meeting for the purpose of responding to appropriate
questions.
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<PAGE>
ELECTION OF DIRECTORS
(Proposal No. 1)
Nominees
Six directors are to be elected at the meeting. Each nominee named
below is currently a director of the Company. In the event that any nominee of
the Company becomes unavailable for any reason or if a vacancy should occur
before election (which events are not anticipated) the shares represented by the
enclosed proxy may be voted for such other person as may be determined by the
holders of such proxy. In the event that additional persons are nominated for
election as directors, the proxy holders intend to vote all proxies received by
them cumulatively, in their discretion, in such a manner as will assure the
election of as many of the nominees listed below as possible. In such event, the
specific nominees to be voted for will be determined by the proxy holders in
their discretion. The term of office of each person elected as a director will
continue until the next annual meeting and until his successor has been elected
and qualified.
The names of the nominees and certain biographical information relating
to the nominees are set forth below.
Director
Name of Nominees Age Position(s) Since
- ---------------- --- ----------- -----
Steven G. Mihaylo 53 Chairman and Chief 1969
Executive Officer
J. Robert Anderson 60 Director 1997
Gary D. Edens 55 Director 1994
Maurice H. Esperseth 71 Director 1986
C. Roland Haden 56 Director 1983
Norman Stout 39 Director 1994
Mr. Mihaylo, the founder of the Company, has served as Chairman of the
Board of Directors of the Company since September 1983 and as Chief Executive
Officer of the Company since its formation in July 1969. Mr. Mihaylo served as
President of the Company until December 1994 and as Chairman of the Board of
Directors from July 1969 to October 1982. Mr. Mihaylo also is a director of
MicroAge, Inc. and Microtest, Inc.
Mr. Anderson was elected as a director of the Company in February 1997.
Mr. Anderson held various positions at Ford Motor Company from 1963 to 1983,
serving from 1978 to 1983 as President of the Ford Motor Land Development
Corporation. He served as Senior Vice President, CFO and a member of the Board
of Directors of The Firestone Tire and Rubber Company from 1983 to 1989, and as
Vice Chairman of Bridgestone/Firestone, Inc. from 1989 through 1991. He most
recently served as Vice Chairman, CFO and a member of the Board of Directors of
the Grumman Corporation
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from 1991 to 1994. Mr. Anderson is currently semi-retired, and he is an active
leader in various business, civic and philanthropic organizations.
Mr. Edens has been a director of the Company since October 1994. He was
a broadcasting media executive from 1970 to 1994, serving as Chairman and Chief
Executive Officer of Edens Broadcasting, Inc. from 1984 to 1994 when that
corporation's nine radio stations were sold. He presently is President of The
Hanover Companies, Inc., an investment firm. He is an active leader in various
business, civic and philanthropic organizations.
Mr. Esperseth has been a director of the Company since October 1986.
Mr. Esperseth joined the Company in January 1983 as Senior Vice
President-Research and Development, after a 32-year career with GTE, and served
as Executive Vice President of Inter-Tel from 1986 to 1988. Mr. Esperseth
retired as an officer of the Company on December 31, 1989.
Dr. Haden has been a director of the Company since 1983. Dr. Haden has
been Vice Chancellor and Dean of Engineering of Texas A&M University since 1993.
Previously, he served as Vice Chancellor of Louisiana State University from 1991
to 1993, Dean of the College of Engineering and Applied Sciences at Arizona
State University from 1989 to 1991, Vice President for Academic Affairs at
Arizona State University from 1987 to 1988, and Dean of the College of
Engineering and Applied Sciences from 1978 to 1987. Dr. Haden holds a doctoral
degree in Electrical Engineering from the University of Texas and has served on
the faculties of the University of Oklahoma and Texas A & M University.
Mr. Stout has been a director of the Company since October 1994. Mr.
Stout has been President of Superlite Block, a manufacturer of concrete block
since February 1993. Since 1996 Mr. Stout has also been President of Oldcastle
Architectural West, the parent company of Superlite Block and four other
concrete products plants. Prior thereto he was employed by Boorhem-Fields, Inc.
of Dallas, Texas, a manufacturer of crushed stone, as Chief Executive Officer
from 1990 to 1993 and as Chief Financial Officer from 1986 to 1990. Previously,
Mr. Stout was a Certified Public Accountant with Coopers & Lybrand.
The Board of Directors recommends that the shareholders vote "FOR" the
nominees listed above.
Security Ownership of Management
The following table sets forth the beneficial ownership of Common Stock
of the Company as of March 14, 1997, by (a) each director of the Company, (b)
each of the Named Officers (defined below) and (c) all directors and executive
officers as a group:
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Shares of Common Stock
Beneficially Owned
Number Percent
Name (9) of Shares of Total
- ----------------------- --------- --------
Steven G. Mihaylo 2,750,000 21.2%
Gary D. Edens 10,000 (1) (8)
Maurice H. Esperseth 13,017 (2) (8)
C. Roland Haden 8,376 (2) (8)
Norman Stout 10,000 (1) (8)
Thomas C. Parise 83,690 (3) (8)
Craig W. Rauchle 41,450 (4) (8)
Ross McAlpine 18,000 (5) (8)
Kurt R. Kneip 12,000 (6) (8)
All directors and executive
officers as a group (10 persons) 2,946,533 (7) 22.7%
(1) Includes 10,000 shares under options which were exercisable on March 1,
1997, or within 60 days of that date.
(2) Includes 5,000 shares under options which were exercisable on March 1,
1997, or within 60 days of that date.
(3) Includes 33,000 shares under options which were exercisable on March 1,
1997, or within 60 days of that date.
(4) Includes 23,750 shares under options which were exercisable on March 1,
1997, or within 60 days of that date.
(5) Includes 18,000 shares under options which were exercisable on March 1,
1997, or within 60 days of that date.
(6) Includes 7,800 shares under options which were exercisable on March 1,
1997, or within 60 days of that date.
(7) Includes 112,550 shares subject to stock options held by all directors
and executive officers as a group which are currently exercisable or
which will become exercisable within 60 days after March 1, 1997.
(8) Less than 1%.
(9) Address for the above named directors and executive officers: C/O
Inter-Tel, Incorporated, 120 North 44th Street, Suite 200, Phoenix,
Arizona 85034-1822.
Board Meetings and Committees
The Board of Directors of the Company held a total of four meetings
during the fiscal year ended December 31, 1996.
The Audit Committee of the Board of Directors during 1996 consisted of
directors Esperseth, Stout and Wade. The Audit Committee met three times during
the last fiscal year. This Committee recommends engagement of the Company's
independent public accountants and is primarily responsible for approving the
services performed by the Company's independent public accountants and for
reviewing and evaluating the Company's accounting principles and its system of
internal controls and financial management practices. Mr. Anderson was elected
as a director
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and Chairman of the Audit Committee in February 1997, upon the retirement of Ms.
Wade from the board.
The Compensation and Stock Option Committee of the Board of Directors
consisted of directors Esperseth, Edens and Stout. Mr. Stout replaced Dr. Haden
as a member of this committee, effective at the July 1996 meeting. The Committee
reviews employee compensation and makes recommendations thereon to the Board of
Directors. The Committee met three times during the year. The Committee
functions include the administration of the Company's Stock Incentive Plans. The
Committee also determines, upon review of relevant information, the fair market
value of the Company's Common Stock, the exercise price-per-share at which
options shall be granted and the employees to whom options shall be granted.
There is no nominating committee or other committee performing similar
functions.
During the fiscal year ended December 31, 1996, each director attended
all meetings of the Board of Directors and of the committee(s) on which the
director served.
Director Compensation
Each director who is not employed by the Company was paid a fee of
$3,000 for each Board of Directors meeting attended and $1,500 for each
committee meeting attended. All directors, except Mr. Mihaylo, are eligible to
participate in the Company's 1990 Directors' Stock Option Plan, under which each
director is granted options to purchase 2,500 shares of Common Stock annually at
the market price five days after the date of his or her re-election. During
1996, all directors, except Mr. Mihaylo, received two stock option grants of
2,500 shares each, pursuant to the amendment of the 1990 Director's Stock Option
Plan approved by the shareholders at the annual meeting held on May 2, 1996.
Section 16(a) Reporting
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten percent shareholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the year ended 1995, all Section 16(a) filing
requirements applicable to its officers, directors and ten percent shareholders
were complied with.
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Executive Compensation
The following Summary Compensation Table sets forth compensation paid
by the Company for services rendered during the fiscal years 1996, 1995 and 1994
by the Chief Executive Officer and the four most highly compensated executive
officers of the Company (the "Named Officers") whose salary and bonus exceeded
$100,000 in 1996.
INTER-TEL, INCORPORATED
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------
Number of
Securities All
Underlying Other
Salary Bonus Options Compensation (1)
Name and Position Year ($) ($) (#) ($)
- ----------------- ---- --- --- --- ---
<S> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (g) (i)
Steven G. Mihaylo 1996 300,000 48,000 - 9,215
Chairman and Chief 1995 300,000 51,442 - 8,310
Executive 1994 204,000 76,145 - 2,310
Thomas C. Parise 1996 225,000 86,000 60,000 11,234
President and Chief 1995 225,000 170,105 - 8,310
Operating Officer 1994 170,000 124,675 70,000 2,310
Craig W. Rauchle 1996 189,807 87,734 45,000 17,000
Exec. Vice President -- 1995 180,000 75,000 - 8,119
Corporate Development 1994 170,000 72,510 50,000 2,119
Ross McAlpine 1996 110,000 89,646 - 5,529
President -- Inter-Tel 1995 110,000 100,977 - 2,129
Leasing, Inc. 1994 101,769 46,500 30,000 1,463
Kurt R. Kneip (2) 1996 112,039 11,040 - 2,375
Vice President/CFO/ 1995 104,000 45,413 - 2,310
Secretary/Asst. Treasurer 1994 85,861 24,747 20,000 1,485
</TABLE>
(1) Company contribution under 401(k) Retirement Plan. Messrs. Mihaylo, Parise
and Rauchle also received auto allowances of $6,000 each during 1995, and
Mr. Rauchle also received reimbursements for club dues and expenses. In
addition, each officer was allocated common stock under the Employee Stock
Ownership Plan (a maximum of 145 shares in 1996, 142 shares in 1995, and
165 shares in 1994).
(2) Mr. Kneip was elected Vice President and Chief Financial Officer in
September 1993 and Secretary/Treasurer in October 1994. In May 1996, Mr.
Kneip was elected Assistant Treasurer upon the election of John Abbott as
Treasurer.
(3) No compensation is present under omitted columns (e), (f) and (h).
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AGGREGATED OPTION EXERCISES IN 1996 AND
DECEMBER 31, 1996 OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of
Unexercised in-the-Money
Options at Options at
Shares December 31, December 31,
Acquired 1996 (#) 1996 ($) (2)
on Value -------- ------------
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
---- --- --- ------------- -------------
<S> <C> <C> <C> <C>
(a) (b) (c) (d) (e)
Steven G. Mihaylo (1) -- -- -- --
Thomas C. Parise:
Exercised 3,750 46,406
Exercisable 28,000 364,000
Unexercisable 102,000 793,500
Craig W. Rauchle
Exercised 5,000 67,500
Exercisable 20,000 260,000
Unexercisable 75,000 575,625
Ross McAlpine
Exercised -- --
Exercisable 16,000 209,000
Unexercisable 20,000 260,500
Kurt R. Kneip (4)
Exercised 1,000 11,750
Exercisable 8,000 104,000
Unexercisable 13,000 169,250
</TABLE>
(1) Steven G. Mihaylo has elected not to participate in the Company's stock
option plans at this time.
(2) Potential unrealized value is (i) the fair market value at December 31,
1996 ($19 per share) less the option exercise price times (ii) the number
of shares.
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Option Grants in Last Fiscal Year
The Company granted stock options to the Named Officers during the
fiscal year ended December 31, 1996, as follows:
<TABLE>
<CAPTION>
Option Grants in Fiscal 1996 (Individual Grants)
Potential Realizable
Value at Assumed
Number of Annual Rates of Stock
Securities Percent of Total Price Appreciation for
Underlying Options Granted Option Terms (3)
Options To Employees Exercise Expiration ----------------
Name Granted In Fiscal Year (1) Price ($/Sh) Date (2) 5%($) 10%($)
- ---- ------- ------------------ ------------ -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Thomas C. Parise 20,000 5.4% 16.875 2-27-2006 212,252 537,888
Thomas C. Parise 40,000 10.8% 13.875 10-25-2006 349,037 884,527
------ ----- ------- -------
60,000 16.3% 561,289 1,422,415
Craig W. Rauchle 15,000 4.1% 16.875 2-27-2006 159,189 403,416
Craig W. Rauchle 30,000 8.1% 13.875 10-25-2006 261,777 663,395
------ ---- ------- -------
45,000 12.2% 420,966 1,066,811
</TABLE>
(1) The Company granted options to purchase 369,000 shares of Common
Stock to employees in fiscal 1996.
(2) Options may terminate before their expiration upon the termination of
the optionee's status as an employee or consultant, or upon the death
of the optionee.
(3) Potential realizable value assumes that the stock price increases from
the date of grant until the end of the option term (10 years) at the
annual rate specified (5% and 10%). Annual compounding results in total
appreciation of 63% (at 5% per year) and 159% (at 10% per year). The
assumed annual rates of appreciation are specified in SEC rules and do
not represent the Company's estimate or projection of future stock
price growth. The Company does not necessarily agree that this method
can properly determine the value of an option.
COMPENSATION COMMITTEE REPORT
Executive Compensation Principles
The Company's Compensation and Stock Option Committee's
responsibilities include determining the cash and non-cash compensation of
executive officers. Through 1996, non-cash compensation had been limited to
incentive stock option grants to purchase Company common stock at fair market
value at the grant date. All executive officers and some middle managers also
participate in such stock incentive plans. These plans are designed to attract
and retain qualified personnel and to tie their performance to the enhancement
of shareholder value.
Executive officers also participate in the Company's 401(k) Thrift
Savings Plan and the Inter-Tel Employee Stock Ownership Plan, together with
other permanent Inter-Tel employees.
The Committee's policy regarding compensation of the Company's
executive officers is to provide generally competitive salary levels and
compensation incentives that attract and retain individuals of outstanding
ability; that recognize individual
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performance and the performance of the Company; and that support the Company's
primary goal -- to increase shareholder value.
The Compensation Committee intends to continue to consider expansion of
executive compensation to include deferred cash and equity-based compensation
integrated with attainment of specific long-term performance goals and
shareholder value enhancement.
Executive Compensation Program
Key Executives
The total compensation program for executives, other than the Chief
Executive Officer, includes both cash and equity-based compensation. The
Committee determines the level of salary for executive officers and determines
the salary or salary ranges based upon a review of base salary levels for
comparable officer positions in similar companies of comparable size and
capitalization. Salary changes are based upon the Committee's subjective
assessment of the executive's performance and the scope and complexity of the
position held.
At the beginning of 1996, the Compensation Committee considered the
business plan of each major operating unit and of the consolidated Company.
Consideration included past and anticipated performance, new product and market
expectations, assets employed and similar factors. The Committee set target
income performance levels for each unit and earnings per share performance
levels for the consolidated Company. Cash bonus awards, based upon meeting or
exceeding such performance levels and limited to a percentage of base salary,
were set for each executive officer.
As indicated above, annual cash bonus awards are integrated with
performance against specific profit contribution and earnings per share goals
set forth in the Company's business plan. Performance benchmarks are specific to
the responsibilities of the individual executive. The cash bonuses in the
Summary Compensation Table reflect the performance of the named officers against
the benchmarks established at the beginning of the year.
Chief Executive Officer
The Chief Executive Officer's salary was determined based on a review
of the salaries of Chief Executive Officers of similar companies of comparable
size and capitalization and upon a review of the Chief Executive Officer's
performance against the Company's 1995 performance.
The Compensation Committee determined the CEO's 1996 bonus based on
similar Company consolidated earnings performance criteria used to determine
bonuses for the other executive officers.
The Chief Executive Officer, Steven G. Mihaylo, has voluntarily elected
not to participate in equity-based compensation plans at this time.
Maurice H. Esperseth, Chairman; Gary Edens; Norman Stout
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COMPARISON OF CUMULATIVE TOTAL RETURNS
AMONG INTER-TEL, PEER GROUP AND NASDAQ MARKET
The graph below compares the cumulative total return of the Company's
Common Stock with the NASDAQ market index and a self-determined peer group index
from January 1, 1992 to January 31, 1997. The Common Stocks of the peer group
companies have been included on a weighted basis to reflect the relative market
capitalization at the end of each period shown.
COMPARISON OF CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
Assumes December 31, 1991 = 100
- -------------------------------------------------------------------------------------------------------------------
Legend
CRSP Total Returns Index for: 12/31/91 12/31/92 12/31/93 12/31/94 12/29/95 12/31/96
- ----------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INTER-TEL, INCORPORATED 100.0 486.7 933.3 773.3 1646.7 2026.7
Nasdaq Stock Market (US Companies) 100.0 116.4 133.6 130.6 184.7 227.2
Self-Determined Peer Group 100.0 171.8 449.2 327.7 479.6 478.9
Companies in the Self-Determined Peer Group
COMDIAL CORP EXECUTONE INFORMATION SYS INC
MITEL CORP NORSTAN INC
Notes:
A. The lines represent monthly index levels derived from compounded daily returns that include all
dividends.
B. The indexes are reweighted daily, using the market capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day
is used.
D. The index level for all series was set to $100.0 on [12/31/91].
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
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INTER-TEL, INCORPORATED 1997
LONG-TERM INCENTIVE PLAN
(Proposal No. 2)
The Company seeks shareholder approval of the Inter-Tel, Incorporated
1997 Long-Term Incentive Plan (the "Option Plan"), which was adopted by the
Board of Directors on February 24, 1997.
The purpose of the Option Plan is to promote the success and enhance
the value of the Company by linking the personal interests of its key employees
with an incentive for outstanding performance. It is further intended to
attract, motivate and retain the services of the best available officers and key
employees.
The Option Plan permits the grant of stock-based incentives to selected
officers and key employees. Such grants are traditionally in the form of stock
options, although the Option Plan permits other forms of incentives. The Option
Plan shall be administered by the Board or one or more Committees appointed by,
and serving at the discretion of the Board (referred herein collectively as the
"Administrator").
The per share exercise price of any incentive stock options may not be
less than the fair market value of a share of Common Stock at the time of grant.
No incentive stock option may be granted on or after the tenth anniversary of
the date the Option Plan was approved by the Shareholders.
In 1993, Section 162 (m) was added to the Internal Revenue Code of
1986, as amended. Section 162(m) limits the Company's deduction in any one
fiscal year for federal income tax purposes to $1,000,000 per person with
respect to the Company's Chief Executive Officer and its four other highest paid
executive oficers who are employed on the last day of the fiscal year unless the
compensation was not otherwise subject to the deduction limit. Grants under the
Option Plan will not be subject to the deduction limitation if the shareholders
approve the Option Plan including the option grant limitations. The Option Plan
provides that no employee may be granted, in any fiscal year of the Company,
options to purchase more than 500,000 shares of Common Stock. Therefore, in
order to maximize the Company's federal income tax deductions, the Board of
Directors of the Company is requesting that the shareholders approve the
adoption of the Option Plan at the Annual Meeting.
A total of 1,200,000 shares of the Company's Common Stock are reserved
under the Option Plan. Approval of the Option Plan requires the affirmative vote
of a majority of the votes cast with respect to the proposal. A copy of the
Option Plan is attached as Exhibit A.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE
INTER-TEL, INCORPORATED 1997 LONG-TERM INCENTIVE PLAN.
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INTER-TEL, INCORPORATED
EMPLOYEE STOCK PURCHASE PLAN
(Proposal No. 3)
The Company seeks shareholder approval of the Inter-Tel, Incorporated
Employee Stock Purchase Plan (the "Purchase Plan"), which was adopted by the
Board of Directors on February 24, 1997.
The purpose of the Purchase Plan is to provide employees of the Company
with an opportunity to purchase Common Stock of the Company through accumulated
payroll deductions. It is the intention of the Company to have the Purchase Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code"). The provisions of the Purchase
Plan, accordingly, shall be construed so as to extend and limit participation in
a manner consistent with the requirements of that section of the Code.
Shares purchased by participants will be held in the participants'
accounts pursuant to the Purchase Plan for a twelve (12) month holding period
following purchase. Upon completion of the holding period, the relevant shares
will be transferred to the participants. A total of 250,000 shares of the
Company's Common Stock are reserved under the Purchase Plan.
Each offering of Common Stock under the Purchase Plan is for a period
of six months (the "Offering Period"). To participate in the Purchase Plan, each
employee must authorize payroll deductions pursuant to the Purchase Plan, which
deductions may not exceed 10% of a participant's compensation. Shares of Common
Stock may be purchased under the Purchase Plan at a price equal to 85% of the
lesser of (i) the fair market value of the Common Stock on the first day of the
Offering Period, or (ii) the fair market value of the Common Stock on the last
day of the Offering Period.
Approval of the Purchase Plan requires the affirmative vote of a
majority of the votes cast with respect to the proposal. The Purchase Plan is
attached as Exhibit B.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE
INTER-TEL, INCORPORATED 1997 EMPLOYEE STOCK PURCHASE PLAN.
AMENDMENT TO THE
RESTATED ARTICLES OF INCORPORATED OF
INTER-TEL, INCORPORATED
(Proposal No. 4)
The first paragraph of Article IX of the Company's Restated Articles of
Incorporation reads as follows:
"The corporation shall indemnify any and all of its existing and former
directors and officers to the fullest extent permitted by Arizona law; provided,
however, that the corporation shall have the right to refuse indemnification in
any instance in which the person to whom indemnification would otherwise have
been applicable shall have
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unreasonably refused to permit the corporation, at its own expense and through
counsel of its own choosing, to defend him or her in the action."
Section 202B.2 of the Arizona Corporate Code (the "Code"), which became
effective July 1996, permits an Arizona corporation to include a provision in
its articles of incorporation permitting, or requiring the corporation to
indemnify a director or officer against liability to any person for any action
taken, or any failure to take any action, as a director or officer, except
liability for any of the following:
(i) the amount of a financial benefit received by a director or
officer to which the director or officer was not entitled;
(ii) an intentional infliction of harm on the Company or its
shareholders;
(iii) an approval of a specified unlawful distribution by the Company
to its shareholders (in the case of a director only); and
(iv) an intentional violation of criminal law.
On February 24, 1997, the Board of Directors adopted, subject to shareholder
approval at the 1997 annual meeting, a proposed Amendment to the Company's
Articles of Incorporation that is consistent with Section 10-202B.2 of the Code.
The proposed Amendment, a copy of which is attached as Exhibit C to this Proxy
Statement, would require the Company to indemnify any and all of its existing
and former directors and officers against liability to any person for any action
taken, or any failure to take any action, as a director or officer, except
liability for any of the four matters described in the preceding paragraph.
The four matters for which a corporation may not indemnify a director
or officer are identical to the four matters for which a director's liability
cannot be eliminated pursuant to Code Section 10-202B.1. Section 10-202B.2 is
based on the Model Business Corporation Act and is designed generally to allow
an Arizona corporation to indemnify its directors and officers for unintentional
errors or the directors' or officers' exercise of judgment, but not for matters
involving intentional wrongdoing or bad faith.
Under the Code, a majority of the Company's disinterested directors,
independent legal counsel, or the Company's shareholders must determine whether
a director or officer has met the requisite standard of conduct to be eligible
for indemnification. The adoption of the proposed Amendment would change the
standard of conduct that a director or officer must meet in order to be eligible
for indemnification by the Company.
Currently, the Company may not indemnify a director or officer unless
(i) the director or officer's conduct was in good faith; (ii) the director or
officer reasonably believed that the conduct was in the corporation's best
interest; and (iii) in the case of any criminal proceeding, the director or
officer did not have any reasonable cause
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to believe the conduct was unlawful. If adopted, the proposed Amendment would
require the Company to indemnify a director or officer in instances in which the
director's or officer's conduct was grossly negligent. The Board of Directors
believes that adoption of the propsed Amendment would provide directors and
officers with greater certainty about those matters for which they may be
eligible for idemnification. As is the case with current Article IX, Paragraph
1, the Company would retain the right to refuse indemnification in any instance
in which the person to whom indemnification would otherwise have been applicable
unreasonably refuses to permit the Company, at its own expense and through
counsel of its own choosing, to defend him or her in the action.
The Company believes that adoption of the proposed Amendment will
enable the Company to continue to attract and retain qualified directors and
officers. The Board of Directors believes that the level of scrutiny, diligence
and care exercised by directors and officers of the Company will not be lessened
by adoption of the proposed Amendment.
Generally, the Company has not experienced difficulty in recruiting and
retaining qualified directors and officers, and the proposed Amendment is not
being proposed in response to any resignation or threat of resignation of any
director or officer, nor is it being proposed in response to any refusal by any
director or officer to continue to serve or, in the case of any director, to
stand for reelection. The Company is not aware of any pending or threatened
claim which would be covered by the proposed Amendment.
The Company's directors acknowledge that they have a direct personal
interest in having the proposed Amendment adopted. Approval of the proposed
Amendment requires the affirmative vote of a majority of the Company's
outstanding common stock. The Board believes that it is in the best interest of
the Company and its shareholders for the Company's shareholders to so amend the
Company's Articles of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL TO AMEND THE
RESTATED ARTICLES OF INCORPORATION OF INTER-TEL, INCORPORATED.
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EXHIBIT A
INTER-TEL, INCORPORATED
1997 LONG-TERM INCENTIVE PLAN
ARTICLE 1 PURPOSE
1.1. GENERAL. The purpose of the Inter-Tel, Incorporated
Long-Term Incentive Plan (the "Plan") is to promote the success, and enhance
the value, of Inter-Tel, Incorporated, (the "Company") by linking the personal
interests of its key employees to those of Company shareholders and by
providing its key employees with an incentive for outstanding performance. The
Plan is further intended to provide flexibility to the Company in its ability
to motivate, attract, and retain the services of employees upon whose
judgment, interest, and special effort the successful conduct of the Company's
operation is largely dependent. Accordingly, the Plan permits the grant of
incentive awards from time to time to selected officers and key employees of
the Company and its Subsidiaries.
ARTICLE 2 EFFECTIVE DATE
2.1. EFFECTIVE DATE. The Plan is effective as of February 24,
1997 (the "Effective Date"). Within one year after the Effective Date, the
Plan shall be submitted to the shareholders of the Company for their approval.
The Plan will be deemed to be approved by the shareholders if it receives the
affirmative vote of the holders of a majority of the shares of stock of the
Company present, or represented, and entitled to vote at a meeting duly held
(or by the written consent of the holders of a majority of the shares of stock
of the Company entitled to vote) in accordance with the applicable provisions
of the Arizona Corporation Law and the Company's Bylaws and Articles of
Incorporation. Any Awards granted under the Plan prior to shareholder approval
are effective when made (unless the Committee specifies otherwise at the time
of grant), but no Award may be exercised or settled and no restrictions
relating to any Award may lapse before shareholder approval. If the
shareholders fail to approve the Plan, any Award previously made shall be
automatically canceled without any further act.
ARTICLE 3 DEFINITIONS AND CONSTRUCTION
3.1. DEFINITIONS. When a word or phrase appears in this Plan
with the initial letter capitalized, and the word or phrase does not commence a
sentence, the word or phrase shall generally be given the meaning ascribed to it
in this Section or in Sections 1.1 or 2.1 unless a clearly different meaning is
required by the context. The following words and phrases shall have the
following meanings:
(a) "Award" means any Option, Stock Appreciation
Right, Restricted Stock Award, Performance Share Award,
Dividend Equivalent Award, or Other Stock-Based Award, or any
other right or interest relating to Stock or cash, granted to
a Participant under the Plan.
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(b) "Award Agreement" means any written agreement,
contract, or other instrument or document evidencing an Award.
(c) "Board" means the Board of Directors of the
Company.
(d) "Change of Control" means and includes each of
the following:
(1) A change of control of the Company of a
nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of the 1934 Act regardless of
whether the Company is subject to such reporting requirement;
(2) A change of control of the Company
through a transaction or series of transactions, such that any
person (as that term is used in Section 13 and 14(d)(2) of the
1934 Act), excluding affiliates of the Company as of the
Effective Date, is or becomes the beneficial owner (as that
term is used in Section 13(d) of the 1934 Act) directly or
indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then
outstanding securities;
(3) Any merger, consolidation, dissolution
or liquidation of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which
Shares would be converted into cash, securities or other
property, other than a merger of the Company in which the
holders of the Shares immediately before the merger have the
same proportionate ownership of common stock of the surviving
corporation immediately after the merger;
(4) The shareholders of the Company approve
any plan or proposal for the liquidation or dissolution of the
Company; or
(5) Substantially all of the assets of the
Company are sold or otherwise transferred to parties that are
not within a "controlled group of corporations" (as defined in
Section 1563 of the Code) in which the Company is a member;
(6) A majority of the Board in office at the
beginning of any thirty-six (36) month period is replaced
during the course of such thirty-six (36) month period (other
than by voluntary resignation of individual directors in the
ordinary course of business) and such replacement was not
initiated by the Board as constituted at the beginning of such
thirty-six (36) month period.
The foregoing events shall not be deemed to be a Change in Control if the
transaction or transactions causing such change shall have been approved by the
affirmative vote of at least a majority of the members of the Board in office as
of the Effective Date ("Incumbents"), those
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serving on the Board pursuant to nomination or appointment thereto by a majority
of Incumbents ("Successors"), and those serving on the Board pursuant to
nomination or appointment thereto by a majority of a Board composed of
Incumbents and/or Successors.
(e) "Code" means the Internal Revenue Code of 1986,
as amended from time to time.
(f) "Committee" means the committee of the Board
described in Article 4.
(g) "Disability" shall mean a total and permanent
disability as defined in Section 22(e)(3) of the Code.
(h) "Dividend Equivalent" means a right granted to a
Participant under Article 11.
(i) "Fair Market Value" means with respect to Stock
or any other property, the fair market value of such Stock or
other property as determined by the Committee in its
discretion, under one of the following methods: (1) the
average of the closing bid and asked prices for the Stock as
reported on the NASDAQ National Market System (or any other
national securities exchange on which the Stock is then
listed) for that date or, if no prices are so reported for
that date, such prices on the next preceding date for which
closing bid and asked prices were reported; or (2) the price
as determined by such methods or procedures as may be
established from time to time by the Committee.
(j) "Incentive Stock Option" means an Option that is
intended to meet the requirements of Section 422 of the Code
or any successor provision thereto.
(k) "Non-Qualified Stock Option" means an Option that
is not intended to be an Incentive Stock Option.
(l) "Option" means a right granted to a Participant
under Article 7 of the Plan to purchase Stock at a specified
price during specified time periods. An Option may be either
an Incentive Stock Option or a Non-Qualified Stock Option.
(m) "Other Stock-Based Award" means a right, granted
to a Participant under Article 12, that relates to or is
valued by reference to Stock or other Awards relating to
Stock.
(n) "Participant" means a person who, as an officer
or key employee of the Company or any Subsidiary, has been
granted an Award under the Plan.
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(o) "Performance Share" means a right granted to a
Participant under Article 9, to receive cash, Stock, or other
Awards, the payment of which is contingent upon achieving
certain performance goals established by the Committee.
(p) "Plan" means the Inter-Tel, Incorporated 1997
Long-Term Incentive Plan, as amended from time to time.
(q) "Restricted Stock Award" means Stock granted to a
participant under Article 10 that is subject to certain
restrictions and to risk of forfeiture.
(r) "Stock" means the common stock of the Company and
such other securities of the Company that may be substituted
for Stock pursuant to Article 13.
(s) "Stock Appreciation Right" or "SAR" means a right
granted to a Participant under Article 8 to receive a payment
equal to the difference between the Fair Market Value of a
share of Stock as of the date of exercise of the SAR over the
grant price of the SAR, all as determined pursuant to Article
8.
(t) "Subsidiary" means any corporation, domestic or
foreign, of which a majority of the outstanding voting stock
or voting power is beneficially owned directly or indirectly
by the Company.
ARTICLE 4 ADMINISTRATION
4.l. COMMITTEE. The Plan shall be administered by the Board or
one or more Committees appointed by, and serving at the discretion of the Board
(referred herein collectively as the "Administrator").
(a) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different
groups of employees.
(b) Section 162(m). To the extent that the Board
determines it to be desirable to qualify Options granted
hereunder as "performance-based compensation" within the
meaning of Section 162(m) of the Code, the Plan shall be
administered by a Committee of two or more "outside directors"
within the meaning of Section 162(m) of the Code.
(c) RULE 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3 promulgated
under Section 16 of the Securities Exchange Act of 1934 ("Rule
16b-3"), the transactions contemplated hereunder shall be
structured to satisfy the requirements for exemption under
Rule 16b-3.
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(d) Other Administration. Other than as provided
above, the Plan shall be administered by the Board or a
Committee serving at the discretion of the Board, which
committee shall be constituted to satisfy all applicable laws.
4.2. ACTION BY COMM1TTEE. A majority of a Committee shall
constitute a quorum. The acts of a majority of the members present at any
meeting at which a quorum is present and acts approved in writing by a majority
of a Committee in lieu of a meeting shall be deemed the acts of such Committee.
Each member of a Committee is entitled to, in good faith, rely or act upon any
report or other information furnished to that member by any officer or other
employee of the Company or any Subsidiary, the Company's independent certified
public accountants, or any executive compensation consultant or other
professional retained by the Company to assist in the administration of the
Plan.
4.3. AUTHORITY OF ADMINISTRATOR. The Administrator has the
exclusive power, authority and discretion to:
(a) Designate Participants;
(b) Determine the type or types of Awards to be
granted to each Participant;
(c) Determine the number of Awards to be granted and
thenumber of shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award
granted under the Plan including but not limited to, the
exercise price, grant price, or purchase price, any
restrictions or limitations on the Award, any schedule for
lapse of forfeiture restrictions or restrictions on the
exercisability of an Award, and accelerations or waivers
thereof, based in each case on such considerations as the
Administrator in its sole discretion determines;
(e) Determine whether, to what extent, and under what
circumstances an Award may be settled in, or the exercise
price of an Award may be paid in, cash, Stock, other Awards,
or other property, or an Award may be canceled, forfeited, or
surrendered;
(f) Prescribe the form of each Award Agreement, which
need not be identical for each Participant;
(g) Decide all other matters that must be determined
in connection with an Award;
(h) Establish, adopt or revise any rules and
regulations as it may deem necessary or advisable to
administer the Plan; and
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(i) Make all other decisions and determinations that
may be required under the Plan or as the Administrator deems
necessary or advisable to administer the Plan.
4.4. DECISIONS BINDING. The Administrator's interpretation of
the Plan, any Awards granted under the Plan, any Award Agreement and all
decisions and determinations by the Administrator with respect to the Plan are
final, binding, and conclusive on all parties.
ARTICLE 5 SHARES SUBJECT TO THE PLAN
5.1. NUMBER OF SHARES. Subject to adjustment provided in
Section 1 5.1, the aggregate number of shares of Stock reserved and available
for Awards or which may be used to provide a basis of measurement for or to
determine the value of an Award (such as with a Stock Appreciation Right or
Performance Share Award) shall be one million two hundred thousand (1,200,000).
5.2. LAPSED AWARDS. To the extent that an Award terminates,
expires or lapses for any reason, any shares of Stock subject to the Award will
again be available for the grant of an Award under the Plan and shares subject
to SARs or other Awards settled in cash will be available for the grant of an
Award under the Plan.
5.3. STOCK DISTRIBUTED. Any Stock distributed pursuant to an
Award may consist, in whole or in part, of authorized and unissued Stock,
treasury Stock or Stock purchased on the open market.
5.4. LIMITATION ON NUMBER OF SHARES SUBJECT TO AWARDS.
Notwithstanding any provision in the Plan to the contrary, the maximum number of
shares of Stock with respect to one or more Awards that may be granted to any
one Participant over the term of the Plan shall be five hundred thousand
(500,000).
ARTICLE 6 ELIGIBILITY
6.1. GENERAL. Awards may be granted only to individuals who
are officers or other key employees (including employees who also are directors
or officers) of the Company or a Subsidiary, as determined by the Administrator.
ARTICLE 7 STOCK OPTIONS
7.1. GENERAL. The Administrator is authorized to grant Options
to Participants on the following terms and conditions:
(a) Exercise Price. The exercise price per share of
Stock under an Option shall be determined by the
Administrator.
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(b) Time and Conditions of Exercise. The
Administrator shall determine the time or times at which an
Option may be exercised in whole or in part, provided that no
Option may be exercisable prior to six (6) months following
the date of the grant of such Option. The Administrator also
shall determine the performance or other conditions, if any,
that must be satisfied before all or part of an Option may be
exercised.
(c) Payment. The Administrator shall determine the
methods by which the exercise price of an Option may be paid,
the form of payment, including, without limitation, cash,
shares of Stock, or other property (including net issuance or
other "cashless" exercise arrangements), and the methods by
which shares of Stock shall be delivered or deemed to be
delivered to Participants. Without limiting the power and
discretion conferred on the Administrator pursuant to the
preceding sentence, the Administrator may, in the exercise of
its discretion, but need not, allow a Participant to pay the
Option price by directing the Company to withhold from the
shares of Stock that would otherwise be issued upon exercise
of the Option that number of shares having a Fair Market Value
on the exercise date equal to the Option price, all as
determined pursuant to rules and procedures established by the
Administrator.
(d) Evidence of Grant. All Options shall be evidenced
by a written Award Agreement between the Company and the
Participant. The Award Agreement shall include such provisions
as may be specified by the Administrator.
7.2. INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock
Options granted under the Plan must comply with the following additional rules:
(a) Exercise Price. The exercise price per share of
Stock shall be set by the Administrator, provided that the
exercise price for any Incentive Stock Option may not be less
than the Fair Market Value as of the date of the grant.
(b) Exercise. In no event, may any Incentive Stock
Option be exercisable for more than ten (10) years from the
date of its grant.
(c) Lapse of Option. An Incentive Stock Option shall
lapse under the following circumstances:
(1) The Incentive Stock Option shall lapse
ten (10) years after it is granted, unless an earlier time is
set in the Award Agreement.
(2) The Incentive Stock Option shall lapse
upon termination of employment for any reason, except that the
Administrator may in its discretion permit a Participant to
exercise all or any portion of the Incentive
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Stock Option for a period of up to ninety (90) days after the
Participant's termination of employment, except in the case of
the Participant's termination of employment due to Disability,
in which case the Incentive Stock Option shall lapse twelve
(12) months after the date the Participant terminates
employment.
(3) If the Participant dies before the
Option lapses pursuant to paragraph (1) or (2), above, the
Incentive Stock Option shall lapse, unless it is previously
exercised, on the earlier of (i) the date on which the Option
would have lapsed had the Participant lived and had his
employment status (i.e., whether the Participant was employed
by the Company on the date of his death or had previously
terminated employment) remained unchanged; or (ii) fifteen
(15) months after the date of the Participant's death. Upon
the Participant's death, any vested and otherwise exercisable
Incentive Stock Options may be exercised by the Participant's
legal representative or representatives, by the person or
persons entitled to do so under the Participant's last will
and testament, or, if the Participant shall fail to make
testamentary disposition of such Incentive Stock Option or
shall die intestate, by the person or persons entitled to
receive said Incentive Stock Option under the applicable laws
of descent and distribution.
(d) Incentive Stock Option Limitation.
Notwithstanding the designation of an Option as an Incentive
Stock Option, to the extent that the aggregate Fair Market
Value of the shares of Stock with respect to which Incentive
Stock Options are exercisable for the first time by the
Optionee during any calendar year (under all plans of the
Company and any Subsidiary) exceeds $100,000.00, such Options
shall be treated as Non-Qualified Stock Options. For purposes
of this Section 7.2(d), Incentive Stock Options shall be taken
into account in the order in which they were granted. The Fair
Market Value of the shares of Stock shall be determined as of
the time the Option with respect to such shares of Stock is
granted.
(e) Ten Percent Owners. An Incentive Stock Option
shall not be granted to any individual who, at the date of
grant, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of Stock of the
Company.
(f) Expiration of Incentive Stock Options. No Award
of an Incentive Stock Option may be made pursuant to this Plan
after April 23, 2007.
(g) Right To Exercise. During a Participant's
lifetime, an Incentive Stock Option may be exercised only by
the Participant.
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ARTICLE 8 STOCK APPRECIATION RIGHTS
8.1. GRANT OF SARs. The Administrator is authorized to grant
SARs to Participants on the following terms and conditions:
(a) Right to Payment. Upon the exercise of a Stock
Appreciation Right, the Participant to whom it is granted has
the right to receive the excess, if any, of:
(1) The Fair Market Value of one share of
Stock on the date of exercise; over
(2) The grant price of the Stock
Appreciation Right as determined by the Administrator, which
shall not be less than the Fair Market Value of one share of
Stock on the date of grant in the case of any SAR related to
any Incentive Stock Option.
(b) Other Terms. All awards of Stock Appreciation
Rights shall be evidenced by an Award Agreement. The terms,
methods of exercise, methods of settlement, form of
consideration payable in settlement, and any other terms and
conditions of any Stock Appreciation Right shall be determined
by the Administrator at the time of the grant of the Award and
shall be reflected in the Award Agreement.
ARTICLE 9 PERFORMANCE SHARES
9.1. GRANT OF PERFORMANCE SHARES. The Administrator is
authorized to grant Performance Shares to Participants on such terms and
conditions as may be selected by the Administrator. The Administrator shall have
the complete discretion to determine the number of Performance Shares granted to
each Participant. All Awards of Performance Shares shall be evidenced by an
Award Agreement.
9.2. RIGHT TO PAYMENT. A grant of Performance Shares gives the
Participant rights, valued as determined by the Administrator, and payable to,
or exercisable by, the Participant to whom the Performance Shares are granted,
in whole or in part, as the Administrator shall establish at grant or
thereafter. The Administrator shall set performance goals and other terms or
conditions to payment of the Performance Shares in its discretion which,
depending on the extent to which they are met, will determine the number and
value of Performance Shares that will be paid to the Participant.
9.3. OTHER TERMS. Performance Shares may be payable in cash,
Stock, or other property, and have such other terms and conditions as determined
by the Administrator and reflected in the Award Agreement.
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ARTICLE 10 RESTRICTED STOCK AWARDS
10.1. GRANT OF RESTRICTED STOCK. The Administrator is
authorized to make Awards of Restricted Stock to Participants in such amounts
and subject to such terms and conditions as may be selected by the
Administrator. All Awards of Restricted Stock shall be evidenced by a Restricted
Stock Award Agreement.
10.2. ISSUANCE AND RESTRICTIONS. Restricted Stock shall be
subject to such restrictions on transferability and other restrictions as the
Administrator may impose (including, without limitation, limitations on the
right to vote Restricted Stock or the right to receive dividends on the
Restricted stock). These restrictions may lapse separately or in combination at
such times, under such circumstances, in such installments, or otherwise, as the
Administrator determines at the time of the grant of the Award or thereafter.
10.3. FORFEITURE. Except as otherwise determined by the
Administrator at the time of the grant of the Award or thereafter, upon
termination of employment during the applicable restriction period, Restricted
Stock that is at that time subject to restrictions shall be forfeited and
reacquired by the Company, provided, however, that the Administrator may provide
in any Award Agreement that restrictions or forfeiture conditions relating to
Restricted Stock will be waived in whole or in part in the event of terminations
resulting from specified causes, and the Administrator may in other cases waive
in whole or in part restrictions or forfeiture conditions relating to Restricted
Stock.
10.4. CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock
granted under the Plan may be evidenced in such manner as the Administrator
shall determine. If certificates representing shares of Restricted Stock are
registered in the name of the Participant, certificates must bear an appropriate
legend referring to the terms, conditions, and restrictions applicable to such
Restricted Stock, and the Company shall retain physical possession of the
certificate until such time as all applicable restrictions lapse.
ARTICLE 11 DIVIDEND EQUIVALENTS
11.1. GRANT OF DIVIDEND EQUIVALENTS. The Administrator is
authorized to grant Dividend Equivalents to Participants subject to such terms
and conditions as may be selected by the Administrator. Dividend Equivalents
shall entitle the Participant to receive payments equal to dividends with
respect to all or a portion of the number of shares of Stock subject to an
Option Award or SAR Award, as determined by the Administrator. The Administrator
may provide that Dividend Equivalents be paid or distributed when accrued or be
deemed to have been reinvested in additional shares of Stock, or otherwise
reinvested.
ARTICLE 12 OTHER STOCK-BASED AWARDS
12.1. GRANT OF OTHER STOCK-BASED AWARDS. The Administrator is
authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that are payable in, valued in whole or in part
by reference to, or otherwise based on or
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related to shares of Stock, as deemed by the Administrator to be consistent with
the purposes of the Plan, including without limitation shares of Stock awarded
purely as a "bonus" and not subject to any restrictions or conditions,
convertible or exchangeable debt securities, other rights convertible or
exchangeable into shares of Stock, and Awards valued by reference to book value
of shares of Stock or the value of securities of or the performance of specified
Subsidiaries. The Administrator shall determine the terms and conditions of such
Awards.
ARTICLE 13 PROVISIONS APPLICABLE TO AWARDS
13.1. STAND-ALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards
granted under the Plan may, in the discretion of the Administrator, be granted
either alone or in addition to, in tandem with, or in substitution for, any
other Award granted under the Plan. If an Award is granted in substitution for
another Award, the Administrator may require the surrender of such other Award
in consideration of the grant of the new Award. Awards granted in addition to or
in tandem with other Awards may be granted either at the same time as or at a
different time from the grant of such other Awards.
13.2. EXCHANGE PROVISIONS. The Administrator may at any time
offer to exchange or buy out any previously granted Award for a payment in cash,
Stock, or another Award (subject to Section 13.1), based on the terms and
conditions the Administrator determines and communicates to the Participant at
the time the offer is made.
13.3. TERM OF AWARD. The term of each Award shall be for the
period as determined by the Administrator, provided that in no event shall the
term of any Incentive Stock Option or a Stock Appreciation Right granted in
tandem with the Incentive Stock Option exceed a period of ten (10) years from
the date of its grant.
13.4. FORM OF PAYMENT FOR AWARDS. Subject to the terms of the
Plan and any applicable law or Award Agreement, payments or transfers to be made
by the Company or a Subsidiary on the grant or exercise of an Award may be made
in such forms as the Administrator determines at or after the time of grant,
including without limitation, cash, Stock, other Awards, or other property, or
any combination, and may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case determined in accordance with
rules adopted by, and at the discretion of, the Administrator. The Administrator
may also authorize payment in the exercise of an Option by net issuance or other
cashless exercise methods.
13.5. LIMITS ON TRANSFER. No right or interest of a
Participant in any Award may be pledged, encumbered, or hypothecated to or in
favor of any party other than the Company or a Subsidiary, or shall be subject
to any lien, obligation, or liability of such Participant to any other party
other than the Company or a Subsidiary. Except as otherwise provided below, no
Award shall be assignable or transferable by a Participant other than by will or
the laws of descent and distribution. In the Award Agreement for any Award other
than an Award that includes an Incentive Stock Option, the Administrator may
allow a Participant to assign or otherwise transfer all or a portion of the
rights represented by the Award to specified
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individuals or classes of individuals, or to a trust benefiting such
individuals, subject to such restrictions, limitations, or conditions as the
Administrator deems to be appropriate.
13.6 BENEFICIARIES. Notwithstanding Section 13.5, a
Participant may, in the manner determined by the Administrator, designate a
beneficiary to exercise the rights of the Participant and to receive any
distribution with respect to any Award upon the Participant's death. A
beneficiary, legal guardian, legal representative, or other person claiming any
rights under the Plan is subject to all terms and conditions of the Plan and any
Award Agreement applicable to the Participant, except to the extent the Plan and
Award Agreement otherwise provide, and to any additional restrictions deemed
necessary or appropriate by the Administrator. If the Participant is married and
resides in a jurisdiction in which community property laws apply, a designation
of a person other than the Participant's spouse as his beneficiary with respect
to more than fifty percent (50%) of the Participant's interest in the Award
shall not be effective without the written consent of the Participant's spouse.
If no beneficiary has been designated or survives the Participant, payment shall
be made to the person entitled thereto under the Participant's will or the laws
of descent and distribution. Subject to the foregoing, a beneficiary designation
may be changed or revoked by a Participant at any time provided the change or
revocation is filed with the Administrator.
13.7. STOCK CERTIFICATES. All Stock certificates delivered
under the Plan are subject to any stop-transfer orders and other restrictions as
the Administrator deems necessary or advisable to comply with federal or state
securities laws, rules and regulations and the rules of any national securities
exchange or automated quotation system on which the Stock is listed, quoted, or
traded. The Administrator may place legends on any Stock certificate to
reference restrictions applicable to the Stock.
13.8. TENDER OFFERS. In the event of a public tender for all
or any portion of the Stock, or in the event that a proposal to merge,
consolidate, or otherwise combine with another company is submitted for
shareholder approval, the Administrator may in its sole discretion declare
previously granted Options to be immediately exercisable. To the extent that
this provision causes Incentive Stock Options to exceed the dollar limitation
set forth in Section 7.2(d), the excess Options shall be deemed to be
Non-Qualified Stock Options.
13.9. ACCELERATION UPON DEATH OR DISABILITY. Notwithstanding
any other provision in the Plan or any Participant's Award Agreement to the
contrary, upon the Participant's death or Disability, all outstanding Options,
Stock Appreciation Rights, and other Awards in the nature of rights that may be
exercised shall become fully exercisable and all restrictions on outstanding
Awards shall lapse. Any Option or Stock Appreciation Rights Awards shall then
lapse in accordance with the other provisions of this Plan and the Award
Agreement.
13.10. ACCELERATION UPON A CHANGE OF CONTROL. If a Change of
Control occurs, all outstanding Options, Stock Appreciation Rights, and other
Awards in the nature of rights that may be exercised shall become fully vested,
exercisable and all restrictions on outstanding Awards shall lapse; provided,
however, that with respect to any
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Change of Control in which the outstanding Options, Stock Appreciation Rights,
and other Awards in the nature of rights that may be exercised shall terminate
upon the occurrence of the Change of Control, each Participant shall fully vest
and have exercisable such Awards prior to the occurrence of such Change of
Control.
ARTICLE 14 CHANGES IN CAPITAL STRUCTURE
14.1. GENERAL. In the event a stock dividend is declared upon
the Stock, the shares of Stock then subject to each Award (and the number of
shares subject thereto) shall be increased proportionately without any change in
the aggregate purchase price therefor. In the event the Stock shall be changed
into or exchanged for a different number or class of shares of Stock or of
another corporation, whether through reorganization, recapitalization, stock
split-up, combination of shares, merger or consolidation, there shall be
substituted for each such share of Stock then subject to each Award (and for
each share of Stock then subject thereto) the number and class of shares of
Stock into which each outstanding share of Stock shall be so exchanged, all
without any change in the aggregate purchase price for the shares then subject
to each Award.
ARTICLE 15 AMENDMENT, MODIFICATION AND TERMINATION
15.1. AMENDMENT, MODIFICATION AND TERMINATION. With the
approval of the Board, at any time and from time to time, the Administrator
may terminate, amend or modify the Plan. However, without approval of the
shareholders of the Company (as may be required by the Code, a national
securities exchange or quotation system on which the stock can be listed or
reported or any other applicable law or regulation), no such termination,
amendment, or modification may:
(a) Materially increase the total number of shares of
Stock that may be issued under the Plan, except as provided in
Section 14.1;
(b) Materially modify the eligibility requirements
for participation in the Plan; or
15.2. AWARDS PREVIOUSLY GRANTED. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant.
ARTICLE 16 GENERAL PROVISIONS
16.1. NO RIGHTS TO AWARDS. No Participant or employee shall
have any claim to be granted any Award under the Plan, and neither the Company
nor the Administrator is obligated to treat Participants and employees
uniformly.
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16.2. NO STOCKHOLDERS RIGHTS. No Award gives the Participant
any of the rights of a shareholder of the Company unless and until shares of
Stock are in fact issued to such person in connection with such Award.
16.3. WITHHOLDING. The Company or any Subsidiary shall have
the authority and the right to deduct or withhold, or require a Participant to
remit to the Company, an amount sufficient to satisfy United States Federal,
state, and local taxes (including the Participant's FICA obligation and any
withholding obligation imposed by any country other than the United States in
which the Participant resides) required by law to be withheld with respect to
any taxable event arising as a result of this Plan. With respect to withholding
required upon any taxable event under the Plan, the Administrator may, in its
sole and absolute discretion, permit a Participant to satisfy the withholding
requirement, in whole or in part, by having the Company or any Subsidiary
withhold shares of Stock having a Fair Market Value on the date of withholding
equal to the amount to be withheld for tax purposes in accordance with such
procedures as the Administrator establishes. The Administrator may, at the time
any Award is granted, require that any and all applicable tax withholding
requirements be satisfied by the withholding of shares of Stock as set forth
above.
16.4. NO RIGHT TO EMPLOYMENT. Nothing in the Plan or any Award
Agreement shall interfere with or limit in any way the right of the Company or
any Subsidiary to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continue in the employ of the Company or any
Subsidiary.
16.5. UNFUNDED STATUS OF AWARDS. The Plan is intended to be an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award Agreement shall give the Participant any rights that
are greater than those of a general creditor of the Company or any Subsidiary.
16.6. INDEMNIFICATION. To the extent allowable under
applicable law, each member of the Administrator or of the Board shall be
indemnified and held harmless by the Company from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by such member in
connection with or resulting from any claim, action, suit, or proceeding to
which he or she may be a party or in which he or she may be involved by reason
of any action or failure to act under the Plan and against and from any and all
amounts paid by him or her in satisfaction of judgment in such action, suit, or
proceeding against him or her provided he or she gives the Company an
opportunity, at its own expense, to handle and defend the same before he or she
undertakes to handle and defend it on his or her own behalf. The foregoing right
of indemnification shall not be exclusive of any other rights of indemnification
to which such persons may be entitled under the Company's Articles of
Incorporation or By-Laws, as a matter of law, or otherwise, or any power that
the Company may have to indemnify them or hold them harmless.
16.7. RELATIONSHIP TO OTHER BENEFITS. No payment under the
Plan shall be taken into account in determining any benefits under any pension,
retirement, savings,
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profit sharing, group insurance, welfare or other benefit plan of the Company or
any Subsidiary.
16.8. EXPENSES. The expenses of administering the Plan shall
be borne by the Company and its Subsidiaries.
16.9. TITLES AND HEADINGS. The titles and headings of the
Sections in the Plan are for convenience of reference only, and in the event of
any conflict, the text of the Plan, rather than such titles or headings, shall
control.
16.10. FRACTIONAL SHARES. No fractional shares of stock shall
be issued and the Administrator shall determine, in its discretion, whether cash
shall be given in lieu of fractional shares or whether such fractional shares
shall be eliminated by rounding up.
16.11. SECURITIES LAW COMPLIANCE. With respect to any person
who is, on the relevant date, obligated to file reports under Section 16 of the
1934 Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To the
extent any provision of the Plan or action by the Administrator fails to so
comply, it shall be void to the extent permitted by law and voidable as deemed
advisable by the Administrator.
16.12. GOVERNMENT AND OTHER REGULATIONS. The obligation of the
Company to make payment of awards in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Company shall be under no obligation to
register under the Securities Act of 1933, as amended (the "1933 Act"), any of
the shares of Stock paid under the Plan. If the shares paid under the Plan may
in certain circumstances be exempt from registration under the 1933 Act, the
Company may restrict the transfer of such shares in such manner as it deems
advisable to ensure the availability of any such exemption.
16.13. GOVERNING LAW. The Plan and all Award Agreements shall
be construed in accordance with and governed by the laws of the State of
Arizona.
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EXHIBIT B
INTER-TEL, INCORPORATED
1997 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Inter-Tel, Inc., an Arizona
corporation, and any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross
earnings and commissions, exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary which
has been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of
the Company for tax purposes whose customary employment with the Company is at
least twenty (20) hours per week and more than five (5) months in any calendar
year. For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds ninety (90)
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each
Offering Period.
(i) "Exercise Date" shall mean the last day of each Offering
Period.
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(j) "Fair Market Value" shall mean, as of any date, the value
of Common Stock determined as follows:
(1) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq Market of The Nasdaq Stock Market, its Fair
Market Value shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such exchange or system for the
last market trading day on the date of such determination, as reported in The
Wall Street Journal or such other source as the Administrator deems reliable,
or;
(2) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;
(3) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board.
(k) "Holding Period" shall mean a period of twelve (12)
calendar months beginning on the Exercise Date during which (i) shares purchased
by the Participant under the Plan may not be sold, traded, transferred, pledged
or otherwise hypothecated and (ii) these shares are held by the Company in the
Participant's account.
(l) "Offering Period" shall mean a period of approximately six
(6) months during which an option granted pursuant to the Plan may be exercised,
commencing on the first Trading Day on or after June 1, 1997 and terminating on
the last Trading Day in the period ending the following November 30, 1997, or
commencing on the first Trading Day on or after December 1, 1997 and terminating
on the last Trading Day in the period ending the following May 30, 1997. The
duration of Offering Periods may be changed pursuant to Section 4 of this Plan.
(m) "Plan" shall mean this Employee Stock Purchase Plan.
(n) "Purchase Price" shall mean an amount equal to eighty-five
percent (85%) of the Fair Market Value of a share of Common Stock on the
Enrollment Date or on the Exercise Date, whichever is lower.
(o) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than fifty percent (50%) of the voting shares are
held by the Company or a Subsidiary,
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whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a
given Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent that, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own capital stock of the Company and/or hold outstanding options
to purchase such stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent that his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
subsidiaries accrues at a rate which exceeds twenty-five thousand dollars
($25,000) worth of stock (determined at the fair market value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive
Offering Periods with a new Offering Period commencing on the first Trading Day
on or after June 1 and May 1 each year, or on such other date as the Board shall
determine, and continuing thereafter until terminated in accordance with Section
21 hereof. The Board shall have the power to change the duration of Offering
Periods (including the commencement dates thereof) with respect to future
offerings without stockholder approval if such change is announced at least five
(5) days prior to the scheduled beginning of the first Offering Period to be
affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan
by completing a subscription agreement authorizing payroll deductions in the
form of Exhibit 1 to this Plan and filing it with the Company's payroll office
prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last payroll in
the Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
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(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding ten percent (10%) of the
Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation in
the Plan as provided in Section 11 hereof, or may increase or decrease the rate
of his or her payroll deductions during the Offering Period by completing or
filing with the Company a new subscription agreement authorizing a change in
payroll deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 11 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to zero percent (0%) at any
time during an Offering Period. Payroll deductions shall recommence at the rate
provided in such participant's subscription agreement at the beginning of the
first Offering Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 11 hereof.
(e) At the time the option is exercised, in whole or in part,
or at the time some or all of the Company's Common Stock issued under the Plan
is disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Offering Period more than two
thousand (2000) shares (subject to any adjustment pursuant to Section 20), and
provided further that such
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purchase shall be subject to the limitations set forth in Sections 3(b) and 13
hereof. Exercise of the option shall occur as provided in Section 8 hereof,
unless the participant has withdrawn pursuant to Section 11 hereof. The Option
shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 11 hereof, his or her option for the purchase of shares
shall be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Offering Period, subject to earlier withdrawal by the participant as provided in
Section 11 hereof. Any other monies left over in a participant's account after
the Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her. Shares purchased shall be issued subject to the Holding
Period, as described in Section 9.
9. Holding Period
Shares purchased by the participant will be held in the
participant's account pursuant to the Plan for the duration of a twelve (12)
month Holding Period.
The Holding Period will commence on the first day following
the Exercise Date and end after twelve (12) calendar months after the Exercise
Date. Upon completion of the Holding Period, the relevant shares will be
transferred to the participant.
Notwithstanding the foregoing, the Holding Period shall lapse
in the event of a sale of all or substantially all of the Company's assets or a
merger with or into another corporation.
10. Delivery. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
11. Withdrawal.
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit 2 to this Plan. All of the participant's payroll
deductions credited to his or her account shall be paid to such participant
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering Period. If
a participant withdraws from an
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Offering Period, payroll deductions shall not resume at the beginning of the
succeeding Offering Period unless the participant delivers to the Company a new
subscription agreement.
(b) A participant's withdrawal from an Offering Period shall
not have any effect upon his or her eligibility to participate in any similar
plan which may hereafter be adopted by the Company or in succeeding Offering
Periods which commence after the termination of the Offering Period from which
the participant withdraws.
12. Termination of Employment. Upon a participant's ceasing to be an
Employee for any reason, he or she shall be deemed to have elected to withdraw
from the Plan and the payroll deductions credited to such participant's account
during the Offering Period but not yet used to exercise the option shall be
returned to such participant or, in the case of his or her death, to the person
or persons entitled thereto under Section 16 hereof, and such participant's
option shall be automatically terminated. The preceding sentence
notwithstanding, a participant who receives payment in lieu of notice of
termination of employment shall be treated as continuing to be an Employee for
the participant's customary number of hours per week of employment during the
period in which the participant is subject to such payment in lieu of notice.
13. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
14. Stock.
(a) The maximum number of shares of the Company's Common Stock
which shall be made available for sale under the Plan shall be two hundred and
fifty thousand (250,000) shares, subject to adjustment upon changes in
capitalization of the Company as provided in Section 20 hereof. If, on a given
Exercise Date, the number of shares with respect to which options are to be
exercised exceeds the number of shares then available under the Plan, the
Company shall make a pro rata allocation of the shares remaining available for
purchase in as uniform a manner as shall be practicable and as it shall
determine to be equitable.
(b) The participant shall have no interest or voting right in
shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan
shall be registered in the name of the participant or in the name of the
participant and his or her spouse.
15. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
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16. Designation of Beneficiary.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a participant
may file a written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
17. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 16 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 11 hereof.
18. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
19. Reports. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
20. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action
by the stockholders of the Company, the Reserves, the maximum number of shares
each participant may purchase per Offering Period (pursuant to Section 7), as
well as the price per share and the
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number of shares of Common Stock covered by each option under the Plan which has
not yet been exercised shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration". Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. 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
of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period shall terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"). The
New Exercise Date shall be before the date of the Company's proposed sale or
merger. The Board shall notify each participant in writing, at least ten (10)
business days prior to the New Exercise Date, that the Exercise Date for the
participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 11 hereof.
21. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and
for any reason terminate or amend the Plan. Except as provided in Section 20
hereof, no such termination can affect options previously granted, provided that
an Offering Period may be terminated by the Board of Directors on any Exercise
Date if the Board determines that the termination of the Plan is in the best
interests of the Company and its stockholders. Except as provided in Section 20
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Section 423 of the Code (or any other applicable law, regulation or
stock exchange rule), the Company shall obtain shareholder approval in such a
manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether
any participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll
39
<PAGE>
withholding in excess of the amount designated by a participant in order to
adjust for delays or mistakes in the Company's processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts applied toward
the purchase of Common Stock for each participant properly correspond with
amounts withheld from the participant's Compensation, and establish such other
limitations or procedures as the Board (or its committee) determines in its sole
discretion advisable which are consistent with the Plan.
22. Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
23. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
24. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 21 hereof.
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<PAGE>
EXHIBIT 1
INTER-TEL, INCORPORATED
1997 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: __________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _____________________________________ hereby elects to participate in
the Inter-Tel, Incorporated 1997 Employee Stock Purchase Plan (the
"Employee Stock Purchase Plan") and subscribes to purchase shares of
the Company's Common Stock in accordance with this Subscription
Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (from 1 to _____%) during
the Offering Period in accordance with the Employee Stock Purchase
Plan. (Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise
my option.
4. I understand that any shares of the Company's Common Stock I purchase
shall be held by the Company for twelve (12) months after the date of
purchase. I understand that the Company will deliver to me the shares I
have purchased as soon as possible after the twelve (12) month Holding
Period.
5. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is
in all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is
subject to stockholder approval of the Employee Stock Purchase Plan.
6. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of _____________________________________
(Employee or Employee and Spouse only).
41
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7. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares), I will be
treated for federal income tax purposes as having received ordinary
income at the time of such disposition in an amount equal to the excess
of the fair market value of the shares at the time such shares were
purchased by me over the price which I paid for the shares. I hereby
agree to notify the Company in writing within thirty (30) days after
the date of any disposition of shares and I will make adequate
provision for Federal, state or other tax withholding obligations, if
any, which arise upon the disposition of the Common Stock. The Company
may, but will not be obligated to, withhold from my compensation the
amount necessary to meet any applicable withholding obligation
including any withholding necessary to make available to the Company
any tax deductions or benefits attributable to sale or early
disposition of Common Stock by me. If I dispose of such shares at any
time after the expiration of the 2-year holding period, I understand
that I will be treated for federal income tax purposes as having
received income only at the time of such disposition, and that such
income will be taxed as ordinary income only to the extent of an amount
equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price which I
paid for the shares, or (2) fifteen percent (15%) of the fair market
value of the shares on the first day of the Offering Period. The
remainder of the gain, if any, recognized on such disposition will be
taxed as capital gain.
8. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase Plan.
9. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print) ____________________________________________
(First) (Middle) (Last)
____________________________________________
(Relationship)
____________________________________________
____________________________________________
(Address)
Employee's Social
Security Number: ____________________________________________
Employee's Address: ____________________________________________
____________________________________________
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<PAGE>
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated: ___________________
___________________________________________
Signature of Employee
___________________________________________
Spouse's Signature (If beneficiary other than Spouse)
43
<PAGE>
EXHIBIT 2
---------
INTER-TEL, INCORPORATED
1997 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Inter-Tel,
Incorporated 1997 Employee Stock Purchase Plan which began on ___________ 19____
(the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
____________________________________
____________________________________
____________________________________
Signature:
____________________________________
Date: ______________________________
44
<PAGE>
EXHIBIT C
AMENDMENT TO THE
RESTATED ARTICLES OF INCORPORATION OF
INTER-TEL, INCORPORATED
(Proposal No. 4)
Paragraph 1 of Article IX of the Restated Articles of Incorporation is amended
in its entirety to read as follows:
"The corporation shall indemnify any and all of its existing and former
directors and officers to the fullest extent permitted by Section 10-202.B.2 of
the Arizona Business Corporation Act; provided, however, that the corporation
shall have the right to refuse indemnification in any instance in which the
person to whom indemnification would otherwise have been applicable shall have
unreasonably refused to permit the corporation, at its own expense and through
counsel of its own choosing, to defend him or her in the action. If the Arizona
Business Corporation Act is amended to authorize corporate action broadening the
corporation's ability to indemnify its directors and officers, the corporation
shall indemnify its existing and former directors and officers to the fullest
extent permitted by the Arizona Business Corporation Act, as amended. Any repeal
or modification of this Article IX, Paragraph 1 shall not adversely affect any
right or protection of any existing or former director or officer of the
corporation existing hereunder with respect to any act or omission occurring
prior to or at the time of such repeal or modification."
45
<PAGE>
This Proxy is Solicited on Behalf of the Board of Directors
INTER-TEL, INCORPORATION
1997 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of INTER-TEL, INCORPORATED, as Arizona
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated March 21, 1997, and hereby appoints
Kurt R. Kneip and N. Thomas Peiffer, Jr., and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1997 Annual Meeting
of Shareholders of INTER-TEL, INCORPORATED, to be held on April 23, 1997, at
10:00 a.m., local time, at the Wyndam Gardens Hotel, 427 N. 44th Street,
Phoenix, Arizona 85008, and at any adjournment or adjournments thereof, and to
vote all shares of Common Stock which the undersigned would be entitled to vote,
if then and there personally present, on the matters set forth below:
(Continued, and to be marked, dated and signed, on the other side)
^ FOLD AND DETACH HERE ^
<PAGE>
Please mark
your votes as [X]
indicated in
this example
The Board of Directors recommends FOR all WITHHELD
a vote FOR Items 1, 2, 3, and 4. nominees listed AUTHORITY to vote
below (except for all nominees
1. ELECTION OF DIRECTORS: as indicated) listed below
Steven G. Mihaylo, J. Robert Anderson,
Gary D. Edens, Maurice Esperseth, C. [ ] [ ]
Roland Haden and Norman Stout
(INSTRUCTION: To withhold authority to vote for any nominee, print that
nominee's name in the space provided below.)
________________________________________________________
________________________________________________________
2. APPROVAL OF THE COMPANY'S FOR AGAINST ABSTAIN
1997 LONG-TERM INCENTIVE PLAN. [ ] [ ] [ ]
3. APPROVAL OF THE COMPANY'S FOR AGAINST ABSTAIN
1997 EMPLOYEE STOCK PURCHASE PLAN. [ ] [ ] [ ]
4. APPROVAL OF AN AMENDMENT TO FOR AGAINST ABSTAIN
THE RESTATED ARTICLES OF [ ] [ ] [ ]
INCORPORATION REGARDING
DIRECTOR AND OFFICER
INDEMNIFICATION
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND AS SAID PROXIES DEEM ADVISABLE
ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
A majority of such attorneys or substitutes as shall be present and shall act at
said meeting or any adjournment or adjournments thereof (or if only one shall be
present and act, then that one) shall have and may exercise all of the powers of
said attorneys-in-fact hereunder.
Signature(s)_________________________________________ Date _____________________
NOTE: Please sign name exactly as it appears herein. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
